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| Fair Trade Commission Chairperson Joh Sung-wook speaks during a meeting held at the National Assembly on Yeouido, June 23. Korea Times file |
New regulation to go into effect next year
By Kim Jae-heun
The Fair Trade Commission (FTC) is revising regulations on platform operators' mergers and acquisitions (M&A) deals in hopes of restraining their expansion.
According to the government, the FTC will review its regulation guidelines internally within this year and outsource the study on their effectiveness to a private research institute next year. Any regulation changes will be put into effect in 2022.
Currently, it is out of the hands for the top regulator to exert control over firms such as Naver or Kakao to keep them from advancing into new markets by taking over a number of startups in different industries. The FTC's current examination guidelines approve a major firm's right to acquire small companies from any sector freely, as it deems such deals will barely affect their respective markets.
However, the FTC had seen platform operators expanding their businesses into multiple sectors and associating them with one another simultaneously.
IT giant Kakao Mobility is the epitome of a company that is providing a link between services in the mobility business.
The top regulator recently approved Hyundai Capital's Delivery Car business transfer to Kakao. Delivery Car provides vehicle rental service, although Kakao has placed it under its mobility business.
Kakao operates local transportation service application Kakao T, which connects taxis with passengers. The FTC approved the deal between Kakao and Hyundai Capital because it determined the business transfer would not affect the market shares in either rental or transportation services.
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| Customers use a taxi service by Tada in Seoul. Courtesy of Kakao |
However, it would have been a different outcome if the top regulator had categorized the two businesses as being from the same mobility service sector.
It is hard for the FTC to study and predict possible market changes when a big firm combines two startups from different fields.
"A customer can get a call taxi with Kakao T and rent a bicycle or use a chauffeur service afterward. The FTC is reviewing whether to count each service as a different business or put them under the single category of mobility. The decision to approve a deal can be like tossing a coin depending on the standards of the guidelines," an industry source said.
If the top regulator fixes specific guidelines on this matter, local platform operators will be unable to diversify businesses as quickly as they are doing now.
Kakao Entertainment is another example. The IT giant not only runs music labels and talent agencies, but also has a webtoon business and content creation company in the intellectual property field.
It will make popular webtoons into TV series and films and fill the casts with actors contracted with its talent agency. Naver is competing against Kakao in the same business globally.
There is also concern that if the top regulator tightens up its guidelines, it could stifle the M&A market. The startup ecosystem will become more active when companies can exit and make big profits by selling off their businesses to other major firms.
"Our possible new regulations may not apply to platform operators," an FTC official said. "A thorough study will have to come first before we make a final decision."
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