South Korea's Federal Trade Commission (FTC) has initiated a comprehensive investigation into Kakao Mobility following public criticism from President Yoon Seok-yeol. The FTC's Anti-Monopoly Investigation Division and Franchise Investigation Division recently launched inquiries into Kakao Mobility, a taxi-hailing service provider of the country's tech giant Kakao.
During a town hall meeting on Nov. 1, President Yoon denounced Kakao Mobility, saying, "Predatory pricing, which involves offering exceptionally low prices to eliminate all competition and subsequently raising prices when monopolistic dominance is achieved, is unethical." He went on to emphasize that "Kakao's domination of the taxi industry is highly questionable, and the government must take action."
President Yoon's call for government intervention has initiated the FTC's probe on Kakao Mobility.
Kakao Mobility is already under FTC investigation for alleged "call blocking" practices and unfair franchise agreements. It has been reported that the FTC recently forwarded an examination report, similar to a prosecutor's indictment, along with a recommendation for sanctions, concerning Kakao Mobility's abuse of its dominant market position under the Fair Trade Act.
The People's Solidarity for Participatory Democracy (PSPD) and Lawyers for a Democratic Society had previously filed a complaint with the FTC, alleging that Kakao Mobility utilized its dominance in the taxi-hailing market to suppress competition by not dispatching passengers to taxis affiliated with competitors like Uber and Tada.
The FTC contends that Kakao Mobility engaged in exclusionary practices that violate the Fair Trade Act.
President Yoon's statements are expected to trigger a more rigorous investigation by the FTC. The FTC had previously launched extensive investigations into various industries after Yoon highlighted the detrimental consequences of monopolies in the financial and telecommunications sectors.
The FTC also conducted inquiries into misleading advertising within the tutoring industry following Yoon's mention of a "private education cartel."
Kakao rose to prominence after introducing its signature messenger service KakaoTalk in March 2010, amassing over 10 million users in under a year. Initially a free alternative to paid text messaging services provided by telecom companies, Kakao later expanded its business to ride-hailing, gaming, entertainment, banking, and artificial intelligence.
The company came under scrutiny from regulatory and financial authorities for issues including a split listing, Fair Trade Act violations, monopoly-related controversies, market manipulation suspicions, and segmented accounting practices.
In response to these developments, Kakao has announced the establishment of a management reform committee. The committee, led by Kakao founder Kim Beom-su and comprised of CEOs from major affiliates, will oversee efforts to drive change and innovation across the entire company to address current challenges.
In a recent community management meeting attended by over 20 executives, the group discussed the possibility of forming a monitoring organization, and specific actions regarding issues such as mobility fee matters.
The decision was made to engage key stakeholders in the activities of the Compliance and Trust Committee, an external entity responsible for overseeing the ethical conduct and compliance of Kakao's affiliated entities. This committee will serve as a robust executive body to enhance compliance and internal control mechanisms across individual affiliates.
The meeting also addressed the restructuring of Kakao Mobility, including the revision of member taxi fees. Kakao Mobility is in the process of scheduling an emergency meeting with taxi associations to thoroughly revise the fee structure, incorporating feedback gathered during the meeting.
"While we have upheld the autonomy and responsible management of each community, as the founder and majority shareholder, we are now returning to our roots and taking the lead in overcoming the current challenges," said Kakao founder Kim Beom-su. "Kakao has evolved into a national platform and company, and each community should now operate with a sense of responsibility that aligns with the expectations of today's society."
Kakao announced on Friday that the company appointed former Supreme Court Justice Kim So-young to lead the compliance and trust Committee, an external entity tasked with monitoring the ethical conduct and compliance of Kakao's affiliated entities.
The committee will have authority to oversee and actively investigate issues that have been criticized by the public, such as excessive listing of affiliates, violation of the Fair Trade Act, market monopolization, and violation of compliance obligations by top management.
This article was originally published on Nov. 3, 2023.