Ministry of SMEs & Startups Initiates Action Against Corporate Misconduct: Kakao Mobility & Dain Construction Under Legal Scrutiny

In a decisive move, the Ministry of SMEs and Startups has taken action against two major corporations, Kakao Mobility and Dain Construction, by requesting the Fair Trade Commission to report their alleged violations to the prosecution. The ministry’s decision was announced during the 24th Mandatory Reporting Request Deliberation Committee on December 19.

The Ministry of SMEs and Startups invoked the mandatory reporting request system, designed to empower the ministry to request complaints for violations of laws within its jurisdiction, which the Fair Trade Commission has not reported to the prosecution. This mechanism aims to address the damage inflicted on small and medium-sized businesses and mitigate broader social repercussions resulting from unfair trade practices.

Kakao Mobility: Allegations of Discriminatory Practices

Kakao Mobility, a prominent player in the ride-hailing industry, is accused of violating the Fair Trade Act through unfair trade practices. The company allegedly exploited its market dominance by utilizing a dispatch algorithm that favored its affiliated taxis over non-affiliated ones. This discriminatory strategy, executed through the ‘Kakao T App,’ particularly in the Kakao T Blue service, led to a surge in affiliated taxis, expanding Kakao Mobility’s market control. Non-affiliated taxis, however, faced dispatch disadvantages and substantial losses in fare income.

Despite a corrective order and a hefty fine of 27.12 billion won ($20 million) issued by the Fair Trade Commission in June of the previous year, the Ministry of SMEs and Startups deemed it necessary to file a complaint. The ministry contends that Kakao Mobility’s extensive influence nationwide necessitates stronger measures to rectify the alleged market abuses that have adversely affected non-affiliated taxis across the country.

Dain Construction: Repeated Violations and Substantial Damages

Dain Construction also finds itself under scrutiny for violating the Subcontracting Act. The company, implicated in non-payment of subcontract fees totaling approximately 6.156 billion won ($4.7 million) to 19 small and medium-sized businesses from April 2017 to June 2021, received a prevention order and a payment order from the Fair Trade Commission last March. The Ministry of SMEs and Startups decided to escalate the matter further by filing a complaint, considering the significant financial damage inflicted on the affected enterprises and Dain Construction’s history of violating the same law three times in the past three years.

Meanwhile, during the deliberation committee, considerations were made regarding potential complaints against the Association and the Seoul Bar Association for Fair Trade Act violations. However, the committee opted not to request a complaint, emphasizing the system’s role in protecting small and medium-sized businesses from unfair transactions and vowing to take strict action against companies abusing their positions of authority.

As legal proceedings unfold, the Ministry’s decisive actions underscore a commitment to holding corporate entities accountable for unfair practices and ensuring the protection of smaller businesses within the national economic landscape. The outcomes of these cases are poised to shape the regulatory landscape for similar allegations in the future.

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