Google is again facing the prospect of a penalty surcharge from the Korea Fair Trade Commission after three years for monopolistic conduct in the app market (Google Play Store). Google is the No. 1 operator in Korea's Android app market with a share of more than 80%. The No. 2 player is ONE store, created in partnership by the three Korean telecom companies (SKT, KT, LGU+) and Naver, but its share remains in the 10% range.
In 2023, Google was hit with a 42.1 billion won penalty surcharge for giving benefits to game companies on the condition that they did not have a transaction with a competitor (ONE store). This time, it was found to have provided expense support in return for launching games under better terms than competitors. In 2023, the period of monopolistic conduct was two years, but this time it exceeds six years, and the amount of the penalty surcharge under review by the Korea Fair Trade Commission (FTC) comes to about 850 billion won.
◇ Google supports expense in return for "launching games faster and with better quality than ONE store," including at Nexon
The Korea Fair Trade Commission (FTC) said it sent Google an examination report outlining alleged violations of the Monopoly Regulation and Fair Trade Act and proposed remedies. Sending the examination report means the FTC has formally begun the sanction process. The FTC will hear Google's views for eight weeks and decide the final level of sanctions through a meeting.
According to the Korea Fair Trade Commission (FTC), from July 2019 to March this year over six years and nine months, Google was found to have demanded "most-favored treatment" from 22 domestic and foreign game companies, including Netmarble, NCSOFT, Nexon, Pearl Abyss, Com2uS, and Riot Games.
Most-favored treatment is a demand to supply products on at least the same terms as a competitor, or on better terms. Google reportedly signed what is known as a GVP (Google Velocity Program) contract with game companies. The contract is said to have required that when a game company launches a new game on the Google Play Store, the timing and quality be the same as, or better than, other app markets. In return, Google partly supported the expense of using Google services such as Cloud, Ads, and YouTube for the game companies.
The Korea Fair Trade Commission (FTC) determined that such most-favored treatment contracts constitute abuse of market-dominant position and exclusive conditional transaction conduct prohibited under Article 5(1) of the Monopoly Regulation and Fair Trade Act. A penalty surcharge of up to 6% of related sales can be imposed. The FTC estimated Google's app market-related sales during the violation period at $9,217.77 million (about 14.16 trillion won). Applying 6% allows for imposing 849.6 billion won.
◇ Excluding ONE store also in 2023 led to a 42.1 billion won penalty surcharge
In 2023, Google also received a 42.1 billion won penalty surcharge from the Korea Fair Trade Commission (FTC) over monopolistic conduct in the app market. At the time, the FTC determined that from 2016 to 2018, Google provided "featuring" benefits to game companies on the condition that they did not have a transaction with ONE store. Featuring means exposing a game at the very top when opening the Google Play app or listing it as a "New recommended game of the week." Google has filed an administrative suit challenging the FTC's penalty surcharge. A ruling has not yet been issued.
According to the FTC's finding, Google told game companies from 2016 to 2018 "Do not have a transaction with ONE store," and after being sanctioned by the FTC, from 2019 it demanded "Have a transaction with ONE store, but give favorable transaction terms." Although the demands changed, the strategy of supporting game companies to disadvantage competitors remained. This has prompted criticism that the FTC's sanction goal of preventing monopolies and promoting competition has not been achieved.