The Korea Fair Trade Commission (KFTC) announced on the 24th that it has imposed corrective orders and a total fine of 390 million won on Kakao Entertainment for violating the Act on Labeling and Advertising by engaging in deceptive advertising. From October 2016 to February of the previous year, Kakao Entertainment acquired or established music channels on 15 social media platforms, amassing a total of 4.11 million followers. They posted a total of 2,353 promotional materials without disclosing their affiliation with the company, engaging in so-called "backdoor advertising."
Between May 2021 and December 2023, Kakao Entertainment instructed its employees to write a total of 37 promotional posts on major domestic online communities such as Theqoo, Ppomppu, MLB Park, Clien, and Instiz, which collectively have 1.5 million subscribers. These posts, titled "Sincerely well-produced songs," "Videos l'd like to recommend," and similar, did not disclose that they were authored by company employees.
Additionally, from July 2016 to December 2023, Kakao Entertainment allocated 860 million won to 35 advertising agencies for 427 social media advertisements without clearly disclosing their economic affiliations.
As the leading company in the domestic digital music distribution market, Kakao Entertainment benefits from increased sales and consumption of distributed music and albums, leading to higher distribution commission revenues. For artists under their own label, both music and album sales expand, indicating deceptive advertising practices.