Antitrust watchdog in dilemma over Google’s proposal to halt cross-sales of YouTube Music

Kim Moon-sik, director of the Market Surveillance Department at the Fair Trade Commission, speaks during a briefing at Government Complex Sejong, Thursday. Yonhap

The nation’s antitrust watchdog is stuck in a dilemma over whether to accept Google Korea’s proposal that it would stop bundling YouTube Music with its YouTube Premium subscription service amid unresolved trade tensions between Seoul and Washington.

The latest decision from Google came in response to the Fair Trade Commission's (FTC) ongoing investigation into what the authority considered “anti-competitive cross-sales practices” done by the market-dominant platform firm. The bundled YouTube Premium subscription plans are offered only to Korean users.

The watchdog started reviewing Google's proposal on Thursday, and it will take at least a couple of months to decide whether to accept it and close the investigation.

Once the FTC comes to terms with Google Korea, the company will go unpunished over the high-profile investigation and the business activities which have continued for the past seven years here, which the authority viewed as "unfair."

The logo of YouTube Music / Screen capture from YouTube Music

However, the FTC is not likely to give a flat refusal to the proposal due to the possibility of U.S. trade retaliation. Seoul is in trade talks with Washington to minimize shocks from U.S. President Donald Trump’s imposition of tariffs particularly on Korea’s key export items, such as cars, chips and steel products.

Given the uncertain trade landscape between the two countries, Korean authorities have no choice but to walk on eggshells before slapping any sanctions on U.S. Big Tech firms such as Google.

An official from the FTC said the agency will hold more talks with Google Korea to fine-tune other details regarding the proposal.

“We cannot say for sure when the process will come to an end for the time being,” the official said. “If both sides fail to narrow their gap quickly, the issue can be protracted for a longer period of time. The authority will have more talks with Google Korea to reach a conclusion.”

Google Korea also offered to provide a total 30 billion won ($21.7 million) for the benefit of customers signing up for its unbundled new subscription plans. The co-prosperity fund will also be used to support Korea’s music industry, artists and creators, according to the company.

The decision reflects on unceasing concerns that forcibly bundling the YouTube Premium service with YouTube Music hampers the growth of local music platforms.

According to data from market tracker Wiseapp Retail Goods, the number of monthly active users for YouTube Music here reached 9.79 million as of April, the largest among music streaming apps here.

The figure has more than doubled for the past four years, while domestic Korean music apps have lost their market shares gradually to YouTube Music apparently due to its dominant market position.

Industry officials argued that Google’s move to unbundle its music service comes as a boon for its rival platform firms, but the effect will not be as high as expected.

“Millions of customers have already become accustomed to YouTube Music for the past few years when YouTube increased its profile rapidly with the cross-sales act,” an official from a local steaming platform said.