Industry leader Kakao Entertainment, 8 years of "backdoo" advertisement pretending to be fan reviews… 390 million won in fines

(Sejong = Yonhap News) Reporter Daehee Lee = Kakao Entertainment, the number one company in domestic music and album distribution, was caught by the Fair Trade Commission for conducting online ‘backdoor advertising’ for over eight years.

The Fair Trade Commission announced on the 24th that it had imposed a total of 390 million won in fines and a corrective order on Kakao Entertainment for violating the Fair Labeling and Advertising Act (deceptive advertising).

Kakao Entertainment is accused of conducting hidden advertising by acquiring or opening 15 social media (SNS) music channels (total number of followers: 4.11 million) between October 2016 and February of last year and posting a total of 2,353 promotional materials without disclosing the company's connection to them.

'Musemon' (Naver Blog, Instagram, Twitter, Facebook), 'Idol Lab' (Facebook), 'Are You Listening to the Song?' (Facebook, YouTube, TikTok, Instagram), 'HIP-ZIP' (Facebook, Instagram), etc. were investigated as Kakao Entertainment's disguised promotional channels.

It was revealed that they were disguised as reviews rather than advertisements, using phrases such as, “A song that appeared on my algorithm today,” and “An artist I accidentally listened to and fell in love with.”

[Provided by Fair Trade Commission. DB and resale prohibited]

Kakao Entertainment is also suspected of having its employees write a total of 37 advertisements on major domestic online communities (totaling 1.5 million subscribers), including Deokoo, Pomppu, MLB Park, Clien, and Instiz, between May 2021 and December 2023.

It was revealed that although the posts were titled 'A truly great song' and 'A video I would like to recommend', they did not disclose that they were written by an employee.

Kakao Entertainment is also accused of not clearly disclosing its economic interests while executing 427 SNS advertisements for 860 million won to 35 advertising agencies between July 2016 and December 2023.

Kakao Entertainment, the number one company in the domestic digital music distribution market, was found to have engaged in deceptive advertising in that as the sales and consumption of music and albums it distributes increase, its distribution commission revenue increases, and in the case of its artists, music and album sales also increase.

The Fair Trade Commission determined that this was an illegal act, taking into account the fact that general consumers are likely to accept Kakao Entertainment's advertisements as honest recommendations written by ordinary people.

In particular, considering that they continued to violate the law despite the internal legal review results indicating that their actions were likely to constitute unfair advertising, the court determined that it was a serious illegal act and imposed a fine in the hundreds of millions of won.

A Fair Trade Commission official said, "Popular music is strongly affected by the bandwagon effect (influence on demand from others), word-of-mouth effect (success through word-of-mouth), and fandom effect," and "Whether the writer of a post is a general consumer or an advertiser has a significant impact on consumer choice, so concealing or omitting this is an act of deceiving consumers."

He continued, "This measure is the first case of sanctioning deceptive advertising practices in the popular music industry," and added, "We will continue to work to ensure that accurate information that can significantly influence consumers' rational purchasing decisions in the cultural industry is provided."

[Provided by Fair Trade Commission. DB and resale prohibited]

https://www.yna.co.kr/view/AKR20250324048700002?input=tw