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| The headquarters of Naver and Kakao / Graphic by Newsis |
Internal businesses grow, as number of subsidiaries rises at IT conglomerates
By Anna J. Park
Naver and Kakao, Korea's leading IT platform companies, each recorded internal transactions worth over one trillion won ($700 million) last year. While the volume of the internal transactions doubled at Naver during the past four years, Kakao logged a seven-fold increase in such settlements during the same period.
According to documents submitted by the Fair Trade Commission (FTC) to ruling party Rep. Yun Chang-hyun, the volume of Naver's internal transactions stood at 1.15 trillion won last year, up 2.3 times from 2017. Kakao's internal transactions stood at 1.46 trillion won, which is a whopping 7.3-fold jump from 2017.
The key reason behind the surge in internal transactions at the IT conglomerates was a rapid increase in the number of their subsidiaries. The number of Naver's subsidiaries increased to 54 in 2021 from 45 in 2018. Kakao saw an even bigger increase in the number of subsidiaries, almost doubling from 72 in 2018 to 136 last year.
Kakao's drastic expansion in the number of its subsidiaries was criticized at last year's annual parliamentary hearings, as the IT giant's move was seen as threatening the country's mom-and-pop store owners in a wide variety of industries, such as local hair salons and flower shops. Despite the criticism, the number of Kakao's subsidiaries grew by 18 compared to the previous year.
"Because of IT platform services' innate expansionary nature and lock-in effects, platform conglomerates' rapid increases in both the number of their subsidiaries and internal transactions pose a graver concern to society than general companies," Yun said.
The ruling party lawmaker explained, although internal transactions within a conglomerate are not illegal, the growth of such practices within a company that already holds dominant shares of markets is troubling. The lawmaker urged the FTC to come up with preventive measures to curb such moves to protect consumer rights.
Others also urged financial authorities to look into possible unfair practices involving internal transactions, considering their rapid growth in just a couple of years.
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