South Korea Fines Google $32 Million for Squeezing Local Rival

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 local rival, the latest sign of intensifying scrutiny on the US tech firm as it seeks to expand overseas.

Google tried to block Korean platform rival One Store Co.’s growth, Korea’s Fair Trade Commission said in an e-mailed statement Tuesday. Google allegedly asked some of Korean 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.

Google — which controls roughly three-quarters of Korea’s mobile app market — has denied offering benefits to developers who put their apps only on Google Play.

“There has been no violation of the law,” a Google spokesperson said in a written statement, adding that it’s an open platform that gives developers control over how they distribute their apps. “Google makes substantial investments in the success of developers, and we respectfully disagree with the KFTC’s conclusions.”

The regulator said Google began making the conditional offers in June 2016, when One Store began operations in Korea, and continued through April 2018. The activity hindered One Store’s ability to attract new games and resulted in a drop in sales, while lifting Google’s revenue by about 1.8 trillion won, the FTC said.

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.”

Faced with mounting accusations of anti-competitive practices around the world, Google has argued that unlike Apple Inc., it doesn’t prevent other app stores from competing on its platform. The company points users to apps from its Play Store because that’s where it can provide the best security and oversight, it says.

Google has faced various antitrust charges outside the US, including fines and suits in India and in the UK in past months.

The Korean watchdog disclosed internal memos, documents and e-mails from Google employees, alleging that the US firm saw the entry of One Store as a threat to its Korean sales and proceeded with a strategy to shut out its rival, even while it was aware its practices were anti-competitive.

The FTC ordered Google LLC, Google Korea and Google Asia Pacific to launch an internal monitoring system and report to the regulator for follow-ups.

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.

—With assistance from Vlad Savov