(Bloomberg) — South Korea fined Alphabet Inc.’s Google $177 million for hampering the development of rivals to its Android operating system, sustaining a campaign targeting the U.S. search giant’s dominance in smartphone software.
Regulators accuse Google, whose mobile operating system powers more than 80% of smartphones around the world, of using its immense bargaining power to squeeze out the competition. The Korea Fair Trade Commission said Google’s anti-fragmentation agreements (AFA) with manufacturers like Samsung Electronics Co. and LG Electronics Inc. prevented gadget makers from developing or using modified versions of the Android OS. The watchdog banned Google from forcing manufacturers to sign AFA contracts and ordered that it modify existing ones.
Korea in August became the first country to pass a law forcing Apple Inc. and Google to open up their app stores to outside payment systems, setting a potentially radical precedent for their lucrative operations everywhere from India to the U.S. That bill becomes effective Sept. 14, the Korea Communications Commission said in a statement. Tuesday’s 207.4 billion won fine is one of the highest levied in the country over abuse of market dominance, with only Qualcomm Inc.’s mobile chipsets drawing higher sanctions.
Google responded by saying Android has accelerated innovation — including among Korean companies — and improved the user experience, and that it will appeal the decision. “The KFTC’s decision released today ignores these benefits, and will undermine the advantages enjoyed by consumers,” the company said in a statement.
Read more: Google, Apple Forced to Open App Store Payments by S. Korea
“It shows the KFTC is taking action after years of sitting on the fence,” said Tom Kang, research director at Counterpoint. “It has made the verdict that Google enjoys monopoly power so the regulator will continue to monitor and fine the company and other internet giants like it. It’s a big win for increased competition.”
The new measures from the KFTC are intended to spur competition by freeing companies to create so-called forks of Android — versions built from the same basic building blocks but modified to suit the manufacturer’s aims, such as targeting different device classes or use cases — without fear of punitive measures from Google.
“The Fair Trade Commission’s action was not limited to mobile devices, but corrective measures included emerging smart device-related areas such as smart watches and smart TVs,” Chairperson Joh Sung-wook said in a briefing on Tuesday. “Therefore, we expect that new innovations will occur as some competitive pressures in this area are activated.”
Korean regulators have stepped up scrutiny of tech giants this year, including of local players. Kakao Corp.’s group of companies lost more than $16 billion of market value at one point this month after prominent lawmakers called the nation’s biggest messaging and social media service “a symbol of greed.” Consumer protection has been a focal point of measures designed to curb the market-control powers of the largest companies, especially in developing spheres such as fintech services.
The market dominance of Google in the mobile arena has solidified as a result of the tech giant’s obstruction of competitors, the Korean regulator said. Amazon.com Inc. and Alibaba Group Holding Ltd. failed to launch mobile OS businesses while Samsung and LG were not able to release devices such as smartwatches and speakers with new services on time due to Google’s obstruction, according to the Commission.
Separately, the KFTC is investigating three other cases related to Google and competition restrictions in its Play Store app market, in-app purchases and the advertisement market.
(Updates with analyst comment in fifth paragraph)
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