[비즈한국] Kakao Mobility, which dominates the domestic taxi-hailing market, has been hit with a 72.4 billion won fine for allegedly “blocking calls from competitors.” This significant negative development represents the fourth-largest fine ever imposed for an abuse of market-dominant position. Having already been fined over 20 billion won last year for “call-rigging” (preferential dispatching), Kakao Mobility is facing an unprecedented crisis due to successive sanctions from the Korea Fair Trade Commission (KFTC). With impending sanctions from the Financial Services Commission regarding allegations of intentional accounting fraud, the pressure against the abuses of its monopoly is mounting from all sides.
Forced Disclosure of Trade Secrets to Rivals Like UT: A Real ‘Monopoly Effect’
On the 7th, the prosecution began an investigation into allegations that Kakao Mobility increased its market dominance by blocking competitor calls. This follows a referral from the KFTC on the 2nd, which concluded that Kakao Mobility—the operator of the franchise taxi service “Kakao T Blue”—had entered into illegal partnership agreements with four competitors (UT, Tada, Banban, and Macaron) to maintain its monopoly.
According to the KFTC, Kakao Mobility demanded that the four competitors provide core internal data, such as real-time information on franchise taxi status, sign-up and cancellation history, and passenger pick-up and travel routes. If companies refused, Kakao Mobility allegedly blocked its “Kakao T General Call” service from those companies' drivers. This situation occurred as Kakao Mobility, which held a 96% market share in the mid-sized taxi app general call market (as of 2022), sought to strengthen its dominance in taxi supply, including expanding its paid-driver base. UT and Tada, which refused the partnership agreements, saw over 12,000 of their drivers’ IDs blocked by Kakao Mobility. It was later discovered that Tada was forced to sign the partnership agreement with Kakao Mobility after experiencing a surge in franchise cancellations among its drivers.
The KFTC estimated that Kakao Mobility generated 1.4 trillion won in revenue through these illegal acts up to July. This also affected its market power expansion. Kakao Mobility's share of the franchise taxi market rose from 51% in 2020 to 79% in 2022. During this period, competitors like Tada, Banban Taxi, and Macaron Taxi either withdrew from the market or were effectively forced out.
Kakao Mobility explained that its request for information from franchise competitors was intended to reduce “call overlap between platforms.” It argued that when a franchise taxi affiliated with another company accepts a general Kakao call and then receives a “franchise call” while moving toward the passenger, they often cancel the general call to prioritize the franchise call; the company claimed its actions were meant to resolve the limitations of this “cherry-picking” behavior. In a statement regarding the KFTC’s ruling, Kakao Mobility said, “The information obtained from other franchise headquarters after the partnership agreement was not used in any of our business areas. It is unreasonable to view this as information with the value of trade secrets,” adding, “We plan to diligently explain to the court through administrative litigation that no illegal activities took place.”
Despite Regulatory Barrage… Uncertainty Remains on Ending the Monopoly
The current provisionally confirmed total for Kakao Mobility’s fines is 98.1 billion won. The increase in revenue, driven by its growth in franchise call share, has also impacted the scale of the fines. In February of last year, Kakao Mobility was fined 25.7 billion won for the so-called “call-rigging” incident, where it manipulated dispatch algorithms to favor its own franchise taxis. Han Ki-jeong, Chairperson of the KFTC, stated, “The fine amount increased (compared to the call-rigging case) because the relevant revenue and the gravity of the violation are greater. We judged this to be a very serious violation of law with competitive limitations and applied a 5% fine rate.”
With sanctions from regulatory authorities also expected regarding allegations of intentional revenue inflation (accounting fraud), the total fines imposed on Kakao Mobility over the last two years are expected to exceed 100 billion won. This amount is nearly triple the company’s operating profit of 38.7 billion won from last year. Previously, the Financial Supervisory Service (FSS) determined that Kakao Mobility had intentionally chosen an accounting method that counted all franchise fees for Kakao T Blue as revenue, thereby inflating its business performance. The FSS recommended the highest level of sanctions, including a 9 billion won fine and the dismissal of Kakao Mobility CEO Ryu Gung-seon.
However, it remains unclear whether such sanctions will break Kakao Mobility’s monopoly. Currently, the only viable competitor to Kakao Mobility is UT, which has a market share gap of over 10 times. People’s Solidarity for Participatory Democracy (PSPD), which reported Kakao Mobility’s exclusionary practices in 2021, evaluated the company’s moves in the franchise taxi market, saying, “They were the referee acting as a player, placing themselves in a favorable position and sabotaging competitors’ businesses through illegal methods.” The PSPD’s Center for People’s Livelihood stated, “Even if a 72.4 billion won fine is imposed now that Kakao Mobility’s monopoly is firmly established, it is not enough to resolve the completed monopoly,” criticizing that “the fact that they continued to block calls despite being aware that these unfair practices were subject to regulation is because they know it remains a ‘profitable business.’”
Opinions are divided on whether the “win-win roadmap” for the taxi industry that Kakao Mobility released early this year can serve as a turning point beyond a mere “last-ditch effort.” Kakao Mobility is focusing on lowering franchise fees, improving working conditions for platform workers, and engaging in social contribution activities using its own infrastructure to revitalize local economies. Some observers express hope that the company’s recent consideration of a stake investment in a new mobility entity spun off from T-money could lead to a mobility-hailing service that enhances public interests through the cooperation of both companies.
Hwang Yong-sik, a professor of business administration at Sejong University, pointed out, “At the root of the distorted mobility market lies a systemic problem that focused only on protecting the existing taxi market without sufficiently considering an ever-changing environment. Kakao Mobility used makeshift strategies in conditions where it was difficult for various companies to survive on their own.” He added, “To break the monopoly, new entry must be possible. If the barriers to entry erected by Kakao collapse through regulatory sanctions, the room for existing operators to maneuver will widen and new companies will be able to enter, potentially changing the market landscape.”