The Fair Trade Commission (FTC) has conditionally approved Kakao’s acquisition of SM Entertainment, a significant move poised to reshape South Korea’s music industry. Kakao, which operates Melon, South Korea’s largest digital music distribution platform, is set to become an influential player in the music market by consolidating roles in music planning, production, and distribution. The transaction sees Kakao and its subsidiary Kakao Entertainment purchasing a 39.87% stake in SM Entertainment, known for managing major K-pop acts. This follows approximately a year of regulatory review since the announcement in April of the previous year. The FTC expressed concerns regarding market dominance, fearing Kakao might exclusively supply content or give preferential treatment to its artists on Melon. As remedial action, the FTC mandated two main corrective measures that require Kakao to distribute music fairly across competing platforms and establish an oversight body to monitor this practice for a span of three years. These conditions aim to prevent potential anti-competitive behavior following a merger expected to increase Kakao’s market share extensively in music production, distribution, and platform services. The FTC left room for adjustment of these measures should market conditions change significantly, particularly with the increased presence of global platforms such as YouTube Music and Spotify.

Digital Music Distribution, Music Production and Planning,South Korea