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The Economic Cost of the Fair Online Platform Intermediary Transactions Act: A Comparative Case Study  

Ahn, Yongkil (Department of Business Administration, Seoul National University of Science and Technology)
Kim, Yonghwan (Naver Agenda Resarch)
Song, Myungjin (Research Team Leader, Startup Alliance)
Publication Information
Asia-Pacific Journal of Business Venturing and Entrepreneurship / v.17, no.5, 2022 , pp. 237-250 More about this Journal
Abstract
On September 28, 2020, the Korea Fair Trade Commission introduced a proposed bill entitled the "Fair Online Platform Intermediary Transactions Act." We quantify the impact of this proposed act on Naver, Korea's major digital platform. Finding a proper control unit is not an easy task in social science studies. We overcome this caveat by constructing a synthetic version of Naver using Abadie & Gardeazabal's (2003) synthetic control method. It appears that the economic cost of the proposed act is not negligible at all. Naver's opportunity loss amounted to 16.18% of its market capitalization (approximately 8.5 trillion won in comparison with its pre-regulation market capitalization). Any regulation-based approaches to resolving digital platform issues have both promises and pitfalls. The results highlight that regulatory bodies should carefully gauge the impact of such regulations, as we have seen with Naver's case.
Keywords
Digital Platform Regulation; The Fair Online Platform Intermediary Transactions Act; Economic Cost; Synthetic Control Method; Naver;
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