South Korea Takes Aim at Google with Anti-Competitive Sanctions

Corrective order, fine issued for violating fair trade . . .

Seoul announced on Tuesday that it will impose a penalty of US$177 million on Google along with a corrective order for violating South Korea’s Monopoly Regulation and Fair Trade Act by interfering with competitors' business activities and abusing its dominant market position. The Korea Fair Trade Commission (KFTC) banned Google from forcing device manufacturers to sign Anti-Fragmentation Agreements (AFA) in connection with Play Store licenses and Operating System (OS) pre-access rights. It also ordered Google to notify device manufacturers of this order, revise existing contracts to comply with the order, and report revised contracts to the KFTC. Google indicated it will lodge a legal appeal against the sanctions. A final decision is likely several years away.

What did Google do wrong?

According to Seoul, Google’s AFAs prevent device manufacturers from installing independently developed versions of Google’s Android OS (called a forked OS) for different types of devices. Seoul contends device manufacturers were also prevented from developing new kinds of Android forks for themselves. Google had interfered with the launch of Samsung Electronics' forked OS for smart watches in 2013, LG Electronics' forked OS for smart speakers in 2018, and Amazon's forked OS for smart TVs in 2018 and 2019. Google has significantly increased its global market share over this time frame from 38 per cent of the mobile OS market in 2010 to 97.7 per cent in 2019, excluding iPhones and devices in China. The international tech giant also possessed an over 95 per cent market share of the global mobile app market in 2019, again excluding iPhones and devices in China.

Additional sanctions from Seoul expected . . .

Meanwhile, the KFTC said it is investigating three additional cases against Google, including restrictions on competition in the app market, enforcement of in-app payments, and advertising. Additional sanctions could be levied in the future. In addition, the Korean government announced that revisions to the Telecommunications Business Act (the so-called ‘Google Abuse Prevention Act’), which aims to ban app market operators such as Google and Apple from forcing certain payment methods, will take effect from September 14. These current and planned sanctions against Google add to increasing pressure on South Korea’s big tech landscape overall. Governing party lawmakers and the Financial Services Commission have hinted at regulations targeting domestic tech leaders Kakao and Naver in the foreseeable future.