Chairman Kim Beom-su Steps In Personally: Will Kakao Present a Concrete Win-Win Plan?

[Asia Economy Reporter Kang Nahum] Kim Beom-su, chairman of Kakao's board, directly addressing the controversy over Kakao's infringement on local small businesses is interpreted as an expression of his intention to empathize with the criticism from political circles and the government regarding Kakao's sprawling business expansion and to resolve the issue on his own. Attention is particularly focused on whether he will present a win-win cooperation plan that can dispel concerns about the encroachment on local small businesses, which has become a contentious issue.

◆ Fair Trade Commission targeting Chairman Kim = According to Kakao on the 13th, the reason Chairman Kim is directly stepping in amid various controversies surrounding the company is due to increasing pressure from political circles and authorities regarding Kakao's business practices.

The Fair Trade Commission recently detected allegations of violations of the Fair Trade Act by Chairman Kim and conducted an on-site investigation at the headquarters of Kakao and K Cube Holdings. It is known that the commission launched a compulsory investigation after finding signs that data related to K Cube Holdings was omitted or falsely reported in the ‘designated materials’ submitted by Kakao over the past five years. This marks a shift from targeting the company Kakao to directly going after its head.

In the National Assembly, bills targeting Kakao are being proposed one after another. Assemblyman Byun Jae-il of the Democratic Party of Korea introduced a partial amendment to the Telecommunications Business Act aimed at preventing ‘data monopolization’ by big tech companies. The core of the bill is to prohibit telecommunications operators above a certain scale, such as Kakao, Naver, and the three major mobile carriers, from monopolizing user-generated data. This stems from concerns that if one company monopolizes user-generated data, it could hinder other companies' market entry and reduce consumer choices.

The regulatory atmosphere toward Kakao is also not subsiding in the financial industry. Financial platforms like Kakao Pay must register with the Financial Services Commission under the Financial Consumer Protection Act to compare and recommend customized financial products to consumers. Until now, these financial platforms avoided regulation by claiming they were merely advertising financial products, but going forward, financial authorities have decided to regulate them.

◆ Naver’s ‘Deja Vu’ in the Past = There is speculation that if regulation and pressure on Kakao continue, it may eventually follow a path similar to Naver’s. At last year’s National Assembly Audit by the Political Affairs Committee, Han Seong-sook, CEO of Naver, appeared as a witness. At that time, the biggest issue surrounding Naver was the ‘news algorithm manipulation suspicion.’

CEO Han explained that "news editing is within the realm of algorithms," but the suspicion did not subside, and on the day Han appeared before the National Assembly, Naver abolished its ranking news feature that showed ‘most viewed news’ in order. At that time, the industry interpreted this as Naver surrendering under pressure from the National Assembly and public opinion.

Kakao is also in a situation where it must present sufficient win-win measures to dispel controversies. Currently, Kakao Mobility, which has been embroiled in controversies such as allegations of preferential taxi dispatch and increased taxi call fees, is considering ways to increase benefits provided to taxi drivers. Kakao Hairshop, which faced criticism over excessive commissions, is also considering lowering its commission fees.

However, it is uncertain whether these measures will satisfy small business owners and consumers. Criticism and concerns over sprawling expansion have accumulated over a certain period, and as long as Kakao continues its business, small business owners will have no choice but to continue competing with large corporations. If pressure from political circles and authorities persists, some affiliates may even have to consider withdrawing from certain businesses.

An IT industry insider said, "I understand that Chairman Kim is taking the recent controversies seriously," adding, "Since Chairman Kim is considering additional personal financial contributions, this should be taken as an opportunity for the native platform to mature further and also to leap forward as a global platform."