Google is set to face the Korea Fair Trade Commission (KFTC) over allegations that it demanded "most-favored-nation" treatment from major domestic and international game developers using its app market.
Although Google was fined over 40 billion won in 2023 for providing support to game companies on the condition that they did not launch their apps on the competing app market, One Store, the company is facing regulatory action again after just three years.
The KFTC secretariat announced on July 1 that it has sent an investigation report to the parties involved regarding Google’s alleged violations of the Monopoly Regulation and Fair Trade Act (Fair Trade Act) and has submitted the report to the commission.
The specific entities under investigation are Google LLC (USA), Google Asia Pacific Pte. Ltd. (Singapore), and Google Korea LLC (South Korea).
The investigation report is a document containing the findings of illegal activities and proposed sanctions by KFTC investigators, serving a role similar to an indictment in criminal proceedings.
Once the investigation report is sent to the parties, the KFTC's sanctioning process begins.
As game developers sought to leave Google's Play Store due to high in-app payment commissions—a brokerage fee that takes a certain percentage of payments when users purchase paid items—Google entered into contracts known as GVP (Games/Google Velocity Program) with major domestic and international game companies to prevent them from leaving.
The core of these contracts was that Google would provide support for costs related to Google platform services, such as cloud, Ads (advertising purchase tools), and YouTube, on the condition that game companies set their launch timing and quality to be more favorable or at least equal to other app markets.
The game companies that signed these contracts include five domestic firms, such as Netmarble and NCSoft, and 17 foreign companies, including Activision Blizzard King and Riot Games.
The KFTC explained that while the contract periods varied by company, the total duration spanned from July 2019 to March of this year.
A key feature of these contracts was a progressive structure where the amount of support increased as the revenue from Google's app market grew.
KFTC investigators concluded that through this method, Google significantly reduced the incentive for game companies to enter other app markets.
In particular, the investigators are of the opinion that the progressive structure effectively forced game companies into exclusive dealings with Google.
This, they argue, hindered the business activities of competing app markets like One Store.
In fact, Google Play Store maintained a market share of over 80% in the domestic Android app market.
Furthermore, the KFTC determined that Google also blocked the possibility of some game companies launching their own app markets.
Jeong Hee-eun, Director General of the Market Surveillance Bureau at the KFTC, explained, "Although the game companies received support from Google, it was practically difficult for them to refuse the support given Google's overwhelming bargaining position," adding, "Receiving economic support does not necessarily mean the game companies violated the Fair Trade Act."
When asked if the KFTC considered the fact that the U.S. is sensitive to sanctions involving its own companies, she dismissed the notion.
"The KFTC did not discover this issue for the first time," Jeong said. "This matter has already been addressed in the U.S. through civil litigation regarding antitrust activities, and a final ruling has been reached."
The domestic revenue Google earned through this abuse of its market-dominant position is estimated to be 9.21777 billion dollars (approximately 14.16 trillion won).
Investigators viewed these contracts by Google as a very serious violation and recommended corrective orders and the imposition of fines.
The KFTC will deliberate on the matter and may impose a fine of up to 6% of the relevant revenue in accordance with related laws.
This means a fine of up to 849.6 billion won could be imposed.
Previously, in 2023, it was revealed that Google provided benefits such as top-tier exposure and support for overseas expansion to game companies on the condition that they did not launch apps on the competing app market, One Store, resulting in a 42.1 billion won fine and a corrective order.
As this is a repeat violation within five years, the fine could be increased by 20 to 40% according to relevant regulations.
However, a KFTC official explained, "Even with the increase, the maximum fine remains the same at 849.6 billion won."
Google is guaranteed the right to defend itself, including submitting written opinions and requesting to view or copy evidence, within eight weeks from the date of receiving the investigation report.
The KFTC plans to reach a final decision quickly, as this is a critical issue for restoring actual competition in the app market.
(Photo: Yonhap News)
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