The Korea Fair Trade Commission has approved of Kakao and SM Entertainment's M&A (Merger & Acquisition) on the condition that the commission would monitor the Kakao-owned music streaming platform, Melon, for a 3-year period.

On May 2 KST, the Korea Fair Trade Commission formally acknowledged Kakao's acquisition of 39.87% of SM Entertainment's shares. However, the acknowledgement was granted on the condition that the FTC would be allowed to exercise corrective measures upon recognition of any activities by Kakao to "limit competition in the market". 

Kakao is currently the #1 leader in the Korean music industry's digital music planning and production field, as well as in digital music distribution and services, as the parent company of Melon. SM Entertainment is also a leader in the domestic digital music planning and production field. As a result, the FTC raised concerns that an M&A between Kakao and SME could potentially limit competition in an open market. This could occur in two ways: 1) Kakao and SM Entertainment partner up to distribute digital music and contents exclusively on Melon, and 2) Melon uses promotional tactics to expose users and music listeners to more content produced by its subsidiaries over those by other companies. 

The FTC has now established that Kakao is obligated to supply all competing streaming platforms which request digital music and contents produced by Kakao (and affiliated companies) for distribution, unless there is a valid reason. Digital music and contents must also be supplied equally and in a timely manner to all competing platforms on the market. An examining body will be set up to monitor Melon for any activities favoring its affiliated companies for a period of 3-years.

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