SEOUL, Oct. 21 (Korea Bizwire) — South Korea’s antitrust regulator said Friday it plans to come up with measures to build grounds for fair competition in the online platform market amid growing criticism that the government has failed to properly monitor Kakao Corp.’s dominant position in the market.
The move came after nearly all services by Kakao — a tech giant with a vast business portfolio ranging from mobile messenger KakaoTalk to online banking and ride-hailing services — suffered a massive disruption from Saturday to earlier this week due to a fire at its data center near Seoul.
The accident laid bare the vulnerability of a super-connected South Korean society where 43 million out of the country’s 51 million people use KakaoTalk. The company’s co-CEO Namkoong Whon stepped down Wednesday in response to the incident.
“To some extent, the recent Kakako incident came as the dominant platform, which has no competition pressure in the market, failed to make efforts to reform and neglected its social responsibility,” the Fair Trade Commission (FTC) said in a press release.
“We will seek to promote a customized policy improvement plan to solve the issue of the monopoly or oligopoly in the platform sector and take stern actions for violations that take advantage of its dominance,” the FTC added.
In detail, the FTC said it plans to draw up clear guidelines to assess online platform operators’ market dominance and provide examples of actions that can be considered violations by the end of this year.
“Compared with traditional areas, we need to consider that a single platform can be connected to various services, expanding its dominance into various markets,” the FTC said.
The FTC plans to devise measures to prevent major platforms from seeking reckless merger and acquisition projects, including bolstering reviews on such activities. The watchdog plans to start making revisions early next year.
The number of affiliates of Kakao came to 136 as of May 1, up 18 from 2021. In 2018, the group had 72 subsidiaries.
The plans were reported to President Yoon Suk-yeol.
A ruling party’s lawmaker called for the FTC to bolster its surveillance of platform operators and urged Kakao to be more responsible for the benefits of consumers.
“The chaos sparked by the disruptions in Kakao services, which caused major confusion and damage to the people, came as the company neglected infrastructure inspections and related investment, while focusing only on reckless expansion and generating profits,” Rep. Kang Min-Kuk of the ruling People Power Party said.
According to the data provided by the FTC to his office, Kakao’s advertisement sales from its messenger platform came to 1.6 trillion won (US$1.12 billion) in 2021. Sales in the second quarter of 2022 came to 914.1 billion won.
“Based on its dominant market share of KakaoTalk, they took advantage of a lock-in effect and have been focusing on maximizing profits by expanding the advertisement business, knowing users do not have other choices,” Kang said.