Naver and Kakao are quickly expanding by leveraging dominating platform control, prompting concerns for safeguards against misuse of power.
South Korea approved a measure last week aimed at stopping Google and Apple from exploiting their app market duopoly, a move that drew international attention.
The so-called “anti-Google law” amends the Telecommunications Business Act to prevent Google, located in California, from forcing local app developers to adopt its own in-app payment mechanism.
Korean tech titans in strong market positions, according to industry observers, are expected to confront similar regulatory hurdles. The country’s two largest startup-turned-tech powerhouses, Naver and Kakao, have been criticised in particular.
Naver, the country’s most popular online platform, began as a web portal in 1999. Naver has developed as a local large tech business, with over 54 million users and 133 affiliates and subsidiaries, spearheading search engine technology, news portal, webtoon, and other key digital services.
Kakao, which owns KakaoTalk, Korea’s most popular mobile chat app, was founded in 2006 and merged with Daum Communications, a portal that competes with Naver, in 2014. Following its rebranding, Kakao now has over 46 million monthly active users for its mobile chat app, as well as 158 affiliates and subsidiaries in a variety of fields.
The most popular internet platform providers in Korea are Naver and Kakao. The virtual duopoly is rapidly expanding into other growth sectors and strengthening its control over the domestic digital market in general, from online retail to ride-hailing to fintech.
In terms of user base and technological advantage, other smaller platform competitors in online retail and other niche sectors are no match for Naver and Kakao. Critics say that, like Google and Apple, it is past time to put in place safeguards to prevent the two digital behemoths from abusing their market position as dominant platform providers and participating in unethical commercial practises.
“Online platform operators, who have trade data for both sellers and buyers, might utilise their exclusive monopoly on the data to control consumers and small merchants in order to maximise their profits,” said Kim Yoon-jeong, a legal expert and Fair-Trade Commission consultant.
