[THE VIEW]Will SoftBank Ultimately Take Full Control of Line?

Naver Faces Unprecedented Pressure from Japanese Government
Concerns over Monopoly of Digital Administrative Services
Japan Seeks Full Control of Line for Security and Sovereignty

The Naver Line incident is escalating into a Korea-Japan diplomatic issue. The Japanese government is demanding that Naver relinquish management rights over Line, citing administrative guidance following the personal information leak incident involving Japanese citizens. In line with this, SoftBank of Japan, which holds a 50% stake in Line, has also publicly moved to secure shares. They have requested A Holdings, which owns about 65% of Line shares held by Naver, to sell its stock. Essentially, the Japanese government is pressuring Naver to completely transfer management rights to Japan's SoftBank.

Why has the Japanese government stepped in to allow SoftBank to monopolize Line's management rights? Line is more than just a messenger service; it almost monopolizes digital administrative services such as issuing official documents. From the Japanese government's perspective, the fact that a foreign company monopolizes digital administration and civil service is unwelcome. In the long term, transforming Line into a fully Japanese company for digital security and safety is a more rational choice.

Attention should also be paid to Line's diverse platform scalability. Just as Korea's Kakao offers not only the KakaoTalk messenger but also services like gift-giving and reservations, Line can expand beyond digital administrative services into a ‘platform’ capable of transportation, delivery, shopping, and digital payments. Most Japanese citizens have long used Line, becoming accustomed to the Line brand and services, creating an ‘inertia’ that allows for limitless expansion into various services. Bringing a ‘platform’ with infinite growth potential under Japanese ownership would be advantageous for the Japanese government and companies.

However, direct pressure to transfer management rights through administrative guidance is uncommon from an international perspective. In the United States, a leader in personal information and cybersecurity, fines and material compensation and apologies to customers are typical. Europe is also known for imposing hefty fines on companies that leak personal information, but cases of intervening in corporate management rights are rare. Even within Japan, there have been no cases demanding management rights transfer due to cybersecurity failures. During the large-scale Facebook user account hacking incident in 2018, administrative guidance was limited to explaining the cause of the hack to users and preventing recurrence of the leak.

As the Korean Ministry of Foreign Affairs has expressed direct concerns over this unprecedented international measure, expanding it into a diplomatic issue, reconsidering internal corporate management strategies should be prioritized. Issues of management rights monopoly and share seizure commonly occur in overseas joint ventures. From the beginning of the joint operation between Naver and SoftBank for Line, Naver seems to have insufficiently considered such possibilities and failed to prepare countermeasures in advance.

Additionally, criticism that Naver's response to this hacking incident was significantly delayed is unavoidable. Considering that Line still uses Naver's security system, Naver should have responded more actively and swiftly when the hack occurred. Responsibilities for server security and security infrastructure should have been clearly defined internally, and countermeasures devised. Before seeking assistance from the Korean government through diplomatic channels, internal governance and management strategies must be reconsidered to prevent recurrence of such incidents.

Kyung Na Kyung, Professor, Department of Computer Science, National University of Singapore