South Korea’s antitrust watchdog has identified multiple structural factors that could restrict fair competition and harm consumer interests in the country’s generative artificial intelligence market. (Image courtesy of Yonhap)
SEOUL, Dec. 18 (Korea Bizwire) – South Korea’s antitrust watchdog has identified multiple structural factors that could restrict fair competition and harm consumer interests in the country’s generative artificial intelligence market, according to a policy report released on December 17.
The Korea Fair Trade Commission (KFTC) announced plans to closely monitor the market and begin reviewing potential regulations next year, particularly concerning AI data collection practices and emerging technologies.
The report, titled “Generative AI and Competition,” marks the agency’s first comprehensive analysis of the domestic generative AI market since the emergence of ChatGPT in 2022, examining competitive dynamics and consumer protection issues.
The KFTC concluded that the generative AI market inherently creates high barriers to entry. Each segment of the value chain—infrastructure, development, and implementation—requires substantial capital and advanced technical capabilities. Once established players achieve economies of scale and scope, new entrants face significant challenges breaking into the market.
In the AI semiconductor sector, Nvidia maintains strong market preference, competing alongside international players like Intel and AMD, as well as domestic companies such as Sapeon Korea, Rebellions, and Furiosa AI. Cloud computing services are dominated by foreign providers including Amazon Web Services, Microsoft, and Google, outperforming domestic providers like Naver Cloud, KT Cloud, and NHN Cloud.
The foundation model sector, crucial for AI functionality, is already controlled by Big Tech companies such as Google, Meta, OpenAI, Microsoft, and Nvidia, which have secured essential infrastructure. Domestic players including Naver, Kakao, LG, KT, NC Soft, and Upstage remain at a competitive disadvantage.
The report raises concerns about potential anti-competitive practices, including the possibility of dominant players restricting access to essential resources, forcing bundled sales, imposing exclusive dealing conditions, or misusing technology during business collaborations. It also warns that well-funded vertically integrated companies could abuse market dominance through investments and acquisitions.
On the consumer protection front, the commission expressed concern about AI companies potentially collecting data without meaningful user consent.
The KFTC plans to explore regulatory improvements starting next year, including potential applications of fair trade and consumer protection laws to AI data collection practices. The agency will also examine its authority to review new forms of business combinations, citing the UK competition authority’s scrutiny of Microsoft’s partnership with Inflection AI as an example.
“This policy report aims to foster an environment where fair competition can thrive without hindering innovation in the rapidly growing AI market,” said Lee Junheon, director of the KFTC’s market surveillance policy division. He added that while some academics suggest amendments to fair trade laws regarding data collection, further research is needed, particularly concerning merger regulations.
M. H. Lee (mhlee@koreabizwire.com)
