Regulators around the world are keen to keep dominant market players from abusing their overwhelming power to eliminate smaller and nascent rivals. South Korea’s top antitrust regulator attempted to legislate an act to prevent such unfair practice, only to face fierce protests -- even from small startups the agency had intended to protect.

Last week, the Fair Trade Commission publicly admitted it needs more in-depth and extensive discussions with industries and stakeholders in pushing the Platform Fair Competition Act, a bill aimed at regulating the monopolistic practices of heavyweight platform operators.

The FTC’s senior official said the regulator would “review” its proposed act, which is interpreted as a sign that some of the key contentious points of the bill might be drastically revised, with its original regulatory level likely to be softened.

FTC officials insisted that the Platform Act would not be nixed, nor indefinitely delayed. But the outlook looks grim, to say the least, as the lawmakers of the current National Assembly session are unlikely to have a chance to handle the controversial act before the April parliamentary election.

The first reason for the botched attempt seems to come from the mix of the tight schedule and insufficient opinion-gathering process. It was on Dec. 19 last year when Han Ki-jeong, chair of the FTC, officially announced the legislation plan for the Platform Act. It was rather an abrupt announcement, even though the FTC ran a task force team comprising experts for six months to explore the pros and cons of the bill.

The antitrust regulator initially planned to unveil the content of the bill before the four-day Lunar New Year's holiday that began Friday and finish up the legislation procedure before the general election in April. The plan was ambitious but, in all fairness, unrealistically on a tight schedule.

The second, possibly more important, reason lies in the core content of the regulatory proposal: the preliminary designation of the list of monopolistic platform companies to restrict them from doing “unfair” practices. The idea of designating monopolistic platforms in advance is nothing if not controversial, since there could be plenty of doubts and complaints about whether the standards underlying such a designation system can be fair, objective and timely for the platform industry that is going through fast-paced innovation and changes.

Given the debatable nature of the preliminary designation, the FTC must have set aside much more time in the deliberation of details and consulted with a wide range of experts and stakeholders.

In the past 50 days or so since Han’s announcement, however, the regulator sent confusing signals. As recently as Jan. 24, FTC Secretary General Yook Sung-kwon said in a press conference that the proposed act is necessary to prevent the problems of monopolistic behaviors by platforms, brushing aside concerns and protests from the industries as a mere “misunderstanding.” Two weeks later, the official stance of the FTC turned upside down, admitting the need to collect more opinions.

The turnaround was driven by two stakeholders. The first player was local startups, which are supposed to receive benefits if the legislation is implemented. They expressed deep worry that the new regulation would stifle the growth momentum of major platforms in Korea, which in turn could negatively affect the entire platform industry and undercut innovation efforts.

Indeed, the country’s two homegrown platform giants, namely Naver and Kakao, are intricately connected with a number of startups and online business operators through digital payment, keyword search and online community services. A big impact on such major platforms is bound to have an impact on small players.

The second player that influenced the FTC’s change in stance was the US Chamber of Commerce, which openly opposed the proposed act. In addition, the US Department of Commerce reportedly expressed its worry about the act. The possibility of trade conflict was also raised as US platform giants doing business in Korea, such as Google, Meta and Apple, might suffer unexpected regulatory disadvantages.

In a poorly regulated market, of course, monopolistic platform giants could make it hard to maintain a level playing field as they tend to gobble up small rivals by taking advantage of enormous network effects and lock-in effects. But the FTC must realize that it takes far more time and effort than it has so far spent to establish effective legislation for a complex sector like the platforms business that is evolving at a rapid pace.