eBay Korea attempts to restrict advertisers from contracting with other companies

Posted on : 2017-11-25 15:47 KST Modified on : 2019-10-19 20:29 KST
The firm is being criticized for exploiting its market position to engage in heavy-handed behavior

eBay Korea, a subsidiary of the US company eBay, and which runs Gmarket, Auction and other online commerce websites, has caused a stir by asking advertising agencies not to make contracts with other companies. These smaller advertising agencies are accusing eBay of exploiting its position as the largest company in the industry to engage in heavy-handed behavior.

Multiple industry sources told the Hankyoreh on Nov. 23 that eBay Korea has forced advertising agencies doing business with eBay from January of next year to contractually agree not to work with other e-commerce companies (including 11 Street, Interpark, Coupang, Ticket Monster and We Make Price) for the duration of the contract and for one year after the contract ends. If these agencies are found to be doing business with other e-commerce companies, their contract with eBay will terminate and they will be forced to pay a cancellation penalty along with damages. Online advertising agencies help numerous retailers selling products on these websites advertise in various ways, including preparing their ad copy and selecting the location of their exposure.

eBay Korea is the most influential of all e-commerce companies. According to figures from the Ministry of Trade, Industry and Energy, auction websites such as Gmarket, Auction and 11Street accounted for 63.3% of the e-commerce market in terms of sales last year, of which eBay-owned Gmarket (38%) and Auction (26%) have more than a 60% share, maintaining an effective control of the market. As a subsidiary of American company eBay, eBay Korea has been growing rapidly, from 662.2 billion won in sales in 2013 to 863.3 billion won last year.

The majority of advertising agencies, which are smaller companies, have contracts not only with eBay but also with 11Street and other e-commerce companies. “If we aren’t able to do business with 11Street, our sales will decrease by more than 30%. In order to keep the company in business, we have no choice but to let some of our employees go. It’s frustrating that eBay would suddenly do this. I just feel so awful every day,” said a source with one advertising agency.

“Given our dependent position, we have to walk on eggshells around eBay. The online advertising market keeps growing, but eBay seems to be trying to counter other e-commerce companies by taking advantage of advertising agencies, which are the weakest link,” said a source at another agency. This is not the first time that eBay has taken advantage of its dominance in the market. When it came out in 2010 that eBay had threatened to cause problems for its vendors if they did business with 11Street, it was slapped with a fine by South Korea’s Fair Trade Commission.

eBay justifies its actions on the grounds of keeping its secrets. Data acquired during the process of advertising could be handed over to its rivals, the company alleges. But all e-commerce companies except for eBay guarantee the freedom of advertising agencies to make contracts. Furthermore, the huge web portals Naver and Daum were left off the list of companies that eBay bans agencies from doing business with, leading critics to argue that eBay’s standards for keeping secrets are quite flexible.

“Advertisers are selling products on a variety of platforms, not only Gmarket but also 11Street and Naver Shopping. It’s only natural for data to accumulate at advertising agencies,” said a source in the e-commerce industry.

“The information that is given to advertising agencies is no big secret, and on top of that each e-commerce website has its own unique characteristics, which means that eBay’s data can’t be immediately applied at another company. eBay is interfering with business,” another industry source said.

“We were forced to make this choice to protect the company’s business expertise. Allowing business with Naver Shopping was an internal decision,” a spokesperson for eBay Korea said.

By Kim So-youn, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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