"Kakao Mobility Faces 'Heavy Fine' Blow, Takes Strong Administrative Lawsuit Stance... 'Ignoring Passenger Benefits' (Comprehensive)"

Fair Trade Commission Fines Kakao Taxi 25.7 Billion Won for 'Call Steering'
Kakao Mobility: "Not Franchise Favoritism, but for Passenger Convenience"

[Asia Economy Reporter Yuri Choi] Kakao Mobility has been hit with a fine by the Korea Fair Trade Commission (KFTC) for allegedly funneling calls to its affiliated taxis. Kakao Mobility immediately opposed the KFTC’s sanctions and announced plans to file an administrative lawsuit. The company stated it will settle the dispute in court, calling the decision "a judgment that disregards passenger convenience."

On the 14th, the KFTC imposed corrective orders and a fine of 25.7 billion KRW on Kakao Mobility, citing preferential treatment of its affiliated taxis. This amount is twice Kakao Mobility’s operating profit of 12.6 billion KRW in 2021, the year it first turned a profit. The KFTC judged that Kakao Mobility secretly manipulated its dispatch algorithm to concentrate calls on affiliated drivers, thereby restricting competition between affiliated taxis and the overall taxi call market.

Kakao Mobility rebutted the KFTC’s findings point by point. First, it argued that the dispatch logic did not incorporate call acceptance rates to favor affiliated taxis. The company explained that it has considered call acceptance rates since 2017, before introducing affiliated taxis, and currently reflects this in the dispatch system to prevent selective call acceptance. This directly challenges the KFTC’s premise that using call acceptance rates as a dispatch criterion inherently disadvantages non-affiliated taxis.

[Image source=Yonhap News]

The company also claimed that market competition was not restricted, citing the emergence of new operators and services in the taxi platform market. From the user’s perspective, it explained that the ‘lock-in effect’?being confined to a single platform?is not significant, as many users utilize multiple platforms simultaneously.

Regarding the KFTC’s pointed issues of ‘priority dispatching of general calls to affiliated drivers’ and ‘exclusion or reduction of short-distance dispatches under 1 km,’ Kakao Mobility drew a clear line, stating these are unrelated to the current dispatch method. They were temporary tests applied to all taxis regardless of affiliation status. The company finds it difficult to accept the judgment that selectively extracting some dispatch logics unfavorable to non-affiliated taxis among various attempts equates to preferential treatment of affiliated taxis.

Conversely, Kakao Mobility pointed out that the positive effects on consumer benefits were not sufficiently considered. Since introducing AI dispatch logic in April 2020, the company reported a 9 percentage point increase in dispatch success rates. Compared to before the introduction, it matched an additional 18 million calls per month on average. The average waiting time for passengers from request to dispatch was also reduced by 43%, from 15 seconds to 8 seconds.

Additionally, the company dismissed as unreasonable the KFTC’s claims that changes to the dispatch algorithm were secretly made with specific intent without notification, and that non-affiliated drivers suffered losses because their income increased less than affiliated drivers, ignoring differences in labor intensity and operating hours.

Kakao Mobility plans to devise countermeasures, including filing an administrative lawsuit. A company official stated, "The KFTC accepted the claims of some taxi operators as they were and decided on sanctions without properly resolving misunderstandings. We will do our utmost to demonstrate that the current AI dispatch logic is designed to ‘enhance consumer benefits’ and ‘protect the rights of diligent taxi drivers.’"

Meanwhile, this sanction is expected to mark the beginning of continued confrontations between Kakao and the KFTC. At the end of last year, the KFTC reported Kim Beom-su, Kakao’s founder, to the prosecution for violating the separation of financial and industrial capital through his personal company K Cube Holdings. The KFTC is also investigating Kakao Entertainment for allegations including web novel copyright infringement and defamation of competitors’ idols.

This content was produced with the assistance of AI translation services.