In the “110 National Tasks” published on May 3, 2022, the Presidential Transition Committee had stated that it will develop a system of self-regulation for the online platform market as well as the necessary minimum regulatory measures to ensure fair trade. On July 6, 2022, the government formed the Platform Policy Council, and the Legal System T/F on the Digital Platform Self-Regulation Organization (the “Self-Regulation Legal System T/F”), organized by the Ministry of Science and ICT (the “MSIT”), plans to develop the legal grounds and regulatory measures for self-regulation by the end of the year, to then be finalized by the Platform Policy Council. Further, in September 2022, the Private Self-Regulation Organization for the Online Platform Market (the “Self-Regulation Organization”; an organization led by the private sector for development of a self-regulation system and assisted by the government) began to engage in detailed discussions, and its four divisions held kick-off meetings to determine the issues for discussion relating to self-regulation (Gap-Eul Division, Consumer and User Division, Data and Artificial Intelligence Division, and ESG Division).
Developing the legal grounds and regulatory measures for self-regulation: The Self-Regulation Legal System T/F is expected to discuss various issues relating to the Self-Regulation Organization, including its legal status and composition, financing plans, relationship with the government, operational performance evaluation, and incentive grants.
Issues for discussion relating to self-regulation: The four divisions of the Self-Regulation Organization held their first kick-off meetings in September 2022, and follow-up meetings are expected to be held regularly to discuss various issues in detail. However, progress has been somewhat slow due to differences in opinions among platform companies or between platform companies and consumer organizations.
Gap-Eul Relationship Division: According to the press release issued by the Ministry of Economy and Finance, the issues for discussion in this division are expected to include Gap-Eul relationships (i.e., unequal relationship between contracting parties) in the online platform market, unfair trade practices, and voluntary dispute resolution, and the Korea Fair Trade Committee (the “KFTC”) will preside over the discussions. Discussions will be conducted separately for each major business type, and open market businesses and delivery app businesses are the current focus. Discussions include issues related to co-prosperity in the platform market and improving the trade environment, such as platform fees and advertising costs, market entry practices, standard agreements, and fact-finding investigations.
Consumers and Users Division: The issues for discussion in this division are expected to include protection of platform consumers through self-regulation, improving the user environment such as through moderation of harmful content, and voluntary dispute resolution, and the KFTC and the Korea Communications Committee will preside over the discussions. As with the Gap-Eul Relationship Division, stakeholders in the open market and delivery app businesses are currently participating in these discussions, though detailed issues for discussion and specific measures have not yet been developed. Consumer organizations have previously raised issues such as (i) measures related to platform consumers, such as voluntary covenants or guidelines relating to liability for illegal content and labeling and advertising or relating to data collection and use, (ii) establishing a voluntary arbitration/mediation organization, and (iii) forming an algorithm review committee, through which experts can objectively review exposure algorithms such as algorithms for ranking, user reviews, and sales rankings, and report review results to the consumers.
Data and AI Division: The issues for discussion in this division are expected to include data mobility and compatibility, AI transparency and reliability, and safe use of data, and the MSIT will preside over the discussions. The kick-off meeting was attended by major platform operators, relevant associations and organizations, academic experts, specialized organizations (including K-DATA, KISA, NIA and NIPA) and relevant ministries, discussing operation plans and potential issues for discussion.
ESG Division: The issues for discussion in this division are expected to include solving social issues using online platforms, digital engagement, and corporate governance of platform companies, and the MSIT will preside over the discussions. The kick-off meeting discussed various issues at a high level, including examples of using inherent and innovative characteristics of online platforms to create value for society, as well as how to achieve and spread innovation.
Separately, on May 11, 2022, the Personal Information Protection Commission (the “PIPC”) established a plan for private-public cooperation on self-regulation of personal information and has since been working on implementation.
Details of the Plan: A working group will be formed for each major business type to prepare drafts of voluntary covenants, and upon approval by the PIPC, independent agencies such as KISA will monitor implementation and impose incentives, recommendations, and administrative dispositions. The order of business types for discussion is as follows: (i) open market → (ii) order, delivery and mobility services → (iii) job search and hospital reservation services → (iv) real estate and accommodation services.
Progress: On July 13, 2022, the PIPC approved the first draft voluntary covenants for the open market sector (e.g., online shopping malls). However, due to the difficulties in reconciling opinions from various businesses, it is expected to take a considerable amount of time to establish such covenants for other business types.
There are complex interplays between the interests and incentives for various parties, which will require careful balancing between the Self-Regulation Organization and businesses, as well as between businesses and consumer organizations. Thus, it will take a considerable amount of time for the stakeholders to reach a conclusion on these issues, and the industry impact will be substantial. Further, in light of the recent data center fires, support has been growing for legal/systematic regulations of online platforms, as opposed to self-regulation, and it is possible that the government may revise its positions on self-regulation. It will be important to continue to monitor discussions by the Self-Regulation Legal System T/F and the Self-Regulation Organization’s four divisions, as well as the PIPC.