This file photo taken on Nov. 3, 2022, shows a taxi affiliated with Kakao Mobility, South Korea’s leading ride-hailing app. (Yonhap)
SEOUL, Feb. 14 (Korea Bizwire) — South Korea’s antitrust regulator said Tuesday it has decided to slap fines of 25.7 billion won (US$20 million) on Kakao Mobility Corp., the nation’s leading taxi-hailing service, for manipulating its algorithm to give more calls to cabs under its franchise.
The punishment on the operator of the app, Kakao T, came after the company gave preferential treatment to franchise taxis under the Kakao brand, dubbed Kakao T Blue, according to the Fair Trade Commission (FTC).
The app is open to both franchise and non-franchise taxis.
“(Since its launch, Kakao Mobility) has been giving priority to its franchise taxis in allocating rides, and it secretly operated an algorithm to exclude them from less profitable requests, such as rides less than 1 kilometer,” the FTC said in a statement.
For example, the app allowed franchise taxis to receive ride requests even when other non-franchise taxis were located closer to clients.
Under the contract, all drivers are subject to the same terms, with Kakao T Blue taxis only being required to receive additional calls.
The FTC said that Kakao Mobility was able to easily increase the number of its affiliated taxis, as franchise drivers earned relatively higher incomes due to the manipulated algorithm.
Through the unfair business tactic, the watchdog said Kakao T Blue expanded its presence in the market for franchise taxis, with its share soaring to 73.7 percent in 2021, compared to 14.2 percent tallied in 2019.
The FTC said the increase in the number of taxis receiving requests only from Kakao T has led to the so-called lock-in effect in the ride-hailing industry, making it harder for cabs and customers to leave the platform.
The watchdog also pointed out that the app operator may charge more commission fees on users and drivers based on its dominant position in the market, revealing such discussions were actually made among its employees in 2020.
“(Through the latest measure), we have clarified that setting or altering algorithms of services in a discriminative manner can be considered a violation of fair trade rules,” the regulator said.
The FTC said that the amount of the fine was calculated based on related sales and could be adjusted based on the final earnings report
As of December 2021, Kakao T boasted monthly active users of 11 million, hovering far above around 516,000 posted by No. 2 player UT.
Kakao Mobility, meanwhile, said the decision made by the FTC is “regrettable,” adding it will consider various measures, including legal action.
“The fact that the AI-based allocation system has contributed to consumers’ benefits by helping them return home was not reflected in the result, even if it was confirmed during the FTC’s reviewing process,” the company said.
“It is extremely regrettable that the punitive measure was made based on claims from some taxi operators, instead of taking the business nature of the cab industry into account,” it added.
(Yonhap)
