South Korea fines Google over Android smartphone dominance and anti-fragmentation agreements with smartphone makers

South Korea fined Google US$177 million after the Fair Trade Commission determined that agreements with smartphone makers prevented modified versions of Android

Google says it will appeal the decision that would end its agreements with brands like Samsung and LG requiring them to use approved versions of its OS

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The Google app seen on a smartphone on July 13. South Korea fined Google US$177 million over agreements with smartphone makers that prevented prominent gadget brands from developing their own versions of Android. Photo: Reuters

Published: 1:51pm, 14 Sep 2021Updated: 1:51pm, 14 Sep 2021

South Korea fined Alphabet Inc’s Google US$177 million for hampering the development of rivals to its Android operating system, sustaining a campaign targeting the US search giant’s dominance in smartphone software.

Regulators accuse Google, whose mobile operating system powers more than 80 per cent of smartphones around the world, of using its immense bargaining power to squeeze out the competition. The Korea Fair Trade Commission said Google’s anti-fragmentation agreements (AFA) with manufacturers like Samsung Electronics Co and LG Electronics Inc prevented gadget makers from developing or using modified versions of the Android OS. The watchdog banned Google from forcing manufacturers to sign AFA contracts and ordered that it modify existing ones.

Korea in August became the first country to pass a law forcing Apple Inc and Google to open up their app stores to outside payment systems, setting a potentially radical precedent for their lucrative operations everywhere from India to the US. That bill becomes effective September 14, the Korea Communications Commission said in a statement. Tuesday’s 207.4 billion won fine is one of the highest levied in the country over abuse of market dominance, with only Qualcomm Inc’s mobile chipsets drawing higher sanctions.

Google responded by saying Android has accelerated innovation – including among Korean companies – and improved the user experience, and that it will appeal the decision. “The KFTC’s decision released today ignores these benefits, and will undermine the advantages enjoyed by consumers,” the company said in a statement.

The new measures from the KFTC are intended to spur competition by freeing companies to create so-called forks of Android – versions built from the same basic building blocks but modified to suit the manufacturer’s aims, such as targeting different device classes or use cases – without fear of punitive measures from Google.

“The Fair Trade Commission’s action was not limited to mobile devices, but corrective measures included emerging smart device-related areas such as smartwatches and smart TVs,” Chairperson Joh Sung-wook said in a briefing on Tuesday. “Therefore, we expect that new innovations will occur as some competitive pressures in this area are activated.”

Korean regulators have stepped up scrutiny of tech giants this year, including of local players. Kakao Corp’s group of companies lost more than US$16 billion 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.