▲ This corporate logo of Kakao Entertainment is provided by the firm. (PHOTO NOT FOR SALE) (Yonhap)

 

SEOUL, March 24 (Yonhap) -- Kakao Entertainment, the No.1 company in South Korea’s digital music distribution market, has been caught by the Fair Trade Commission (FTC) for engaging in undisclosed online advertising for over eight years.

 

The FTC announced on Monday that it had imposed corrective orders and a total fine of 390 million won on Kakao Entertainment for violating the Act on Labeling and Advertising (deceptive advertising).

 

Between October 2016 and February 2023, Kakao Entertainment acquired or created music-related social media channels on 15 different platforms (with a total of 4.11 million followers) and posted 2,353 promotional materials without disclosing its affiliation, thereby engaging in covert advertising.

 

▲ This image of fake fan reviews, captured from online community websites, is provided by the South Korean Fair Trade Commission (FTC). (PHOTO NOT FOR SALE) (Yonhap)

 

The investigation revealed that channels such as "Muzmon" (Naver Blog, Instagram, Twitter, Facebook), "Idol Research Lab" (Facebook), "Do You Even Listen to Music?" (Facebook, YouTube, TikTok, Instagram), and "HIP-ZIP" (Facebook, Instagram) were actually promotional channels operated by Kakao Entertainment.

 

The company disguised its advertisements as organic fan reviews, using phrases such as "A song that randomly popped up in my algorithm today" and "An artist I accidentally discovered and fell in love with."

 

▲ This image of a fake fan review, captured from online community websites, is provided by the South Korean Fair Trade Commission (FTC). (PHOTO NOT FOR SALE) (Yonhap)

 

Additionally, from May 2021 to December 2023, Kakao Entertainment allegedly instructed its employees to write 37 promotional posts on major online communities in Korea, including Theqoo, Ppomppu, MLB Park, Clien, and Instiz (with a total of 1.5 million members). These posts, featuring titles like "They seriously produce great songs" and "A video I really want to recommend," did not disclose that they were written by company employees.

 

Furthermore, between July 2016 and December 2023, Kakao Entertainment reportedly spent 860 million won on 35 advertising agencies to create 427 social media advertisements, again failing to clearly disclose its financial ties to these promotions.

 

As the top digital music distributor in Korea, Kakao Entertainment benefits financially when the sales and consumption of its distributed music and albums increase, leading to higher distribution fees. For its own artists, this also translates into direct revenue growth from music and album sales. The FTC determined that Kakao Entertainment’s deceptive advertising practices were aimed at boosting these profits.

 

The FTC emphasized that consumers were likely to perceive the company’s advertisements as genuine recommendations from ordinary users, making the act deceptive and unlawful. Despite internal legal reviews warning of the high likelihood that their actions constituted unfair advertising, Kakao Entertainment continued its violations, leading to the imposition of a significant fine.

 

An FTC official stated, "Popular music is highly influenced by bandwagon effects, word-of-mouth marketing, and fandom culture. Whether a post is written by a regular consumer or a corporate advertiser significantly impacts consumer choices. Concealing or omitting this information misleads consumers."

 

"This is the first case of penalizing deceptive advertising in the popular music industry," the official added. "We will continue to ensure that important information influencing consumer decisions in the cultural industry is transparently provided."

 

In response, Kakao Entertainment stated that it would comply with the FTC’s corrective order.

 

A company representative commented, "We humbly accept the FTC’s decision and will continue to comply with regulations and work towards establishing a fair market order."

[ⓒ K-VIBE. 무단전재-재배포 금지]