Applying the current regulatory framework for abuse of superior bargaining position to abusive conduct (gapjil in Korean) by digital platforms presents two key challenges: identifying harmed parties (victims) and incorporating efficiency considerations. Requiring the identification of each harmed party imposes significant procedural burdens in handling platform abuse cases and may be inadequate to remedy actual harm. In addition, given the intermediary nature of platform services, unfair trading practices may yield direct benefits for other user groups besides victims. Therefore, it is necessary to improve the relevant systems to reduce the burden of identifying victims and to examine possibilities for efficiency gains.

Ⅰ. Introduction

Public concern over abusive practices by digital platforms―often referred to as gapjil in Korean―has been rising. In recent years,news reports have repeatedly covered food delivery apps imposing excessive commissions on partner restaurants or introducing new fee schemes to bypass controversy about commissions. Similar news has highlighted content platforms forcing unfavorable terms on creators, ride-hailing apps discriminating against taxi drivers depending on the degree of business relevance, and e-commerce platforms mobilizing business users for promotional campaigns and passing costs onto them. The steady stream of reports about digital platforms abusing their superior bargaining position has prompted calls for a new regulatory framework tailored to platform markets.

The call for a new regulatory approach stems from the recognition that unfair practices in digital platforms differ fundamentally from those in traditional firms, both in manner and impact. As will be explained in detail in the following sections, platform businesses have unique characteristics that distinguish online platforms from traditional firms. The issue is that these very characteristics function both as forces that enable platforms to exploit their business users more easily and as sources that drastically enhance user benefits. Considering the potential for exploitation, more comprehensive and stringent regulation is needed; however, once efficiency effects are taken into account, such regulation may not always be the optimal solution.

Because platform business strategies create both economic harm and benefits, identifying the appropriate regulatory level and approach proves challenging. Some argue for stronger regulation to rein in platforms’ considerable capacity to exploit business users, and others caution that excessive intervention could undermine their positive contributions. Still others advocate industry self-regulation over direct government oversight as a means of fostering an efficient regulatory environment.

Recent legislative trends in Korea appear to lean toward stronger regulation, particularly in the form of ex-ante oversight and commission caps. Although none have been enacted, 41 bills on digital platform regulation have been introduced since 2021, many of which include ex-ante provisions. Opponents of the tougher stance generally favor adapting existing frameworks―principally the Monopoly Regulation and Fair Trade Act (the Fair Trade Act) and the Act on Fair Transactions in Large Retail Business (the Large Retail Business Act) to platform markets. Some have also proposed incorporating industry self-regulation.

Whether through ex-ante rules or self-regulation, strengthening the effectiveness of existing ex-post enforcement mechanisms, especially under the Fair Trade Act, remains essential. Neither approach can anticipate or codify all possible forms of unfair conduct in advance. Expost remedies are thus indispensable for detecting and sanctioning practices outside predefined regulatory boundaries. Moreover, the prospect of robust ex-post enforcement provides a key incentive for making self-regulation effective.

However, even the ex-post regulatory regime is not fully suited to the way digital platforms operate. Focusing on the Fair Trade Act, a key expost regulation addressing abusive and exploitative conduct, this study examines the issues that arise when applying it to digital platform transactions and explores possible directions for improvement. Strengthening the effectiveness of existing ex-post regulation is necessary not only as a complementary mechanism when introducing a new governing system but also as a safeguard against regulatory gaps while the introduction of a new regulatory framework is delayed.

Ⅱ.Regulating Abuse of Superior Bargaining Position: Distinctive Characteristics of the Position of Platforms

Abuse of superior bargaining position occurs when a business entity with transactional leverage (Party A) coerces its counterparty (Party B)into unfair trading terms and exploits its gains. To determine whether such abuse has occurred, the Korea Fair Trade Commission (KFTC) first ① identifies whether Party A holds a superior bargaining position over Party B (existence of superior bargaining position) and then ② assesses whether Party A’s conduct has forced unfair trading terms on Party B (unfairness). This section examines the concept of superior bargaining position in detail and considers how the superior bargaining position of digital platforms differs from that of traditional firms.

Despite the absence of a clear definition of superior bargaining position, a degree of consensus has emerged on the factors to determine whether it exists. The Supreme Court of Korea has held that superior bargaining position should be assessed by “comprehensively considering market conditions the parties are facing, disparity in overall business capacity between them, and the characteristics of the goods or services involved” (Supreme Court Decision, 97Nu19427, June 9, 2000). The existing literature categorizes these factors into two: (i) the binding force within trading relationships and (ii) differences in overall economic capacity (Shin, 2015). Put simply, bargaining position concerns (i) transactional dependence and (ii) disparities in scale or capabilities.

The literature finds that information asymmetry and transactional dependence are the sources of bargaining power. Information asymmetry arises not only when Party A possesses more information than Party B but also when Party A learns about what was exclusively known to Party B. For example, when Party A does not know about Party B’s production costs or methods, Party B may receive fairly adequate compensation, but once Party A becomes privy to these details, it can propose more exploitative terms.

It is well established that digital platforms collect and use data at a scale and quality greatly surpassing the capabilities of traditional firms. They can track consumer data that is difficult for traditional firms to obtain, such as search patterns, product comparisons, and final purchase decisions. This sharply contrasts with conventional firms, which can only check their sales volumes. The ability to combine information about consumers and business users gives platforms far stronger bargaining leverage than traditional firms.

The second source, transactional dependence, can be divided into monopsony power and hold-up from relationship-specific investment. Monopsony (or buyer) power arises when a supplier has few or no alternative buyers. The hold-up occurs when a supplier has invested in assets of little or no value to other trading partners and must continue dealing with that particular buyer to recoup its investment.

In traditional markets, monopsony power changes slowly, and it is uncommon for Party A to suddenly expand its buying power and revise trading terms.5) In contrast, digital platform markets evolve rapidly, allowing the degree of monopsony power to change just as fast. Moreover, because a counterparty’s transactional dependence rests on access to users that the platform secures on the opposite side (per the cross-side network effects), monopsony power may be significant even when the platform’s market share is low, once it secures a sufficiently large and loyal user base. As a result, platforms would have more opportunities than traditional firms to modify trading terms by taking advantage of the increase in buying power.

Concerns over hold-up from relationship-specific investment are less pronounced for platforms. For business users, platform-specific investments typically amount to little more than the cost of developing algorithms or adapting to the platform’s transaction system.

III. Challenges in Applying Current Regulations on Abuse of Superior Bargaining Position to Platforms

Current regulatory practices concerning the abuse of a superior bargaining position generally follow two steps: ① assessing whether a superior bargaining position exists and ② determining whether Party A’s conduct constitutes a sufficiently improper abuse. To establish whether the suspected firm qualifies as Party A (with a superior bargaining position), the affected counterpart, Party B, must first be identified. Because a superior bargaining position is inherently relative, it can only be confirmed by comparing the circumstances and capacities of the two parties. Demonstrating unfairness further requires specific and concrete identification of the harm suffered by Party B, as both the nature and extent of the harm should be examined. Existing regulations, however, contain no procedure for weighing the positive effects that a transaction may generate for other stakeholders, since the harmed Party B is evident, and no third party beyond Parties A and B is typically treated as a direct stakeholder.

However, platforms that set general trading rules within the digital ecosystems they create may cause broader harm to business users rather than to a limited number of specific counterparties. For intermediary platforms, direct stakeholders include both business users and consumers, and business users themselves may be segmented into multiple groups facing different circumstances. In such settings, even when certain business users (Party B) are harmed, consumers or other business users may experience positive economic effects.

These characteristics highlight two main challenges in applying existing regulations on the abuse of superior bargaining position to digital platforms: ① the difficulty of specifying harmed parties (Party B) and ② the potential efficiency gains accompanying exploitative conduct. The current framework may fail to capture the full range of economic effects arising from conduct by platforms, limiting the precision and effectiveness of regulatory responses.

These challenges call for closer examination of the rule-setting authority of digital platforms. Platforms provide transaction venues but do not select individual participants. Rules are established when users and service duration cannot be specified. Yet abuse of bargaining position always stems from changing trading terms, and for platforms,this authority is intrinsic and fundamental.

For traditional dominant firms (Party A), changing trading terms is not always unconstrained. Each contract requires negotiation with Party B, and its alternative trading partners exert indirect competitive pressure. Platforms, by contrast, face competition from rival platforms but retain fundamental authority to establish or revise transaction rules without consulting individual vendors. In terms of their capacity to change trading terms, platforms thus possess greater potential to abuse bargaining position than traditional firms.

Because this rule-setting authority operates uniformly and without discrimination, it constrains individualized abuse toward specific Party Bs. Traditional Party As have exercised transactional leverage through individual contracts with counterparties such as suppliers, modifying terms over time. However, platforms that govern transactions through general rules cannot easily tailor terms to individual business users.11)12) The main reason lies in the large number of counterparties and their inability to determine who participates and for how long. Another stems from their standing and responsibility as rule-setters: excessive or self-serving use of this authority against individual users risks eroding credibility as platform operators and weakening their competitive position. Such misuse also invites political and public pressure. As abuses by platforms reach a broader range of stakeholders than those by traditional dominant firms, public scrutiny tends to be much stronger.

Given these characteristics, the requirement to specify Party Bs does not reflect the realities of platform transactions. The power of digital platforms to abuse their superior bargaining position comes from their general rule-setting authority, rather than individual contractual relationships. Yet platforms’ incentives to restrain abuse also come from that same authority. Because the platform’s power to abuse and its incentive to exercise restraint both arise from the rule-setting authority that is not directed at specific trading partners, requiring identification of an individual harmed party is somewhat inconsistent with economic reality.

Considering the platform’s intermediary function and relationship with vendors, its business strategies that outwardly resemble traditional abuses of superior bargaining position can produce unintended outcomes. When platforms revise trading terms for business users, the changes directly affect consumers, even if the new terms are only somewhat unfavorable to the users. In certain circumstances, consumer welfare may even improve. Suppose a food delivery app passes on delivery fees previously shared with consumers entirely to restaurants, but restaurants cannot find a way to pass those costs onto consumers. While these changes are clearly disadvantageous to restaurants, they can benefit consumers. If the app transfers part of its costs to restaurants and uses all the resulting savings to issue discount coupons to customers, the outcome is vastly unfavorable for restaurants. While the platform gains little, consumers alone enjoy significant benefits. Moreover, platform ecosystems often encompass closely linked adjacent service areas. When the delivery app collects additional fees from restaurants and disburses them to delivery drivers or agencies, the resulting adjustment constitutes a change in trading terms that harms restaurants and benefits drivers.

Second, platforms can capitalize on the data generated through their intermediary activities. By facilitating transactions, they collect extensive information on both business users and consumers. These data can be used to improve transactional convenience, enable more satisfactory matches, and support the development of products and services that are more appealing to consumers and business users alike. These efficiency gains have already been widely observed in practice.

Ⅳ. Policy Recommendations

Second, the regulatory refinement must incorporate ② an assessment of the impact on the trade practice.15) Even when each harm to individual parties is not large, widespread instances can materially distort fair trade practices. Accordingly, the adverse effects of platform business strategies should be evaluated with appropriate scope and rigor. One possible approach is to add anti-competitiveness to the criteria for unfair trading practices. However, requiring the same level of proof as in the market-dominant position would weaken regulatory effectiveness. It is necessary to design the institution by appropriately calibrating the evidentiary standard according to the overall impact on the market practice, and in the future operation of the institution, careful handling―particularly by the courts―will be required.

Lastly, ③ efficiency-enhancing effects should be taken into consideration. Platform business strategies involve multiple direct stakeholders beyond the harmed counterparties, and the economic impacts on them are both immediate and substantial. When platform strategies generate positive outcomes for stakeholders, ignoring them could inadvertently undermine efficiency across markets and the overall economy. One approach is to allow firms to invoke efficiency defenses, as in cases involving abuse of market-dominant position.

The position that allows platforms to exploit business users is closer to an absolute one exercised within the trading ecosystems they create than to relative leverage over specific counterparties. This conduct aligns more closely with abuse of market-dominant position than with abuse of superior bargaining position (see Box 1).

To transition from the abuse of superior bargaining position by platforms to the abuse of market-dominant position, two issues must first be addressed. First, the regulatory framework needs to be refined to determine the market-dominant position based on a platform’s ability to alter trading terms rather than market share. For traditional firms, a 50% market share has long served as the benchmark for market dominance. However, for platforms, defining the relevant market is difficult, and a 50% threshold may not be proper to capture market power. As the rule maker, platforms can often exert substantial influence even without large market shares. Once a platform secures a sufficient base of single-homing users on one side, competitive pressure from rival platforms weakens, making it easy to change trading terms. KFTC’s recent attempt to include user numbers and mediated transaction volumes, alongside market share, as presumptive indicators of market power can be viewed as a step in this direction. For the concrete policy suggestions, soft institutional adjustments that modify the application of the existing system can also be considered, in addition to institutional reform through new legislation.

Second, steps should be taken to include exploitative abuse in the enforcement of regulations on the abuse of market-dominant position. Abuse of market dominance generally takes two forms: exclusionary abuse, which pushes out competitors or prevents new entry, and exploitative abuse, which imposes unfair prices or conditions on counterparties. Globally, enforcement against exploitative abuse has been withheld. Although there are occasional cases where the exploitation of business users by platforms results in the exclusion of competitors, in principle, this involves using one’s own business capabilities to extract benefits from the trading partner. As such, regulating exploitative conduct within the market dominance abuse rules would be difficult. Nevertheless, recent developments in the European Union and several European countries show a growing tendency to examine exploitative abuse while regulating abuse of market dominance by platforms.16) Korea, too, should begin exploring ways to address such abuse under the market dominance regime.