There have been disputes as to whether Digital Rights Management(DRM) does violate competition law. By using a DRM, the company can tie the playback of certain digital files to its own IT device. The problem arises when the company has a dominant market position, because it entails an argument from competitors that the company has abused its dominant market position to distort a free competition at the market.
In November last year, the Supreme Court of Korea firstly issued a ruling addressing this issue. The case dates back to 2006, when Fair Trade Commission(FTC) of South Korea ordered SK Telecom, the largest mobile carrier company and music download service provider, to lift up a DRM which had prevented the purchasers of MP3 mobile phone of SK Telecom from playing MP3 files downloaded from other online music store that SK Telecom does not operate. SK Telecom had appealed the FTC’s decision to the court.
At the heart of this lawsuit lies the issue of whether SK Telecom’s use of DRM does constitute an abuse of its dominant market position under Korean Competition law. In this regard, the Monopoly Regulation and Fair Trade Act(MRFTA) of Korea provides that any market dominant enterpriser shall not commit an act of either (i) unreasonably interfering with the business activities of other enterprisers or (ii) unreasonably doing considerable harm to the interests of consumers. The FTC found SK Telecom’s using a DRM fell under this two anti-competitive acts.
The Supreme Court of Korea, however, held a different view from the FTC. The Supreme Court pointed out SK Telecom’s use of DRM can be regarded as a justifiable measure for its copyright protection. Therefore, the court ruled even though SK Telecom’s DRM interferes with other competitor’s online music download business, there is nothing unreasonable under the MRFTA. Also the Supreme Court held that as there exists no legal obligation for music download service providers to standardize their DRMs, the inconveniences experienced by the consumers due to incompatible DRMs can not be deemed as unreasonable or considerable harm to the interests of consumers. In conclusion, the Supreme Court ruled that the court found no unfairness nor unreasonableness in SK Telecom’s DRM scheme, which means SK Telecom had no intent or objective of maintaining or reinforcing monopolistic status at the market, i.e., influencing a market artificially by restricting a free competition at the market, therefore FTC had erred in its decision that SK Telecom’s use of DRM violated the MRFTA provision on the abuse of dominant market position.
If you have any question related to this article or any other Korean legal issues, please send your inquiry email to Mr. Wonil Chung by clicking here.
© 2012 Wonil Chung, a Korean Licensed Lawyer at Chung & Partners. All rights reserved.
Because of the generality of this update, the information provided herein, which may or may not reflect the most current legal development, may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.