The 50-page study, “Understanding the Impact of KFTC Enforcement on U.S. Firms,” concludes that the Korea Fair Trade Commission (KFTC) has carried out enforcement that “conveys a pattern that firms widely perceive as protectionist” and diverges from global best practices. The report, written by Nigel Cory, a nonresident fellow at NBR, draws on confidential interviews with U.S. executives who described a regulatory environment that is “unpredictable, politicized, and tilted against them.”
“The Trump Administration has previously expressed concern about digital barriers like these, and a new report by the National Bureau of Asian Research shows how this regulatory harassment intimidates U.S. companies operating in Korea. The KFTC’s moves are creating a climate of fear that discourages U.S. investment into Korea and damages our bilateral relationship,” said Ambassador Robert O’Brien, the former national security advisor to President Trump said.
Aggressive Enforcement Tactics
The report says the KFTC routinely launches investigations on minimal evidence, conducts unannounced “dawn raids” on company offices, and threatens employees with criminal prosecution for resisting document requests. Such tactics, it concludes, have created “a climate of fear that discourages investment, chills innovation, and undermines rule of law and fair trade.”
Executives told NBR that investigators sometimes occupied offices for weeks, seized proprietary data, and required staff to sign statements before being released from questioning. Several companies reported investigations recurring every two to four months, often coinciding with periods of political scrutiny in the National Assembly. “A lull in investigations makes them nervous,” the report says, describing what it calls a “permanent compliance crisis.”
Although South Korea enacted legal amendments in 2020 intended to improve transparency, NBR found that companies “cannot meaningfully review or rebut evidence” before penalties are imposed, preventing them from defending themselves “as they would in other advanced economies.”
Pattern of Discrimination
NBR found that U.S. companies face disproportionate scrutiny compared with Korean and Chinese competitors. Firms told researchers that the same regulators “are also giving lighter treatment to Korean and Chinese competitors,” a pattern the report says raises concerns about selective enforcement. While the KFTC denies favoritism, NBR says the combination of opaque procedures and political pressure has produced “a regulatory environment viewed by U.S. companies as unpredictable and tilted against them.”
In related submissions to the Office of the U.S. Trade Representative, industry groups used even stronger language. The Computer and Communications Industry Association, the App Association, and others said the KFTC had effectively “weaponized competition law” to harass U.S. firms while sparing domestic conglomerates—a characterization NBR cites in its review of third-party comments.
Broader Trade Implications
The findings come as the Trump administration presses allies to dismantle what it calls “back-door protectionism.” Officials at the U.S. Trade Representative are examining the report’s conclusions as part of the 2026 National Trade Estimate Report on foreign trade barriers.
In earlier filings to that process, the Coalition of Service Industries described Korean enforcement as “a troubling anomaly for a closely allied U.S. trading partner,” and the Computer and Communications Industry Association said the KFTC’s reliance on criminal threats “undermines the regulatory predictability and transparency necessary for cross-border digital trade.”
The Competere Foundation, whose economic modeling is cited by NBR, estimates that discriminatory enforcement could cost the U.S. economy $525 billion over ten years, or roughly $3,900 per household, and result in $128 billion in foregone U.S. exports tied to digital-services trade. Competere also projects similar losses for Korean consumers and small businesses.
Competere’s modeling hasn’t been independently verified by other economists.
Seoul’s New Policy Direction
President Lee Jae-myung and KFTC Chairman Ju Byung-ki have advocated a more activist approach to regulating digital platforms. Their proposed Online Platform Fairness Act, modeled on the European Union’s Digital Markets Act, would grant the KFTC new powers to cap service fees and police what it calls “superior bargaining positions.”
NBR warns that the proposed legislation would “legally enshrine the unfair treatment that these firms have reported already exists in practice.” While U.S. officials have urged Seoul to reconsider, the report predicts that the KFTC “will continue to pursue its agenda even in the face of staunch domestic and international opposition.”
The KFTC has previously stated that its enforcement “applies equally to domestic and foreign firms” and that its actions are aimed at protecting consumers and ensuring fair competition. Korean analysts say public resentment of large technology platforms—most of them foreign—has fueled political pressure for aggressive oversight.
Still, NBR cautions that without stronger transparency and procedural safeguards, South Korea’s competition regime risks becoming a de facto non-tariff barrier. “These practices,” Mr. Cory wrote, “amount to a significant non-tariff barrier that undermines a key bilateral economic partnership.”
The report’s release places a close U.S. ally under fresh scrutiny just as Washington seeks to rally trading partners behind its broader push against economic nationalism in Asia.
“President Trump has worked hard in recent months to rebalance that trade relationship, and it would be a shame if Korea undermines all of that hard work through its KFTC’s discriminatory competition enforcement practices, proposed digital trade bills, and unfair mapping data restrictions that target U.S. firms like Google, Apple, Meta, and Coupang. A firm, coordinated U.S. response is essential to safeguard fair treatment of U.S. companies and maintain strategic balance against China’s growing economic influence,” O’Brien, the former national security advisor, said.
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