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Regarding the alleged act of discriminatory treatment, the Supreme Court held that neither the “unfairness” of the abuse of market dominance nor the “significance and unfairness” of unfair trade practice due to discriminatory treatment can be recognized. That is, in connection with the element of “unfairness,” the Supreme Court determined that there were legal errors and insufficient examination in the High Court Decision, which recognized the existence of anti-competitive concern and anti-competitive intent:
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The Supreme Court clarified that “there is no legal basis to require Naver to provide equal treatment when setting transaction conditions with other companies solely on the grounds that Naver is a market-dominant online platform operator.” In other words, the Supreme Court held that under the MRFTA, being a market-dominant platform operator does not automatically impose a duty of equal treatment toward competitors’ products or services.
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Applying the standard established in the POSCO case (Supreme Court decision 2002Du8626 rendered on November 22, 2007), the Supreme Court closely examined whether the conduct at issue “raises concerns of actual anti-competitive effects, such as price increases, output reduction, impediment to innovation, reduction in number of effective competitors, or decrease in diversity,” rather than merely causing some disadvantage to competitors. While the High Court Decision recognized anti-competitive concerns on the grounds that “it cannot be entirely ruled out that there was no concern of anti-competitive effects,” the Supreme Court clarified that mere abstract concern is insufficient and it must be recognized that “there is specific concern of anti-competitive effects caused by the discriminatory conduct” in the marketplace platform market where the concern of anti-competitive effect is at issue.
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In light of the above standard, the Supreme Court also held that the fact that there could be a “leverage of market power” in the relevant markets, whereby Naver altering the search algorithm in the comparison shopping market affects competition in the adjacent marketplace platform market, does not automatically make the conduct more anti-competitive.
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The Supreme Court also pointed out that effective competition continued in this case considering that Naver’s comparison shopping service only served a limited role as an entry path to marketplace platforms, that competing marketplace platforms have continuously grown, and that promising new entrants have entered the relevant markets. On this basis, the Supreme Court held that the High Court Decision erred by failing to sufficiently examine the causal relationship – i.e., whether Naver’s relatively fast growth was a result of the alleged conduct or “competition on the merits” and overall expansion of the market.
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The Supreme Court also held that Naver’s anti-competitive intent was not proven, finding that adjusting and changing search algorithms, along with studying the resulting variations in search exposures, is an ordinary business activity for search service providers, and may be part of “competition on the merits,” and therefore Naver’s anti-competitive intent or purpose cannot be presumed simply on the ground that Naver reviewed the effect or impact of changes to the search algorithm. In particular, the Supreme Court pointed out that it is standard practice for search algorithms to be gradually improved through numerous steps or review, and it was unlawful for the KFTC to impose sanctions by recognizing anti-competitive intent and purpose based on just five search algorithm alterations that were selectively chosen among dozens of iterative search algorithm improvements made by Naver over the relevant period.
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