South Korea fines Google for abusing its dominant position

 The antitrust regulator said Google’s terms with device makers on using its operating system restricted competition.

A South Korean antitrust regulator has fined Alphabet Inc’s Google 207 billion won ($176.64m) for blocking customised versions of its Android operating system (OS), in the US technology giant’s second setback in less than a month.

The Korea Fair Trade Commission (KFTC) on Tuesday said terms with device makers amounted to the abuse of Google’s dominant market position that restricted competition in the mobile OS market. Google’s mobile operating system powers more than 80 percent of smartphones around the world.

Google said in a statement it intends to appeal. It said the ruling ignores the benefits offered by Android’s compatibility with other programs and undermines advantages enjoyed by consumers.

The fine, one of the highest levied in the country over abuse of market dominance, comes on the day an amendment to South Korea’s Telecommunications Business Act – popularly dubbed the “anti-Google law” – came into effect.

The law now bans app store operators such as Google from requiring software developers to use their payment systems – a requirement that effectively stopped developers from charging commissions on in-app purchases.

KFTC said Google hampered competition by making device producers abide by an “anti-fragmentation agreement (AFA)” when signing key contracts with it regarding app store licences.

Under the AFA, manufacturers could not equip their handsets with modified versions of Android, known as “Android forks”. That has helped Google cement its market dominance in the mobile OS market, the KFTC said.

The watchdog banned Google from forcing manufacturers to sign AFA contracts and ordered that it modify existing ones.

The new measures from the KFTC are intended to spur competition by freeing companies to create so-called Android forks without fear of punitive measures from Google.

The regulator said the fine could be the ninth-biggest it has ever imposed.

In 2013, Samsung Electronics Co Ltd launched a smartwatch with a customised OS, but switched to a different OS after Google regarded the move as an AFA violation, KFTC said.

Samsung Electronics declined to comment.

Korean regulators have stepped up scrutiny of tech giants this year, including local players. Kakao Corp’s group of companies lost more than $16bn of market value at one point this month after prominent lawmakers called the nation’s biggest messaging and social media service “a symbol of greed”.

Consumer protection has been a focal point of measures designed to curb the market control powers of the largest companies, especially in developing spheres such as fintech services.