[Exclusive] Did Kakao Entertainment Abuse Its Power in Web Novels? Fair Trade Commission Begins Sanctions

[Asia Economy Reporter Eunju Lee] The Fair Trade Commission (FTC) has initiated disciplinary procedures against Kakao Entertainment on allegations of copyright infringement involving participants in its web novel contest. This comes about two years after the FTC began investigating Kakao Entertainment.

According to industry sources on the 1st, the FTC has sent Kakao Entertainment a review report containing disciplinary recommendations (equivalent to a prosecutor's indictment). The FTC plans to send the review report to the commission for deliberation. Kakao Entertainment is understood to be in the final stages of preparing a written defense to submit to the FTC.

The FTC's Service Industry Monitoring Division examiner believes that Kakao Entertainment imposed unfavorable contracts on some award-winning authors regarding secondary copyright creation rights during the web novel contest. The review report includes provisions for fines under the Fair Trade Act for abuse of trade dominance, specifically citing the charge of 'providing disadvantages.' Since 2021, the FTC has been investigating whether Kakao Entertainment forced unfavorable contracts on web novel contest participants. The FTC's final decision on the legality and level of sanctions is expected to be made at a plenary session.

As the FTC strengthens its oversight of monopolistic practices by big tech platform companies, it has recently intensified scrutiny of Kakao affiliates. On the morning of the 1st, the FTC held a plenary session to review allegations of abuse of market dominance by Kakao Mobility. After the session, the FTC is expected to decide on the level of sanctions regarding Kakao Mobility's alleged preferential treatment of affiliated taxis through the KakaoT app.

In December last year, the FTC decided to file charges with the prosecution against KCube Holdings, a private company wholly owned by Kim Beom-su, head of Kakao Future Initiative Center. Earlier in November, the FTC also launched an investigation into allegations that Kakao Entertainment deliberately posted defamatory content online against its competitor Idol. The investigation into this matter is currently ongoing. FTC Chairman Han Ki-jung stated in an interview with a media outlet earlier this year, "The investigation into Kakao Entertainment has been completed, and we will deliberate after the review of Kakao Mobility."