S.Korea fines Google $32 mn for squashing local rival

South Korea’s antitrust body on Tuesday fined Alphabet Inc.’s Google LLC and its regional arms 42.1 billion won ($32 million) for allegedly abusing its dominant position in the app market to hurt a domestic rival, becoming the first competition watchdog in the world to punish the US tech giant for unfair practices.

The Fair Trade Commission said Google interrupted the business of One Store Co., South Korea’s homegrown app store, and strengthened its market dominance with its monopoly status. The Big Tech firm allegedly asked game developers such as NCSOFT Corp. and Netmarble Corp. to exclusively release new titles on Google Play in return for in-app exposure and further support for global expansion, the regulator said.

“The move is significant as it creates fair competition conditions in the app market by a tough penalty on major platforms such as Google that use market dominance to reinforce their positions. The fine is in line with the establishment of fair market orders emphasized by the Yoon Suk Yeol Administration,” the FTC said in a statement.

Google started making the conditional offers in June 2016, when South Korea’s three telecom majors – SK Telecom Co., KT Corp. and LG Uplus Corp. – and online behemoth Naver Corp. launched One Store, continued the practice through April 2018, according to the regulator.

'ONLY ON GOOGLE PLAY'

The FTC said the activity limited One Store’s competitiveness as the app store could not attract new mobile game titles. Mobile games are critical to app stores as Google Play and One Store generate more than 90% of sales in South Korea from selling games, according to the watchdog.

One Store’s market share, which had initially stood at up to 20%, fell to as low as 5% in 2017 and 2018 when Google took such measures. One Store recovered some ground to reach 15% market share in 2019 after the FTC launched the investigation.

The regulator unveiled Google’s internal memos that showed its intention to make “One Store a minor loser’s league.”

“Its headquarters was also involved as senior executives from Google US came to Korea for meetings with game developers,” said an FTC official.

Google expressed regret over the decision.

“It’s an open platform that gives developers control over how they distribute their apps,” the company said. “We will carefully review the final written decision once it’s shared with us to evaluate the next course of action.”

One Store on the other hand welcomed the FTC's move, expecting more game developers to launch titles on the app store. The local game industry also plans to consider releasing games on various markets.

In 2021, the FTC imposed a fine of 207.4 million won on Google, alongside a correction order, after the company was found to have forced Samsung Electronics Co. and other smartphone manufacturers to use its operating system.

Write to Han-Shin Park, Seung-Woo Lee and Sul-Gi Lee at phs@hankyung.com
 
Jongwoo Cheon edited this article.