Kakao's market dominance is a focus for FTC Chairman Han

Fair Trade Commission Chairman Han Ki-jeong at his first press conference since taking office in September in Sejong on Monday. [YONHAP]

IT companies abusing their dominant market positions are top priority for the Fair Trade Commission (FTC) Chairman Han Ki-jeong.

On Monday, he singled out Kakao, which he said is failing to innovate and take its social responsibilities seriously due to the lack of competitive pressures.

“As such we need to address the dysfunction caused by the monopoly effectively while respecting creativity and innovation,” Han said on Monday during his first press briefing as the head of the FTC.

Han, who was a Seoul National University professor specializing in commercial law, started in the job in September.

“We need to take a different approach," he added, citing the indirect network effect, in which groups are brought together by a service, and that increases the value of the service.

He said that approvals of acquisitions will be a focus of the initiative.

Kakao was founded just over a decade ago and has expanded beyond its messenger service rapidly. It now has 134 subsidiaries or related companies, up from 118 last year.

The antitrust agency is currently looking into a number of potentially anticompetitive practices. This includes preferential treatment for its own products and restricting merchants using its services from using the services of competitors.

Han said a ruling on K Cube Holdings will be issued by the end of the year. The company owns about 10 percent of Kakao shares.

The antitrust agency is investigating it for violating the Banking Act, which separates finance and industry. While the company is registered as a software developer, it has acted as a financial institution.

Kakao Mobility is under investigation for blocking calls to drivers not using Kakao T, its taxi hailing app, for their business and for preventing users of its service from contacting competing services.

The FTC said the results will be announced no later than early next year.

The antitrust agency chief said he will review legislation to see if existing laws are enough to handle infractions by dominant IT companies.

“Establishing the foundation for fair competition should be the prerequisite for innovation,” Han said.

When Kakao services went down last month due to a fire at a data center, small businesses were greatly affected, as many were unable to take reservations and accept payments.

The public outrage over the meltdown led to Kakao co-CEO Namkoong Whon resigning a few days after the incident.

President Yoon Suk-yeol said on Oct. 17 that if a market is distorted due to monopoly and the company's services become national infrastructure "then the state must take necessary measures for the good of the people."

He added that he "respects the rules of a free market that guarantee a company's freedom and creativity," but that is "only while the market runs on a reasonable and fair system."

The FTC chairman offered assurances that the crackdown on IT companies will not limit market competition.

“We are trying to prevent monopolistic market structures from setting roots,” Han said. “We plan to remove regulations that obstruct the market entry of innovative companies as well as regulations that excessively limit business activities.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]