Case highlights rising scrutiny of platform energy in South Korea’s ride-hailing market
South Korean prosecutors have indicted Kakao Mobility, the corporate behind the taxi-hailing service KakaoT, together with a number of senior executives, over alleged breaches of the Honest Commerce Act. The Seoul Southern District Prosecutors’ Workplace mentioned on January 26 that it introduced non-custodial expenses towards the agency and three executives, together with chief govt Ryu Geung-seon, citing suspected abuse of market dominance in relations with rival franchise operators.
Prosecutors additionally charged Kakao Mobility as a company entity underneath a joint legal responsibility clause, which makes each executives and the corporate itself topic to legal accountability. On the identical time, authorities mentioned they have been unable to substantiate claims that the agency gave preferential dispatch remedy to drivers affiliated with its personal companies.
In response to prosecutors, the case centres on Kakao Mobility’s conduct as competitors intensified within the franchise taxi market round late 2020. Investigators allege the corporate demanded that 4 smaller franchise operators both pay charges equal to 2 to 3 occasions normal franchise expenses or hand over delicate operational knowledge, together with car numbers, routes, and departure data.
When a number of operators refused, prosecutors say Kakao Mobility carried out a plan to dam dispatch calls to drivers affiliated with these firms by KakaoT. Consequently, greater than 14,000 driver accounts linked to at least one agency and over 1,000 accounts linked to a different have been allegedly suspended from receiving experience requests.
Impression on drivers and rivals
Prosecutors mentioned the alleged name blocking had direct financial penalties for drivers. Affected drivers reportedly misplaced a median of about 1.01 million received in month-to-month revenue, whereas one competing franchise operator noticed its fleet dimension lower roughly in half.
As drivers migrated away from smaller operators towards Kakao Mobility-affiliated companies, the corporate’s market share within the mid-sized franchise name section rose sharply—from 55% in March 2021 to 79% by December 2022, in line with the investigation. Prosecutors described this end result as proof that the alleged conduct strengthened Kakao Mobility’s dominant place on the expense of smaller rivals.
Why market construction issues
The case additionally highlights the construction of South Korea’s taxi-hailing market, which is split into two segments: “basic calls,” accessible to most registered drivers, and “franchise calls,” that are restricted to drivers affiliated with particular operators.
Kakao Mobility has lengthy dominated the final name market, with market share exceeding 90% since round 2019, in line with trade knowledge cited by prosecutors. Investigators argue that this dominance gave the corporate important leverage when negotiating with smaller franchise operators that trusted entry to KakaoT’s person base.
Whereas prosecutors moved ahead with expenses associated to name blocking and coercive calls for, they mentioned they may not set up legal legal responsibility for different allegations. Claims that Kakao Mobility manipulated name allocation to favour affiliated drivers, in addition to accusations of inflated gross sales figures, have been dropped resulting from inadequate proof.
A prosecution official mentioned authorities would “proceed to reply strictly, in accordance with the legislation and ideas, to truthful commerce crimes that undermine market competitors and hurt folks’s livelihoods and the nationwide economic system.”
Kakao Mobility denies wrongdoing
Kakao Mobility rejected the allegations, arguing that the measures underneath scrutiny have been a part of regular enterprise discussions meant to forestall service high quality issues and tackle what it described as “free-riding,” through which some operators use the platform’s infrastructure with out contributing to its working prices.
“This matter concerned official consultations to forestall service high quality deterioration and free-riding points that come up in platform operations,” the corporate mentioned in a press release. “There was no intent or motion to limit competitors, nor any violation of related legal guidelines.” The corporate added that associated administrative litigation is already underway and that it’s going to “faithfully clarify the info” through the legal trial.
A broader check for platform regulation
The indictments observe a prolonged investigation triggered by a criticism from the Honest Commerce Fee, together with searches of a number of areas and questioning of dozens of workers. The case underscores growing scrutiny of dominant digital platforms in South Korea, notably the place market energy intersects with livelihoods in sectors equivalent to transportation.
Because the trial proceeds, authorized observers say the result might have wider implications for a way platform operators negotiate with smaller companions—and the way far market leaders can go in utilizing their scale with out crossing into unlawful restraint of competitors.
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