Kakao Entertainment and its subsidiary Starship Entertainment received a non-indictment disposition from the Fair Trade Commission regarding allegations of discriminatory music distribution fees and improper support.
According to related industry sources on the 4th, the Fair Trade Commission recently determined that there was no likelihood of a violation of the Fair Trade Act by Kakao Entertainment and Starship, and closed the case. This matter was concluded without being submitted to the Commission.
This case began in March of last year when small entertainment agency Big Planet Made (BPM) reported Kakao Entertainment to the Fair Trade Commission. BPM argued that "Kakao Entertainment demands a fee of about 20% from general music planning companies while favoring its affiliates with a fee of 5-6%," raising concerns about fee discrimination and improper support.
The Fair Trade Commission conducted an on-site investigation at Kakao Entertainment's headquarters in June last year and, in November, further investigated the headquarters of Starship, a subsidiary of Kakao. At that time, the Fair Trade Commission thoroughly examined the distribution contract situation with Starship to assess whether there was fee discrimination for the purpose of supporting affiliates.
In response, Kakao Entertainment refuted that "the transaction fee was calculated through negotiations with clients based on contract conditions, advance payments, and distribution methods, regardless of affiliate status," asserting that there was no intentional discrimination or support for affiliates.
The Fair Trade Commission concluded after a comprehensive review of the secured contract documents and the explanations from the parties involved that there was insufficient evidence to meet the requirements for improper support or to suggest competition was restricted. The Fair Trade Commission only notified the conclusion of the investigation and did not proceed with sanctions as no illegality was recognized.