Kakao Corp. and Naver Corp. plummeted, set for the biggest declines in years, after South Korean lawmakers warned the nation’s internet giants against abusing their market dominance in the pursuit of profits.

Kakao, which runs Korea’s biggest messaging and social media service, plunged more than 11 percent, on track for its worst drop since 2012. Naver, which runs the messaging platform Line as well as a host of apps, slid more than 8 percent, poised for its biggest loss in six years.

Kakao should not follow the path of the country’s sprawling “chaebol” conglomerates in ignoring fair competition, Song Young-gil, head of the ruling Democratic Party, told a forum hosted by fellow lawmakers, Yonhap reported. A separate report from DongA Ilbo said the ruling party has decided to focus on platform operators in its annual assembly audit starting Oct. 1.

South Korea has been making moves to rein in foreign and local tech firms, mirroring a months-long crackdown in China that’s erased more than $1 trillion in value for China’s largest corporations. As in Beijing, regulators and politicians in Seoul have expressed concerns about the growing power and valuations of internet firms like Kakao, Naver and Coupang Inc. after the pandemic spurred an unprecedented surge in internet activity.

“Regulatory issues are not just one-time issues,” said Sung Jonghwa, an analyst at eBEST Investment & Securities Co. “When stocks are performing extremely well, regulatory issues can take a bigger toll.”

Kakao and Naver were among the most notable beneficiaries of the pandemic stay-at-home trend in South Korea’s stock market. Kakao is still up 78 percent in the past 12 months, helped by the mega share floats of subsidiaries including Kakao Games Corp. and KakaoBank Corp., while Naver is up 32 percent.

Korean lawmakers have in recent years targeted massive tech and industrial complexes like Samsung Electronics Co. over monopolistic behaviour and corruption scandals. This week’s moves are among the strongest yet against the domestic internet sector, which has grown to rival the traditional conglomerates in terms of corporate power and market value.

In addition to the criticism of legislators, the sector is also facing pressure from financial regulators. The Financial Services Commission said Tuesday that online platforms that advertise financial products could become subject to regulations that seek to protect consumers.

By Shinhye Kang and Youkyung Lee

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