South Korea fines Google $177 million

South Korea’s antitrust regulator has fined Alphabet Inc’s Google 207 billion won ($176.64 million) for blocking customised versions of its Android operating system (OS), in the US 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.

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.

The antitrust regulator said this could be the ninth-biggest fine it has ever imposed.

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 licenses.

Under the AFA, manufacturers could not equip their handsets with modified versions of Android, known as “Android forks”. That has helped Google cement 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 customized 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.

The fine comes on the day that an amendment to South Korea’s Telecommunications Business Act – popularly dubbed the “anti-Google law” – came into effect.

The bill was passed in late August and it bans app store operators such as Google from requiring software developers to use their payment systems. The requirement had effectively stopped developers from charging commission on in-app purchases.

Last year, India’s antitrust body ordered an investigation into allegations that Google was abusing its market position to promote its payments app as well as forcing app developers to use its in-app payment system.