Case highlights growing scrutiny of platform power in South Korea’s ride-hailing market
South Korean prosecutors have indicted Kakao Mobility, the company behind the taxi-hailing service KakaoT, along with several senior executives, over alleged breaches of the Fair Trade Act. The Seoul Southern District Prosecutors’ Office said on January 26 that it brought non-custodial charges against the firm and three executives, including chief executive Ryu Geung-seon, citing suspected abuse of market dominance in relations with rival franchise operators.
Prosecutors also charged Kakao Mobility as a corporate entity under a joint liability clause, which makes both executives and the company itself subject to criminal responsibility. At the same time, authorities said they were unable to confirm claims that the firm gave preferential dispatch treatment to drivers affiliated with its own services.
According to prosecutors, the case centres on Kakao Mobility’s conduct as competition intensified in the franchise taxi market around late 2020. Investigators allege the company demanded that four smaller franchise operators either pay fees equivalent to two to three times standard franchise charges or hand over sensitive operational data, including vehicle numbers, routes, and departure information.
When several operators refused, prosecutors say Kakao Mobility carried out a plan to block dispatch calls to drivers affiliated with those companies through KakaoT. As a result, more than 14,000 driver accounts linked to one firm and over 1,000 accounts linked to another were allegedly suspended from receiving ride requests.
Impact on drivers and rivals
Prosecutors said the alleged call blocking had direct economic consequences for drivers. Affected drivers reportedly lost an average of about 1.01 million won in monthly income, while one competing franchise operator saw its fleet size cut roughly in half.
As drivers migrated away from smaller operators toward Kakao Mobility-affiliated services, the company’s market share in the mid-sized franchise call segment rose sharply—from 55% in March 2021 to 79% by December 2022, according to the investigation. Prosecutors described this outcome as evidence that the alleged conduct reinforced Kakao Mobility’s dominant position at the expense of smaller rivals.
Why market structure matters
The case also highlights the structure of South Korea’s taxi-hailing market, which is divided into two segments: “general calls,” available to most registered drivers, and “franchise calls,” which are limited to drivers affiliated with specific operators.
Kakao Mobility has long dominated the general call market, with market share exceeding 90% since around 2019, according to industry data cited by prosecutors. Investigators argue that this dominance gave the company significant leverage when negotiating with smaller franchise operators that depended on access to KakaoT’s user base.
While prosecutors moved forward with charges related to call blocking and coercive demands, they said they could not establish criminal liability for other allegations. Claims that Kakao Mobility manipulated call allocation to favour affiliated drivers, as well as accusations of inflated sales figures, were dropped due to insufficient evidence.
A prosecution official said authorities would “continue to respond strictly, in accordance with the law and principles, to fair trade crimes that undermine market competition and harm people’s livelihoods and the national economy.”
Kakao Mobility denies wrongdoing
Kakao Mobility rejected the allegations, arguing that the measures under scrutiny were part of normal business discussions intended to prevent service quality problems and address what it described as “free-riding,” in which some operators use the platform’s infrastructure without contributing to its operating costs.
“This matter involved legitimate consultations to prevent service quality deterioration and free-riding issues that arise in platform operations,” the company said in a statement. “There was no intent or action to restrict competition, nor any violation of relevant laws.” The company added that related administrative litigation is already underway and that it will “faithfully explain the facts” during the criminal trial.
A broader test for platform regulation
The indictments follow a lengthy investigation triggered by a complaint from the Fair Trade Commission, including searches of multiple locations and questioning of dozens of employees. The case underscores increasing scrutiny of dominant digital platforms in South Korea, particularly where market power intersects with livelihoods in sectors such as transportation.
As the trial proceeds, legal observers say the outcome could have wider implications for how platform operators negotiate with smaller partners—and how far market leaders can go in using their scale without crossing into illegal restraint of competition.
