Ministry of SMEs Requests Fair Trade Commission to File Complaint Against Kakao Mobility and Dain Construction

The Korean Bar Association and Seoul Bar Association Decide Not to Request Prosecution

The Ministry of SMEs and Startups has decided to request the Fair Trade Commission to file a criminal complaint with the prosecution against Kakao Mobility and Dain Construction. This is due to unfair trade practices involving abuse of transactional dominance and illegal acts of habitual non-payment of subcontracting fees, which caused significant damage to small and medium-sized enterprises.

On the 19th, the Ministry held the 24th Mandatory Prosecution Request Deliberation Committee meeting and decided to request the Fair Trade Commission to file a criminal complaint against Kakao Mobility for violating the Fair Trade Act and Dain Construction for violating the Subcontracting Act. The mandatory prosecution system allows the Ministry of SMEs and Startups, the Public Procurement Service, and the Board of Audit and Inspection to request prosecution when the Fair Trade Commission has confirmed illegality and imposed fines but has not filed a criminal complaint. When these agencies request prosecution, the Fair Trade Commission must file a complaint with the prosecution according to the Fair Trade Act and related laws.

The Ministry judged that Kakao Mobility abused its transactional dominance to engage in unfair trade practices. Previously, Kakao Mobility was found by the Fair Trade Commission to have violated the Fair Trade Act by manipulating algorithms to favor affiliated taxis during dispatch. Although a fine of 25.7 billion KRW was imposed in February for this issue, no criminal complaint was filed.

The Deliberation Committee pointed out, "The preferential dispatch practice led to an increase in the number of Kakao T Blue affiliated taxis, resulting in an expansion of market dominance in the affiliated taxi market." It added, "Meanwhile, non-affiliated taxis continuously suffered disadvantages in dispatch, causing significant losses in fare revenue." Furthermore, "Using its widespread influence nationwide and market-dominant position, the company violated the law by operating algorithms and platforms to favor its affiliated taxis, undermining fair competition order." The committee concluded, "Considering the significant fare revenue losses suffered by non-affiliated taxis nationwide, which are small and medium-sized enterprises, we decided to request prosecution."

Dain Construction failed to pay approximately 6.156 billion KRW in subcontracting fees and delayed interest to 19 small and medium-sized enterprises from April 2017 to June 2021. In March, Dain Construction received an order from the Fair Trade Commission to prevent recurrence and to make payments. The Deliberation Committee explained, "Given the large total damage to small and medium-sized enterprises and the company's three prior violations of the same law in the past three years, we decided to request prosecution."

During this committee meeting, the request for prosecution regarding violations of the Fair Trade Act by the Korean Bar Association and the Seoul Bar Association was also reviewed but it was decided not to request prosecution.

Won Young-jun, Director of the Small Business Policy Office at the Ministry of SMEs and Startups, stated, "Companies that abuse superior positions to harm small and medium-sized enterprises or repeatedly commit similar violations without reflecting on past offenses will be strictly dealt with."