Kakao Entertainment faces $540M fine over unfair contracts

A Fair Trade Commission office in Busan, southern Korea [NEWS1]

The Fair Trade Commission (FTC) fined Kakao Entertainment $540 million for forcing unfair contracts on their contest-winning web novelists.

The country's antitrust regulator said Sunday that Kakao Entertainment was fined for limiting a total of 28 authors, who won a contest run by the Korean company, from using their original content to make secondary works like webtoons, dramas and movies.

"It is an act of Kakao Entertainment disadvantaging [the authors] by abusing their market dominance," FTC said in a statement. "A big platform provider limited the content creators' rights using its superior status in the contracts signed for the contests, which are a gateway for young writers."

Kakao forced to reexamine how it treats webtoon artists

Kakao Entertainment ran a total of five contests on mystery and thriller themes between 2018 and 2020 and signed contracts with a total of 28 authors.

One condition in the contract was that "the rights to make secondary works for winning content belong to Kakao Entertainment," FTC said, which means those works will proceed exclusively through Kakao Entertainment.

The antitrust regulator also ruled that Kakao Entertainment must report the details of the contracts it signs with contest-winning authors for three years from now on.

Kakao Entertainment immediately issued a statement denying the act, adding that it will appeal the FTC's decision.

"Kakao Entertainment considers creators as our main partners, and has never taken over the authors' rights to make secondary works unfairly," the company said in a statement. "It is with great regret that the FTC made such a decision, even though we thoroughly explained our situation in the investigation."

BY SARAH CHEA [chea.sarah@joongang.co.kr]