Kakao and SK Square curb chauffeur services

Oh Young-gyo (left), chairman of the Korea Commission for Corporate Partnerships, speaks to an authority after the commission’s 70th meeting held at the JW Marriott Hotel in Seocho-gu on Tuesday , in Seoul. (Yonhap)

Over 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 medium-sized businesses. companies entering the market, the Korean Enterprise Commission announced. Partnership said Tuesday.

Other large companies seeking to start chauffeur services are also prohibited from entering the industry worth 3 trillion won ($2.4 billion) during the cited period.

Although the decision has not yet been made on detailed guidelines, it is highly likely that their two mobility companies – Kakao Mobility and T Map, respectively – will be prohibited from acquiring or investing in companies that offer telephone outreach services, industry sources said.

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

Additionally, the commission said that Kakao Mobility and T Map cannot distribute coupons or offer cash discounts and other benefits to customers and drivers who use their driver services.

The committee’s decision comes as big companies fear it will reduce business mobility opportunities for SMEs.

“We respect the decision of the commission and we will comply with it. However, we regret to say that the commission failed to reach a final agreement including more detailed guidelines,” a Kakao Mobility official told the Korea Herald.

Over the next three months, the KCCP, Kakao Mobility, T Map and relevant authorities are to discuss the issue.

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

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