Kakao Entertainment fined 390 million won for “backdoor advertising,” FTC found no evidence of smear campaign against LE SSERAFIM

On March 24, 2025, South Korea’s Fair Trade Commission (FTC) fined Kakao Entertainment 390 million won for violating the Display and Advertising Act. The agency concealed its role in promotional posts, which made consumers believe the content was organic when it was paid marketing.

From October 2016 to February 2023, Kakao Entertainment ran or created popular social media channels to post hidden ads. The FTC found 2,353 undisclosed promotional posts across 15 platforms.

These channels never revealed their ties to Kakao, making it hard for consumers to spot the ads. Further, between May 2021 and December 2023, the South Korean entertainment subsidiary posted 37 hidden ads in 11 major online communities.

Employees wrote these posts to look like independent opinions instead of sponsored content. The company also didn’t disclose payments to ad agencies. From July 2016 to December 2023, it paid 860 million won to 35 agencies for 427 viral marketing campaigns—none of which were labeled as paid promotions.

These posts appeared on platforms with up to 1.5 million members, while Kakao’s social media accounts in the campaign had over 4.1 million followers, increasing their influence on consumers. The FTC decided the publisher misled consumers by concealing its ads.

Meanwhile, the FTC also investigated if Kakao Entertainment was involved in “reverse viral marketing" against LE SSERAFIM. It refers to intentionally spreading negative content about competitors.

"While Kakao Entertainment organized viral marketing to promote its own music, there was no organized effort to target competitors and defame them. We believe there is no evidence of reverse viral marketing, so we only investigated the backdoor advertising aspect and handled the case accordingly," an FTC official said.

They checked if the company posted negative comments through its SNS channel, 'Idol Research Institute.' However, after reviewing the claims, the commission found no evidence to support the allegations.

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Kakao Entertainment's reply to the Fair Trade Commission's ruling

In response to the ruling, Kakao Entertainment states that they accept the FTC’s decision. They also pledged to strengthen compliance with advertising laws to maintain fair industry practices.

"We humbly accept this decision by the Fair Trade Commission, and we will continue to comply with laws and regulations and strive to establish a fair order," the mass media company said in a statement (reported by Naver News).

This is the first time deceptive ads in the music industry have been penalized. The commission vowed to keep cracking down on unfair marketing to ensure transparency.

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Kakao Entertainment Corp. is a South Korean company in entertainment, media, and publishing. It’s a subsidiary of Internet giant Kakao. The company was founded in 2021 after Kakao incorporated its two subsidiaries—KakaoPage and Kakao M.

The company handles artists, produces films and music, and broadcasts content across various platforms. It operates on social media, streaming services, and online platforms.