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Naver, the number one portal operator in Korea, received a 26.7 billion won fine from the Fair Trade Commission for exposing its products and services to its advantage by changing the search algorithm in the shopping and video sector. in his favor. The FTC found that Naver seriously disrupted the order of the market by adjusting the search results.
However, a fierce legal dispute between the two parties is expected to continue, as Naver announced its policy of filing an objection lawsuit against the provision.
○ Change the search algorithm by narrowing down competing products.
The Fair Trade Commission announced on the 6th that it imposed a penalty of 26.7 billion won (26.5 billion won for purchases and 200 million won for video) along with a corrective order on Naver. Naver is accused of arbitrarily adjusting its shopping and video search algorithms to elevate its own products or content to the top of search results and lower competing products last. Naver is the number one provider in the shopping search services market with over 70% market share. It has established itself as a ‘distribution dinosaur’ by directly operating an open market service (smart store) that connects sellers and consumers of products, as well as a service (Naver Shopping) that allows you to compare and search for products sold in several shopping centers. However, as a result of the FTC survey, it was revealed that from 2012 to 2015, the search algorithm was changed five times so that the shopping search results were advantageous for the company’s open market service. Specifically, Naver changed its algorithm so that competitive open market products such as 11st, Gmarket and Auction are out of search exposure rankings prior to the launch of the open market service in April 2012. In July of that year, it was changed the search method so that products on the company’s open market accounted for 15% per page of shopping search results, and five months later, this share increased to 20%.
Prior to the launch of the simple payment service ‘Naver Pay’ in June 2015, the exposure of products linked to Naver Pay was increased at the request of the executive in charge. Naver employees also exchanged emails in the process, fearing that competitors could pose problems. Due to the change in search method, Naver’s open market market share increased from 4.97% in 2015 to 21.08% in 2018. On the other hand, the share of competitors fell all at once.
○ “Deceptive behavior of consumers due to market disruption”
Naver first exposed the video for its service, ‘Naver TV’, in video search. When the video search algorithm was completely reorganized in 2017, competitors like Pandora TV and Afreeca TV weren’t aware of it, so it wasn’t relatively exposed. In addition, the premium service ‘Naver TV Theme Pavilion’ awarded bonus points to the videos and exposed them first. With this measure, the number of Naver TV videos exposed to the top of search results in one week increased by 22%.
“Naver misled consumers who believed that the search results were objective and distorted the competition between the open market and the video platform market,” said Song Sang-min, head of the Commission’s Market Supervision Commission. Fair Trade.
Abroad, like Naver, he is retreating from the act of giving preferential treatment to his own service by manipulating the search algorithm to his advantage. In 2017, the European Union (EU) imposed a 2.42 billion euro (about 3 trillion won) penalty on Google for allowing its shopping sites to be searched before its competitors.
Naver issued a statement that day, rebutting that “the FTC has made a decision that essentially infringes on business activities without sufficient review and concern.” In addition, he said, “The reorganization of the video and shopping search logic noted by the FTC is the result of efforts to display optimal search results to meet user search needs.”
Sejong = Nam Geon-woo [email protected] / Reporter Shin Moo-kyung
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