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Kakao Mobility faces corrective order and fine from the FTC.

Photo by Tingey Injury Law Firm / Unsplash

The South Korean Fair Trade Commission (FTC) has imposed a corrective order and a preliminary fine of KRW 25.7 billion ($20 million) on Kakao Mobility.

The FTC allegedly manipulated the medium-size taxi placement algorithm in the KakaoT app to favor taxis operated by its subsidiary.

The FTC found that Kakao Mobility favored calls to franchised drivers, resulting in higher fare revenue for those drivers than for non-franchised drivers, which in turn created an incentive for drivers to become franchised and strengthened Kakao Mobility’s market dominance.

The regulator said its corrective action would remove discriminatory elements from the KakaooT app’s dispatching system, allowing fair dispatching without call picking and promoting competition in the market.

Kakao Mobility responded to the FTC’s decision with a rebuttal, pointing out that its dispatch logic does not seek to give preferential treatment to partners and that the dispatch acceptance rate is an essential tool to motivate taxi drivers to improve the user experience.

The company added that the FTC’s decision to exclude and reduce short-haul trips applies to all cabs, regardless of affiliation, and that unaffiliated taxis receive ample business opportunities through the KakaoT platform.

Kakao Mobility further emphasized that the algorithm changes were not secretive and that the decision must reflect that unaffiliated drivers receive ample business opportunities through the platform.

The company said it would take various actions to address the FTC’s misunderstanding, including filing an administrative complaint in the future.

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