Kakao chairman apologies for aggressive expansion

Tech

Published: 05 Oct. 2021, 19:03

Kakao chairman apologies for aggressive expansion

Kim Beom-su, chairman of Kakao, takes a vow before answering questions from lawmakers during an audit held at the National Assembly on Tuesday. Kim was summoned on Tuesday for the audit held by the National Policy Committee of the National Assembly, along with Joh Sung-wook, chairperson of the Fair Trade Commission (FTC), and the CEOs of tech companies such as Yanolja. Kang Han-seung, representative director of Coupang, did not take part due to “health issues.” [JOINT PRESS CORPS]

Kakao Chairman Kim Beom-su apologized for recent controversies surrounding his company K Cube Holdings and Kakao’s aggressive expansion into businesses previously dominated by smaller companies during a parliamentary audit held Tuesday.

“We are changing K Cube Holdings into a company that fulfills its social obligations, not the family-run format [it is now], so that similar controversies do not arise in the future,” said Kim, adding that he will “speed up the process.”

K Cube Holdings is considered the de facto holding company of Kakao, wholly owned by Kim. It used to be run by seven staff members, five of whom were related to Kim — his wife, his brother and his children. Kim is Kakao’s largest shareholder with 13.3 percent, followed by K Cube Holdings, which owns 10.6 percent.

Kim is currently being investigated by the Fair Trade Commission (FTC) for failing to make disclosures about K Cube Holdings or falsifying them over the last five years.

“I am sincerely sorry for causing this controversy,” Kim said.

He refused to provide details about the company because he was “currently under FTC investigation,” but stated that “K Cube Holdings is not the holding company of Kakao.”

Rep. Kim Byong-wook of the ruling Democratic Party used the example of Naver, where none of founder Lee Hae-jin's family members own any part of the company or its subsidiaries, and asked Kim if he was willing to follow his example. He answered that he “wished to do so.”

“I’ve been wanting to clear this up since 2007, but I really couldn’t find a way of doing it because of the early investments that have been made,” Kim said. “But I have declared that I will change it.”

Kim Beom-su, chairman of Kakao, answers questions from lawmakers during an audit held at the National Assembly on Tuesday. Kim was summoned on Tuesday for the audit held by the National Policy Committee of the National Assembly, along with Joh Sung-wook, chairperson of the Fair Trade Commission (FTC), and the CEOs of tech companies such as Yanolja. Kang Han-seung, representative director of Coupang, did not take part due to “health issues.” [JOINT PRESS CORPS]

Kim also apologized for Kakao expanding into local markets that were dominated by smaller businesses. Kakao has been under fire for running reservation systems for hair salons, nail salons, flower shops, indoor golf venues, cram schools, chauffeur services and more, and collecting commissions from them.

“One of our subsidiaries is an investment firm and it has a tendency of investing in a business that seems profitable,” said Kim. “We have been aware of this problem in recent years and we’re planning to pull out from certain businesses and selling our shares in others.”

So far, Kakao Mobility has revealed plans to back down from acquiring phone-call chauffeur services, according to Rep. Jo Seoung-lae of the Democratic Party. It will also stop its hair salon reservation service, according to local reports.

In between apologies, Kim also asked that people keep in mind the good that Kakao has brought through its services.

“I believe that there is both light and shadow in a platform business,” Kim said. “We have allowed smaller businesses without capital or technology to compete. But we will pull out from businesses that involve smaller competitors and look for ways that we can fulfill our role as a part of a community.”

Kim was summoned on Tuesday for the audit held by the National Policy Committee of the National Assembly, along with Joh Sung-wook, chairperson of the Fair Trade Commission (FTC), and the CEOs of tech companies such as Yanolja. Kang Han-seung, representative director of Coupang, did not take part due to “health issues.”

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]