Naver and Kakao have had their fair share of bad press this year, with both finding themselves at the center of a controversy over biased news editing on their respective platforms that came to the fore during this year’s May elections (held following the impeachment of former president Park, the first in the nation’s history). (Image: Yonhap)
SEOUL, Dec. 19 (Korea Bizwire) – 2018 is looking increasingly like a tough year for the tech industry, as it appears inevitable that some form of regulations will be passed by the government in response to a year in which allegations of biased news editing and “reverse prejudice” were volleyed towards domestic and foreign firms, respectively.
Prior attempts to introduce greater oversight into the industry fell flat as the two domestic giants – Naver and Kakao – of online search and instant messaging managed to plead their way out of the government’s grip, citing the technology arena as difficult “to demarcate” as their excuse.
The same excuse should fall on deaf ears going forward, as signs emanating from both the legislature and the executive branch indicate a strong governmental resolve to support regulations.
Naver and Kakao have had their fair share of bad press this year, with both finding themselves at the center of a controversy over biased news editing on their respective platforms that came to the fore during this year’s May elections (held following the impeachment of former president Park, the first in the nation’s history).
An example of what Naver is up against was on display at a policy discussion on news portal neutrality held on government grounds on December 19. There, a Naver managing director flatly denied that the tech monolith had purposefully altered the headline of a news article, insisting, “Up to this moment, Naver has not once modified a news article title.”
Despite such adamant rebuttals, evidence suggests that Naver has already lost public support; 95.5 percent of 200 PR directors of major domestic firms believe that a “news portal law” should be introduced to place the burden of social responsibility on online news distributors (news platforms).
As the actions of Naver and Kakao have been put under the microscope of public opinion, foreign counterparts Facebook, Google and others have also been roped into the discussion for greater oversight. (Image: Yonhap)
Conducted by the Korea Advertisers Association, the survey also revealed a desire for greater transparency and/or a complete separation of search engines and news distribution. Among the respondents, 86.4 percent were in favor of the public disclosure of news-editing algorithms, and 70.5 percent advocated that Naver restrict itself to online search only.
The supposed misdeeds don’t stop there, as Naver was criticized for abusing its near-monopolistic position as South Korea’s leading search engine to drive up fees for ad placements and putting the squeeze on micro businesses (an unverified report has claimed that 83 percent of Naver’s ad revenue last year was from sub-500,000 won monthly payments by micro business owners).
The most concrete preliminary bill produced so far has been the “New Normal Law” produced by Kim Seong-tae of the Liberty Korea Party. If enacted, the bill would revise a pair of existing laws pertaining to electronic communication, and place select companies under government regulation, with the imposition of fines as a method of enforcing compliance.
However, without making much headway, the bill is now lingering in a subcommittee of the National Policy Committee in the National Assembly, after coming under fire for “being excessive”.
With pro-regulation sentiment having built up plenty of momentum, that the bill will be reintroduced is not out of the question; if so, Naver and Kakao will have no choice but to adapt to the changes wrought by the winds of the political climate.
Despite revenue estimated in the trillions of won from its Google Play Store, Google Korea is not a tax paying entity. (Image: Yonhap)
As the actions of Naver and Kakao have been put under the microscope of public opinion, foreign counterparts Facebook, Google and others have also been roped into the discussion for greater oversight.
Other national governments have also begun to bear down on borderless, multinational internet companies for abstaining from paying taxes.
Facebook has already acquiesced to these demands by agreeing to file tax forms directly with the tax authorities from where it generated its ad revenues.
Accordingly, Facebook Korea will do likewise and commence tax payments starting in 2019.
While Facebook Korea has decided to bend on the issue of taxes, Google Korea has so far dismissed the matter with an ambiguous response of “we are acting in accordance with South Korean law”. Despite revenue estimated in the trillions of won from its Google Play Store, Google Korea is not a tax paying entity.
Starting next year, the South Korean tax authority will get to take a look under the hood of entities like Google Korea thanks to a regulation targeting multinational firms that will require them to submit detailed information on organizational structure, present business operations, profits and losses, and other areas of interest to the National Tax Service.
Some have pointed out that the tug of war between multinationals and the tax man are forecast to end by 2020, the year the OECD has targeted as the deadline to resolve the problem. The South Korean government most likely would prefer that the resolution comes sooner.
S.B.W. (sbw266@koreabizwire.com)
