A Kakao T taxi in Seoul (File photo by News1)
South Korea’s antitrust body fined Kakao Mobility Corp., the country’s largest taxi-hailing app operator, 72.4 billion won ($54.9 million) and filed a complaint against the unit of platform giant Kakao Corp. with the prosecution for allegedly violating competition laws.
The Korea Fair Trade Commission (FTC) said on Wednesday that Kakao Mobility with a 96% share in the general taxi-hailing market required rivals including Uber Technology Inc.’s joint venture in the country to sign partnership agreements that allow the South Korean company to collect real-time data on drivers affiliated with its competitors.
Kakao Mobility blocked the drivers from accessing its ride-hailing app Kakao T unless its rivals accepted the demand, according to the watchdog.
“It was to punish anticompetitive activities by a giant platform that unfairly used its market dominance to extend its supremacy into neighboring markets,” said FTC Chairperson Han Ki Jeong. “It is an example of the judgment that a practice of asking rivals to provide confidential business information and using it could hinder fair competition.”
FTC Chairperson Han Ki Jeong speaks to the press about the antitrust body’s penalties against Kakao Mobility on Oct. 2, 2024 (Courtesy of Yonhap)
Kakao Mobility said such practices were agreed upon with competitors for customer convenience under the government’s policy, adding the punishments were so severe that they could hurt its competitiveness in the fight against global platform operators.
The company also said the penalties are likely to cause few local mobility service providers not to launch new businesses.
“The FTC levied an excessive fine, which is similar to a total operating profit in the recent three years. The body even decided to file a complaint, bucking the trend of global competition law enforcement, which does not impose criminal penalties for violations of anti-trust laws,” Kakao Mobility said in a statement. The company reported a profit of 70.7 billion won in 2021-2023.
“Homegrown platforms are concerned that such strict regulations could leave them behind in competition with global mobility platforms, which work on large promotion with big money.”
BOOSTS FRANCHISED SERVICE WITH GENERAL TAXI-HAILING SERVICE
The South Korean taxi-hailing market consists of the general service and the franchised service.
The general service allows taxi users to hail any cabs, while the franchised service connects customers with only taxi drivers who subscribe to paid memberships with such platform operators.
Kakao Mobility, which started the general service in 2015, launched a franchised service under the Kakao T Blue brand in 2019.
The FTC said the company abused its dominance in the general service for the Kakao T Blue whose market share surged to 79.1% by 2022 from 14.2% in 2019.
Kakao Mobility demanded its rivals to share their core data through partnerships, which was difficult for them to refuse as they heavily relied on Kakao T for their general taxi-hailing service, according to the FTC.
The company blocked the general service for competitors such as UT LLC., a joint venture between Uber and the country’s leading navigation app operator Tmap Mobility Co.
“The competing franchised service operators such as Tada had no choice but to sign the cooperation deals with Kakao Mobility to prevent member drivers from leaving them,” said an FTC official. Tada is a Seoul-based van-hailing service owned by a domestic fintech unicorn Viva Republica Inc.
Kakao Mobility sought data on franchised taxi drivers, their trip routes, times and others. The company used such information to supply more Kakao T Blue cabs when and where taxi demand was strong, according to the regulator.
The FTC said such practices allowed Kakao Mobility to boost its market shares in the franchised taxi-hailing sector and eliminate some of its rivals from the market. The country now has only two franchised taxi-hailing service providers – Kakao T Blue and UT.
A UT taxi in Seoul (File photo by Bum-June Kim)
The penalty against Kakao Mobility was the FTC’s first punishment for a major platform’s business strategy of requesting and using data from competitors.
“Overseas regulators have taken similar action with antitrust authorities in the European Union and the UK investigating Meta and Amazon over their use of merchant and customer data for their own businesses,” Han said.
The authority in March 2023 has already fined Kakao Mobility 25.7 billion won, saying the company rigged Kakao T’s algorithm to allow franchised cab drivers under the Kakao T Blue brand to receive more calls from taxi users compared to non-franchise taxis, irrespective of the distance between the caller and the taxi.
COOPERATION FOR CUSTOMERS
Kakao Mobility said it sought partnerships with other taxi-hailing service providers to deal with various issues such as multiple bookings for single services on different platforms and canceling them as per the government’s policy.
“Many taxi drivers of other franchised service providers canceled calls of Kakao T to select profitable routes,” Kakao Mobility official. “We agreed to share necessary information with other service operators to reduce customer inconvenience.”
Kakao Mobility has not used additional data collected from competitors for its own businesses, according to the company.
“The data the FTC mentioned was the same as the information obtained when using basing navigation systems such as departure-arrival coordinates, travel routes and real-time GPS,” the company said.
By Yeong-Hyo Jeong and Eun-Yi Ko
hugh@hankyung.com
Jongwoo Cheon edited this article.
