FTC cracks down on music streaming companies

The corporate regulator will fine five music streaming companies a total of 296 million won ($244,000) for misleading advertising and obstructing users from canceling their services.

The Fair Trade Commission (FTC) said Wednesday that it found widespread fair trade law violations by music streaming services operated by Kakao, Naver, Samsung Electronics, Soribada and Genie Music.

Kakao’s music service Melon was found to have broken the most violations and will be fined a total of 193 million won.

The corporate regulator said Melon misinformed users about its discount promotions.

For example, Melon conducted a discount campaign that charged new users 100 won for the first month of use. The promotion, however, had additional requirements such as having to use the service for two months to get the discount. The information was only listed below the purchase button in small print.

The FTC added that Melon also misled users when it tried to raise its service prices in late 2016.

According to the regulator, Melon ran advertisements saying it would maintain prices for users that approved a service agreement, while telling users that they would have their services canceled if they did not approve it. Melon, however, continued to maintain services for users who did not sign up for the agreement by charging the same price.

Other music services also face fines for false advertising.

Soribada ran an advertising campaign promising a discount of 58 percent. The promotion, however, only applied to one of its products, while another was only discounted by up to 36.7 percent. Soribada was fined 3 million won.

Meanwhile, Genie Music’s Mnet service offered discounts of up to 68 percent when in fact it only provided discounts of up to 59.7 percent.

The FTC added that Mnet also prevented users from canceling their services through unreasonable automatic monthly payment processes.

Mnet charged users to make automatic monthly payments a day prior to the month being charged. This meant users were tied to the service for at least one additional month.

Mnet was ordered to take corrective measures and a fine of 5.5 million won.

The FTC said in a statement that it expects the fines to prevent further losses to users.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]