[Robert D. Atkinson] Korea's digital gamble: Will new tech rules hurt innovation and help China?

Korea Herald

04-03-2025

South Korea is on the verge of making a costly mistake by copying Europe's misguided digital competition regulations. The Korean government's proposed competition rules for major internet platforms misunderstand how digital markets function and would actually hurt Korean consumers' online experience. Even worse, by unfairly penalizing large American technology companies, these policies risk provoking President Trump, who is already looking for excuses to slap tariffs on adversaries and allies alike. Korea should think twice before giving Trump a reason to retaliate and escalate tensions.
Parliament's Platform Competition Promotion Act (PCPA), modeled after the EU's Digital Markets Act (DMA), would place strict rules on platforms like social media sites, search engines, and online marketplaces. Separately, Korea's Fair Trade Commission (KFTC) is considering changes to its competition rules along similar lines. These 'reforms' would, among other things, restrict how platforms rank search results, display products, and integrate services.
Rather than making markets more competitive, Europe's new tech rules have created unexpected problems. While Europe's DMA is still new, early results suggest that it has harmed users, slowed economic growth, and made it harder for startups to expand, leading many to move their businesses elsewhere. For example, Google had to remove some search features in Europe, forcing users to visit multiple websites to find information that used to be easily accessible in one place. Additionally, Apple was forced to allow third-party app stores, creating security risks and confusion for users.
Europe's struggles with the DMA should be a lesson for Korea. For example, if Kakao is forced to allow rival payment services within KakaoPay, the seamless integration between chat, shopping, and payments could be disrupted -- making it harder for users to complete transactions. What's more , if Korea bans common business practices like promoting a company's own products or bundling services together, digital services could become pricier and less user-friendly. Indeed, many small Korean brands and retailers depend on platforms like Coupang or Naver Shopping to reach customers. If e-commerce sites are forced to prioritize competitors in search results, smaller businesses will have a harder time standing out.
While the PCPA and KFTC's adjustments would burden US and Korean firms, Chinese firms would largely escape scrutiny. Why? Because China's tech companies fly under the radar in Korea as the regulations target platforms that meet certain market thresholds, often linked to Korean revenue or user numbers. By contrast, US companies like Google and Apple, as well as domestic leaders like Naver and Coupang, are likely to cross these thresholds and be subject to the new restrictions.
While Korean and US companies would struggle with compliance and increased restrictions on their business practices, Chinese firms will expand in Korea, strengthening their foothold in AI, cloud computing, and e-commerce. For example, Chinese e-commerce giants like Alibaba and Pinduoduo have been aggressively entering overseas markets, including Korea. By leveraging lower costs and government-backed subsidies, these firms could capture a larger share of Korea's online retail market -- putting pressure on domestic companies like Coupang and Naver. Additionally, China's dominance in AI-driven recommendation algorithms could give its platforms an unfair advantage if Korean firms are restricted in how they personalize search results and shopping experiences.
Finally, this isn't just a techno-economic issue, it's a diplomatic one. Make no mistake, the very prospect of these regulations is already putting strain on US-Korea trade relations. US Congresswoman Carol Miller (R-WV) introduced the US-Republic of Korea Digital Trade Enforcement Act, which calls for greater scrutiny of Korea's trade policies and potential retaliation if American firms face such discriminatory rules. And if Korea continues to consider this approach, it will likely be seen as a red flag for the new Trump admin, with US Trade Representative nominee Jamison Greer already signaling things could escalate things even further. In fact, the second Trump term is likely to be quite different than the first. Trump has already expressed his frustration both with allies like Korea and adversaries over what he perceives a system rigged against America. The fact that the United States runs a trillion-dollar trade deficit with the world is something the President thinks about every day. And he has already said that he is tariff man and will apply tariffs to resolve these problems. Adding insult to injury by copying the EU (likely Trump's next big target for tariffs) and applying laws that target US technology leaders is likely to just 'poke the bear.' Korea would be well advised to do otherwise.
It's time for Korean policymakers to take a strategic pause. There is no crisis; in fact, there is nothing that current Korean competition law cannot adequately address. Watching how these laws unfold elsewhere would allow Korean policymakers to craft a smarter approach that protects innovation, competition, and national security. But more importantly, now is not the time for Korea to be seen as passing unfair regulation that lets President Trump say that Korea is 'taking advantage of America.'
Robert D. Atkinson is president of the Information Technology and Innovation Foundation. Lilla Nóra Kiss contributed to this article. The views expressed here are the writer's own. -- Ed.