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Google Fined Over Its Dominance


On Tuesday (14/9), South Korea's competition regulator announced a charge of ₩207.4 billion (US$176.9 million) against Google for allegedly stifling competition with its dominant market position in mobile operating systems. Legislators accuse Google of abusing its enormous bargaining power to suffocate competitors. According to the Korea Fair Trade Commission (KFTC), Google's anti-fragmentation agreements (AFA) with manufacturers such as Samsung Electronics Co. and LG Electronics Inc. restricted device makers from developing or utilizing modified versions of the Android operating system. In extension, Yonhap News implies the Korean regulator stated that while signing striking contracts with Google, such as app store licensing and early access to the operating system, the tech giant compelled smartphone makers to adhere to an "anti-fragmentation agreement (AFA)." Furthermore, the deal barred device manufacturers from installing customized versions of the Android operating system, known as "Android forks," on their handsets. Google responded by claiming that Android has promoted innovation, particularly among Korean enterprises, and improved user experience and that it will appeal the ruling. In a statement to the public Tuesday (14/9), "The KFTC's judgment issued today ignores these benefits and will damage the advantages experienced by consumers."


The Korea Fair Trade Commission (KFTC) admits that they have been monitoring Google since 2016. One factor contributing to the KFTC's lack of confidence in Apple and Google is the widespread criticism both companies received for collecting up to 30% commission on app sales and forcing users to use their payment system, which takes a cut of each transaction. As Korea implements its legislation, dubbed the "Anti-Google Law," they will offer users a selection of app payment providers that enable them to avoid store-set charges. This South Korean action will undoubtedly affect the rest of the globe. As Kang Ki-hwan told AFP on (8/31) at a meeting of the Korean Mobile Internet Business Association, "This law will certainly set a precedent for other countries, as well as app developers and content creators worldwide." Additionally, starting in October, Google intends to impose a commission on all content payments, thus eliminating the commission exemption for online games. Google's declaration of a "commission on all content purchases" sparked outrage among South Korean artists and creators, with online fiction authors and webtoon artists accusing Google of "power abuse" and campaigning fiercely for the new law. "Without this law, our working environment, where creators are guaranteed full rewards for their efforts, would've been destroyed. We need this law to protect the diversity of our industry, where artists and creators of all economic backgrounds can share their content without having to worry about the commission fees." On (8/31) AFP spoke with Seo Bum-gang, a webtoon artist and head of the Korea Webtoon Industry Association.


As of the closing market on Tuesday (9/14) Google (NSDQ : GOOGL) experienced a decline of 0.3%. However, the imposition of fines from the South Korean antitrust regulator is not the first fine to Google. Prior to this, An antitrust agency in India has once investigated a similar case where Google took advantage of its stocks positions and used it to promote Google’s payment application instead and fined Google of Rp288 billion in 2018. A bunch of other countries have also given Google a fine for various reasons. France gave Google a fine of €500 million for copyright reasons, Italy gave Google a fine of €100 million for closing a contender’s smartphone application, and Belgia gave Google a fine of €600 thousand due to Google’s attempt to eradicate a news article from their search engine. And though it might seem like much, many believe that paying fines will not give much of an effect towards stock prices. For example, after Alibaba’s were fined for Rp40.9 trillion, the company experienced an increase of 5%. All in all, the fine has not affect Google stock yet brings the market's focus back to fundamentals.


Sources:

Bloomberg

CNBC International


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