South Korea's Fair Trade Commission has begun deliberation procedures into allegations that Google abused its dominant position in the app market. The probe covers Google's signing of so-called GVP (Games/Google Velocity Program, also known as Project Hug) contracts with major game companies in South Korea and overseas to prevent them from leaving the Google Play Store due to the burden of in-app payment fees.

The KFTC secretariat submitted an examiner’s report to the commission on alleged violations of the Fair Trade Act by respondents including Google LLC (United States), Google Asia Pacific Pte Ltd (Singapore) and Google Korea Ltd, and sent it to the respondents on Tuesday. This started the deliberation process.

The case began after complaints from the Citizens' Coalition for Economic Justice, the Korea Game Consumers Association and the Korea Game Consumer Association were received in November 2024. The KFTC then prepared the report after analysing overseas litigation materials, conducting on-site inspections and interviewing witnesses. The KFTC said the report records alleged illegality and proposed measures identified by examiners during the investigation and does not bind the commission’s final decision.

Jeong Hee-eun (정희은), director general of the KFTC’s Market Surveillance Bureau, said at a briefing on Tuesday, "As a result of the examiner’s investigation, it was determined there are suspected violations of the Fair Trade Act."

GVP contracts began to be signed in 2019, and the KFTC set the period of the alleged violations as about 6 years and 9 months from July 2019 to March 2026. The contracts cover 22 top game companies by sales in Google’s app market, including Activision Blizzard King and Riot Games. Of them, 5 are South Korean game companies — NC, Nexon, Netmarble, Pearl Abyss and Com2uS — and the remaining 17 are overseas companies.

Under the contracts, game companies agree to a “most-favoured” condition that sets release timing and quality to be favourable to, or at least equal to, Google’s app market compared with other app markets, while Google supports costs for its premium services such as Cloud, Ads and YouTube.

Jeong explained the quality condition as requiring that features or benefits provided in an app be better than, or at least equal to, the app registered in other app markets. “Google’s app market” refers to the Play Store operated by Google and is distinguished from rival app markets such as One Store.

The support structure was designed on a progressive basis in which Google’s support amount increases as game revenue within Google’s app market rises. Jeong said, "The progressive structure itself is not a violation of the law, but we viewed the demand for it on the condition of most-favoured treatment as containing elements that restrict competition, and the effect became larger because it was designed with a progressive structure."

The examiner concluded that Google, through the most-favoured condition and progressive support method of the GVP, significantly reduced incentives for game companies to enter rival app markets and thereby interfered with the business activities of competing app markets such as One Store. The examiner also concluded it blocked the possibility of contracted game companies launching a new separate app market, and that the GVP contracts effectively forced exclusive dealing with Google.

Relevant revenue in the Android app market affected by the alleged abuse of dominant position was estimated at $9,217,770,000 (about 14.16 trillion won). The relevant revenue was calculated based on domestic revenue. The KFTC said Google’s share in South Korea’s Android app market is generally more than 80 percent.

The examiner judged the conduct to be a very serious violation as an abuse of dominant market position that violates Article 5(1) of the Fair Trade Act, including interference with business activities (Item 3) and conditional exclusive dealing (Item 5), and proposed corrective orders and the imposition of a penalty. After deliberation by the commission, a penalty of up to 6 percent of relevant revenue could be imposed, and in that case the cap would be arithmetically about 849.6 billion won. A past record of violations could be an aggravating factor in calculating the penalty, but whether and how much to impose will be decided through the commission’s deliberations.

Google can submit written opinions within 8 weeks of receiving the report and is guaranteed due process through access to and copying of evidence materials and opportunities to state its views. The KFTC said it views the case as a major matter for restoring substantive competition in the app market and plans to convene a full commission meeting to make a final decision once the due process procedures are completed.

On whether game companies that received economic support through the GVP contracts bear responsibility, Jeong said, "Considering Google’s overwhelming position in its relationship with Google, it would have been practically difficult for game companies to refuse the support, and it is hard to view game companies as having violated the Fair Trade Act simply because they received economic support." She also made clear the case is not an investigation into alleged collusion but an investigation and measures regarding Google’s abuse of dominant position.

Separately, the issue of forcing in-app payments is a different matter. The Telecommunications Business Act, which prohibits forcing a specific payment method, applies first, and it is being handled by the Korea Communications Commission. The KFTC said it plans to monitor the issue while continuing consultations with the KCC.

The case is different in nature from a case in which Google was sanctioned in 2023 for conduct from 2016 to 2018 that specifically excluded One Store. Jeong said that while the earlier case involved support on the condition that One Store not be launched, the current case allows the launch of other app markets but requires timing and conditions at least equal to Google’s app market. She said it was in the sense that it could be seen as a result of Google seeking other means after the 2023 sanction.