Proponents and opponents of regulation both spurn South Korean President Yoon Suk Yeol’s attempt at compromise.

As the operator of a burger shop in southern Seoul, Hwang Seong-koo had a growing feeling that he was not feeding customers so much as sating the appetite of online delivery services like Coupang Eats and Baedal Minjok, known as Baemin.

These companies, which accounted for almost a third of his sales, were holding onto as much as 30% of his customers’ order payments to cover brokerage, transaction, and delivery fees.

“I felt like I was a modern slave living in a vicious system,” Hwang said. “Is that a righteous distribution? I couldn’t help but reduce delivery portion sizes due to the high fees.”

Last April, Hwang delisted his shop from South Korea’s major delivery apps. His gross sales have dropped significantly with the shift in focus back to takeout orders and in-store diners, but for him, it has been a worthwhile tradeoff given the high cost of working with the platforms.

“I might get more money,” he said. “But I don’t want to go back.”

As with restauranteurs like Hwang, many South Korean taxi drivers are feeling squeezed by the rising fees collected by the country’s dominant driver dispatch app, Kakao T. Last year, South Korean President Yoon Suk Yeol called Kakao T “predatory” and “tyrannical” for undercharging to drive out competitors and then jacking up rates to the detriment of users. Other politicians have raised concerns about the outsized market power enjoyed by dominant local platforms in areas such as online fashion and hotel bookings.

Although elected in 2022 on a conservative platform promising deregulation, Yoon has pushed to rein in the market power of major online platforms, particularly since a network outage months after his inauguration temporarily knocked out a range of Kakao services across South Korea, including the company’s popular messaging app, KakaoTalk.

Yet, while many small businesses and liberal opposition politicians support the notion of more closely regulating internet services, Yoon’s efforts have struggled in the face of resistance from both the country’s homegrown internet powers and the US, Seoul’s security patron. A compromise move by his administration to abandon a draft law covering the sector in favor of amending existing antimonopoly legislation is so far looking even more problematic.

The South Korean government’s flailing quest to rein in the market power of internet platforms contrasts with successful recent pushes by the European Union and Japan, whose approaches Seoul sought to build on. Yet, Yoon’s efforts have faced greater opposition at home because so many of the online service providers Seoul is trying to restrain are local companies, rather than US ones.

Even though Seoul does not have its sights centered on American platforms, Yoon’s initiative has still faced heavy backlash from Silicon Valley and Washington. While the US runs a large trade deficit with South Korea, Washington has been holding on to a small surplus in digital services while fretting that Chinese companies could undermine the position of US platforms like Google and Apple.

Referring to the draft Platform Competition Promotion Act the Yoon administration unveiled almost a year ago, Carol Miller, a congresswoman representing West Virginia, said earlier this year, “The PCPA would benefit Chinese companies, put our national security at risk and negatively impact our economy.”

In an echo of the 2022 EU Digital Markets Act, Yoon’s PCPA would have imposed greater restrictions on designated dominant digital platforms, in part by constraining the cross-promotion of different types of services to squeeze out upstart competitors.

US politicians and lobbyists trumpeted the fact that none of the companies expected to fall within the PCPA’s spotlight were Chinese—while overlooking how most would be South Korean, rather than American.

Naver, South Korea’s biggest internet company, for example, had a 57.3% market share in online search over the first ten months of 2024, far outpacing Google, according to Internet Trend, a local internet data service. Rival Kakao is even more dominant in its original stronghold in messaging as well as playing a leading role in ride-hailing. Baemin, the leading food delivery platform, was acquired by Germany’s Delivery Hero in 2021.

Still, South Korean internet companies also worry that new regulatory restraints could benefit Chinese rivals. Already, Coupang, which South Korean consumers indicated was their most preferred e-commerce platform in a government survey last year, is losing sales due to heavy discounting by Chinese competitors including Alibaba Group’s AliExpress, PDD’s Temu, and Shein.

“New China commerce entrants remind us that barriers to entry are low, and consumers can switch shopping options faster in retail than in almost any other industry,” said Coupang CEO Kim Bom-suk in May.

In September, the Yoon administration threw in the towel on the PCPA, with Korea Fair Trade Commission (KFTC) chairperson Han Ki-jeong saying the government would instead seek to amend the existing Monopoly Regulation and Fair Trade Act.

“Even if the legislative form is changed, in terms of content, most of the content of the bill that we promoted separately last time will be reflected in the amendments,” he said at a news briefing. “We believe that the purpose and content are more essential than the legislative form, and it is necessary to adapt to each country’s situation.”

Indeed, under the proposed amendments, the government would still designate specific dominant platforms for greater scrutiny but focus more on intervening when unfair practices are suspected than on preempting them. Platforms with a market share of 60% or more and at least 10 million users, as well as annual local revenues of more than KRW 4 trillion (USD 2.9 billion), would get the most attention.

But the government’s new approach has failed to mollify opposition to new regulation while at the same time disappointing those pushing for decisive action.

In the eyes of local online platform companies, the problem is precisely that the new approach carries over much of what was in the draft PCPA.

“Nothing has changed,” the Digital Economy Research Institute, the research arm of industry group Korea Internet Corporations Association, told Nikkei Asia in a statement. “All the stuff is included in the revised bill.

“We worry that applying identical regulations to a wide range of platform markets will kill innovation in the ecosystem,” the group said. “The best way is to let companies set up their own guidelines.”

US criticism of the Yoon administration’s effort has not abated either. Two and a half weeks after the KFTC’s announcement of its strategic shift, representative Miller submitted a bill that would require the US Trade Representative to report to Congress on discriminatory South Korean moves against US platforms and encourage retaliatory trade measures if they are found to have been disadvantaged.

“The Republic of Korea is an important economic and security partner of ours, but we cannot stand by and let US digital companies be targeted by their laws,” she said.

President-elect Donald Trump can be expected to take an even more belligerent stance, according to Haeyoon Kim of the Korea Economic Institute in Washington and Simon Lester of the Baker Institute for Public Policy in Houston.

“Whereas the Biden administration has been relatively restrained in challenging foreign digital regulations, a potential second Trump presidency would likely more aggressively promote the argument of discriminatory effects, which could strain the US-Korea alliance if not carefully handled,” Kim and Lester wrote in an analysis last month.

At the same time, activists pushing for regulation fear the amendments advocated by the KFTC would be insufficient to curb abuses of market power.

Lee Yeon-ju, a coordinator with the advocacy group People’s Solidarity for Participatory Democracy, believes that enforcement under the new approach will take too long and that the regulatory focus has been narrowed too much, expressing worry that Coupang in particular will be left out. “We need a new law,” she said.

An analyst at another economic research center added: “I’m afraid the KFTC will not be able to control platform companies effectively with the revisions. The agency needs to be given more power and authority to investigate big online platform companies’ abusive activities.”

With its legislative proposals pending in the opposition-dominated National Assembly, the government is attempting to use informal mechanisms to address complaints while deploying existing legal tools to tackle abuses.

Last month, the KFTC imposed a KRW 72.4 billion (USD 52.5 million) fine on Kakao T for forcing competing ride-hailing services whose drivers received orders through its app to share internal data about the drivers for its own benefit.

The KFTC noted that Kakao T’s share of the mainstream taxi-hailing market exceeded 96% in 2022. The fee marks a record penalty for a South Korean company for abuse of market power, although Kakao T has denied wrongdoing.

The government has also set up a forum for restauranteurs to discuss market practices directly with delivery app operators, but four months of discussions have yielded little.

The failure of this course, though, might ultimately help the government to finally reach a consensus with the Democratic Party, which holds a majority in the National Assembly.

“We strongly warn Coupang and Baemin,” Democratic lawmakers said at a news conference in end-October. “We will push for passing the [PCPA] quickly if their negotiations with small business owners fail.”

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