Korea to tighten reins on Google's monopoly

The Korea Times

The Korea Times

Business

Sun, September 24, 2023 | 06:15

Korea to tighten reins on Google's monopoly

Posted : 2020-09-09 17:12

Updated : 2020-09-09 17:48

Fair Trade Commission (FTC) Chairwoman Joh Sung-wook speaks during a press conference at the agency's head office in Sejong, Tuesday. Courtesy of FTC

By Nam Hyun-woo

Korea's Fair Trade Commission (FTC) heralded tighter investigations into monopolistic practices in app market operation and mobile phone operating systems, which appear to be targeting Google for running exclusive policies based on its market dominance.

Controversies are rising over Google's looming policy to have app developers use an in-app payment system, in which Google takes a 30 percent cut from each payment made. This drew strong opposition from app developers claiming that Google is abusing its market dominance.

"We believe the recent controversy over the app market fee mostly stems from lack of competition between app markets," FTC Chairwoman Joh Sung-wook said during a press conference on Tuesday. The remarks were embargoed until Wednesday morning. "Currently, the FTC is closely monitoring the impact on fair competition of a change in fee systems for app markets."

Though Joh did not single out any companies by name, her remarks are interpreted as an apparent warning against Google. Sales in the Google Play Store accounted for 63.4 percent of the total app market sales available in Korea as of 2019.

Both Google Play Store and Apple App Store take a 30-percent cut from in-app payments. While Apple has been forcing its in-app payment module for all apps offering in-app purchases since 2011, Google has only applied its in-app payment system to game apps, allowing other types of apps to use their own payment systems. However, Google is now planning to expand the in-app payment system to all apps bringing them under the 30-percent rule.

The Korea Internet Corporations Association filed a petition to the Korea Communications Commission on Aug. 24, asking for an investigation into whether Google and Apple are violating laws related to in-app purchases. Also, Rep. Jo Seoung-lae of the ruling Democratic Party of Korea (DPK) tabled a revision on the Telecommunications Business Act prohibiting app market operators from forcing particular payment systems on apps.

Apple has been running the 30-percent rule for all apps since the launch of its in-app payment service, while Google is attempting to apply the rule after securing market dominance with looser policies, which could be deemed as abuse of its dominant position.

"In businesses related to app markets, first movers retain high market shares," Joh said. "It becomes problematic when companies controlling the market abuse their status and exclude others from competition. If dominant companies raise fees or exercise other (unfair) practices, app developers and consumers will suffer."

gettyimagesbank

Along with the 30-percent rule, the country's top antitrust regulator is also investigating Google on two allegations of abusing its market dominance.

"The FTC is currently investigating practices in which a business controlling the mobile operating system market hampers device manufacturers from making smart mobile devices running on other operating systems," Joh said without specifying the name of the company. "Also, the FTC is scrutinizing practices forcing app developers to launch apps exclusively on a certain app market which is deemed harmful to competition. Strict punishments will be levied on violators."

The FTC has been investigating Google on those charges since 2016.

While signing deals with device manufacturers, Google has prevented manufacturers wishing to pre-install Google apps from selling devices running on alternative versions of the Android operating system that have not been approved by Google. The FTC is examining these practices.

Also, the FTC projected suspicions that Google abused its power by forcing Korean game studios to launch their game titles exclusively on the Google Play Store.

Though the FTC has long been investigating Google's practices, it is the first time the agency has spoken out about charges against the search engine giant. The FTC's Anti-Monopoly Bureau Director Song Sang-min refused to reveal an exact timeframe of investigation, but anticipation is growing that the FTC will send a review report to Google soon.

Meanwhile, Joh said the FTC will finish reviewing two M&A cases ― one between delivery app market giants Delivery Hero and Woowa Brothers, and another between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering ― within this year.

namhw@koreatimes.co.kr