South Korea's antitrust regulator has fined Alphabet Inc's (GOOGL.O) Google 207 billion won ($176.64 million) for blocking customised versions of its Android operating system (OS), in the U.S. technology giant's second setback in the country in less than a month.
The Korea Fair Trade Commission (KFTC) said on Tuesday Google's contract terms with device makers amounted to an abuse of its dominant market position that restricted competition in the mobile OS market.
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 ascertain its market dominance in the mobile OS market, the KFTC said.
Under the ruling, Google is banned from forcing device makers to sign AFA contracts, allowing manufacturers to adopt modified versions of Android OS on their devices.
In one instance, Samsung Electronics Co Ltd launched a smartwatch with a customised OS in 2013 but switched to a different OS after Google regarded the move as an AFA violation, KFTC said. Samsung Electronics declined to comment.
According to a report by Reuters Google said in a statement it intends to appeal the ruling, saying it ignores the benefits offered by Android's compatibility with other programs and undermines advantages enjoyed by consumers.
"The Korea Fair Trade Commission's decision is meaningful in a way that it provides an opportunity to restore future competitive pressure in the mobile OS and app market markets," KFTC Chairperson Joh Sung-wook said in a statement.
Joh said Google has hampered competition since 2011 by obligating its electronics partners to sign anti-fragmentation agreements.
This has prevented the companies from installing modified versions of Google's operating systems on devices like smartphones and smartwatches. That gave Google an easy way to cement its leadership in mobile software and app markets, she said.
Joh added that manufacturers like Samsung and LG had to agree to the terms when signing contracts with Google for app store licensing or early access to computer codes so that they could build devices in advance before Google released new versions of its Android and other operating systems.
In a news conference, she said South Korea will ban Google from requiring device manufacturers to sign anti-fragmentation agreements in relation to (business contracts) regarding Play Store licensing and early access to operating systems.
Thus statement, made on Tuesday came as the Korea Communications Commission began enforcing a revised telecommunications law that prohibits app market operators like Google and Apple from requiring smartphone users to pay with their in-app purchasing systems. It is the first nation to adopt such regulations.
According to a report by the Business Standard, the fine announced for Google would be the ninth largest the FTC has ever imposed. The company may end up paying even more.
Kim Min-jeong, another FTC official, said the amount announced by her commission was tentative, based on the revenue Google generated in South Korea from 2011 to April this year. She said the finalised fine, which could be announced in October or November, might be slightly higher.
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