Kakao’s monopoly in mobile services

Korean society has become disconnected over the weekend due to the meltdown of KakaoTalk, a chat platform some 90 percent of Koreans use. A crash from late Saturday stemmed from a fire at the SK C&C building in Bundang that houses the data center for Kakao, which provides a range of services from banking to mobility based on its dominant chat platform. The fire caused a shut down in the server powering Kakao online and mobile services. SK has been on emergency repair, but it may take days before services are fully restored. The fiasco underscored the risk of Kakao monopoly in mobile services.

Most people came to experience the inconvenience of disconnection. They were unable to communicate via the messaging platform and could not hail taxis. Mobile pay and settlements were not possible. Legal claims could balloon. If the accident occurred during a weekday, the damage could have been colossal.

The accident could have been foreseeable. There should have been countermeasures related to the overreliance on online behemoths. The U.S. and European Union have been working to fix online monopolies since four to five years ago. The U.S. Congress packaged and passed five related bills in June last year. The Ending Platform Monopolies Act allows the Department of Justice or Federal Trade Commission to force platform giants to divest line of business when dual ownership creates a conflict of interest and if their gatekeeper power allows them to favor their own services or disadvantages rivals.

The Korean government and legislation have been neglecting to enhance fair competition among online platforms. The Fair Trade Commission in September 2020 proposed a regulation, but it has not been activated due to conflicts over command among government offices, protests from big platform operators, and neglect from the legislation. The Yoon Suk-yeol government proposes voluntary supervision and fixes, but that would be like having players double as referees.

The two behemoths have come to rule the digital space. Merchants, self-employed and platform workers are at their mercy due to the lack of regulations and policies. Kakao has been sucking up small online service operators through mergers and acquisitions. Vendors and self-employed no longer can run online business without going through the platform giants. The predominance of Kakao in cab-hailing after the National Assembly banned unorthodox ride-sharing has come to worsen the taxi shortage and fee hikes.

The latest mishap demonstrates Kakao had neglected services and system backup while expanding its outreach. President Yoon Suk-yeol ordered the ICT and Science Minister to fix the problem. But the system repair does not fix the monopoly issue. The U.S. has prospered through a ban on monopolies. Korea should address the predominance of online platforms that can destabilize society.