KDI - Korea Development Institute - RESEARCH - Research Areas

Summary

Policy Study KOR A Study on Platform Collusion

This study analyzes the differences between traditional cartels and platform cartels and examines their specific characteristics. First, unlike traditional cartels, platform cartels may take the form of partial cartels in which only some firms participate, excluding a dominant competitor. Second, such partial cartels may result in intensified competition with the dominant competitor. Third, as competition strengthens, there is a possibility of efficiency gains that improve the welfare of certain users. Therefore, the institutional framework for investigating and addressing platform cartels should be improved to take account of potential efficiency gains and the possibility of enhanced competition.

Chapter 2 derives these results using theoretical model analysis. When the model incorporates firm heterogeneity, partial cartels may arise even in traditional single-sided market settings. However, such partial cartels are formed not to compete against a dominant firm, but rather to eliminate competition among the participating firms themselves. In fact, once a partial cartel is formed, the number of effective competitors in the market decreases, which in turn weakens market competition.
By contrast, when two-sidedness and indirect network externalities are introduced, partial cartels can instead promote competition on the opposite side of the market and narrow the market share gap between the leading platform and the cartel-participating platforms. As a result, there is also a potential for efficiency gains that improve the welfare of users on the opposite side of the market. These outcomes arise because platforms that had previously lagged behind the leading platform in competition on the opposite side are now able to strengthen such competition by leveraging the cartel arrangement.

Chapter 3 examines existing competition law provisions relevant to the characteristics identified in Chapter 2. With respect to the potential for cartels to generate efficiency gains, the chapter reviews buyer cartels and countervailing cartels. Although the potential efficiency-enhancing effects of both have been extensively examined in academic and theoretical discussions, they have rarely received serious consideration in actual case enforcement. Because the nature and manifestation of efficiency gains from platform cartels differ from those in traditional contexts, institutional reform will be needed to ensure that efficiency effects receive more serious attention in enforcement.

Regarding conduct involving the exclusion of competing firms through joint coordination, the chapter examines the regulation of abuse of collective dominance and the regulation of concerted refusals to deal. Joint coordination that falls short of an explicit agreement has not been actively enforced in Korea to date. However, as demands may arise in the future to expand the scope of application of these regulations, it is necessary to study their potential applicability in advance.

Summary

Policy Study KOR A Study on Competition in the Mobile Ecosystem: Focusing on the Market Dominance of App Stores

Using detailed market data, this study provides an in-depth analysis of competition in app store related markets and derives implications for the market dominance of app store platforms. It examines the state of competition both between the app stores of Google and Apple, and among leading apps within them from various perspectives, while also examining where the Korean market diverges from other major markets.

Chapter 2 analyzes the market sizes of Google Play and Apple’s App Store across multiple dimensions, including free versus paid apps, non-game versus game apps, and category-level breakdowns. The relative dominance of each app store varies considerably across countries. In Korea, Google Play accounted for over 70% of both downloads and revenue as of 2023. Across all major countries, the share of free apps has risen steadily in both measures, recently surpassing 98%―a pattern consistent with revenue models anchored in in-app purchases rather than paid app sales. Comparing non-game and game apps, game apps account for 93% of Google Play revenue and 71% of App Store revenue, making them the primary driver of overall revenue growth. Korea stands out in this regard. Not only is the revenue share of game apps disproportionately high relative to major countries, but concentration in a narrow set of top-performing categories is also markedly more pronounced.
Chapter 3 uses app-level performance data for the top 1,000 apps to analyze within-store concentration. The degree of concentration is substantial: these apps account for nearly 100% of revenue and roughly 60% of downloads. When a Pareto distribution is fitted to app performance, the estimated shape parameters fall below 1 in many categories―especially for free downloads―indicating an extreme bias toward top-ranked apps. Revenue distributions are more uneven still for game apps than for non-game apps.

Chapter 4 examines the volatility of app performance rankings, focusing on top-ranked apps. Monthly transition matrices constructed across ranking groups, reveal a tendency for apps to remain within the same ranking group from one month to the next, with persistence more pronounced among higher-ranked groups. Revenue rankings exhibit considerably less volatility than download rankings.

These findings suggest that the app store market is close to a competitive bottleneck, situation in which platforms can exercise strong market dominance over app developers. The heterogeneous user bases of Google Play and the App Store further suggest that inter-store competition for single-homing consumers may be limited. Korea’s market situation heightens these concerns. Compared to other major countries, game apps account for a dominant portion of revenue in Korea, and spending is heavily concentrated in popular categories―particularly games with high in-app purchase volumes. For app stores, this concentration raises the stakes of attracting top game apps; for app developers, it elevates the importance of marketing tools such as chart rankings and featured placements. This environment can amplify both the incentives for and the effects of practices already under scrutiny―mandatory in-app payment requirements, the use of featured placements to exclude rival app stores, and self-preferencing―suggesting a need for close monitoring by competition authorities.

Summary

KDI FOCUS Improving Regulations on Abuse of Superior Bargaining Position by Digital Platforms

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.

- Concern over platform abuse runs high, yet regulatory frameworks premised on the superior bargaining position of traditional firms fail to capture the inherent nature of platform businesses, which generate both economic harm and efficiency gains.

- Discussions on platform regulation have increasingly focused on ex-ante solutions. However, given the complementarity between new and existing frameworks, strengthening ex-post enforcement against abuse of superior bargaining positions remains crucial to reflect the distinctive characteristics of digital platforms.

- In assessing superior bargaining position, key factors are the extent of dependence by the counterparty (Party B) on the superior firm (Party A) and disparities in their scale or capacity.

- The superior data capabilities of digital platforms increase the potential for abuse of superior bargaining position.

- The rapid pace of market change amplifies the risk of abuse through expanding monopsony power.

- Conversely, the smaller scale of platform-specific investment mitigates the risk of abusing bargaining position.

- Whereas market-dominant position is absolute, allowing firms to change trading terms regardless of counterparties, bargaining position is relative, varying with counterparties.

- Earlier rulings under the Large Retail Business Act imposed a lighter burden in identifying counterparties(Party B) when establishing a superior bargaining position, but the Seoul High Court has recently required individual specification of harm for each victim.

- For platforms, the authority to set and revise transactional rules substantially amplifies the potential for abusing their bargaining position through changing trading terms, but their role as general rulesetters limits their ability to exploit counterparties individually.

- Mandating the specification of Party B in cases involving abuse of a superior bargaining position by platforms is misaligned with the economic realities of platforms with general rule-setting authority.

- The intermediary role of platforms broadens the scope of direct stakeholders in platform transactions, creating the possibility that conduct seemingly exploitative toward certain users may instead yield direct and substantial benefits for users on the opposite side or in related positions.

- Because abuse of superior bargaining position by platforms can cause widespread harm across many parties, the burden of identifying harmed parties should be eased when common circumstances among them are sufficiently established.

- When harm among users becomes widespread, regulation should consider the impact on the trade practice to ensure that it reflects real economic conditions.

- Given the possibility for directly affected third parties to benefit from abusive practices by platforms, efficiency-enhancing effects should be examined during case review.

- Because the authority of platforms to set and revise general rules endows the absolute dominant position, it will be necessary to shift toward regulating
abuses of market-dominant positions in the long term.

Summary

Research Monograph KOR Empirical Study on the Growth of Korea’s Cultural Content Industry and Policy Implications

This study conducts a comprehensive analysis of the growth dynamics of South Korea's cultural content industry to enhance its competitiveness and support sustainable development. Employing a multifaceted empirical approach, it examines quantitative metrics―such as the number of businesses, employment levels, revenue, and trade flows―across the industry and its subsectors to identify growth trajectories and structural characteristics (Chapters 3 and 4).

Given the industry's complex interdependence with other sectors, this study combines data from the "Special Classification of the Content Industry" (Statistics Korea, Ministry of Culture, Sports and Tourism), the "Korean Standard Industrial Classification (KSIC)" (Statistics Korea), and the "Input-Output Tables" (Bank of Korea). This integration creates a new input-output table that captures 12 subsectors of the cultural content industry (Chapter 5).

The study uses the new input-output table to examine supply, demand, and input structures to illuminate the industry's economic roles and inter-industry linkages. Key metrics―including total output ratio, import dependency, intermediate input structure, and value-added ratio―are compared with other sectors to highlight the distinctive characteristics (Chapter 6). The study further investigates the sector's effects on the broader economy, calculating coefficients for input, production induction, and sensitivity, assessing the sector's overall impact via inter-industry ties and interactions (Chapter 7).

In recognition that individual businesses drive the industry's growth, this study identifies business growth enablers within the CPND framework (Content, Platform, Network, and Device). They include intellectual property ownership, workforce size, operational tenure, market diversification, and digital infrastructure. This analysis highlights the critical impact of IP rights―especially utility patents and copyrights―on competitiveness and revenue growth (Chapter 8).

Moreover, the study systematically evaluates relevant policies through a descriptive statistical analysis of 149 support programs managed by the Ministry of Culture, Sports and Tourism and the Korea Creative Content Agency (KOCCA), focusing on their primary functions and target groups (Chapter 9). Finally, building on the study's findings, key policy directions are proposed: fostering digital adaptability among small and medium-sized enterprises (SMEs), enhancing IP protection in the digital era, diversifying export markets, and addressing regional disparities to ensure balanced development across Korea (Chapters 10).

Summary

KDI FOCUS The Ascent of K-Content: Industry Structure and Growth Drivers

Korea’s cultural content industry has seen rapid growth. Key drivers include improved content quality, a maturing digital ecosystem, and increasingly interconnected business networks. As the industry takes on a more prominent role in the national economy―generating a significant production inducement effect―policy efforts should focus on strengthening copyright protection and enforcement, advancing digital transformation among small and midsize firms, and diversifying export markets through deeper industry linkages.

- This paper analyzes the structural changes and growth trajectory of Korea’s content industry, assesses its economic impact, and identifies key drivers of firm-level growth.

- The industry composition is shifting toward digital content production and online distribution.

- Knowledge information has been the largest contributor to sales growth in the content industry.

- Content exports reached $12.45 billion in 2021, continuing a streak of record highs since data collection began.

- Rising domestic production capacity and declining reliance on foreign content have boosted net exports of K-content, contributing to a surplus in intellectual property trade.

- The content industry shows higher self-input coefficients than most service industries and even some manufacturing industries.

- The content industry has grown through close integration with the diverse industries comprising the CPND value chain.

- One unit increase in final demand in the content industry generates 1.572 units of output across all industries―64% within and 36% in other sectors.

- In 2020, the total production inducement effect of the content industry amounted to 113.7 trillion won.

- The content industry’s power dispersion index ranks 19th of 33, placing it in the mid-range.

- The content industry demonstrates aboveaverage sensitivity, highlighting the need for industrial and policy responses to external market changes.

- K-content has solidified its position in global markets through high production quality and artistic merit.

- Changes in CPND factors can also significantly influence the growth of content firms.

- Copyrights increase firm revenue by 11.6%, playing a key role in revenue generation by protecting creative works.

- Development of platforms, networks, and digital devices has also contributed significantly to growth in the content industry.

- Expanding sales channels improves market access and exposure to diverse customer segments. Overseas expansion helps broaden the consumer base and stabilize firm revenue.

- Engagements with content firms generate over twice the revenue growth compared to noncontent firms.

- Copyright acquisition and protection should be embedded across the entire support system for content firms.

- Promoting digital transformation―paired with measures to enhance adaptability―can help steer policy in a more strategic direction for small and midsize content firms.

- The government should systematically develop region-specific entry strategies through the K-Content Export Council.

Summary

KDI FOCUS Designing Social Protections for Platform Workers

In the expanding landscape of the platform economy, the rapid rise in the number of platform workers underscores a critical issue: the need for social protection for those not covered by conventional labor laws. Recognizing the transformative impact and significant societal value of the platform economy, it becomes essential to rethink the legal classification of platform workers, moving beyond the traditional "employee" versus "business owner" dichotomy. This paper argues that while platform workers might exhibit similar work patterns, the protection they receive should be proportionate to the labor monopsony power exerted by the platforms they associate with. A harmonized approach that aligns labor and competition policies is crucial to address these challenges.

- Today, platform labor is experiencing a swift expansion both in scope and magnitude.

- While the growth of platform workers presents numerous benefits, recent developments have spotlighted a few notable concerns.

- The discourse surrounding social protection for platform workers has been active, primarily revolving around the question of acknowledging their status as workers.

- The approach needs to be about reconciling the characteristics of the platform economy with genuinely effective protection for its workers.

- By focusing on the labor monopsony inherent to platforms, we can objectively assess the necessity of social protection for platform workers, incorporating discussions on both labor and fair trade policies.

- In this paper, ICT software developer platforms and delivery app platforms are investigated as representative examples of web-based freelance platforms and locally-based labor provision platforms, respectively.

- While the labor supply elasticity offers an empirical estimate of monopsony power, the platform economy necessitates a broader examination of additional factors.

- As for in-house contracts in the ICT developer platform, an empirical analysis shows that its labor monopsony power is on par with that of the typical labor market.

- In the delivery app market, it is imperative to examine the competitive dynamics among platforms from the standpoints of delivery app providers and consumers. Of particular interest is understanding the reasons and frequency of individuals using multiple apps at the same time (multihoming), along with the ease of switching between platforms.

- From the consumer perspective, the entry of newer players and heightened competition among delivery apps have increased multi-homing and reduced market dominance.

- Delivery app riders generally view themselves as wage workers. While they enjoy considerable flexibility in tasks and working hours, they are also subject to significant ex-post oversight through performance evaluations.

- To ensure the effective protection of platform workers while allowing platform-driven innovation, policies must be both flexible and unified under the goal of curbing platforms' monopsony power over labor demand and preventing potential abuses.

Summary

KDI FOCUS Restructuring Platform Merger Review

Platform mergers differ significantly from traditional mergers. In platform mergers, foreclosure issues, which are crucial in traditional vertical mergers, carry less significance but may still arise indirectly. Platforms, moreover, can favor their own businesses potentially disadvantaging competitors, and leverage their market power to new businesses. Lastly, entry barriers could increase as a result of platforms’ multi-service provisions. Nevertheless, platforms can enhance consumer welfare, especially through product (service) bundling. Thus, we need to overhaul the merger review system to incorporate the aforementioned characteristics of platform mergers.

- Amidst the escalating debate on platform regulation, there has been a surge in platform mergers, leading to a corresponding increase in the need for platform merger reviews.

- There is a need for new guidelines for platform merger review to reflect the unique characteristics of such mergers. These guidelines should outline the review methodology and the assessment of potential competitive constraints.

- Indirect network externality plays a crucial role in locking in users to specific platforms.

- Platform firms provide a diverse range of services, offering multiple ancillary service platforms that revolve around a few core platforms or other businesses associated with the platforms.

- Platform firms often pursue mergers to expand into new revenue-creating areas or to strengthen their competitiveness in core services.

- One significant concern regarding anticompetitive practices in platform mergers is the potential for excluding competitors via selfpreferencing in the new markets.

- The addition of new ancillary services through a merger can potentially raise entry barriers in both the platform’s core service areas and the overall platform ecosystem.

- If a vertical merger leads to the foreclosure of purchasing or sales channels, it can seriously harm market competition.

- In mixed mergers, leveraging market power from one market to another can occur through tying.

- The determination of whether a merger is vertical or mixed is bound to be confusing when a platform, acting as an intermediary between consumers and small and medium-sized vendors, seeks to merge in order to add an auxiliary service for these vendors.

- Platform operators have the ability to foreclose competitors in other sectors but only indirectly, using accessibility to users.

- Without tying, platform operators can leverage market power from their core business area to ancillary service areas by raising rival’s costs.

- Platform mergers can raise barriers to entry not only in new markets but also in existing core service areas and the overall platform ecosystem. In some cases, the creation and reinforcement of entry barriers may be a deliberate objective of the merging parties.

Summary

Policy Study KOR Causes of self-employment management difficulties and policy directions

This study analyzes the factors affecting the sales, operating profits, and expenses of the domestic self-employed by using the MDIS data of the wholesale and retail industry for the last 20 years.

First, the operating profit of the self-employed has been on a downward trend since the 2010s. As of 2019, the average operating profit fell to 16.87 million won in the wholesale and retail business and 12.89 million won in the lodging and restaurant business. This was significantly lower than the operating profit of 20 years ago (on a real value basis).

Second, the decline in operating profit was attributed to cost increases while sales growth was limited due to market competition. In particular, the biggest increase among expenses was ‘other expenses’. The proportion of other expenses to sales more than doubled from 4.6% in 2000 to 9.5% in 2019 in the wholesale and retail industry, and in the lodging and restaurant industry, it increased from 45.8% to 66.9% during the same period.

In addition, as a result of analyzing the factors affecting the sales of the self-employed, there was a tendency for the surplus of self-employed people to significantly decrease sales. When the surplus increased by 1,000 people, the sales of the self-employed in wholesale and retail business decreased by 0.76 to 0.94 million won, and the sales of the lodging and restaurant businesses tended to decrease by 1.49 to 2.36 million won.

Lastly, the surplus of self-employed and rising costs in the wholesale and retail business lowered the average annual operating profit by 1.26 million won and 1.11 million won, respectively, and these magnitudes were strong enough to reach 3.95% and 3.48% of the operating profit. In the case of the lodging/ restaurant industry, the decrease in operating profit due to oversupply and rising costs was found to be 6.07 million won and 2.12 million won on average, which corresponded to 25.04% and 8.75% of the average operating profit.

Summary

Policy Study KOR A Study on the Change of Sales Concentration Linked to Platforms Providing On-demand Services

This study analyzes the impact of food delivery service platforms on the restaurant market in South Korea. The appearance of a delivery app leads to many changes in the food service industry. Using monthly sales panel data of restaurants nationwide in 2020 provided by a credit card company, this study examines the revenue growth of restaurants which use a delivery platform. It also relates to sales redistribution among restaurants that use a delivery platform.

The study finds that restaurants which use a food delivery service platform have higher sales than those which do not. During the COVID-19 pandemic in 2020, sales through delivery apps played a role in compensating for the sharp decline of in-person dining at many restaurants. In particular, restaurants with low sales are more likely to raise their position in the market with a food delivery platform. It implies that small restaurant owners should be more actively encouraged to use a delivery platform.

Second, it also shows that sales changes occurred when a restaurant started or stopped using a delivery service platform. Each restaurant can expect a 33.0% sales growth due to the use of delivery apps. In addition, it turns out that restaurants with lower sales have higher expectations of sales growth with a food delivery platform than those with higher sales.

Finally, this study shows sales inequality of entire markets could worsen due to food delivery service platforms. As a result of the Gini index, a food delivery sales component has a more significant contribution to worsening inequality as compared to dine-in sales.

Based on the above empirical analysis, this report can suggest several implications for the growth and distribution of the delivery platform market. Food delivery platforms increase consumers’ convenience and benefit owners of both small and large restaurants. Therefore it is essential to set a policy direction that does not hinder this effect. However, as all restaurants begin to use delivery apps, the larger restaurants are able to increase their market share more than smaller restaurants. It suggests that new policies address ways to maintain a competitive market.

Summary

Policy Study KOR Considering Innovation Competition in Merger Controls

First, this study briefly discusses arguments that it has a limitation to apply results from the extensive literature on the impact of competition on innovation incentives in a horizontal merger context and recent studies that examine more directly the effects of merger on innovation incentives.

Next, taking into account that the recent studies mostly focus on the effects of merger on intensive margin of innovation incentives, this study analyzes the effects of merger on extensive margin of innovation incentives and on R&D project choice. It is shown that (i) a horizontal merger induces merging firms to choose less differentiated R&D projects compared to a situation in which those firms choose their R&D projects independently without the merger if the probability of achieving a successful innovation is relatively high and more differentiated R&D projects in the opposite case; (ii) A horizontal merger can increase the number of R&D projects pursued by merging firms if the probability of achieving a successful innovation is relatively low and R&D cost is relatively high but decrease it if the probability of achieving a successful innovation is relatively high and R&D cost is relatively low. (iii) The impact of the horizontal merger on innovation competition is not clear, and consequently, consumer and social welfare may increase by the merger when the merger intensifies innovation competition.

Finally, this study examines relevant regulations and merger control cases to provide policy implications.

SITEMAP

HOT ISSUE

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Law and Economics

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary