Korea’s antitrust regulator refers K Cube Holdings to prosecution

The Fair Trade Commission on Thursday said it issued a correction order on K Cube Holdings for exercising its voting rights in Kakao and Kakao Games shares in 2020 and 2021, and reported the company to the prosecution. [Photo by Yonhap]

South Korea’s antitrust authority has referred K Cube Holdings, an investment firm owned by app giant Kakao Corp.‘s founder, to the prosecution after pressing a charge against it for alleged violation of fair-trade regulations, signaling the government’s regulatory crackdown on IT market dominators.

The Fair Trade Commission on Thursday said it issued a correction order on K Cube Holdings for exercising its voting rights in Kakao and Kakao Games shares in 2020 and 2021, and reported the company to the prosecution.

The antitrust watchdog, however, did not file a charge against Kim Beom-soo, Kakao founder who owns a 100-percent stake in K Cube Holdings due to the absence of proof of his direct involvement in the case.

Under the so-called “separation of industrial and financial capital” law, a financial or insurance company that belongs to a large business group with combined assets of 10 trillion won ($7.6 billion) or greater subject to mutual investment regulations are banned from exercising its voting rights on its affiliated companies.

K Cube Holdings held 12.12 percent in Kakao in 2020 and 11.54 percent in 2021, and 1.34 percent and 1 percent in Kakao Games in respective years. Due to its stake holdings, K Cube Holdings is considered as the de facto holding company of Kakao Group, which operates a chat app, internet-only bank and various other digital platform services.

Kim Beom-soo [Photo by Yonhap]

According to the antirust watchdog, K Cube Holdings executed its voting rights in Kakao and Kakao Games shares in 2020 and 2021, even after Kakao was designated as a large business group. Moreover, its votes influenced a decision, specifically the agenda of shortening the board of directors meeting period to three days from seven days that was put to vote at the general shareholders meeting in March 2020. National Pension Service and some minority shareholders opposed the proposed change but it was passed with backing from K Cube Holdings.

K Cube Holdings refuted the FTC’s accusation, arguing that it should be regulated as a non-financial company since it only operates and manages its own assets. The company is fundamentally different from a financial service company that runs business with capital raised from third parties, it said, stressing that the company acquired Kakao shares with its own funds.

The IT industry sees the FTC’s action as the government’s move to clamp down on platform companies with dominating market power.

The tax authority recently launched a special investigation into Kakao’s key units, said an industry official.

The antitrust regulator plans to discuss monopoly screening guidelines on digital platform companies in a plenary meeting on Dec. 21.