Court overturns monopoly penalty against Kakao Entertainment

The Seoul High Court ruled Wednesday that penalty surcharges imposed by the Korea Fair Trade Commission on Kakao Entertainment should be canceled.

The Korea Fair Trade Commission had imposed a 540 million won ($372,000) fine and ordered corrective measures in 2023. It accused Kakao Entertainment of violating the Monopoly Regulation and Fair Trade Act by abusing its dominant position to infringe upon the rights of contest-winning authors to create secondary works.

According to the commission, Kakao Entertainment signed serialization contracts with 28 authors who won five web novel contests held between 2018 and 2020. The contracts included provisions granting Kakao Entertainment exclusive rights to produce secondary works, such as webtoons, dramas and films.

While it is customary for contest organizers to secure a right of first negotiation for secondary works, the commission said Kakao Entertainment went a step further by requiring exclusive production rights.

Contracts with some authors also stipulated that they could not offer more favorable terms to third parties than those offered to Kakao Entertainment when creating localized secondary works for foreign markets.

The commission argued that such provisions unfairly restricted the authors’ ability to negotiate better terms. Kakao Entertainment objected to the commission’s decision, filing administrative litigation in October 2023.

“We regard creators as key partners in the domestic creative ecosystem and have faithfully demonstrated throughout the trial that there were no unfair contractual practices concerning secondary works,” Kakao Entertainment said in response to the ruling.

“We will continue to work toward fostering a healthy creative ecosystem."