Court Orders Cancellation of Correction Order Against Kakao Kim Beom-su's Private Company

Fair Trade Commission judges K Cube Holdings as a 'financial company'
Court: "Financial business involves managing others' funds"

The court ruled that the Fair Trade Commission's corrective order against K Cube Holdings, a personal company of Kakao founder Kim Beom-su, for violating the 'separation of banking and commerce regulation' must be canceled.

The Seoul High Court Administrative Division 7 (Presiding Judges Kim Dae-woong, Kim Sang-cheol, Bae Sang-won) on the 7th ruled in favor of the plaintiff in the lawsuit filed by K Cube Holdings against the Fair Trade Commission, demanding the cancellation of the corrective order.

Earlier, in December of last year, the Fair Trade Commission issued a corrective order and filed a complaint with the prosecution against K Cube Holdings for exercising voting rights over shares held in Kakao and Kakao Games. This was because the 'financial and insurance companies' belonging to business groups with cross-shareholding restrictions and assets exceeding 10 trillion won are, in principle, prohibited from exercising voting rights over shares of domestic affiliates under the Fair Trade Act (separation of banking and commerce regulation). The Fair Trade Commission judged that K Cube Holdings is a financial company subject to the separation of banking and commerce regulation based on the fact that more than 95% of its income comes from financial earnings such as dividends.

K Cube Holdings filed an appeal lawsuit, arguing that it exercised voting rights because it was judged not to be a financial company. Their claim was that all their financial income was earned by managing their own funds and that they cannot be classified as a financial company engaged in managing customer deposit funds.

The key issue in the trial was whether companies like K Cube Holdings, which earn financial income by managing only 'own funds,' are subject to the separation of banking and commerce regulation. The court ruled in favor of K Cube Holdings, stating, "The financial business referred to in the separation of banking and commerce regulation should be understood as industrial activities that operate customer deposit funds, i.e., 'management of others' funds,' as a business."

The court viewed the purpose of introducing the voting rights restriction system under the separation of banking and commerce regulation as preventing "unfair affiliate expansion using vast customer deposit funds." Furthermore, the court rejected the Fair Trade Commission's argument that "to curb economic power concentration, it is necessary to regulate affiliate expansion using own funds," stating, "There is no reason to suppress the concentration of economic power through legitimate means."

Additionally, the court noted, "Even if excessive economic power concentration is undesirable from the perspective of the national economy as a whole, a complete ban on exercising voting rights over affiliate shares acquired with own funds is excessive."