The Korea Fair Trade Commission Authorizes Kakao’s Acquisition Of SM Entertainment

The Korea Fair Trade Commission accepted Kakao and SM Entertainment’s M&A on the condition that it monitor Melon, Kakao’s music streaming platform, for three years.

Korea Fair Trade Commission confirmed Kakao’s purchase of 39.87% of SM Entertainment’s shares on May 2 KST. The acceptance was given with the caveat that the FTC could take corrective action if Kakao did “limit competition in the market”.

As Melon’s parent business, Kakao leads the Korean music industry in digital music planning, production, distribution, and services. SM Entertainment leads domestic digital music planning and production. The FTC worried that a Kakao-SME M&A could impede competition in an open market. There are two possibilities: 1) Melon only distributes digital music and material from Kakao and SM Entertainment, and 2) Melon promotes its subsidiaries’ content to users and music listeners.

According to the FTC, Kakao must give all rival streaming platforms that seek digital music and content from Kakao (and connected organizations) for distribution unless there is a justifiable cause. All competing platforms must get digital music and content equally and quickly. Melon will be monitored for three years by an inspecting committee for favoring its linked enterprises.