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Kakao faces growing regulatory risks as political scrutiny rises

Kakao’s issues appear to politicised beyond their essential reality

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Kakao faces growing regulatory risks as political scrutiny rises

South Korean tech giant Kakao faces growing regulatory heat after the country’s president urged a review into its taxi app amid complaints about monopolistic practices, which comes on the heels of a probe into suspected stock market manipulation.

Shares in Kakao Corp which operates Korea’s dominant chat app KakaoTalk and has expanded into digital banking, taxi services and entertainment, have dropped 27% over the past three months, undershooting a 10.5% fall in the broader market and reflecting growing regulatory concerns.

Analysts warn those troubles could worsen for the group, creating unwanted distractions just as the firm seeks to push forward on artificial intelligence and infrastructure investment to compete with local rival Naver Corp (035420.KS).

“Kakao’s issues appear to politicised beyond their essential reality,” said Park Ju-gun, head of corporate analysis firm Leaders Index.

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“Its dominance in the country make it a useful subject to draw the public’s attention with before general elections next April.”

South Korean President Yoon Suk Yeol told a public meeting on Wednesday that the market behaviour of Kakao Mobility’s taxi-hailing service was monopolistic and required a review.

“In the sense that they attracted (drivers) and then raised prices, it’s very immoral and the government should take action,” he said in response to a complaint raised by a taxi driver over what he said were market abusing practice.

The president’s office did not elaborate on further action when asked by Reuters for comment. Kakao declined comment for the story.

Kakao Mobility, which holds more than 90% market share of South Korea’s taxi-hailing market, said late Wednesday it would hold an emergency meeting with taxi drivers to reform the fee system.

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Public concerns about the group emerged a year ago when a widespread outage of KakaoTalk raised questions about the mobile chat app’s huge market dominance and just how reliant consumers and businesses were on its related services.

Its regulatory troubles escalated last month when one of its executives was arrested for suspected stock market manipulation during its acquisition of K-Pop agency SM Entertainment (041510.KQ).

Last week, regulator Financial Supervisory Service (FSS) said it will refer Kakao, its affiliate Kakao Entertainment and executives involved in the SM Entertainment acquisition to public prosecutors for suspected violation of the Capital Markets Act.

If a court finds wrongdoing at Kakao Corp, the group could be forced to divest part of its 27.2% stake in online bank KakaoBank (323410.KS), as it would not be legally allowed to remain the bank’s major shareholder, according to legal experts.

Adding to those concerns, state-run National Pension Service (NPS) said on Wednesday it changed the purpose of its investment in Kakao to one that involves more active exercise of shareholder rights from passive investment previously.

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NPS declined to disclose specific reasons for changing its investment purpose. It held a 5.4% stake in Kakao, according to the most recent disclosure.

“Kakao’s resources are currently being divided along various legal proceedings and probes by the prosecution, financial regulator,” Samsung Securities analyst Oh Dong-hwan wrote in a note.

“It is necessary to pay attention to legal risks, as problems may arise in the status of KakaoBank depending on the probes’ results.”

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Don’t worry if your Android gets stolen, new Theft Detection Lock comes to rescue

Don’t worry if your Android gets stolen, new Theft Detection Lock comes to rescue

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Don't worry if your Android gets stolen, new Theft Detection Lock comes to rescue

Google revealed plans to introduce a ground-breaking security feature for Android devices: Theft Detection Lock at the Google I/O 2024 developer conference held on Wednesday.

This innovative addition is specifically designed to combat the rising threat of smartphone theft by automatically locking the device when suspicious activity is detected.

Powered by artificial intelligence, Theft Detection Lock utilizes advanced algorithms to identify common motions associated with theft.

For instance, if a device suddenly begins moving rapidly in the opposite direction, indicative of a potential theft scenario, the feature swiftly triggers a screen lock mechanism.

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This proactive measure aims to thwart thieves from easily accessing sensitive user data stored on the device.

In addition to Theft Detection Lock, Google also announced the introduction of an Offline Device Lock feature. This functionality serves as a safeguard against intentional disconnection from the network, a common tactic employed by thieves to bypass security measures.

Instances such as repeated failed authentication attempts will prompt the Offline Device Lock, providing an added layer of protection for users’ devices.

Google revealed plans to enhance device security with measures aimed at preventing remote factory resets initiated by thieves.

Under the forthcoming update, if a thief attempts to reset a stolen device, they will be unable to set it up again without the necessary device or Google account credentials. This strategic move renders stolen devices essentially unsellable, significantly diminishing the incentives for phone theft.

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Tesla must face vehicle owners’ lawsuit over self-driving claims

Tesla must face vehicle owners’ lawsuit over self-driving claims

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Tesla must face vehicle owners' lawsuit over self-driving claims

A U.S. judge on Wednesday rejected Tesla’s bid to dismiss a lawsuit accusing Elon Musk’s electric car company of misleading owners into believing that their vehicles could soon have self-driving capabilities.

The proposed nationwide class action accused Tesla and Musk of having since 2016 falsely advertised Autopilot and other self-driving technology as functional or “just around the corner,” inducing drivers to pay more for their vehicles. 

U.S. District Judge Rita Lin in San Francisco said owners could pursue negligence and fraud-based claims, to the extent they relied on Tesla’s representations regarding vehicles’ hardware and ability to drive coast-to-coast across the U.S.

Without ruling on the merits, Lin said that “if Tesla meant to convey that its hardware was sufficient to reach high or full automation, the plainly alleges sufficient falsity.”

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The judge dismissed some other claims.

Tesla and its lawyers did not immediately respond to requests for comment. Lawyers for Tesla vehicle owners did not immediately respond to similar requests.

The case was led by Thomas LoSavio, a retired California lawyer who said he paid an $8,000 premium in 2017 for Full Self-Driving capabilities on a Tesla Model S, believing it would make driving safer if his reflexes deteriorated as he aged.

LoSavio said he was still waiting for the technology six years later, with Tesla remaining unable “even remotely” to produce a fully self-driving car.

The lawsuit seeks unspecified damages for people who since 2016 bought or leased Tesla vehicles with Autopilot, Enhanced Autopilot and Full Self-Driving features.

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Tesla has for many years faced federal probes into whether its self-driving technology might have contributed to fatal crashes.

Federal prosecutors are separately examining whether Tesla committed securities fraud or wire fraud by misleading investors about its vehicles’ self-driving capabilities, according to three people familiar with the matter.

Tesla has said Autopilot lets vehicles steer, accelerate and brake in their lanes, and Full Self-Driving lets vehicles obey traffic signals and change lanes.

But it had acknowledged that neither technology makes vehicles autonomous, or excuses drivers from paying attention to the roads.

The case is In re Tesla Advanced Driver Assistance Systems Litigation, U.S. District Court, Northern District of California, No. 22-05240.

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Microsoft asks hundreds of China staff to relocate

Microsoft asks hundreds of China staff to relocate

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Microsoft asks hundreds of China staff to relocate

Microsoft is asking about 700 to 800 people in its China-based cloud-computing and artificial-intelligence operations to consider transferring outside the country, the Wall Street Journal reported on Thursday.

The employees, mostly engineers with Chinese nationality, were earlier in the week offered an option to transfer to countries including the U.S., Ireland, Australia and New Zealand, the report said, citing people familiar with the matter.

The move comes amid spiralling US-China relations as the Biden administration cracks down on various sectors of Chinese imports, including electric vehicle (EV) batteries, computer chips and medical products.

A Microsoft spokesperson told the Journal that providing internal opportunities is part of its global business and confirmed the company had shared an optional internal transfer opportunity with a subset of employees. 

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Reuters reported earlier this month that the U.S. Commerce Department is considering a new regulatory push to restrict the export of proprietary or closed source AI models, whose software and the data it is trained on are kept under wraps.

The spokesperson, however, told the newspaper that the company remains committed to the region and will continue to operate in China.

Microsoft didn’t immediately respond to a Reuters request for comment.

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