Kakao Entertainment reportedly fined 390 Million KRW over deceptive music marketing

Kakao Entertainment, South Korea’s leading music and album distributor, has been found guilty of deceptive marketing practices by the Fair Trade Commission (FTC). As per a report by news outlet Newsoo Plus, the company manipulated consumer trust by abusing social networking services (SNS) and online communities to promote its music and albums without disclosing its involvement.

Newsoo Plus reports that the FTC has determined that Kakao Entertainment’s actions have constituted illegal advertising. They have imposed a corrective order along with a fine of 390 million won as per the outlet's report.

This incident marks the first time the FTC has sanctioned deceptive advertising in the popular music industry, exposing serious flaws in the operations of the top music distribution company. As per Newsoo Plus, experts predict that this will cause irreversible damage to Kakao Entertainment’s brand reliability and the broader popular music industry.

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Kakao Entertainment under fire for systematic manipulation of SNS and online communities, FTC investigation reveals

As per the outlet, Kakao Entertainment systematically manipulated SNS and online communities to promote its music distribution sources. It disguised promotional content as natural fan activity, hiding its economic interests to mislead consumers.

The Fair Trade Commission’s investigation revealed that the company took over or opened popular channels on Facebook, YouTube, Instagram, TikTok, and more. It promoted music and albums through these platforms without disclosing ownership or affiliation.

Further investigation revealed that from October 2016 to February 2023, the Entertainment company either opened or acquired 15 SNS channels related to music, as per Newsoo Plus. A total of 2,353 promotional posts were identified across these 15 channels, including 'Idol Research Center' and 'Are You Listening to the Song?' as per the report. These channels had a combined total of 4.11 million followers.

These posts were packaged to appear as genuine fan opinions. The FTC labeled this a deceptive act that mocked consumers and seriously damaged trust in the popular music industry. Especially in the music market, where fandom and word-of-mouth are critical, such manipulation was viewed as a severe illegal act disrupting market order.

Beyond SNS, Newsoo Plus wrote that Kakao Entertainment also manipulated opinions within online communities. From May 2021 to December 2023, similar practices were observed in major online communities. Employees directly joined communities like Deokgu, Ppomppu, MLB Park, and Instiz, uploading a total of 37 music promotion posts.

They disguised these as voluntary recommendations by regular users, hiding their affiliation with Kakao Entertainment. This was judged to be a criminal act, distorting consumers’ right to choose music freely. The Fair Trade Commission concluded that these actions seriously distorted market fairness and betrayed consumer trust.

Additionally, Kakao Entertainment collaborated with advertising agencies without informing consumers about the financial ties, as per NewsOo Plus. The company paid around 860 million won to 35 advertising agencies, including The Fan (Idol Issue, You Like Issue, etc.) and Banana Marketing (Time-Hooking Page, etc.), to conduct viral marketing on SNS.

They produced a total of 427 disguised posts, again presented as natural consumer reviews. The Fair Trade Commission strongly condemned these practices, stating,

"Providing false information to consumers while hiding economic interests is an unacceptable crime."

It emphasized that the Entertainment company’s manipulation was not a simple public relations issue but a clear fraudulent act, abandoning the responsibility expected from a market leader.

Industry experts warned that the fallout would be significant. According to Newsoo Plus, they noted,

"This incident, which has seriously damaged the trust in the music industry, will irreparably damage Kakao Entertainment's brand image. Strong sanctions are needed to protect the fairness of the popular music market."

Public criticism has also intensified as Kakao Entertainment’s deceptive practices became public knowledge, as per Newsoo Plus. Consumers demand that the company take responsibility for the manipulation, delete the problematic posts, and make full disclosures.

However, due to the gravity of the situation, experts believe it will be difficult for the Entertainment company to recover its brand image. If the company fails to comply with the FTC’s corrective orders, public backlash is expected to grow stronger.