- Kakao Mobility demanded partnership agreements from competing taxi franchise operators to provide real-time business secrets, such as taxi operation information. Refusal to comply resulted in Kakao blocking those operators’ drivers from receiving calls on the KakaoT platform.
- A fine of 72.4 billion won (tentative) has been imposed, and Kakao Mobility has been referred to the prosecution.
The Korea Fair Trade Commission (hereafter, "KFTC") has decided to impose corrective orders, along with a fine of 72.4 billion won (tentative), and to refer Kakao Mobility to the prosecution. This is due to its anti-competitive behavior. Since launching the "Kakao T Blue" franchise taxi service, Kakao Mobility has demanded partnership agreements from four competing taxi franchise operators (UT, Tada, Banban, Macaron Taxi). These agreements required the real-time provision of business secrets such as operation data. If the operators refused, Kakao blocked drivers from receiving general call services (hereafter, "general call service") on the KakaoT app.
Kakao Mobility operates both the general call service and its subsidiary's Kakao T Blue franchise call service via the KakaoT platform. It holds a dominant market position in the medium-sized taxi app call market (hereafter, "general call market") with a market share of 96% as of 2022.
Kakao Mobility began offering its general call service in March 2015 and aimed to strengthen its control over taxi supply by expanding its network of paid drivers, including Kakao T franchise drivers. Its goal was to ensure that "all taxi calls are operated exclusively through the KakaoT platform." To achieve this, in March 2019, it launched its Kakao T Blue franchise taxi service through its subsidiaries.
By the end of 2019, Kakao Mobility expanded the recruitment of Kakao T Blue drivers and sought to exclude competing taxi franchise operators from the franchise taxi market. To do this, it devised a plan to block competing franchise taxi drivers from receiving general calls on the KakaoT app and began justifying this action.
However, Kakao Mobility recognized that blocking only the drivers from competing taxi franchises would violate conventional trade practices in the general call market. Such a move would be difficult to justify and could instead be seen as a restriction on competition in the franchise taxi market, potentially violating the Fair Trade Act.
Despite this, Kakao Mobility proceeded with its plan in May 2021, citing excuses such as customer brand confusion and declining service quality due to competing franchise drivers canceling calls after accepting them.
First, Kakao Mobility pressured four competing taxi franchise operators to either pay a fee for their drivers to use KakaoT’s general call service or to sign a partnership agreement allowing Kakao to collect real-time business secrets from their drivers' apps, such as vehicle and route information. Kakao threatened to block drivers from using the general call service if the operators refused to comply.
These actions by Kakao Mobility made it impossible for competing franchise taxi operators to compete fairly. If they agreed to the partnership, they would have to provide critical business secrets to Kakao, which could use this information for its own strategic advantage. If they refused, their drivers would be blocked from accessing the general call service, which had over 90% market share, forcing many drivers to terminate their franchise contracts and making it difficult for operators to recruit new drivers.
In practice, Kakao Mobility signed partnership agreements with Banban Taxi and Macaron Taxi, acquiring their business secrets, while blocking UT and Tada drivers who did not comply with the partnership agreements. As a result, drivers from these operators canceled their franchise contracts, and it became challenging for the operators to recruit new drivers.
In particular, Tada experienced a surge in contract cancellations by its drivers due to Kakao’s call blocking. As a result, Tada had no choice but to sign a partnership agreement with Kakao, and it continues to provide business secrets, such as operation data, to Kakao to this day.
As a result of these actions, Kakao Mobility's market share in both the general call and franchise taxi markets increased dramatically. In the franchise taxi market, its share grew from 51% in 2020 to 79% in 2022, giving it overwhelming market dominance.
In contrast, Kakao Mobility's competitors, such as Tada, Banban Taxi, and Macaron Taxi, either exited the market or were effectively ousted. The only remaining competitor with any significant market presence was UT, which held a market share more than ten times smaller than Kakao's.
With most taxi franchise operators driven out of the market, fair competition based on price and quality was stifled, and both taxi drivers and consumers saw their ability to make reasonable choices restricted. Taking this into account, the KFTC has imposed corrective measures, including a fine of 72.4 billion won (tentative), and referred Kakao Mobility to the prosecution.
This action aims to curb anti-competitive behavior by large platforms with dominant market positions, particularly those that expand their market power by limiting fair competition in adjacent markets. The case also sets a precedent for ruling that demanding competitors' business secrets for strategic purposes undermines fair competition.
Globally, competition authorities are increasingly investigating and penalizing platform operators who collect competitors' data to strengthen their market dominance.
International Examples:
- The European Union’s competition authority required Amazon to rectify its anti-competitive behavior of using non-public business data from marketplace sellers (including sales volumes, inventory, and customer metrics) to inform its own product strategies (December 2022).
- The UK competition authority is investigating Facebook (Meta) for using user data for its own services (such as e-commerce and dating services), with the investigation launched in June 2021.
The KFTC will continue to monitor and strictly enforce the law against actions that abuse market dominance and undermine fair trade practices.