The Korea Fair Trade Commission (FTC) has given its nod to the merger and acquisition (M&A) deal between Kakao and SM Entertainment, albeit with a watchful eye and certain conditions attached.

Korea Fair Trade Commission Approves Kakao SM Entertainment Acquisition

The approval, granted on May 2 KST, marks a significant development in the Korean music industry, as it brings together two major players under one umbrella. However, concerns regarding potential anti-competitive practices prompted the FTC to impose restrictions aimed at safeguarding market dynamics.

Kakao, renowned as a dominant force in digital music planning, production, and distribution through its flagship platform Melon, joined forces with SM Entertainment, a heavyweight in the realm of music production. The prospect of these two powerhouses merging raised eyebrows at the FTC, who feared that it could stifle competition and lead to monopolistic tendencies in the market.

SM Entertainment

The commission identified two plausible scenarios that could tilt the scales of competition unfavorably. Firstly, there’s the possibility of Kakao and SM Entertainment forming an exclusive partnership, leveraging Melon’s reach to corner the market on digital music distribution. Secondly, concerns were raised about Melon prioritizing content from its subsidiaries, potentially sidelining offerings from other entities and distorting fair competition.

The Future of SM Entertainment

To address these apprehensions, the FTC outlined stringent measures that Kakao must adhere to. Kakao is mandated to provide digital music and content to all competing streaming platforms upon request, barring any valid reasons for refusal. Moreover, the content must be furnished equitably and promptly to ensure a level playing field for all market participants.

In addition to these stipulations, a monitoring body will be instituted to keep a vigilant eye on Melon’s operations for a duration of three years. This watchdog entity will scrutinize Melon’s activities, specifically looking out for any signs of preferential treatment towards affiliated companies, thereby ensuring compliance with fair trade practices.

The FTC’s decision reflects a balancing act between fostering innovation and competition while preventing the consolidation of undue market power. By imposing these conditions, the commission aims to uphold the principles of fair competition and safeguard the interests of consumers and market players alike. As Kakao and SM Entertainment embark on this new chapter of collaboration, their adherence to these regulatory measures will be closely watched, shaping the trajectory of the Korean music industry in the years to come.