Coupang grew up on customer trust... Competition law sharpens [Daeryun’s Biz law forum]

The Coupang incident is not limited to the area of ​​personal information law.
Fair trade legal evaluation possible considering market dominant position
Large platforms should be required to take responsibility commensurate with their influence.

The recent personal information leak incident that occurred at Coupang goes beyond a simple failure to protect information and raises important issues worth reexamining from a fair trade law perspective. So far, personal information leak cases have been mainly discussed in the area of ​​the Personal Information Protection Act or the Information and Communications Network Act, but if the platform company that is the party to the leak has a market dominant position or an equivalent competitive advantage, the legal evaluation has no choice but to expand to the area of ​​the Fair Trade Act (or competition law).

Information leakage, distortion of the entire platform business order

The essence of platform business lies in trust. Consumers gain convenience and price competitiveness in exchange for providing personal information, and the platform uses this to strengthen economies of scale and network effects. The problem is that if personal information is leaked in this structure, the damage is not limited to infringement on the rights of individual consumers, but also has the potential to distort the competitive order of the market as a whole.

In particular, large platforms such as Coupang have a structure in which trading partners have limited options. In this situation, accidents that occur due to neglect of personal information management can act as a barrier to entry for competing businesses and at the same time result in consumers being forced to make 'cut-and-run' transactions.

The Fair Trade Act has traditionally regulated acts that restrict external competition, such as price, transaction terms, and exclusive transactions. However, the recent trend in competition law is to recognize non-price factors such as data, algorithms, and damage to platform trust as important competitive variables. The level of personal information protection is also an extension of that.

Avoiding responsibility after the fact also distorts consumer choice.

Looking at this Coupang incident from a fair trade law perspective, the key points can be summarized in three points.

First, whether a market dominant position or equivalent competitive advantage exists. In general, when determining market dominance, not only market share but also transaction dependence in the relevant market, substitutability, and level of entry barriers are comprehensively considered. Coupang's transaction proportion and frequency of use in the e-commerce platform market, especially its repetitive use structure in the area of ​​daily consumer goods, are not unrelated to these judgment factors.

The second is the so-called ‘lock-in effect’. Membership structure, fast delivery infrastructure, points and subscription benefits, etc. act as factors that substantially increase consumers' switching costs. On the surface, it seems like a device to expand consumer benefits, but if the benefits result in a structure that makes it difficult for consumers to move to another platform even if they are dissatisfied with the level of personal information protection or transaction conditions, this could be evaluated as a competition-limiting effect.

Third, there is the issue of data combination and accumulation. Large platforms continue to strengthen their competitive advantage by combining and analyzing multi-layered data such as purchase history, search history, payment information, and delivery information. Neglecting management of personal information protection under this data combination structure may affect the overall data-based competitive order. If a market-dominant business enjoys a competitive advantage through data combination but does not fulfill its corresponding protection obligations, it can raise an issue under fair trade law. Evading responsibility or delaying damage relief during the response process after an accident also acts as a factor that distorts consumers' rational choices.

Germany regulates unauthorized use of data for 'abuse of market dominant position'

This issue is not only being discussed in Korea. The European Union (EU) and German competition authorities already treat data and privacy protection as an important element of competition law.

In the process of enforcing competition laws on large digital platforms, the European Commission has continuously raised issues about the impact of personal information collection and use on consumer choice and competition structure. In particular, it makes clear that if the platform actually functions as an essential transaction counterparty, the conditions for processing personal information may be evaluated as unfair transaction conditions. It is an approach based on the recognition that personal information protection is a factor that determines the quality of competition beyond regulatory compliance issues.

The case of the German Federal Cartel Office is more direct. German competition authorities took issue with the practice of a dominant platform operator combining and utilizing data collected from various services without the explicit consent of users and judged this to be an 'abuse of market dominance.' The key point in the case was not the data combination itself, but whether the consumer could actually reject it or choose an alternative. In other words, the decision was made to link personal information protection and competition restriction effects into one issue.

These overseas cases show that personal information protection is gradually moving into the core area of ​​competition law, rather than the outskirts.

The ability to protect personal information should be recognized as a ‘competitiveness’ rather than an obligation.

Coupang's personal information leak incident clearly shows the intersection of personal information protection and fair trade law. The Fair Trade Act is no longer a law that only governs price fixing or market division. In the digital platform era, fair trade law is required to play a role in protecting the trust infrastructure of the market.

From a policy standpoint, there is a need to clearly recognize personal information protection capabilities as a key competitive factor. In the digital platform market, the level of personal information protection is no longer considered an incidental compliance item, but an essential transaction condition that determines consumer choice and trust. Nevertheless, imposing only the same level of ex post sanctions or formal obligations on market-dominant platforms would be a measure that does not sufficiently reflect the reality of the data-driven competitive environment.

There is a need to demand greater accountability and transparency from large, market-dominant platforms commensurate with their influence. Disclosure of information on personal information processing and security investment, rapid and effective damage relief procedures in the event of an accident, and responsibility for explaining data combination and utilization structures must be institutionally supported. This is not simply a discussion about increasing the level of punishment, but is closer to the purpose of establishing the prerequisites for competition so that market participants can make rational choices.

This approach is not aimed at sanctions or punishment against specific companies. It can be said to be the minimum condition for creating a competitive environment in which innovation and trust are compatible in the long run by encouraging personal information protection to act as a 'competitiveness' rather than a cost across the platform market.

Coupang's personal information leak incident goes beyond a technical incident and raises questions about the social and competitive legal responsibilities that platform companies must bear from their dominant position. If a platform has grown based on consumer trust, the legal evaluation that must be endured when that trust is damaged should not be limited to the framework of the Personal Information Protection Act. There is a need to calmly look back on this incident from the perspective of the competitive order and the evolution of the Fair Trade Act.

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Coupang grew up on customer trust... Competition law sharpens [Daeryun’s Biz law forum] (Shortcut)