Korea’s antitrust authority delivers $32 mn fine on Google for unfair practices

Yoo Seong-wook, head of the FTC’s market surveillance department, briefs on unfair practices by Google on April 11. [Photo by Yonhap]

South Korea’s antitrust watchdog on Tuesday announced it has imposed a fine of more than 40 billion won ($30 million) on U.S. internet giant Google for forcing Korean game publishers to release their content only on its platform Google Play in return for more exposure.

According to the Fair Trade Commission (FTC), it has fined a total of 42.1 billion won on Google LLC, Google Korea, and Google Asia Pacific for violating the country’s fair trade law by abusing its market dominance and engaging in unfair practices. It is the biggest fine imposed by the FTC among other penalties for anti-competitive practices. The agency also gave a correction order to Google.

According to the FTC, Google has abused its market dominance by pressuring local game publishers such as Netmarble Corp., Nexon Games Co., and NCSoft Corp. to not release contents on the home-grown app market One Store for nearly two years between June 2016 and April 2018. One Store is a local app platform developed by three Korean wireless carriers SK telecom Co., KT Corp., and LG Uplus Corp. and Naver Corp.

The FTC said that Google blocked Korean game companies from releasing their mobile games on the rival platform by offering them the benefit of having their content show up on the market as “featured.”

Google Featuring promotes mobile games on top pages or banners on Google Play so that they can be easily spotted by the users. Google decides on the games to be promoted on the top pages without receiving commissions from game makers. Game companies are sensitive to the feature as it is associated with strong profits and higher downloads.

“I am aware that (Korea) is the first example among others for Google to have promoted the anti-competition practice related to the app market,” said Yoo Seong-wook, head of the FTC’s market surveillance department. “It seems as if Google felt a sense of crisis with the appearance of a rival platform in Korea whereas in other countries there are no competing app markets.”

According to the FTC, Google has also attempted to exclude One Store from the market. Its investigation found an internal memo written by an unnamed employee from Google Korea that read, “One Store must fall into a league of losers.”

“Lineage 2” [Photo provided by NCSoft]

High-profile mobile games like “Lineage 2” were released exclusively on Google Play, which resulted in raising Google’s market share to up to 95 percent in 2018 from 80~85 percent in 2016. The market share of One Store, on the other hand, fell to as low as 5 percent from 15~20 percent during the same period. The number of paid purchases in Google Play soared 30 percent while the number was reduced by half in One Store. The two platforms generate over 90 percent of local sales from game sales.

One Store, in the meantime, welcomed the FTC’s punitive action against Google and said it is considering claiming a civil compensation for the damages caused by Google.

Google Korea expressed regret over the FTC’s decision, saying that it has cooperated diligently with the FTC investigation over the past five years to prove that there was no violation of law.

“The number of Korean game developers that released their titles on Google Play and global revenues have soared over the past 10 years,” said an unnamed official from Google Korea.

The FTC is expected to impose additional sanctions on Google as it is under investigation for implicitly incorporating YouTube Music in the YouTube premium subscription plan. The move can be regarded as an unfair business practice that hampers the ability of local music platforms like Melon under Kakao Entertainment Co. in a fair market, sources said.