Korea fines Google W207 bil. for abuse of market dominance

The Korea Times

The Korea Times

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Sun, December 3, 2023 | 19:52

Tech

Korea fines Google W207 bil. for abuse of market dominance

Posted : 2021-09-14 17:04

Updated : 2021-09-14 17:15

Google's headquarters in Mountain View, California / AP-Yonhap

Regulator expects measure to foster competition in smart device market

By Kim Bo-eun

Korea's antitrust regulator fined Google 207.4 billion won ($177 million) Tuesday for abusing its market dominance to prevent the market entry of competing operating system (OS) developers.

The Korea Fair Trade Commission's (KFTC) fine and corrective measure are the latest moves to curb alleged unfair practices by the U.S. tech giant, following the National Assembly passing a bill last month banning Google from requiring app developers on its app store use its payment system. Google's requirement was devised to increase revenues from fees.

In the latest measure, Google has been ordered to allow electronic device makers to use operating systems other than its Android OS. The watchdog said the multinational company had effectively prevented device manufacturers from developing products loaded with modified versions of the OS. The tech giant had also been forcing manufacturers to sign contracts under which the devices would have to incorporate Google's own app market, Play Store.

These measures were applied to smartphones and other smart devices including watches and TVs. This prevented Samsung Electronics from using a modified OS for its Galaxy Gear 1 smart watch in 2013, the regulator said. Samsung instead opted for the Tizen OS, but faced limitations in its app ecosystem and switched to Google's OS for its Galaxy Watch 4 launched last month.

Google initiated these measures in 2011, effectively increasing its hold over the global OS market. Google's market share grew from 38 percent in 2010 to 87.4 percent in 2012, 93.2 percent in 2014 and 97.7 percent in 2019.

"The keyword in this case is platform. The network effect and resulting dominance in the platform sector makes it difficult for new players to enter the market," KFTC Chairperson Joh Sung-wook told reporters in a briefing.

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"By taking this serious measure against the practice of abusing a dominant status in the platform sector, we expect this to serve as a precedent to refer to in executing the law for platform-related cases."

The commission said the latest measure was not a discriminatory move against a foreign firm, stressing it would take the same action against other players regardless of whether they were local or foreign, if they engage in anti-competitive practices.

Korea Fair Trade Commission Chairperson Joh Sung-wook speaks during a briefing in Sejong, Tuesday, outlining a 207 billion won fine on Google for its practice of blocking the market entry of competing operating system (OS) developers. Yonhap

There are prior cases of punitive measures taken by antitrust authorities against Google's anti-competitive practices. The European Commission fined Google in 2018 for unlawful practices used to cement the dominance of Google's search engine on Android mobile devices. The KFTC said its measure extends beyond the OS market for mobile devices to include other smart devices such as watches and TVs.

"We expect growth in competition for the development of OS that will enable the launch of innovative devices and services in the smart devices sector," Joh said.

The KFTC began looking into the case in 2016.

The fine was calculated based on the revenue Google generated through Play Store, because its smartphone OS does not generate revenue given it is licensed free of charge.

The revenue generated by Play Store between 2011, when Google began its anti-competitive practices, according to the KFTC, and April of this year was multiplied by 2.7 percent to calculate the fine for its violation of fair competition. The regulator said the fine will likely see an upward adjustment, as revenue generated in the months of May through September will be added in the final calculation.

This is the third-largest fine to be imposed by the KFTC on a company for abuse of their dominant market status. Other cases involved Qualcomm, a U.S. semiconductor and telecommunications equipment company.

Google faces possible measures in three more cases under review by the KFTC. These involve allegations of limiting competition in app markets, forcing the use of its own payment system on Play Store and another practice involving advertising.

The commission said it completed its investigation of Google preventing game developers from launching their products on competing app stores, in January. It will review measures to be taken for this practice in the coming months.

bkim@koreatimes.co.kr