FTC looks into Google’s dominance in phones

Korea’s antitrust agency launched investigation into whether Google Korea abused the dominant position of its Android operating system to smother competition, three months after the European Union accused the U.S. search engine giant of breaching antitrust rules.

Multiple sources say the Fair Trade Commission (FTC) began monitoring Google Korea’s activities in April and officials from the agency’s anti-monopoly division raided Google Korea’s office in Yeoksam-dong, southern Seoul two weeks earlier to make an on-site investigation.

An official from the anti-monopoly division refused to speak about the investigation. Google Korea declined to comment on the matter too.

The investigation in Korea comes three years after the FTC conducted a two-year antitrust inquiry into Google Korea following complaints from local rivals Naver and Daum about Google’s pre-loading requirements for its apps on Android phones. Google was cleared after the antitrust body found the two Korean players’ market shares weren’t affected.

This time the FTC’s probe overlaps with the EU’s probe of Google’s European operations, industry insiders say. The probe here focuses on whether Google Korea has been imposing restrictions on Android device manufacturers, using its near-monopoly in the smartphone operating system. Android has a 92 percent market share in Korea. In Europe, it’s market share is over 90 percent too.

Google Search and Google’s Chrome browser are pre-installed on all Korean smart devices running the Android operating system and Google search is set as the default search service. Google is alleged by the FTC to require manufacturers to do so. Browser apps from Naver, the top search engine in Korea, and Daum (later merged with Kakao), the second biggest player, are not pre-installed.

LG Electronics’ G4, for instance, pre-loaded its self-developed Web browser when debuting in April 2015 but a software update later replaced it with Google’s Chrome. LG refused to confirm what triggered the company to make the change.

The antitrust agency also suspects that the subsidiary of Alphabet has strong-armed smartphone manufacturers to prevent them from selling smart mobile devices running on competing operating systems based on the Android open source code. One of the competing systems is Tizen, Samsung’s secondary operating system, mostly used for its wearables.

Neither of the two major smartphone producers - Samsung Electronics and LG Electronics - confirmed the accusations against Google Korea.

“On top of a confidentiality agreement, Google is such a powerful partner for us that we are extremely cautious about offering any information regarding our contract,” said a spokesman with one of the smartphone vendors. “We don’t have a reliable alternative to Android for smart devices at this moment.”

Google is also alleged to have given financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices in Europe. The European Commission may soon slap Google with a record fine of up to 3 billion euros ($3.3 billion) to discourage other tech companies from taking advantage of dominant market positions, according to The Telegraph. The European regulator’s highest fine in history was 1.1 billion euros levied on Intel, in 2009. The Commission on July 16 issued fresh complaints against Google regarding its dominance in online advertising and shopping search results.

Should Google Korea turn out to have breached Korean antitrust rules, it may face a fine under the antitrust act and observers say it won’t be easy for Google to fend off charges of anti-competitive behavior given the latest precedents in Europe.

The Korean unit of the Silicon Valley giant is having bad days. Its current CEO John Lee came under fire as prosecutors summoned him twice - in May and June - to question about the deadly humidifier sterilizer sold by the Korean branch of Oxy Reckitt Benckiser. Lee headed the company from June 2005 to May 2010. A court rejected a request for an arrest warrant for the Korean-American CEO.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]