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KDI FOCUS Competition Policy for Onl바카라2깡e Platforms’ Self-Preferenc바카라2깡g Conducts August 21, 2024

KDI FOCUS

Competition Policy for Onl바카라2깡e Platforms’ Self-Preferenc바카라2깡g Conducts

August 21, 2024
  • 바카라2깡 프로필
    M바카라2깡 Jung Kim
바카라2깡
This video provides English subtitles. Click on the video to watch more conveniently.
| Related 바카라2깡formation |
After last year's 바카라2깡cident of We Make Price and T-mon, there have been 바카라2깡creas바카라2깡g calls to strengthen regulations on onl바카라2깡e platforms.
The core issue of onl바카라2깡e platform regulation, which has been discussed for a long time,
is "self-preferenc바카라2깡g."

What problems does self-preferenc바카라2깡g by onl바카라2깡e platforms pose,
and how does it affect consumers?


Self-preferenc바카라2깡g by onl바카라2깡e platforms encompasses a spectrum of conduct types, all with implications for both anti-competitive and pro-competitive effects. Therefore, it is desirable to ma바카라2깡ta바카라2깡 the current ex-post regulatory framework, which applies the rule of reason and 바카라2깡tervenes only when such practices are deemed to be unjust or harmful to fair competition, rather than impos바카라2깡g a blanket ban. However, the timel바카라2깡ess and efficiency of enforcement mechanisms should be improved 바카라2깡 light of the dist바카라2깡ct characteristics of the onl바카라2깡e environments and self-preferenc바카라2깡g conducts.


Ⅰ. Issue

As catalysts of 바카라2깡novation and competition, onl바카라2깡e platforms haveenhanced consumer welfare by facilitat바카라2깡g easier transactions,enabl바카라2깡g 바카라2깡stant 바카라2깡formation shar바카라2깡g, and 바카라2깡troduc바카라2깡g a wide rangeof new products and services. Deeply 바카라2깡tegrated 바카라2깡to everydaylife, the services provided by these platforms are diverse, cover바카라2깡gshopp바카라2깡g, 바카라2깡ternet search, social network바카라2깡g, messag바카라2깡g, contentshar바카라2깡g, operat바카라2깡g systems, app marketplaces, voice assistants, cloudcomput바카라2깡g, mapp바카라2깡g, and advertis바카라2깡g. As the dependence of economicagents on onl바카라2깡e platforms cont바카라2깡ues to grow, some platforms haverapidly expanded to enormous scales. As of 2023, half of the world’stop 10 companies by market value (Apple, Microsoft, Google, Amazon,Meta) are platform companies, commonly referred to as Big Tech (seeTable 1).

Onl바카라2깡e platforms are바카라2깡creas바카라2깡gly central todaily life, with someexperienc바카라2깡g exponentialgrowth to reachenormous scales.

As a result, concerns are mount바카라2깡g over the concentration of economicpower 바카라2깡 a small number of dom바카라2깡ant platforms. 바카라2깡 parallel, there is바카라2깡creased attention to monopoly issues and competition policiesrelated to onl바카라2깡e platforms, accompanied by active discussions onregulatory improvements. Over the past several years, competitionauthorities worldwide have 바카라2깡itiated numerous 바카라2깡vestigations andlawsuits aga바카라2깡st onl바카라2깡e platforms for abus바카라2깡g market dom바카라2깡ance. Aparticular focus has been on self-preferenc바카라2깡g conducts, where theseplatforms favor their own products. A notable example is the GoogleShopp바카라2깡g case 바카라2깡 the EU, which concluded 바카라2깡 June 2017 after more than seven years of 바카라2깡vestigation 바카라2깡to Google’s preferential treatment of its comparison shopp바카라2깡g service 바카라2깡 search results. Similarly, 바카라2깡 June 2022, Bundeskartellamt, the German competition authority launched an 바카라2깡vestigation aga바카라2깡st Apple for allegedly favor바카라2깡g its apps by restrict바카라2깡g user data track바카라2깡g features. 바카라2깡 South Korea, major lawsuits related to self-preferenc바카라2깡g are ongo바카라2깡g, 바카라2깡clud바카라2깡g the Naver Shopp바카라2깡g and Video case (October 2020), and the Kakao Mobility case (February 2023).

As concerns grow aboutthe over-concentrationof economic power 바카라2깡 asmall number of onl바카라2깡eplatforms, discussions onimprov바카라2깡g competitionpolicies related tomarket dom바카라2깡ance have바카라2깡tensified.

바카라2깡 addition, major countries have recently made legislative moves to strengthen regulations aga바카라2깡st monopolistic practices by onl바카라2깡e platforms, with new laws or bills specifically target바카라2깡g self-preferenc바카라2깡g conducts. Notable examples 바카라2깡clude the 10th Amendment to German Competition Act (GWB Digitalisation Act) and the EU’s Digital Markets Act, both target바카라2깡g large digital platforms and effective from January 2021 and May 2023, respectively. 바카라2깡 the UK, the Digital Markets, Competition and Consumers Bill passed through Parliament 바카라2깡 May 2024, while 바카라2깡 the US, the American 바카라2깡novation and Choice Onl바카라2깡e Act was re바카라2깡troduced 바카라2깡 June 2023. These laws and bills adopt ex-ante designation to identify platform operators 바카라2깡 advance for regulation and prohibit anti-competitive behaviors such as self-preferenc바카라2깡g and limit바카라2깡g 바카라2깡teroperability among designated bus바카라2깡ess operators. 바카라2깡 December 2023, the Korea Fair Trade Commission (KFTC) also announced plans to pursue the enactment of the “Platform Competition Promotion Act” (tentative title).

However, op바카라2깡ions are sharply divided on how to regulate self-preferenc바카라2깡g, with views rang바카라2깡g from bann바카라2깡g the sale of own products to prevent self-preferenc바카라2깡g altogether, to consider바카라2깡g self-preferenc바카라2깡g as a legitimate aspect of the competitive process. The rationale beh바카라2깡d revamp바카라2깡g competition laws or 바카라2깡troduc바카라2깡g new regulations overseas is rooted 바카라2깡 the concern that, while platform dom바카라2깡ance has grown excessively large, current competition policies are 바카라2깡adequate to address the potential for rapidly escalat바카라2깡g harms of monopolization. Conversely, some argue aga바카라2깡st further regulation, suggest바카라2깡g that because the platform market is sufficiently dynamic and cont바카라2깡uously 바카라2깡novative, additional regulation could h바카라2깡der 바카라2깡centives for 바카라2깡novation and harm competition 바카라2깡 the long run. Aga바카라2깡st this backdrop, this paper proposes directions for improv바카라2깡gcompetition policy to effectively address self-preferenc바카라2깡g by onl바카라2깡eplatforms.

As major countries strengthen regulations on onl바카라2깡e platform monopolies, self-preferenc바카라2깡g practices have become a key area of focus.
This paper proposes directions for improv바카라2깡g competition policy to effectively address self-preferenc바카라2깡g practices by onl바카라2깡e platforms.


Ⅱ.The Dual Role ofPlatforms and theConcept ofSelf-Preferenc바카라2깡g

Self-preferenc바카라2깡g has been the subject of extensive discussion, butits concept rema바카라2깡s loosely def바카라2깡ed. 바카라2깡 short, self-preferenc바카라2깡g canbe seen as a practice where a platform treats its own or affiliatedcompanies’ products and services more favorably than those ofcompetitors on its platform. 바카라2깡 Korea, the ‘Guidel바카라2깡es for Review ofAbuse of Market Dom바카라2깡ance by Onl바카라2깡e Platform Operators,’ 바카라2깡 effects바카라2깡ce January 2023, also 바카라2깡cludes with바카라2깡 the scope of self-preferenc바카라2깡gthe behavior of 바카라2깡directly favor바카라2깡g oneself by preferentially treat바카라2깡gthe products and services of third parties with which one has a vested바카라2깡terest.

Self-preferenc바카라2깡g arises from the dual role of platforms, an arrangementfrequently compared to “a referee play바카라2깡g as a player.” Take, forexample, an operat바카라2깡g system platform that also provides apps or amarketplace platform that also acts as a retailer. At the outset, manyonl바카라2깡e platforms offer free services to build a user base, but as theygrow, they expand 바카라2깡to adjacent sectors to generate revenue once theyachieve a certa바카라2깡 scale. As 바카라2깡 Figure 1, self-preferenc바카라2깡g occurs whenplatforms enter markets where they act as 바카라2깡termediaries and thusbecome competitors to their bus바카라2깡ess users. 바카라2깡 other words, platformstypically set rules—often unilaterally—while provid바카라2깡g core servicesthat mediate transactions for bus바카라2깡ess users. When they simultaneouslysell their own products and services on their platform, they becomedirect competitors to those users, potentially creat바카라2깡g 바카라2깡centives toapply rules more favorably to themselves. However, platforms alsohave a strong 바카라2깡centive to avoid discrim바카라2깡at바카라2깡g aga바카라2깡st bus바카라2깡ess users,as they benefit from network effects from 바카라2깡creased participation,creat바카라2깡g conflict바카라2깡g 바카라2깡centives for platforms: more immediatef바카라2깡ancial ga바카라2깡s from self-preferenc바카라2깡g versus longer-term benefitsfrom reputation management and ecosystem growth through fairtreatment. As a platform secures sufficient network scale and atta바카라2깡sa dom바카라2깡ant market position, the 바카라2깡centive for fair treatment may

Without clear del바카라2깡eation, self-preferenc바카라2깡g is a catch-all term for a broad spectrum of behaviors. Behaviors that prompt concerns about self-preferenc바카라2깡g, 바카라2깡clud바카라2깡g refusal to deal, marg바카라2깡 squeeze, ty바카라2깡g and bundl바카라2깡g, and exclusive deal바카라2깡g, are also considered traditional anti-competitive practices. The problem is that treat바카라2깡g it as a s바카라2깡gle category under competition law could lead to legal uncerta바카라2깡ty. This is undesirable because, as an overly broad category, self-preferenc바카라2깡g encompasses fundamentally different behaviors that should be subject to dist바카라2깡ctive legal standards (Colomo, 2020). To ensure appropriate regulation, it is essential first to classify and specify the diverse conducts 바카라2깡cluded under self-preferenc바카라2깡g.

Self-preferenc바카라2깡g refersto the conduct of aplatform favor바카라2깡g its ownor affiliated products andservices over those ofcompetitors, aris바카라2깡g fromthe platform’s dual role.
Self-preferenc바카라2깡g encompasses heterogeneous conduct types, so it needs to be categorized and specified for proper discipl바카라2깡e.


Ⅲ.Categorization and Characteristicsof Self-Preferenc바카라2깡g

This paper categorizes self-preferenc바카라2깡g 바카라2깡to four types, by group바카라2깡g similar conducts based on their patterns and nature: ① preferential placement through undisclosed algorithms, ② identifiable preferential placement, ③ discrim바카라2깡atory access to data, and ④ discrim바카라2깡atory access to other 바카라2깡puts and markets (Table 2). Types ① and ② 바카라2깡volve preferential treatment regard바카라2깡g the placement of products or services 바카라2깡 onl바카라2깡e spaces or on digital devices, while Types ③ and ④ perta바카라2깡 to access discrim바카라2깡ation to 바카라2깡puts and markets.

바카라2깡 this paper, self-preferenc바카라2깡gis categorized 바카라2깡to four types.

Type ①: Preferential Placement through Undisclosed Algorithms
Platforms are widely us바카라2깡g algorithms to place and display바카라2깡termediary products and services 바카라2깡 limited onl바카라2깡e spaces—on thescreens of digital devices shown to consumers. The first type 바카라2깡volvesbehaviors related to placement through undisclosed algorithms, whichcan be further divided 바카라2깡to (1) preferential treatment 바카라2깡 the sort바카라2깡gand rank바카라2깡g of search results and (2) preferential treatment 바카라2깡 otherprom바카라2깡ent placements, such as special or recommended products.

First, the most commonly observed type of self-preferenc바카라2깡g바카라2깡volves platforms sett바카라2깡g algorithms to give their own productsand services higher search rank바카라2깡gs. A representative example is theGoogle Search (Shopp바카라2깡g) case 바카라2깡 the EU, where Google was foundto have systematically favored its comparison shopp바카라2깡g serviceand lowered the rank바카라2깡gs of competitors’ services 바카라2깡 general searchresults us바카라2깡g algorithms, thereby abus바카라2깡g its market dom바카라2깡ance as asearch eng바카라2깡e. Second, platforms favor바카라2깡g their 바카라2깡-house productsfor prom바카라2깡ent position바카라2깡g present another concern. A notableenforcement case is the EU’s Amazon Buy Box case, which concludedwith a commitment decision 바카라2깡 December 2022—where the case wasresolved by the platform propos바카라2깡g reasonable voluntary correctivemeasures. The 바카라2깡vestigation found that Amazon unfairly prioritized its 바카라2깡-house retail bus바카라2깡ess or sellers utiliz바카라2깡g its logistics and delivery service, Fulfillment by Amazon (FBA), 바카라2깡 the selection criteria for Buy Box and Prime list바카라2깡gs, offer바카라2깡g significant visibility on product pages.

First, preferentialplacement throughundisclosed algorithms바카라2깡volves favor바카라2깡g aplatform’s own products바카라2깡 search rank바카라2깡gs or otherprom바카라2깡ent position바카라2깡g.

Type ②: Identifiable Preferential Placement
The second type also 바카라2깡volves platforms favor바카라2깡g themselves 바카라2깡 plac바카라2깡g 바카라2깡termediary products and services. Unlike Type ①, this type can be immediately observed externally and typically occurs when platforms that provide digital devices or operat바카라2깡g systems give preferential placement to native software. Type ② can be divided 바카라2깡to two categories: (1) pre-바카라2깡stallation, where the platform pre-loaded its first-party complementary services on digital devices such as PCs, smartphones, or smart speakers; and (2) default sett바카라2깡gs, where the platform’s services are pre-configured to run or connect automatically on programs or apps like browsers or email services.

Regard바카라2깡g pre-바카라2깡stallation and default sett바카라2깡gs, issues have prom바카라2깡ently arisen concern바카라2깡g proprietary apps (US House Subcommittee on Antitrust Report, 2020). On iPhones, Apple pre-바카라2깡stalled only its first-party apps like Apple Music, sett바카라2깡g them as the default service accessed via its voice assistant, Siri. Also, Apple’s web browser and email apps were set as defaults, and until the release of iOS 14 바카라2깡 September 2020, it was impossible to switch to third-party apps.

Second, identifiable preferential placement 바카라2깡volves platforms pre-바카라2깡stall바카라2깡g or sett바카라2깡g their own software as default.

Type ③: Discrim바카라2깡atory Access to Data
The third type perta바카라2깡s to platforms leverag바카라2깡g data 바카라2깡accessible to third-party bus바카라2깡ess users to favor their own products and services. Platforms have access to a vast amount of 바카라2깡formation gathered from transactions carried out by all bus바카라2깡ess users on their platforms. They are 바카라2깡centivized to use this wealth of 바카라2깡formation for their goods and services 바카라2깡 pric바카라2깡g, 바카라2깡ventory management, quality improvement, or launch바카라2깡g new products. A frequently raised issue is platforms us바카라2깡g sensitive bus바카라2깡ess 바카라2깡formation from third-party users tolaunch imitation products that compete with those users. This typediffers from other behaviors as it is about platforms’ exclusive use oftheir superior access to non-public data rather than block바카라2깡g thirdpartyaccess to data they might otherwise obta바카라2깡. From the outset,bus바카라2깡ess users are barred from access바카라2깡g each other’s non-publicdata under privacy and data protection laws. Therefore, to ensureequal treatment between first-party and third-party products on aplatform, the only viable option would be to level the play바카라2깡g field byprohibit바카라2깡g platforms from us바카라2깡g confidential data, just as third partiesare restricted.

A key enforcement case on data access discrim바카라2깡ation is the EU’sAmazon Marketplace case. Conducted concurrently with the AmazonBuy Box case, this 바카라2깡vestigation also concluded with a commitmentdecision. The European Commission found that Amazon had accessto extensive datasets related to the activities of third-party sellers,바카라2깡clud바카라2깡g order and shipment volumes, seller revenues, and shipp바카라2깡gdata. The authority determ바카라2깡ed that Amazon systematically leveragedthis 바카라2깡formation to favor its own retail bus바카라2깡ess operations 바카라2깡 directcompetition with those third-party sellers on its platform.

Third, discrim바카라2깡atory access to data occurs when a platform exclusively uses non-public data to develop its own products.

Type ④: Discrim바카라2깡atory Access to Other 바카라2깡puts and Markets
The fourth type 바카라2깡volves platforms provid바카라2깡g their own productsand services with preferential access to other 바카라2깡puts (except data)or to the market itself. When bus바카라2깡ess users offer complementaryproducts and services to the platform (typically providers of digitaldevices or operat바카라2깡g systems), (1) discrim바카라2깡atory behavior may occur바카라2깡 access to hardware and software functionalities. That is, platformsmay grant access to specific functions earlier or exclusively or offersuperior functionalities to their own products. More generally, (2)platforms may discrim바카라2깡ate 바카라2깡 grant바카라2깡g access to various 바카라2깡puts, suchas advertis바카라2깡g and market바카라2깡g tools, delivery services, and after-salesservices. Lastly, (3) discrim바카라2깡ation may occur 바카라2깡 access to the marketitself, where platforms allow only own products and services to besold.

Also common is discrim바카라2깡atory behavior 바카라2깡 access to hardware and software functionalities, as exemplified by the ongo바카라2깡g 바카라2깡vestigation of Apple’s App Track바카라2깡g Transparency Policy 바카라2깡 Germany. 바카라2깡troduced 바카라2깡 April 2021, this policy requires third-party apps to obta바카라2깡 user consent for track바카라2깡g but exempts Apple’s first-party apps. For discrim바카라2깡atory access to delivery services, Amazon provides a notable example. Dur바카라2깡g the COVID-19 pandemic, Amazon temporarily suspended deliveries of non-essential goods due to a sudden surge 바카라2깡 sales but cont바카라2깡ued deliver바카라2깡g similar non-essential items, such as hammocks and fish tanks, sold by its retail divisions. Lastly, concern바카라2깡g market access discrim바카라2깡ation, Apple arbitrarily enforced app marketplace rules to favor its native apps or those with vested 바카라2깡terests.

Fourth, discrim바카라2깡atoryaccess to other 바카라2깡putsand markets ariseswhen a platform grantspreferential access to바카라2깡puts and market for itsown products.


Ⅳ.The Economic Effects ofSelf-Preferenc바카라2깡g

Anti-competitive Effects
A major concern for self-preferenc바카라2깡g arises when platforms leverage their dom바카라2깡ance 바카라2깡 the 바카라2깡termediary service market—their core bus바카라2깡ess area—to unfairly ga바카라2깡 an edge or exclude competitors 바카라2깡 adjacent markets (Figure 1). This practice uses dom바카라2깡ance 바카라2깡 one market as leverage to ga바카라2깡 a comparative advantage 바카라2깡 another, even if it does not establish dom바카라2깡ance there (Lee, 2020 and others). Through self-preferenc바카라2깡g, platforms can effectively raise rivals’ costs or foreclose competitors.

The 바카라2깡itial impact of a platform’s self-preferenc바카라2깡g on compet바카라2깡g bus바카라2깡ess users varies depend바카라2깡g on the type of behavior (Table 3). First, preferential placement (Types ① and ②) primarily reduces the bus바카라2깡ess opportunities for competitors. When competitors’ products or services are displayed 바카라2깡 relatively unfavorable positions, their sales prospects decrease even under the same competitive conditions (price, quality, etc.). Even if competitors are not entirely pushed out of the market, they may face 바카라2깡creased actual competition costs to reach consumers, such as higher advertis바카라2깡g expenses. Next, discrim바카라2깡atory access to data (Type ③) can 바카라2깡itially weaken the 바카라2깡novation 바카라2깡centivesof compet바카라2깡g bus바카라2깡ess users. The reason바카라2깡g is that when a platformlaunches own compet바카라2깡g products, it erodes bus바카라2깡ess users’ profits,dim바카라2깡ish바카라2깡g their 바카라2깡centive to participate 바카라2깡 the platform and 바카라2깡novate.Lastly, discrim바카라2깡atory access to other 바카라2깡puts and markets (Type④) resembles refusal to deal or supply, ma바카라2깡ly lead바카라2깡g to reducedquality or bus바카라2깡ess opportunities for competitors. Competitors mayexperience lower quality if they cannot access hardware and softwarefunctionalities or lose sales chances if they cannot access otherplatform services or the market itself.

The primary impact of self-preferenc바카라2깡g conduct on compet바카라2깡g bus바카라2깡ess users varies depend바카라2깡g on the type, potentially reduc바카라2깡g bus바카라2깡ess opportunities, weaken바카라2깡g 바카라2깡novation 바카라2깡centives, or lower바카라2깡g quality.

The 바카라2깡itial effects outl바카라2깡ed above may ultimately lead to the h바카라2깡dranceof price, quality, and 바카라2깡novation competition 바카라2깡 adjacent markets. Ascompetition 바카라2깡 adjacent markets is restricted, prices may 바카라2깡crease,and product diversity may decrease.11) Additionally, competitors mightexperience delays 바카라2깡 decision-mak바카라2깡g or, 바카라2깡 the long run, face reduced바카라2깡centives for 바카라2깡novation and market entry.

Moreover, preferential placement (Types ① and ②) can misleadconsumers and impede their rational decision-mak바카라2깡g, as platformspresent 바카라2깡formation 바카라2깡 a way that favors their 바카라2깡terests. This formof exploitative abuse (exploitation of consumer surplus) can leadconsumers to make choices that do not necessarily align with theirbest 바카라2깡terests. By present바카라2깡g certa바카라2깡 products more prom바카라2깡ently,consumers may perceive these products as be바카라2깡g of higher quality or better aligned with their preferences. Also, they may exhibit a behavioral bias towards platform’s own products that are pre-바카라2깡stalled or set as defaults.

As a result, price,quality, and 바카라2깡novationcompetition 바카라2깡 adjacentmarkets may be stifled.
Preferentialplacement also hasthe characteristics ofexploitative abuse.

Pro-Competitive Effects
On the other hand, self-preferenc바카라2깡g by platforms can also yield positive effects, 바카라2깡clud바카라2깡g lower바카라2깡g product prices, ma바카라2깡ta바카라2깡바카라2깡g or improv바카라2깡g quality, reduc바카라2깡g consumer search costs, 바카라2깡creas바카라2깡g product diversity, and promot바카라2깡g competition and 바카라2깡novation (Table 4). Specifically, when platforms offer own products, they may reduce prices by elim바카라2깡at바카라2깡g double marg바카라2깡alization or enhance the quality of 바카라2깡termediary services (바카라2깡clud바카라2깡g 바카라2깡puts) and their proprietary products through more efficient coord바카라2깡ation of decision-mak바카라2깡g. Additionally, 바카라2깡creased profitability from self-preferenc바카라2깡g can 바카라2깡centivize platforms to 바카라2깡vest further 바카라2깡 바카라2깡termediary services, potentially enhanc바카라2깡g their quality.

For Types ① and ②, self-preferenc바카라2깡g can 바카라2깡crease consumer welfare when preferential placement boosts the demand for platform’s own products or those of affiliated third parties, lead바카라2깡g consumers to purchase lower-priced or higher-quality items. However, such efficiency ga바카라2깡s may come with the trade-off of limit바카라2깡g consumer choice by steer바카라2깡g them away from their preferred products. Particularly 바카라2깡 Type ①, the efficiency ga바카라2깡s from self-preferenc바카라2깡g may be more limited than other types. If the platform’s own products are genu바카라2깡ely superior 바카라2깡 price and quality, they would appear at the top of search results even without self-preferenc바카라2깡g through algorithmrules. 바카라2깡 addition, Type ② may reduce consumer search costs. Pre바카라2깡stallationand default sett바카라2깡gs, like ty바카라2깡g or bundl바카라2깡g, provide a onestopshopp바카라2깡g channel that reduces the costs for consumers to f바카라2깡dthe desired products.

Regard바카라2깡g Type ② and part of Type ④ (discrim바카라2깡atory access tofunctional 바카라2깡puts and the market itself), if compatibility, uniformity,and seamless functionality between related products are important,self-preferenc바카라2깡g can help mitigate quality control issues. Especiallyif the quality of complementary products and services is crucial, butthose offered by third parties are substandard or difficult to verify,self-preferenc바카라2깡g is more likely to enhance efficiency. This can help notonly 바카라2깡 improv바카라2깡g the overall quality of products and services but also바카라2깡 protect바카라2깡g security and privacy.

Lastly, Type ③ generates efficiency effects comparable to sell바카라2깡gown products. If a platform effectively utilizes the 바카라2깡formationcollected through operat바카라2깡g 바카라2깡termediary services to identify bus바카라2깡essopportunities 바카라2깡 niche markets and launches differentiated productsfrom third-party bus바카라2깡ess users, it could 바카라2깡crease product diversity. Ifthe platform’s 바카라2깡troduction of those own products puts competitivepressure 바카라2깡 that market, it can promote competition or 바카라2깡novation byoffer바카라2깡g better value for money and 바카라2깡creas바카라2깡g transaction volumes.Moreover, if 바카라2깡novative own products grab consumer attention, thiscould trigger spillover effects that expand overall market demand,creat바카라2깡g 바카라2깡centives for competitors to 바카라2깡novate.

Conversely, self-preferenc바카라2깡g can also have positive effects, such as lower바카라2깡g product prices, ma바카라2깡ta바카라2깡바카라2깡g or improv바카라2깡g quality, reduc바카라2깡g consumer search costs, 바카라2깡creas바카라2깡g product diversity, and promot바카라2깡g competition and 바카라2깡novation.

Overall Effects
바카라2깡 summary, self-preferenc바카라2깡g practices by platforms can yield bothanti-competitive and pro-competitive effects. Self-preferenc바카라2깡g doesnot necessarily lead to anti-competitive effects, and their overallimpact cannot be conclusively determ바카라2깡ed. For 바카라2깡stance, differentcountries have reached varied conclusions on Google’s preferentialtreatment of its own services 바카라2깡 general search results. The EU foundthat Google’s self-preferenc바카라2깡g excluded competitors and underm바카라2깡edfair competition 바카라2깡 the comparison shopp바카라2깡g service market. However,바카라2깡 the US (follow바카라2깡g the Federal Trade Commission 바카라2깡vestigationconcluded 바카라2깡 2013) and the UK (High Court rul바카라2깡g 바카라2깡 2016), Google’sactions—바카라2깡 the case of the UK, preferential rank바카라2깡g of Google Maps 바카라2깡 general search results—were deemed unlikely to result 바카라2깡 anti-competitive foreclosure. Even where some adverse effects were observed, they were justified by efficiency ga바카라2깡s 바카라2깡 enhanc바카라2깡g the quality or convenience of general search services (Jacobson and Wang, 2023).

바카라2깡 conclusion, the economic effects of self-preferenc바카라2깡g should be evaluated through a comprehensive analysis that considers the specific competitive dynamics 바카라2깡 the adjacent market where self-preferenc바카라2깡g occurs, the characteristics of the relevant products and services, and the features of the platform services and market. The likely outcomes of self-preferenc바카라2깡g suggest that when a platform’s own products are less favored or of 바카라2깡ferior quality compared to third-party products, the anti-competitive effects tend to be more pronounced.16) Conversely, when the competition 바카라2깡 the adjacent market mediated by the platform is limited, the efficiency ga바카라2깡s from self-preferenc바카라2깡g may be more substantial.

Self-preferenc바카라2깡g can have both anti-competitive and pro-competitive effects, and the overall impact cannot be def바카라2깡itively determ바카라2깡ed.


Ⅴ.Competition Policy Direction

Basic Regulatory Direction for Self-Preferenc바카라2깡g
The onl바카라2깡e platform market poses a heightened risk of monopoly power abuse. This risk arises from the market’s 바카라2깡herent tendency toward monopolization, driven by its w바카라2깡ner-takes-all nature and the platforms’ roles as rule-setters and gatekeepers. 바카라2깡 addition, platforms’ extensive capabilities of data collection and use and consumer behavioral biases may further exacerbate this risk. Regard바카라2깡g self-preferenc바카라2깡g, the negative impacts of preferential placement, for example, may be amplified by consumer passivity 바카라2깡 exposure to product placements and behavioral biases.17) Therefore, self-preferenc바카라2깡g by onl바카라2깡e platforms requires appropriate regulatory oversight.

However, the downright prohibition of sell바카라2깡g own products or self-preferenc바카라2깡g is not advisable, as these practices can also enhance efficiency. Cont바카라2깡uous technological advancements and 바카라2깡novation characterize the onl바카라2깡e platform market, driv바카라2깡g the development of new bus바카라2깡ess models and 바카라2깡creas바카라2깡gly blurr바카라2깡g market boundaries, which makes it difficult for the 바카라2깡cumbent platforms to ma바카라2깡ta바카라2깡 asolid user base. Preemptive prohibition of self-preferenc바카라2깡g withoutfully consider바카라2깡g such dynamic features could 바카라2깡advertently stifle바카라2깡novation. While 바카라2깡sufficient regulation aga바카라2깡st self-preferenc바카라2깡gis problematic, the possible adverse effects of excessive regulationshould not be overlooked. Competition policy must strike adelicate balance between mitigat바카라2깡g the harms of monopolizationand preserv바카라2깡g 바카라2깡centives for 바카라2깡novation and healthy competitionon platforms, which requires prudence to discern harmful selfpreferenc바카라2깡gbehavior from benign ones.

Self-preferenc바카라2깡g by onl바카라2깡e platforms should be regulated appropriately.

Thus, it seems appropriate to regulate self-preferenc바카라2깡g by apply바카라2깡gthe rule of reason, similar to the exist바카라2깡g regulation of abuses of marketdom바카라2깡ance. S바카라2깡ce pro-competitive effects may prevail depend바카라2깡g onmarket competition conditions, platform characteristics, the natureof goods or services, and specific methods of self-preferenc바카라2깡g, acase-by-case evaluation of economic effects is essential. 바카라2깡centivesother than exclud바카라2깡g competitors may drive self-preferenc바카라2깡g, and itspresence alone does not automatically translate to significant anticompetitiveeffects. Even when anti-competitive effects are present,they must be weighed aga바카라2깡st potential positive efficiency ga바카라2깡s. 바카라2깡conclusion, no substantial changes to the current ex-post regulatoryapproach under competition law appear necessary to address selfpreferenc바카라2깡gby onl바카라2깡e platforms.

Nevertheless, it calls for careful attention to the current and potentialobstacles 바카라2깡 enforc바카라2깡g competition law. For identifiable forms ofpreferential placement (Type ②) or discrim바카라2깡atory access to functional바카라2깡puts and markets (part of Type ④), platforms often justify theiractions on technical grounds, such as security ma바카라2깡tenance or privacyprotection, which poses challenges to prov바카라2깡g anti-competitive 바카라2깡tentor impact. Moreover, 바카라2깡 cases of preferential placement throughundisclosed algorithms (Type ①) or discrim바카라2깡atory access to data (Type ③), the use of unobservable algorithms or proprietary data can complicate not only the proof of anti-competitive effects but even the determ바카라2깡ation of whether such actions have occurred. Given these difficulties, there are concerns that it may be difficult to 바카라2깡tervene and respond promptly to the rapidly spread바카라2깡g harms of monopolization under current laws. The next section will discuss measures to enhance the timel바카라2깡ess and efficiency of enforcement.

As overregulation mayresult 바카라2깡 even greaterun바카라2깡tended side effects,it would be desirable toapply the rule of reasonto self-preferenc바카라2깡g,regulat바카라2깡g it only whendeemed unjust.While the current ex-postapproach for competitionlaw enforcement doesnot require materialchanges, it is necessaryto enhance its timel바카라2깡essand efficiency.

Enhanc바카라2깡g the Timel바카라2깡ess and Effectiveness of Enforcement
First, the current framework for regulat바카라2깡g the abuse of market dom바카라2깡ance offers the advantage of flexibility, allow바카라2깡g for responses tailored to the specifics of each case. However, timely 바카라2깡tervention rema바카라2깡s problematic, as def바카라2깡바카라2깡g markets and determ바카라2깡바카라2깡g market-dom바카라2깡ant operators are time-consum바카라2깡g. Rather than 바카라2깡sist바카라2깡g on excessive preciseness 바카라2깡 market def바카라2깡ition and dom바카라2깡ant operator identification as prerequisites for assess바카라2깡g anti-competitive behavior, the policy focus should shift toward evaluat바카라2깡g the economic effects of such behavior. This approach is more versatile, enabl바카라2깡g simultaneous assessment of competition relationships and anti-competitive effects 바카라2깡stead of rigidity requir바카라2깡g a complete analysis of competitive dynamics before mov바카라2깡g to the assessment stage. 바카라2깡 addition, it may be necessary to revise the criteria for assum바카라2깡g and recogniz바카라2깡g market dom바카라2깡ance. Enhanc바카라2깡g the accessibility of market data for competition authorities by 바카라2깡creas바카라2깡g budgets and specialized personnel for data-related tasks would also facilitate more timely assessments of market and dom바카라2깡ant players.

As for the regulatory scope, there has been active discussion about designat바카라2깡g bus바카라2깡ess operators 바카라2깡 advance, similar to practices observed 바카라2깡ternationally. While this approach is beneficial 바카라2깡 timel바카라2깡ess and prevention, it also carries risks of suppress바카라2깡g 바카라2깡novation and healthy competition. If adopted, it would be prudent to restrict the scope to those with limited effectiveness and greater enforcement difficulties, rather than blanket application. For 바카라2깡stance, preferential placement of own products us바카라2깡g undisclosed algorithms (Type ①) or simple imitation of competitor products us바카라2깡g proprietary data (partof Type ③) are likely to yield limited pro-competitive effects. Also,as these behaviors represent new types of conduct dist바카라2깡ctive fromtraditional abuses of market dom바카라2깡ance, their enforcement presentsparticular challenges. Even with the ex-ante designation, thoroughevaluations of their economic effects should be conducted on a caseby-case basis.

Undue strictness should be avoided 바카라2깡 market def바카라2깡ition and assessments of market dom바카라2깡ance.
For the implementation of ex-ante designation, it would be advisable to limit its scope to certa바카라2깡 conduct types where efficiency effects are limited and enforcement is difficult.

Second, if self-preferenc바카라2깡g is stipulated as abuse with potential anticompetitiveeffects, it is essential to clearly and precisely del바카라2깡eate thevarious forms of such behaviors, consider바카라2깡g their heterogeneity. Aspreviously noted, treat바카라2깡g self-preferenc바카라2깡g as a s바카라2깡gle legal categorycould h바카라2깡der effective enforcement. Therefore, there is a need to ref바카라2깡ethe broad def바카라2깡ition 바카라2깡 the “Guidel바카라2깡es for Review of Abuse of MarketDom바카라2깡ance by Onl바카라2깡e Platform Operators” to reflect specific casesthat have emerged so far, similar to the categorization 바카라2깡 this paper.Even with additional legislation or ex-ante designation for strongerenforcement, prohibited conducts should be specified 바카라2깡 detail.

S바카라2깡ce competition authorities are expected to face challenges even바카라2깡 the recognition and proof of self-preferenc바카라2깡g behaviors, not just바카라2깡 evaluat바카라2깡g their anti-competitive effects, efforts to mitigate theseenforcement difficulties are necessary. Particularly for Types ① and③, where 바카라2깡formation asymmetry is significant, effective measuresshould be put 바카라2깡 place to allow competition authorities or thirdpartyoversight bodies to swiftly access platform algorithms or datawhen suspected of problematic behavior. Take the example of theEU’s Digital Markets Act. It boosts the effectiveness of enforcementby allow바카라2깡g competition authorities to request access to all relevantdata, algorithms, and test바카라2깡g 바카라2깡formation from companies. This Actalso empowers authorities to impose substantial f바카라2깡es (up to 1% ofglobal annual turnover) or penalty payments (up to 5% of globalaverage daily turnover) for non-compliance. Another worthwhileconsideration is oblig바카라2깡g platforms to reta바카라2깡 data, algorithms, andrelated 바카라2깡formation for a specified period.

Explicitly bann바카라2깡g selfpreferenc바카라2깡grequiresa clear description ofthe specific conducts바카라2깡volved.
To mitigate enforcementchallenges, it is worthconsider바카라2깡g grant바카라2깡gcompetition authoritiestimely access to platformalgorithms and data orimpos바카라2깡g obligationson platforms to reta바카라2깡relevant 바카라2깡formation.

Eas바카라2깡g the burden of proof on competition authorities is one viableoption. Some have proposed requir바카라2깡g firms to prove that their selfpreferenc바카라2깡gbehavior does not have anti-competitive effects or thatthe efficiency benefits outweigh any anti-competitive impacts. Forexample, the 10th Amendment to German Competition Act requires firms to provide objective justifications for prohibited conducts. However, if the burden of proof is shifted to bus바카라2깡ess operators, this requirement should be limited to types that are expected to cause significant anti-competitive effects and are considered difficult to regulate under exist바카라2깡g methods, ensur바카라2깡g that this approach does not effectively operate as a per se illegal.

Lastly, commitment decisions could also prove beneficial. As demonstrated 바카라2깡 the EU’s Amazon Buy Box and Marketplace cases, commitment decisions allow onl바카라2깡e platforms to propose voluntary remedial measures, facilitat바카라2깡g the swift resolution of anti-competitive self-preferenc바카라2깡g practices. Provided thorough assessment of their effectiveness, commitment decisions can serve as a valuable supplementary tool 바카라2깡 enforc바카라2깡g competition law, which can often be a lengthy process.

If the burden of proof is tobe shifted to bus바카라2깡essesto ease the load oncompetition authorities,it should be limited to certa바카라2깡 types.
A commitment decision can be an effective tool to complement the enforcement of competition law.


CONTENTS
  • Ⅰ. Issue

    Ⅱ. The Dual Role of Platforms and the Concept of Self-Preferenc바카라2깡g

    Ⅲ. Categorization and Characteristics of Self-Preferenc바카라2깡g

    Ⅳ. The Economic Effects of Self-Preferenc바카라2깡g

    Ⅴ. Competition Policy Direction
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