Kakao's plan to acquire SM Entertainment facing uncertainties

Corporate logos of Kakao and SM Entertainment / Courtesy of each firm

By Lee Min-hyung

Kakao founder Kim Beom-su

The Fair Trade Commission's anti-trust investigation into Kakao is feared to put the brakes temporarily on the leading mobile platform operator's plans to acquire SM Entertainment.

The anti-trust watchdog recently launched the investigation into the headquarters of Kakao and its de facto holding firm, K Cube Holdings, to look into whether the platform giant allegedly violated the fair trade law.

This is part of the government's widening regulatory pressure on Kakao. The ruling party and financial watchdog recently sent a repeated and negative message about the firm's platform dominance here.

Kakao is in a race to acquire a controlling stake in SM. The platform company is competing with CJ Group and HYBE in a three-way race to acquire the talent management agency.

But concerns are surfacing that the latest move by the FTC and other watchdogs against Kakao may restrict the platform's move for a timely closure of the deal. Given a series of escalating regulatory actions from authorities, there also stands a chance for the FTC tightening regulations to make it harder for platform giants to take over other companies.

Kakao is best known in the local investment industry for its aggressive business acquisition drive. After the company became a nationwide sensation with the huge popularity of the mobile messenger app, KakaoTalk, in early 2010, it has continued its winning streak by expanding its business into a variety of areas through acquisitions. It operates a total of 158 subsidiaries at present.

"Even if they (online platforms) have brought convenience to our daily lives, there are growing concerns about their side effects," FTC Chairwoman Joh Sung-wook said last week. Platforms offer opportunities for small firms to promote their products online, but the regulator cannot dispel worries over possible anti-trust violations by the platform operators, according to Joh.

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