Naver founder faces heavy scrutiny over portal’s news manipulation, influence

Naver founder Lee Hae-jin was heavily grilled by South Korean lawmakers during parliamentary audit sessions held on Monday and Tuesday that scrutinized the portal website’s news manipulation and uncontested monopoly over the local web advertisement market.

The lawmakers also zeroed in on Naver’s core profit-generating services including its search ads and online shopping platform business.

Lee, currently Naver’s Global Investment Officer, was summoned to an audit led by the Ministry of Science and ICT on Monday to testify on the portal’s wrongdoings, including rigging its news display platform to control what type of news it shows or does now show.

Last week, Naver, Korea’s most widely used search engine and news platform, admitted to having pushed out an article criticizing the K League from its main sports news tab upon request by the sports organization.

It was the first confirmed case of news manipulation by the portal, which dominates nearly 70 percent of Korea’s news and media search space. As most Koreans get their news from Naver, the platform exerts heavy influence over what kind of news does or does not reach the public.

“I believe that the sports news removal case is a serious issue of concern and I sincerely apologize,” said Lee. It was his first ever appearance at a parliamentary audit since Naver’s foundation in 1999.

The Naver founder was blasted with questions about the portal’s neutrality as a news platform and the need for more rigorous regulation.

In making responses to various accusations, Lee avoided providing a direct answer, saying they are issues locally managed by CEO Han Seong-sook and local figures in charge.

The Naver founder also refrained from commenting on reforming Naver’s news management system, noting that it will take time and consultation for the company to come up with “the right solution.”

While recognizing concerns over Naver’s overarching position in the media realm, Lee said that “Naver is not a traditional news company as it does not produce news of its own.”

He added that Naver would be open to publicizing its algorithm that automatically determines its news display arrangements as long as there are safeguards to prevent potential abuse of the system.

Another main point of scrutiny on Monday was Naver’s monopoly over Korea’s internet ecosystem that critics claim gives the portal uncontested control over the web search and advertisement market.

Lawmakers argued that Naver collects massive profits from its “power link” ad service that lets paying client companies place ads — which at times are not clearly marked as ads — at the top of the search query result page, giving the portal massive marketing clout.

Lee countered that this type of “search ads” business is one practiced by every web search engine in the world, including US internet giant Google.

He also noted Google monopolizes about 90 percent of the global internet ad market while Naver accounts for about 70 percent of Korea’s web search market, hinting that Naver’s market share is meager when considered on a global scale.

The Naver founder was summoned for another parliamentary audit led by the Fair Trade Commission on Tuesday, during which he was questioned on Naver’s local business practices that can marginalize small businesses.

“As the dominant player in the web search business, Naver has been facing continued complaints from the industry over its market dominance” said FTC Chairman Kim Sang-jo, noting that the antitrust regulator is looking closely into the issue.

For instance, Naver is currently under investigation for top-listing online shopping malls that offer only Naver Pay, the firm’s simplified mobile payment service, as a possible payment option.

At the same time, Kim noted that “Naver is a company that is building the internet business platform” and that regulations should be drawn up rationally and with consideration for their long-term consequences.

By Sohn Ji-young (jys@heraldcorp.com)