Kakao, SK Square hit brake on chauffeur services

For the next three years, South Korean tech giant Kakao and SK Square, the ICT arm of conglomerate SK Group, will be banned from expanding their designated driver service business to make room for small and midsized enterprises entering the market, the Korea Commission for Corporate Partnership said Tuesday.

Other large corporations seeking to start chauffeur services are prohibited from entering the industry worth 3 trillion won ($2.4 billion) in the cited period as well.

Although the decision has not yet been made on detailed guidelines, their two mobility companies -- Kakao Mobility and T Map, respectively -- are highly likely to be forbidden from acquiring or investing in companies that offer driver-hailing services via phone call, industry sources said.

The two have tried to up their stake in the business, since 80 percent of customers directly call cab drivers rather than using mobile apps to search for chauffeurs. In particular, Kakao Mobility last year acquired a massive share of Korea Drive, a company that provides its “1577 chauffeur service” via phone.

Also, the commission said Kakao Mobility and T Map cannot give out coupons or offer discounts and other cash benefits to customers and drivers who use their driver-hailing services.

The commission’s decision comes amid concerns that large corporations are eating away at SMEs’ mobility business opportunities.

“We respect the commission’s decision and shall comply with it. However, we regret to say that the commission has failed to come up with a final agreement that includes more detailed guidelines,” a Kakao Mobility official told The Korea Herald.

In the next three months, the KCCP, Kakao Mobility, T Map and related authorities are to discuss the matter.

Although the KCCP’s decision is not legally binding, a company that fails to follow the guidelines is subject to fines of up to 150 million won or a maximum two-year prison term of corporate executives. So far, no company has refused following a KCCP decision, sources said.

By Byun Hye-jin (hyejin2@heraldcorp.com)