Kakao Entertainment has been slapped with a 390 million won fine by the Fair Trade Commission (FTC) for deceiving music fans with deceptive advertising.
The Fair Trade Commission has caught Korea’s music distribution giant, Kakao Entertainment, red-handed in a long-running online advertising scam that went unchecked for over eight years.
On March 24, the FTC imposed a penalty of 390 million won on Kakao and ordered a corrective order for breaching fair advertising laws through deceptive marketing practices.
The music and album distribution company secretly ran 15 social media music channels from October 2016 to February last year. These channels had a combined following of 4.11 million users and appeared to be independent music platforms. However, Kakao Entertainment used them to post 2,353 promotional materials without revealing its involvement.
These channels disguised advertisements as genuine reviews, using phrases like “A song that popped up in my algorithm today” or “An artist I accidentally discovered and fell in love with”.
It is also accused of using its employees to post fake reviews on major online communities, including Deokoo, Instiz, Pomppu, and MLB Park, between May 2021 and December 2023. The 37 posts reached an audience of 1.5 million subscribers. They were disguised as genuine recommendations. They did not reveal these misleading posts were, in fact, written by Kakao Entertainment staff.
The company is accused of hiding its financial interests in 427 social media ads, worth 860 million won. These ads were created by 35 agencies between 2016 and 2023. As the top digital music distributor in Korea, Kakao Entertainment allegedly profited from increased music and album sales. The company earned money through commission fees and boosted sales of its own artists’ work. However, it failed to share these financial interests with consumers.
The Fair Trade Commission ruled that Kakao Entertainment’s actions were illegal, as they misled consumers into believing their ads were genuine reviews from everyday people. The commission considered it a serious offense, given that the company ignored internal warnings that their advertising practices were unfair. As a result, Kakao Entertainment was slapped with a substantial fine of 390 million won.
Regarding this, Kakao Entertainment stated,
We humbly accept the Fair Trade Commission’s decision and will continue to comply with regulations and strive to establish a fair order.
Kakao Entertainment
Lastly, the Fair Trade Commission looked into Kakao Entertainment’s viral marketing and also checked if they unfairly targeted competitors. They found no evidence of wrongdoing related to counter-viral marketing.
