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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] Kakao Entertainment has been caught by the Korea Fair Trade Commission (KFTC) for conducting undisclosed advertising, or "stealth marketing," on social media (SNS) and online communities. As a result, the company has been fined 3.9 billion KRW ($2.9 million) and ordered to rectify its practices.
On Monday, the KFTC announced that it had identified Kakao Entertainment’s misleading advertising activities, imposing the fine and corrective measures. As of April 2023, Kakao Entertainment holds a dominant 43% share of the domestic music distribution market.
According to the KFTC, from October 2016 to February 2023, Kakao Entertainment acquired or directly operated popular SNS channels such as Idol Lab and Are You Listening to Music?, using them as promotional platforms.
These channels posted content recommending Kakao-affiliated artists using phrases like “an artist I randomly discovered and fell in love with,” creating the illusion of unbiased reviews from regular users. The KFTC found that Kakao Entertainment uploaded 2,253 promotional posts across 15 such channels during this period without disclosing its affiliation.
Furthermore, on major online communities such as Women’s Generation, Theqoo, and FM Korea, Kakao Entertainment employees posted promotional content about affiliated artists' music and albums without revealing their connection to the company.
Advertising agencies contracted by Kakao Entertainment also conducted viral marketing campaigns without disclosing financial relationships, making it difficult for consumers to recognize the posts as commercial advertisements.
The KFTC ruled that such practices constituted consumer deception, emphasizing that whether a music recommendation comes from a general user, an expert, or a distributor significantly influences consumer choices. However, the commission found no evidence of so-called "reverse viral marketing" against competing artists like LE SSERAFIM, an issue initially raised during the 2022 investigation.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
