Japan says it’s not pressuring Naver to sell Line, but Korean insiders say otherwise

Posted on : 2024-05-03 17:18 KST Modified on : 2024-05-03 17:18 KST
The Korean government itself has avoided wading into the conflict
A person walks through the Line offices. (courtesy of Japan’s Line HR blog)
A person walks through the Line offices. (courtesy of Japan’s Line HR blog)

In response to a data leak that exposed Japanese users of the messenger app Line, the Japanese government has been effectively pressuring Korea’s Naver to sell off its shares in the holding firm that controls Line. Japan is now demanding investigations on the part of Korean authorities. 

Some within the Korean industry are questioning the South Korean government’s seeming willingness to overlook damage taken by domestic companies for the sake of improving Seoul-Tokyo relations — not to mention the unprecedented level of pressure levied by the Japanese government against a domestic firm. In response to the controversy, the Japanese government has stated that it never specified any demand for Naver to relinquish its shares.  

During a phone interview with the Hankyoreh on Thursday, an anonymous source within Korea’s Personal Information Protection Commission revealed that, around the middle of April, the Japanese Personal Information Protection Commission contacted the Korean commission to request that it open an investigation into Naver regarding the Line data leak. 

“This was not an email that pertained to diplomatic relations. We haven’t responded yet,” the insider added.  

Since the data leak, the Japanese Ministry of Internal Affairs and Communications has issued two administrative orders to LY Corp. — short for Line-Yahoo — the Japanese subsidiary of A Holdings, the firm that runs Line. Although administrative orders are not legally binding, they have considerable influence in Japan. The orders included measures for reforming the corporate structure of LY. They were essentially orders for Naver to transfer its stake in A Holdings, to SoftBank, Naver’s partner in the joint venture. 

Industry insiders and experts within Korea seem to agree that it’s inappropriate for a Japanese government agency to demand that a Korean company sell its shares in a joint venture. Even more inappropriate is for the Japanese government to demand that a Korean state agency open an investigation into a Korean company. 

“Even if the data leak is caused by a foreign company, standard procedures call for regulators to conduct a domestic investigation, and to dispatch an investigator to the country where the leak originated, where they would cooperate with local regulators. To simply demand that the Korean regulators investigate a Korean company, however, is an inappropriate request that deviates from etiquette,” said a former official at a Korean regulatory agency who wished to remain anonymous. 

In a phone interview with Yonhap News, Tomohiro Nakamura, the director of the Internal Affairs Ministry’s consumer policy division, claimed that the administrative order “was merely a request for a review of the parties tasked with security governance.” 

“The administrative order does contain language that calls for reviewing the influence that the consignor [Naver] exercises, as a result of the shares it controls within the corporate governance structure, but it does not contain any demands for it to sell its shares. None, whatsoever,” Nakamura added.

“Whatever measures are taken should ultimately be decided by the private companies involved,” he concluded. 

These comments have not extinguished the fire, however. Although Nakamura used the phrase “parties tasked with security governance,” this is basically a reference to Naver. Moreover, the administrative order directly points to Naver’s controlling shares in A Holdings. Any corrective measures indicated by the administrative order would inevitably lead to Naver relinquishing those shares.

“The Japanese government has backed off a little after seeing the fierce resistance from the Korean public and press, but they’re still pressing for an investigation,” said an anonymous insider at Naver. 

The Korean Ministry of Foreign Affairs, Ministry of Science and ICT, and Ministry of Trade, Industry and Energy have all released statements noting that they are communicating with the Japanese while respecting the position of Naver. The ambiguity of these statements have added fuel to fire. 

The current administration in Seoul has acquiesced to a unilateral compromise regarding forced labor under the Japanese colonial occupation — one that would have third parties to compensate victims, rather than the companies that were responsible for the forced mobilization. The administration has repeatedly stressed the importance of improving South Korea-Japan relations. In response to public outcry over Japanese hostility and Tokyo’s interference in the affairs of a domestic corporation, the administration has remained passive. This timid response in the face of Japanese aggression has led to greater public criticism.  

Regarding Naver’s A Holdings shares, SoftBank is likely to adopt an official stance ahead of its investor relations report on May 9. As SoftBank acquiring a controlling share in A Holdings suits the interests of SoftBank shareholders and investors, SoftBank is likely to request negotiations with Naver to acquire additional shares. The deadline for submitting a plan for complying with the Japanese Internal Affairs Ministry’s administrative order is July 1. 

By Jung Yu-gyung, staff reporter; Park Ji-young, staff reporter; Jun Seul-gi, staff reporter;  Park Min-hee, senior staff writer

Please direct questions or comments to [english@hani.co.kr]

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