[Abstract(Law)] The Limits of Self-Preferencing in Digital Market under Competition Regime: A Comperative Law Perspective

  • DATE WRITTEN : 2022-02-08
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¡°Self-preferencing¡± by vertically-integrated online platforms(¡°VOPs¡±) currently comes under fierce scrutiny by competition authorities around the world. In a digital ecosystem, these VOPs assume a dual role both as a ¡°rule maker¡± with their power to design search algorithms and at the same time as a ¡°player¡± in downstream markets. While VOPs\' incentive for favorable treatment of their own goods/services over competitors is arguably an inherent element in platform businesses, their rulemaking power would certainly not be without limitation under competition law regimes.

The KFTC\'s recent Naver Shopping decision on self-preferencing left the Korean antitrust community with more questions than answers in at least three aspects. In the first place, statutory interpretation on whether Naver Shopping\'s favoring of its affiliate constitutes any subcategory of abuse of dominance under the Monopoly Regulation and Fair Trade Act(¡°MRFTA¡±) is, to some extent, unclear. Furthermore, KFTC\'s product market definition excluding online marketplaces is likely an issue to be revisited at the appellate stage, given that it arguably failed to shed light on the importance of actual consumer behaviors as well as a recent trend in multi-platform convergence. Last but not least, KFTC\'s attempt to incorporate the much-debated leveraging theory into the framework of the Posco doctrine established by the Supreme Court will likely be challenged at the litigation.

Self-preferencing cases in different jurisdictions such as European Commission\'s Google Shopping decision and UK Streetmap case share both factual circumstances(modifying an algorithm at issue) and legal analysis(leveraging theory applied) in common with the Naver Shopping case. What makes the KFTC case distinguished from the two European cases, however, would be its giving weight to the subjective element(anticompetitive intent) of the abuse-a mandate from the Supreme Court\'s Posco precedent. Not surprisingly, an online platform can have the mixed intent of promoting consumer welfare and convenience in upstream general search services and putting its own goods/services at competitive edge in downstream markets at the same time. A comparative law insight from the UK Streetmap case tells us that when anticompetitive effects of the platform\'s self-prefencing are far from being clear-cut, a multi-layered intent of the platform can step into the analysis to resolve a close case. When it comes to anticompetitive effect, some key external factors (e.g. quality improvement in search services, changing patterns in user preference, etc.) should be integrated into the analytic process of demonstrating causality between self-preferencing and diversion of user traffic.

Jiwon Kang
(Ph.D. in Law, Attorney at Law, Legislative Researcher, National Assembly Research Service)

Jiyoung Lim
(Attorney at Law, LeeKo)

[Journal of Korean Competition Law, Vol. 44, September 2021]
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