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The Fair Trade Commission (hereinafter referred to as the Fair Trade Commission) imposed a total fine of 26.7 billion won on Naver Shopping and Naver TV on the 7th. The FTC found that Naver gave preference to its service on the search.
Naver said he couldn’t fully admit it. Naver said: “I do not agree with the decision of the Fair Trade Commission” and that “the court is going to dispute the injustice.”
So, let’s take a closer look at the issues that the FTC and Naver face differently.
Naver Shopping (search) to competeasleep Who
To determine whether a specific company has abused its monopoly power, it is necessary to first determine whether the company is a dominant business entity in the market (monopoly business). In addition, to determine if it is a dominant business in the market, it is necessary to define the market from where to where.
The FTC defined Naver’s purchasing area as a “comparison shopping service.” The service that compares shopping centers is defined as a market and Naver Shopping is considered a dominant commercial operator in the market. The FTC explained that Kakao Shopping How, Danawa and Enuri are among the comparative shopping service providers that compete with Naver. According to the Fair Trade Commission, when the market was defined in this way, Naver had almost 70% of the market share.
Naver is in the position that it cannot accept this market designation. It is argued that the market definition that Naver Shopping and Coupang do not compete does not make sense. Naver is in the position that all online purchases should be considered as a single market. In this way, Naver Shopping will be a competitor such as Coupang, Gmarket (Auction), 11th Street Wemake, Timon, SSG.com and Lotte On. If the market is defined in this way, Naver’s market share does not exceed 15% and it is difficult to consider it a dominant trader in the market.
Naver said, “As of 2019, the total amount of transactions in the domestic e-commerce market is 135 trillion won, and the share of transactions through Naver is only 14.8%.” “As Naver Shopping does not compete with the open market, we cannot help but wonder if the judgment is in line with the reality of the current online shopping market and the online shopping behavior of users.”
Smart store It is an open market It is not
The FTC defined Naver Smart Store as an open market. The FTC found that Naver used its market dominance in the comparison shopping services market to increase its share of its open market service called Smart Store.
On the other hand, Naver’s position is that smart stores are not open markets. In 2014, Naver abolished ShopN, an open market service, and started a service called the Smart Store, claiming that this is not an open market.
The important reason why a smart store is an open market or not is because of the search results. Naver wants products from multiple shopping centers to appear in product search results. For this reason, a logic was introduced to avoid the exhibition of three or more products in a row in the same shopping center.
Because of this, open market products like Gmarket and 11th Street do not appear more than three consecutively in search results. This is because Gmarket or 11th Street is a shopping mall.
On the other hand, smart store products may be exposed to three or more consecutive Naver shopping search results. The Fair Trade Commission determined that it was an unfair act.
Naver believes that the smart store is not an open market mall like Gmarket or 11th Street, but rather a mall solution like Cafe 24 and Shopify. For example, when Naver Shopping enters a search alliance, it makes a contract with Gmarket or 11th Street. However, smart store sellers sign a separate Naver Shopping contract and are exposed to searches. In other words, the smart store is not seen as a single mall (open market), rather each vendor is seen as an independent mall. Cafe 24 itself is not a shopping center, but for the same reason that the businesses that have entered Cafe 24 are shopping centers.
The FTC judged that only Naver Smart Store appeared three consecutively in search results, but Naver argued that it is not preferential treatment because it is a solution, not a shopping center.
Naver said: “If only the open market is treated as an individual shopping center, as opposed to the contract unit, if the logic of diversity is applied, there are more opportunities for exposure to the open market and smart stores, small shopping centers and medium-sized, social commerce and shopping centers in general. Compared to that, it is treating open market operators more advantageously. “
On the other hand, the Fair Trade Commission noted that “in the name of the diversity of search results, the same mall logic was introduced and unfavorable standards were applied to competitive open market products compared to its own open market.”
Naver Shopping search Smart store Preferential Treatment
The FTC believes that Naver deliberately reduced the weight of competing open markets in the shopping search ranking algorithm and increased the weight of its own services.
The Fair Trade Commission said: “Before and after the company’s open market launch, it artificially lowered the exposure ranking by assigning a weight of less than 1 to competitive open market products. I also raised it ”, he explained.
Naver believes this is not true.
Naver said: “For highly reliable search results, all shopping centers that provide accurate information on sales performance were weighted. In 2013, more than 13,000 external shopping centers were weighted, excluding Shop N.”
Naver said: “Information on sales performance is a very important factor in determining the quality of shopping search, and open markets, social commerce and shopping malls in general also reflect information on performance of sales. sales as a major factor in search rankings. ” It maliciously pointed out that the proportion of exposure to the product increased by assigning weight only to the sales index applied to open market products ”.
It can be controversial to give weights when providing information about the sales performance of shopping centers other than vendors. This is because Naver may have a way of demanding trade secrets from competitors.
The FTC avoided the video market definition trap
The Fair Trade Commission imposed a fine of 200 million won, saying that Naver made an unreasonable customer attraction in searching for videos. In this process, we can see the hard work of the FTC. The FTC approached it with care because it once provided on the same subject.
The Fair Trade Commission imposed a sanction on Naver not for abuse of its dominant position in the market, but for unfair customer attraction. This is because unfair customer attraction can be punished even if you are not a dominant trader in the market. In the video market, I feel the pain of the Fair Trade Commission, which failed to define Naver as an operator that dominates the market.
In 2008, the Fair Trade Commission imposed corrective measures and penalties for Naver’s abuse of its dominant position in the video market. Naver said he couldn’t admit, and took the matter to court, and Naver won. In 2014, the Supreme Court raised Naver’s hand. At that time, the FTC was unable to adequately define the video-related market.
For this reason, it appears that the FTC has chosen a strategy that does not require market definition and market-dominant business regulations.
When Naver reorganized its video search algorithm, the ‘keywords (tags)’ match was a major factor, but the FTC decided this was an unfair attraction for customers. There are not many videos from other companies with keywords, so Naver’s own videos received preferential treatment.
In response, Naver argued that it is common sense for keywords to affect search results. It’s common for videos that don’t enter keywords to lose their ranking.
Naver said: “The property information (title, text, keywords, etc.) has been guided in detail to search for affiliates through guides and help, and the importance of listing the attribution information is known or easy to know. by any video business operator, including search affiliates. “There are many other search affiliates that have a search partnership with Naver, and they are aware of this and have been faithfully entering relevant attribute information.”
Written. Byline Network
<심재석 기자>[email protected]
