SOUTH KOREA Trends and Developments Contributed by: Sang Oh Jeon, Hee Jae Lee, Chiyeol Kim and Seokmin Song, Yoon & Yang LLC
Kakao Mobility case Kakao Mobility, an affiliate of Kakao, one of Korea’s two leading IT corporate groups along with Naver, is the overwhelmingly dominant player in Korea’s app- based taxi hailing service market, holding a market share of more than 90% in the taxi-hailing app market, and approximately 74% in the franchised taxi service market. The KFTC found that Kakao Mobility adjusted the taxi dispatch algorithm of its app to preferentially assign taxis affiliated with its own “Kakao T Blue” service. Specifically, when a passenger requested a taxi, affiliated taxis were prioritised, while less profit - able short-distance rides under 1 km were assigned to non-affiliated taxis. The KFTC determined that this algorithm unfairly interfered with the business activi - ties of non-affiliated drivers by discriminating between affiliated and non-affiliated drivers, and imposed a remedy and a fine of KRW27.1 billion. The Seoul High Court, however, overturned the KFTC’s decision, finding it difficult to conclude that Kakao Mobility discriminated between affiliated and non-affiliated drivers. The court appears to have accepted Kakao Mobility’s argument that the dispatch algorithm was designed not simply to dispatch the nearest available taxi, but to assign taxis based on the likelihood of accepting the request, allowing pas - sengers to hail taxis more quickly. Because affiliated drivers were unaware of passengers’ destinations, they had a naturally higher acceptance rate, resulting in higher dispatch frequency, and the court appears to find that it lacked any intent to favour a particular group of drivers. Meanwhile, the KFTC found that Kakao Mobility abused its dominance by demanding four compet - ing franchised taxi operators to enter into agreements requiring real-time disclosure of confidential busi - ness information upon the launch of its Kakao T Blue taxi service. When these operators refused, Kakao Mobility blocked their affiliated drivers from receiving standard taxi-hailing requests on the Kakao T app. The KFTC, having concluded that this conduct unfairly interfered with the competing franchised taxi opera - tors’ business activities, imposed a remedy and a fine of KRW15.1 billion, and referred Kakao Mobility to the prosecutor’s office. Kakao Mobility has filed an admin - istrative lawsuit challenging this decision.
to conclude that charging for the service key, in itself, excluded equally efficient ISOs from competition or prevented market entry by new competitors. There - fore, the court determined that providing the service key with fees could be regarded as a “normal trade practice” consistent with sound competitive order. Korean Re case Korean Re is the only professional reinsurer in Korea, holding a dominant market share of approximately 90% in the reinsurance market for domestic gen - eral aviation insurance. From 1999 to 2017, Korean Re entered into special agreements with domestic insurers that required them to cede all reinsurance for domestic general aviation risks exclusively to Korean Re and to negotiate reinsurance premium rates solely with Korean Re. Portions of the reinsured risks were subsequently redistributed through retro - cession agreements, initially to domestic insurers and thereafter to panels composed of foreign reinsurers. When certain domestic insurers sought reinsurance quotes from foreign reinsurers, Korean Re protested and threatened sanctions for breaching the special agreements and also demanded the foreign reinsur - ers to cease dealings with those domestic insurers. The KFTC found this practice to constitute unlawful exclusive dealing intended to exclude competitors and imposed a remedy with a fine. The Supreme Court held that even voluntary agree - ments with primary insurers to cede all reinsurance and negotiating rates can constitute exclusive dealing. Moreover, the court viewed the protests and demands to cease doing business over retrocession arrange - ments and alleged breaches as conduct pursued with a single and continuous anti-competitive intention to exclude competing foreign reinsurers from the market. This Supreme Court decision is significant in clarifying that exclusive dealing can arise not only from condi - tions imposed unilaterally by a dominant firm, but also from arrangements voluntarily agreed upon with the counterparties, and further, that conduct organically connected by a single and continuous anti-competi - tive intent to exclude competitors must be viewed as a single and continuous infringement under competition law principles.
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