'Call Blocking' Abuse: Kakao Mobility Fined 72.4 Billion Won in Heavy Penalty

Fair Trade Commission Files Corporate Prosecution
Fourth Highest Fine for Abuse of SISG
Demanding Trade Secrets from Competitors
Call Blocking Penalty for Refusal

Kakao Mobility, the leading taxi-hailing platform in the market, was fined 72.4 billion KRW by the competition authorities on the 2nd for unfairly blocking calls to competitor affiliated taxis based on its market-dominant position. The Kakao Mobility corporation was also reported to the prosecution. The authorities judged that Kakao Mobility, which holds a monopoly position in the taxi-hailing intermediary market, distorted fair competition by blocking calls to competing affiliated taxis.

According to the Korea Fair Trade Commission (KFTC), since May 12, 2021, Kakao Mobility has operated the 'KakaoT Blue' affiliated taxi business and demanded contracts to provide trade secrets in real-time to four competing affiliated taxi operators?Wooty, Tada, Banban, and Macaron Taxi?and if refused, blocked access to the 'KakaoT' app's general call service.

Kakao Mobility is a business operator that provides both the 'general call' service and its subsidiary KakaoT Blue's 'affiliated call' service through the KakaoT platform, holding an overwhelming market share of 96.19% (as of 2022) in the general taxi app call market. Kakao Mobility started in March 2015 with a general call service connecting all taxis and passengers, growing its market share, and launched the KakaoT Blue affiliated taxi business in March 2019.

To quickly dominate the affiliated taxi service market, Kakao Mobility sought ways to restrict usage by affiliated taxis of major competitors. Specifically, it demanded partnership contracts that required paying commissions for calls used by competitor-affiliated drivers or allowed real-time collection of trade secrets such as affiliated driver information and taxi operation data generated from the competitor affiliated taxi operators' call apps. If these demands were not met, Kakao Mobility pressured competitors by threatening to block the affiliated drivers' access to KakaoT general calls.

In fact, Kakao Mobility signed partnership contracts with Banban Taxi and Macaron Taxi to receive trade secrets, while blocking KakaoT general calls for drivers affiliated with Wooty and Tada who did not agree to the partnership contracts, leading those drivers to terminate their affiliation contracts.

As a result, Kakao Mobility gained overwhelming market dominance not only in the general call market but also in the affiliated taxi market, with its market share soaring from 51% in 2020 to 79.06% in 2022. Meanwhile, competitors such as Tada, Banban Taxi, and Macaron Taxi either withdrew from the business or were effectively pushed out, leaving Wooty as the only valid competitor in the affiliated taxi market with a market share more than ten times smaller than Kakao Mobility's.

The KFTC judged that Kakao Mobility's actions led to most competitors being driven out of the market, distorting fair competition among operators and limiting consumer choice. The KFTC found these actions to violate Article 5, Paragraph 1, and Article 45, Paragraph 1 of the Monopoly Regulation and Fair Trade Act, which prohibit 'interference with business activities' and 'abuse of superior bargaining position.'

The 72.4 billion KRW fine imposed on Kakao Mobility by the KFTC was calculated based on the provisional sales of 1.4 trillion KRW related to the confirmed violations from May 12, 2021, to September 25 of this year. This is the fourth-largest fine ever imposed by the KFTC for abuse of market-dominant position. The final fine will be confirmed after review by the Securities and Futures Commission, and if the commission applies the net amount method instead of the gross amount method to the related sales, the final fine is expected to decrease.

Chairman Han Ki-jung of the KFTC stated, "This action penalizes anti-competitive behavior where a giant platform that virtually monopolizes the market unfairly uses its market dominance to restrict fair competition with competitors in adjacent markets, thereby expanding its market dominance into adjacent markets. It will contribute to raising awareness among platform operators to compete fairly with their competitors."

Meanwhile, Kakao Mobility was previously fined 25.7 billion KRW by the KFTC last year for 'call favoritism,' where it manipulated its internal dispatch algorithm to favor its affiliated drivers.