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Kakao founder under FTC probe for failing to report properly on key affiliate

The exterior of the Korea Fair Trade Commission in Sejong (Yonhap)
The exterior of the Korea Fair Trade Commission in Sejong (Yonhap)

South Korea’s Fair Trade Commission is probing Kakao Group founder Kim Beom-su for alleged misreporting of the company’s de facto holding company in violation of the country’s fair trade act.

According to industry insiders on Monday, the antitrust watchdog recently conducted site investigations at Kakao Corp. and K Cube Holdings, after finding that the group has 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 5 trillion won ($4.45 billion) as large business groups that are subject to special corporate disclosure rules and antitrust regulations.

Kakao Group, which runs the country’s No. 1 mobile messenger app KakaoTalk and leading search engine Daum, is an FTC-designated conglomerate and must provide information of all of its affiliates and stockholders.

Other than compiling the annual list of business groups that fall under their 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 the group’s point man, was required to declare 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 the ubiquitous messenger app.

As of Monday, Kim is the largest shareholder of the publicly traded Kakao Corp., directly owning 13.29 percent. His control is backed by an additional 10.57 percent via K Cube Holdings. Kakao Corp. also holds stakes in the group’s core business units, such as KakaoBank and Kakao Games.

Kim and his wife stand as nonexecutive directors of K Cube Holdings, and his son and daughter also work at the company.

If found at fault, the FTC could take legal action or impose fines against Kakao in accordance with the fair trade law.

It is the second time Kakao has come under an FTC investigation. In 2016, it received a warning from the antitrust watchdog for missing reports on five of its affiliates, including NPLUTO, a game company.

By Jo He-rim (herim@heraldcorp.com)
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