- Potential Market Dominance: FTC Reviews Kakao's Acquisition of SM Entertainment 목차
The Fair Trade Commission (FTC) announced on April 26th that it will begin reviewing the merger and acquisition (M&A) of Kakao acquiring SM Entertainment. The FTC will assess whether the combination of SM, a music producer, and Melon, a music distribution platform, could limit competition in the K-pop market. Additionally, the FTC will evaluate the potential for the two companies to expand their dominance into other markets by linking SM's fan platform with Kakao Talk and Melon.
Kakao and Kakao Entertainment reported their business combination related to the acquisition of SM stocks to the FTC earlier today. By acquiring 39.87% of SM shares, Kakao and Kakao Entertainment have become SM's largest shareholder. The FTC will thoroughly review this case, which involves various combinations of platform, comprehensive content companies, and K-pop content companies.
Hive Announces Strong Q1 Financial Performance Amid BTS Military Enlistment
South Korean entertainment company HYBE reported a record-breaking operating profit of 52.5 billion won for the first quarter of 2023, despite the absence of its flagship group BTS due to military enlistment. The company saw a 44.1% increase in sales and a
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If the FTC determines that measures must be taken to prevent harm from restricted competition, it can impose corrective action obligations on Kakao and SM. The FTC review period is up to 120 days, but it could take longer as this period does not include the time needed for supplementing data.
SM Entertainment announces new vision for future growth
Lee Sung-soo, the co-CEO of SM Entertainment, recently shared his vision for the company's future, dubbed "SM 3.0." During the 28th regular shareholders' meeting held at the Acro Seoul Forest D Tower SM building, Lee stated that SM will strive to become a
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The FTC will classify the business areas of the two companies into horizontal integration, vertical integration, and mixed integration, examining the limitations of competition in each sector. A key focus will be assessing potential restrictions in competition through vertical and mixed integration. With Kakao Entertainment operating Melon, the acquisition of SM leads to vertical integration of music production and distribution. The FTC will investigate the possibility of Melon adjusting algorithms to maximize profits for SM or SM discriminating against other music distributors such as YouTube Music.
Mixed integration is also a major review point, as SM's businesses, like celebrity goods and fan platform Dear You Bubble, could be integrated with various Kakao platforms, such as KakaoTalk and Melon. The FTC is expected to examine whether Kakao and SM are likely to expand their monopoly status to other markets through tying, bundling, and combined discounts.
While Hive has agreed to cooperate with Kakao and conceded SM management rights, it does not have to report the business combination to the FTC. This is because Hive's stake in SM was lowered to 8.81% after selling about 44% of its shares to Kakao, failing to meet the mandatory standard for reporting business combinations.
