Stop large portal sites’ unfair practices for Korea’s Steve Jobses

In a speech during a parliamentary session Tuesday, Choi Kyung-hwan, the floor leader of the ruling Saenuri Party, criticized South Korea’s major Internet portal sites and large corporations for knocking down prices for their content suppliers and monopolizing investment, production and distribution of contents. “With this structure unchanged, it is impossible for South Korea to have its own (Steve) Jobses, (Mark) Zuckerbergs and (Steven) Spielbergs,” Choi said. Recently, the Fair Trade Commission of Korea began investigation into NHN and Daum, the operators of the country’s top-two Internet portals, for allegedly unfair business practices.

The problems of large Internet portals that control the domestic online content market is nothing new. Naver, which is operated by NHN, controls 75 percent of the country’s Internet search market, while Daum has a 15 percent share. The two portal sites take advantage of their brands, networks and capital to expand their business areas to Internet content markets for news, videos, cartoons, shopping and properties. In the beginning, the portals allow content providers to begin their services on the portals and take fees, but later, they launch their own services upon learning the business knowhows. A case in point is the online real estate information market.

At a meeting hosted by the ruling Saenuri Party in April to get a grasp of the portals’ unfair business practices, real estate agents expressed strong anger over the portals’ high-handedness. The real estate agents claimed that as Naver charges advertisement fees on them, their sales revenues decreased by more than 80 percent. Naver has caused controversies over its expansion into various business areas such as price comparison, movies, web novels, web cartoons, music services and online open marketplaces.

NHN is a big business that posted a sales revenue of 2.4 trillion won (2.1 billion U.S. dollars) last year and its market value exceeds 15 trillion won (13.4 billion dollars). The company is an online powerhouse in South Korea that even Google, the world’s largest Internet search engine operator, cannot march. NHN is criticized for turning the domestic ecosystem for online content into a “Naver zoo” by exclusively keeping its contents within its barriers. However, many experts say that the performance of its search engine or key services such as e-mail security has many loopholes, compared with global search engine providers.

NHN claims that its high share in the online search market is the result of users’ choice and that monopoly per se is “not evil.” However, it is not persuasive to say that the company is not abusing its dominance in the market at a time when it is under criticism for taking advantage of its monopolistic power to expand its business areas and push smaller companies out of the market. It is not logical for NHN to talk about consumers’ choice since the company shows its own services or fee-paying Internet sites at the top of search results, rather than providing the information users want.

In the country’s current Internet ecosystem, in which small Internet businesses can hardly find an opportunity to promote or grow their businesses without going through Naver, it is almost impossible for start-up content developers to burgeon. It is urgently needed to have a safety system that would protect small start-ups from the monopoly and high-handedness of large portal sites. If the country’s cyberspace becomes a space “of Naver, for Naver and by Naver,” the prospects are dim for the Park Geun-hye administration’s “creative economy” drive.