PRODUCT

Naver and Daum have made a tentative decision to shell out millions of dollars as a form of self-penance for abusing their market dominance in Korea’s internet portal industry, according to the Fair Trade Commission yesterday. As we have reported several times recently their has been concern voiced about the increasing dominance of the two companies in the Korean internet search market.

The money will be spent in ways that benefit Internet users and smaller Internet vendors. Naver will spend 100 billion won ($95.7 million) and Daum 4 billion won.

The decision by the country’s two biggest Internet portals came a month after the FTC accepted a request by them to review self-corrective measures regarding alleged unfair business practices, including promoting their own products and services in ads disguised as news articles.

The FTC launched an investigation in May into whether the two portals violated antitrust laws and decided in November to allow them to come up with their own solutions to the problem instead of imposing penalties that could have run tens of billions of won each. Naver has 75% of the portal market, while Daum has 20%. Google has been squeezed out to around a 2.5% market share.

This is the first time the FTC has resorted to a 'consent order', which is a fast-track system in which a company subject to an antitrust investigation can proceed with its own self-corrective measures. Naver and Daum applied for the system in November.

Under the tentative self-corrective measure disclosed on Wednesday, Naver and Daum will come up with stricter means of separating advertisement and news articles. One such measure is "a clause that they [the portal service providers] will identify their or their affiliates’ name when the Internet users use a paid service provided by themselves,” said Kwon Chul-hyun, a manager of the FTC. In another measure the two companies have agreed to committing money to society.
According to the FTC, Naver said it will contribute 20 billion won over the next three years to establish a public corporation to monitor advertisements disguised as news articles and run a help center for consumers who suffered financial damage as a result of those advertisements.

Another 50 billion won from Naver will be used for helping small and midsize enterprises that are selling their products and services over the Internet, while 30 billion won will be spent for consumer welfare such as consumer education, the FTC said.

Daum is planning to donate 1 billion won over the next two years, mostly for the purpose of increasing customer benefits, the FTC said. It will also spend 3 billion over three years to help SMEs.

Adapted from article in Joongang Daily