Antitrust enforcement aimed at big tech. Then came the backlash.

The South Korean government has triggered a wave of panic in the internet sector: the country’s antitrust regulator said it would enact the toughest competition law outside Europe, reducing influence large technology companies.

The Korea Fair Trade Commission, with the support of President Yoon Suk Yeol, said in December it planned to make a proposal modeled after the Digital Markets Act of 2022, the European Union’s landmark law aimed at curbing American technology giants. This bill also seemed to target South Korean internet conglomerates just as much as the Alphabets, Apples and Metas of the world.

The commission said the law would designate certain companies as dominant platforms and limit their ability to use their strongholds in an online business to expand into new areas.

Then last week, the agency suddenly changed course. After a furious backlash from South Korean industry and consumer lobbyists, and even the U.S. government, the Fair Trade Commission said it would delay formal introduction of the bill to seek more input.

It is unclear when, or even if, the bill will move forward. The timetable was complicated by the crucial general elections in April. Mr. Yoon’s conservative People Power Party is seeking to wrest control of the legislature from the Democratic Party of Korea, which holds a large majority. Surveys have found public support for the regulations, and many constituencies the bill claims to benefit, including small businesses and independent taxi drivers, have generally voted for the Democratic Party of Korea.

The delay was a temporary victory for South Korean internet companies – dominant at home but with little global influence – who lobbied behind the scenes against the bill. They had argued that the legislation was unnecessary and would ultimately benefit emerging Chinese competitors.

Whatever its outcome, this episode demonstrates a growing appetite for stricter regulation of technology companies in Asia. It also underscored South Korea’s concern, which now reflects America’s own apprehension about the influence of its powerful tech giants.

In South Korea, Naver, not Google, is the preferred search engine and mapping service. Coupang has become the dominant e-commerce player with efficient deliveries, and Kakao is a ubiquitous courier service in the country, with a stronghold in ride-hailing.

In the past, it has been US tech giants that have accused the country’s regulators of going too far, arguing that their protectionist policies created an uneven playing field. But this time, it was Korean companies that led the protest.

Park Seong-ho, president of the Korea Association of Internet Companies, known as K-Internet, said the regulations would limit growth opportunities. Group members include Naver, Kakao, Coupang and the Korean units of Alphabet and Meta.

“One dominant platform here will be replaced by another in a few years, and this cycle will repeat itself,” Mr. Park said. “It’s like preventing a tall, strong student with the potential to become an athlete from training prematurely, lest he become a bully.”

THE European Union Digital Markets Act, which takes effect next month, limits the influence of so-called access control platforms that offer dominant technology services. Companies like Apple, Amazon, Alphabet, Meta and Microsoft have announced changes to the way they operate to comply with the new rules.

But unlike South Korea, Europe does not have successful local tech giants whose businesses could be challenged by regulation.

Han Ki-jeong, chairman of the Korea Fair Trade Commission, said in a written statement to the New York Times that the new regulations were necessary. While the country’s digital economy is thriving, he said, “behind the innovative services and rapid growth are frequent abuses of power by a small number of platforms monopolizing the market.”

Naver, Kakao and Alphabet declined to comment on possible regulation.

The proposal, known as the Platform Competition Promotion Act, reflects Mr. Yoon’s own evolution in aggressive oversight of tech companies. Two years ago, he campaigned on the principle of “self-regulation” and minimal government intervention.

South Korea’s reliance on a network of interconnected services became evident when a fire at a facility housing Kakao’s servers took its services offline for more than a day in late 2022, disrupting the communication across the country. At the time, Mr. Yoon said his administration would investigate whether Kakao was a monopoly and whether it should be regulated as “national infrastructure.”

In November, Mr. Yoon called Kakao’s ride-hailing app “tyranny” and “unethical” because it abused its monopoly status. He said Kakao Mobility Corporation, a majority-owned unit of Kakao, got rid of competitors by offering low prices, only to raise them again after becoming a monopoly. He asked the commission to propose measures to prevent abuses by dominant technology companies.

Kim Min-ho, a law professor at Sungkyunkwan University, said Mr Yoon’s change in stance was likely linked to the upcoming elections in April, when his party will seek to win over small business owners, truck drivers taxi and delivery workers who supported the opposition party’s position to regulate big tech companies. Some small businesses have shown support, according to the Korea Micro-Business Federation, which in a survey found that 84 percent of respondents favored the law.

In what is expected to be a close election, Mr. Kim said Mr. Yoon “doesn’t want to lose voters” because there are enough people who support technology regulation to swing the outcome.

Korean regulators also faced protests from U.S. officials. In A declarationthe American Chamber of Commerce denounced the proposal as “profoundly flawed.”

This added even more tension to the already strained economic ties between the two countries. South Korean officials were unhappy with two laws passed under the Biden administration, the Inflation Reduction Act and the CHIPS and Science Act, which they said threatened a few important South Korean industries: electric vehicles and semi-electric vehicles. drivers.

At a news conference this month, Jose W. Fernandez, undersecretary for economic growth, energy and environment at the State Department, said he hoped South Korea South would heed America’s concerns about the proposed bill, just as Washington was listening. in Seoul to talk about his problems with the IRA and the CHIPS and Science Act.

South Korean antitrust authorities said this week they would discuss the bill with the U.S. Chamber of Commerce.

Baek Woon Sub, president of the Korea Platform Seller Organization, which represents about 1,500 internet companies, said the rules would “trickle down” and hurt small and medium-sized businesses. These smaller players know the rules and often work across multiple major platforms.

“Eventually, we will have to bear the brunt of the consequences,” said Mr. Baek, who runs a small e-commerce company called EG Tech. “We will not survive.”

Asked if he thought the delay was a sign the agency would water down the regulations or scrap them altogether, he was skeptical. He said he believed the regulator was regrouping and signaling that it was listening to industry concerns.

“The Fair Trade Commission will not change,” he said. “They’re going to come after us at the end of the day.”