Google faces mounting regulatory challenges in South Korea over app store

11 Sep 2020 6:04 am by Wooyoung Lee

Google

Google has found itself at the center of antitrust scrutiny and growing complaints by local app developers in South Korea, with its role as a leading provider of the Android mobile operating system and app marketplace now getting a fresh round of scrutiny.

Antitrust probes from the South Korean competition regulator have been underway for some time but Google has recently attracted fresh attention from other state officials — the Korea Communications Commission, or KCC, and the ICT Ministry — following complaints from local app developers over a possible increase in the commission rate for in-app sales.

Google is expected to see regulatory developments unfold in coming months as authorities pursue their own ways to examine its potential monopolistic behavior. This means Google can add South Korea to the long list of jurisdictions where it is facing regulatory pressure on multiple fronts.

Android operating system, app store

Google is being closely watched by three South Korean state agencies — the Korea Fair Trade Commission, or KFTC, the KCC and the Ministry of Science and ICT — over potentially problematic conduct on the Android operating system and in the app marketplace.

Google is also the target of an ongoing antitrust probe by the KFTC, which is looking into the company’s alleged abuse of dominance conduct as the leading Android mobile operating system provider, a KFTC chairwoman revealed to the media on Sept. 9. Another probe is looking into whether Google forced local app developers, mainly game developers and publishers, to exclusively launch their apps on Google Play Store.

The KFTC is focusing on whether Google imposed anticompetitive restrictions on competing OS providers and whether this action helped the tech giant cement its monopoly in the app marketplace.

The competition regulator has been concerned about the agreements between Google and smartphone device makers and whether the agreements have significantly reduced the ability of device makers to develop or choose alternative versions of the Android mobile operating system — particularly Samsung in the South Korean case.

A particular focus of the probe is understood to be the Anti-Fragmentation Agreements and the Mobile Application Distribution Agreement that Google has with Samsung, which the European Commission took issue with in its abuse of dominance decision on Google in 2018. According to antitrust experts, this shows that Google may also be expecting to see a European-style abuse of dominance probe on Android reverberate in South Korea.

The regulator believes that Google’s dominance in the mobile operating system and in the app marketplace is closely related because the tech giant wouldn’t be able to charge high commission fees from app sales on its app store if other alternative app stores on Android were in existence.

In-app sales commission

On the app store front, the three agencies are cooperating to figure out how to approach the in-app payment issue, while closely monitoring related debate in the market.

The controversy over in-app sales fees was sparked by a Google notice to local app developers that flagged a possible increase in the commission rate, according to industry groups representing local tech companies. The issue has been in the media spotlight since industry groups filed complaints to the KCC, about in-app sales commissions charged by Apple and Google and their app store payment policies. Another complaint from a group of South Korean tech companies, this time in the form of a class action, is also expected to be lodged against Google, although the timeframe is not yet known.

This has prompted the KCC to review Google’s in-app payment policy and whether having the in-app payment system as the only accepted payment method undermines the ability of app developers to choose other payment methods. Using a different legal framework, the KCC’s review focuses on whether Google has undermined rights of South Korean app developers.

The Science and ICT Ministry, which doesn’t hold enforcement authority, is assisting regulatory agencies with a market study that aims to reveal the commission rates that South Korean app developers pay to app store operators and what impact a possible increase in the commission rate would have. The market study is expected to be widely quoted and referenced by government agencies and the National Assembly.

The KFTC said it is closely monitoring the market debate on the in-app sales fee, while keeping up to date with global regulatory trends, particularly ongoing investigations into in-app payment policies by Apple and Google in the EU and the US.

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