(LEAD) regulator-Kakao deal

(LEAD) regulator-Kakao deal

(LEAD) Regulator to review Kakao's acquisition of SM Entertainment

(ATTN: UPDATES with details in last 4 paras)

By Kang Yoon-seung

SEOUL, April 26 (Yonhap) -- South Korea's antitrust regulator said Wednesday it has launched a review on South Korean tech giant Kakao's acquisition of a stake in SM Entertainment, the K-pop agency behind EXO, Aespa, and NCT.

The move by the Fair Trade Commission (FTC) came a month after Kakao and Kakao Entertainment acquired a combined 39.87 percent stake in SM Entertainment.

"As the merger is expected to give a significant impact on the entertainment industry down the road, including the K-pop sector, we plan to thoroughly examine the deal under the standards and procedures stipulated in the law," the FTC said.

Kakao is a leading IT firm that operates KakaoTalk, the top mobile messenger app here, as well as No. 2 online portal Daum. The company also has music streaming services as well as a webtoon platform under its wing.

The FTC described the deal as "a merger between a general content company and a K-pop firm," noting that their businesses overlap each other.

For example, as Kakao Entertainment operates South Korea's top music streaming service, Melon, its merger with SM Entertainment, which releases albums, can be considered a "vertical merger."

Thus, the FTC will look into possibilities of Melon modifying its algorithms to benefit singers from SM Entertainment.

Additionally, the watchdog will examine the potential for Kakao and SM Entertainment to enhance their market power by jointly launching new products or services, including emojis or other merchandise.

The review process takes 30 days, though it may be extended for up to 90 additional days, excluding any time required for document supplementation.


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