Survey Reveals 52% of Korean Startups Anticipate Negative Impact from Proposed Platform Regulation

In December 2023, the South Korean government announced its intention to introduce regulations targeting major online platform companies, with the Korea Fair Trade Commission taking a leading role in the initiative. The proposed regulations aim to designate key platform companies as “dominant platform operators” and restrict them from engaging in frequent unfair practices within the platform market.

However, the announcement has ignited a vigorous debate within the Korean startup ecosystem regarding the potential impacts of the proposed legislation.

Startup Alliance, a prominent private support organization for the domestic startup ecosystem, recently unveiled the results of a ‘Perception Survey on the Impact of the Platform Competition Promotion Act on the Startup Ecosystem,’ conducted from January 22 to January 29.

The survey, which polled 106 domestic startup CEOs, founders, and co-founders, revealed a notable divide in opinions. A significant 52.8% of respondents expressed concerns that the Platform Competition Promotion Act would exert a negative impact on the startup ecosystem. Conversely, only 14.1% believed it would have a positive effect.

Of particular concern is the perception among platform startups, with 54.4% expressing a negative outlook towards the proposed Act. This contradicts assertions by the Fair Trade Commission that the legislation would safeguard small and medium-sized platforms and foster industrial ecosystem development.

Respondents highlighted various apprehensions regarding the potential ramifications of the Platform Competition Promotion Act. Chief among these concerns, at 50.9%, was the fear that regulating unprofitable startups due to large transaction volumes or user bases could stifle the growth trajectory that drives the J curve phenomenon.

Other significant concerns included the potential for increased domestic influence of global platform giants such as Google and Netflix (45.3%), ambiguity surrounding the standards for regulatory application (39.6%), and the anticipated difficulty for startups in recovering or securing investments through platform companies (32.1%). In response to these concerns, the Startup Alliance has organized a discussion session titled ‘Platform Regulation Act and the Future of the Digital Economy,’ in collaboration with the Digital Economy Forum on January 31.

As South Korea navigates the complexities of regulating its digital landscape, the debate surrounding the Platform Competition Promotion Act underscores the critical importance of balancing regulatory measures with the needs and concerns of the vibrant startup ecosystem. The outcome of these deliberations will likely shape the trajectory of innovation and entrepreneurship in South Korea’s digital economy for years to come.

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