FTC fines Kakao Mobility $55 mn for alleged unfair taxi-hailing service
Yeong-Hyo Jeong and Eun-Yi Ko
8 HOURS AGO
A Kakao T taxi in Seoul (File photo by News1) South Korea’s antitrust body has 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 prosecutors for allegedly violating competition laws.
The Korea Fair Trade Commission (FTC) on Wednesday said that Kakao Mobility, with a 96% share of the taxi-hailing market, required rivals including Uber Technology Inc.’s joint venture in the country to sign partnership agreements that allow the 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 agency.
“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 the practice of asking rivals to provide confidential business information, and using it, could hinder fair competition.”
FTC Chairperson Han Ki Jeong speaks to reporters about the antitrust body’s penalties against Kakao Mobility on Oct. 2, 2024 (Courtesy of Yonhap) Kakao Mobility said such practices were agreed to with competitors for customers' convenience under the government’s policy, adding that the punishments were severe enough to hurt its competitiveness in the duel against global platform operators.
The company added that the penalties would likely prevent some local mobility service providers from launching new businesses.
“The FTC levied an excessive fine, which is similar to total operating profit in the past 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 total profit of 70.7 billion won for the 2021-2023 period.
“Homegrown platforms are concerned that such strict regulations could leave them behind in the competition with global mobility platforms, which work on large promotion with big money.”
BOOSTS FRANCHISED SERVICE WITH GENERAL TAXI-HAILING SERVICE
The Korean taxi-hailing market consists of general service and franchised service.
The first type allows taxi users to hail any cabs, while the second type only connects customers to taxi drivers who subscribe to paid memberships with such platform operators.
Kakao Mobility began offering general taxi service in 2015, and launched a franchised service under the Kakao T Blue brand in 2019.
The FTC said the company abused its dominance in general service to benefit Kakao T Blue, whose market share surged from 14.2% in 2019 to 79.1% by 2022.
Kakao Mobility demanded that its rivals share their core data through partnerships, which was difficult for them to refuse as they relied heavily on Kakao T for their general taxi-hailing service, according to the FTC.
The company blocked general service for competitors such as UT LLC., a joint venture between Uber and the country's leading navigation app operator Tmap Mobility Co.
Kakao Mobility sought data on franchised taxi drivers, their trip routes, times and other details. The company leveraged the data 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 share in the franchised taxi-hailing sector and push some of its rivals out of the market. Korea 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 FTC had already fined Kakao Mobility 25.7 billion won in March 2023, 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 with non-franchise taxis, irrespective of the distance between caller and taxi.
COOPERATION FOR CUSTOMERS
Kakao Mobility said it sought partnerships with other taxi-hailing service providers to deal with issues such as multiple bookings for single services on different platforms and canceling them, in line with the government’s policy.
“Many taxi drivers of other franchised service providers canceled calls by Kakao T to select profitable routes,” said a 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 navigation-based systems such as departure-arrival coordinates, travel routes and real-time GPS,” the company said.