FTC fines Kakao Mobility for demanding 'trade secrets' from competitors

Korea’s antitrust regulator has fined Kakao Mobility, the nation’s largest ride-hailing service provider, 72.4 billion won ($54.8 million) and plans to file charges with the prosecution.

Two Kakao T Blue taxis on the streets of downtown Seoul in November 2023. [YONHAP]

Korea’s antitrust regulator has fined Kakao Mobility, the nation’s largest ride-hailing service provider, 72.4 billion won ($54.8 million) and plans to file charges with the prosecution over the company pressuring competing taxi franchise operators to share their private data in exchange for access to its ride service.

The Fair Trade Commission (FTC) said on Wednesday that Kakao’s mobility arm demanded that competing operators — Banban Taxi, Macaron Taxi, UT and Tada — either pay fees or sign a partnership agreement allowing the company to collect real-time data on drivers affiliated with competing franchises. This would include operating information from their own call apps.

If the operators refused, the firm threatened to block the drivers from accessing its ride-hailing app, Kakao T.

If accepted, Kakao Mobility would be given access to drivers' information, their history of franchise membership and navigation data, such as pickup and departure coordinates, as well as driving route information. The FTC labeled these as “trade secrets” and essential for the recruitment of franchise drivers and the development of new services.

The FTC states that Kakao Mobility’s actions were in line with its effort to strengthen its own franchise taxi business, Kakao T Blue, which was launched in 2019. Unlike general call services, which were originally available to all taxi drivers free of charge, Kakao T Blue charges commission fees to both passengers and drivers. For passengers, it guarantees a ride when a driver is nearby, and for drivers, it offers more consistent ride assignments and a higher volume of ride requests.

Kakao Mobility already has a dominant 94 percent market share in the domestic ride-hailing market, while its market share in the franchise taxi market grew to 79 percent in 2022 from 2020’s 51 percent, according to FTC data.

The fine imposed is based on the sales made from May 12, 2021, when Kakao Mobility’s revised measures went into effect, to July 31 this year. The sum is the fourth-largest fine ever imposed for abuse of market dominance, with the largest being 1.03 trillion won, imposed on Qualcomm for misusing essential patents related to mobile communication standards.

The Fair Trade Commission Chairman Han Ki-jeong speaks during a press conference at the Sejong government complex on Wednesday related to Kakao Mobility's abuse of market dominance. [NEWS1]

Kakao Mobility pushed back on Wednesday, calling the FTC’s penalties “excessive,” claiming that the company's policies were designed to benefit both passengers and drivers by reducing duplicate ride requests.

“The data cited in the FTC review is the same as what’s obtained through standard navigation systems,” it said. “The only additional information that we collected was the taxi’s franchise affiliation, solely to minimize call duplication."

Kakao Mobility also stressed that any extra information obtained from other franchises was not used for any of its business operations, stating, “It seems unreasonable to consider this information as valuable trade secrets.”

The company further argued that the FTC’s actions could be seen as reverse discrimination against domestic platforms, potentially undermining their competitiveness.

"The FTC’s decision to file charges contradicts the global trend of not imposing criminal penalties for antitrust violations."

Kakao Mobility plans to file an administrative lawsuit in response to the matter.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]