Kakao founder under probe for not reporting properly on key affiliate
SOUTH Korea’s Fair Trade Commission (FTC) is probing Kakao Group founder Kim Beom-su for allegedly failing to report properly on the company’s de facto holding company in violation of the country’s fair trade act.
According to industry insiders on September 13, the antitrust watchdog recently conducted site investigations into Kakao and K Cube Holdings, after finding that Kakao may have left out necessary information or falsely reported about K Cube Holdings, an investment firm fully owned by Kim, over the past five years.
The FTC designates conglomerates with assets of at least five trillion won ($4.25 billion) as large business groups that are subject to special corporate disclosure rules and antitrust regulations.
Kakao Group, which runs South Korea’s number-one mobile messenger app KakaoTalk and a leading search engine Daum, is an FTC-designated conglomerate and must provide information of all of its affiliates and stockholders.
In making the annual list of business groups under scrutiny, the FTC also identifies who is at the top of the conglomerate’s ownership structure and requires the person to report his or her equity holdings of affiliated companies, as well as those held by persons of special interest.
Under the regulation, Kim, designated by the FTC as that person on top, was required to submit information about his personal stockholdings as well as those of his relatives.
K Cube Holdings is Kim’s key vehicle atop the sprawling business empire built on ubiquitous messenger app KakaoTalk.
As of September 13, Kim is the largest shareholder of publicly traded Kakao Corp, directly owning 13.29 per cent. His control is backed by an additional 10.57 per cent via K Cube Holdings. Kakao Corp then holds stakes in the group‘s core business units, such as KakaoBank and Kakao Games.
Kim and his wife Hyeong Mi-seon stand as non-executive directors of K Cube Holdings, and his son and daughter also work at the company.
If found at fault, the FTC could take legal actions or impose fines against Kakao in accordance with the fairtrade law.
It is the second time for Kakao to come under investigation by the FTC. In 2016, it received a warning from the antitrust watchdog for missing reports on five of its affiliates, including NPLUTO, a game company.