South Korea fines Google $32 million for squeezing out rival

The Google Inc. logo is displayed on an Apple Inc. iPhone in this arranged photograph taken in Little Falls, New Jersey, U.S., on Saturday, July 20, 2019. Alphabet Inc. is scheduled to release earnings figures on July 25. Photographer: Gabby Jones/Bloomberg

South Korea fined Alphabet Inc.’s Google 42.1 billion won ($32 million) for using its clout in the mobile app market to squeeze out a rival, as scrutiny intensifies on the software giant’s bid to expand its global reach.

Google tried to block Korean platform rival One Store Co.’s business development, Korea’s Fair Trade Commission said in an e-mailed statement Tuesday. Google allegedly asked Korea’s major game companies including NCSoft Corp. and Netmarble Corp., as well as smaller firms and Chinese companies, to exclusively release their new games in Google’s Play Store, in return for Google promoting their games and providing further support abroad.

Google featuring a game on its top pages was seen as crucial for Korean game companies’ success in expanding overseas, where many of their games’ visibility is low, the FTC said.

Such actions by Google began in June 2016, when One Store started in Korea and continued through April 2018, when the watchdog launched the probe, the regulator said. Those activities hindered One Store’s ability to attract new games and resulted in a drop in sales during the period, it said. Google earned around 1.8 trillion won in sales through this activity, the FTC estimated.

Google’s “actions differ from normal marketing activities,” Yu Seong Wook, director general for the commission’s Anti-Monopoly Bureau, said at a briefing.  “Google’s intention was to exclude One Store from the market, which it saw as a strong competitor.”

Google’s rebuttal to accusations of anti-competitive behavior has been to say that’s it an open platform and it doesn’t prevent other app stores from competing. The company points users to apps from its Play Store because that’s where it can provide the best security and oversight, it says.

The regulator ordered Google LLC, Google Korea, Google Asia Pacific to cease offering support to mobile game companies in exchange for promises of exclusivity. The three entities were asked to launch an internal monitoring system and report to the FTC for follow-ups.

The Korean watchdog disclosed internal memos, documents and e-mails exchanged among Google employees and those between Google and game companies to show that the software giant saw the entry of One Store as a threat to its sales in Korea and proceeded with a strategy to shut out its rival in secret.

Google was aware that the practice was anti-competitive, the FTC said. “This may cause a risk of anti-competition or government-related issues,” one memo from a meeting at Google Korea said. An internal email asked employees to delete emails promising to feature games on the top page in exchange for exclusive partnerships.

Both Google’s Play Store and One Store generate more than 90% of sales in Korea from selling games, the FTC said. Google held about 80% to 95% market share in the mobile Android app market in Korea between 2014 and 2019, it said.

One Store is a local platform created by Korea’s three telecom companies — SK Telecom Co., KT Corp., and LG Uplus Corp. — and the internet firm Naver Corp. One Store is preparing an initial public offering and is seeking a valuation of $833 million, according to Hyun-Joon Hwang, analyst at DB Financial Investment.