KFTC hits Google with KRW 207.4 billion for blocking entry of rival operating systems(OS) and development of new smart devices.
- Google bans smart phone manufacturers from releasing devices that run on rival OS as a prerequisite for licensing the Play Store and early access to Android source codes
- Expects to restore competition in the mobile market and generate innovation in the market for smart devices
September 15, 2021
Anti-Monopoly Division(KnowledgeIndustry)
1. Facts
(1) Forcing to sign the ‘Anti-Fragmentation Agreement (AFA)’
□ (Overview) Since gaining market dominance in the mobile market in 2011, Google has forced smart phone manufactures to sign the ‘Anti-Fragmentation Agreement (or AFA)’ in order to block the market entry of fork OS* which is a rival to Android.
* modified versions of Android
□ (Forcing to sign the AFA) Google has required smart phone manufactures to sign the AFA as a precondition for signing the ‘Google Play Store licensing Agreement’* and the ‘Early Access to Android source codes Agreement’** which are essential for the smart phone manufacturers.
* A licensing agreement of Google Mobile Services (GMS) such as the Play Store, Google Search, and YouTube (MADA: Mobile Application Distribution Agreement)
** About six months before releasing the latest version of Android as an open source, Google provides source codes in advance only to smart phone manufacturers that signed this agreement
□ (Details of the AFA) According to the AFA, smart phone manufacturers are banned from installing other companies’ fork OS or developing their own fork OS for any of their smart devices.
ㅇ It also completely hinders the possibility of the emergence of any alternative ‘application (or app) ecosystem’ for fork OS by banning distribution of the SDK* and pre-installation of third party apps for fork OS.
* SDK (Software Development Kit) : A set of software-building tools used by app developers to create their apps that can be operated in a specific OS
□ (Devices subject to the AFA) As all smart devices are subject to the AFA, manufacturers are restricted from releasing not only smart phones, but also other smart devices installed with fork OS including smart watches and TVs.
(2) Actual cases
① (Mobile device) Amazon Fire OS
◆ Amazon developed Fire OSby modifying the Androidsourcecodesandtriedtoenter the smart mobile OS market, but it was without success becauseof the AFA.
ㅇ Amazon, in collaboration with LG Electronics, prepared to release the Kindle Fire in 2011 which is the first tablet of Amazon. However, the project fell through after realizing that releasing Fire OS devices by LG Electronics will violate the AFA, which in turn could disqualify them from the early access to Android source codes
ㅇ Afterwards, Amazon continued to seek for smart phone manufacturers that can install the Fire OS from early 2012 to 2013. But major smart phone makers including HTC, Sony, Samsung Electronics, LG Electronics and ZTE all declined Amazon’s offer due to the concern of violating the AFA.
② (Mobile device) Alibaba’s Aliyun OS
◆ Alibaba released smart phone running the Aliyun OS(fork OS) in 2011 through collaboration with manufacturer K-Touch. But Google deprived K-Touch’s access to the Play Store citing violation of the AFA and K-Touch could no longer release Aliyun OS phones.
◆ Alibaba also tried to collaborate with Acer in 2012, but Acer canceled the launch at last minute when Google threatened Acer that it is in violation of the AFA.
③ (Smart watch) Samsung Electronics Galaxy Gear 1
◆ In August 2013, Samsung Electronics released the ‘Galaxy Gear 1’ by developing its own fork OS for smart watches.
ㅇ When Google threatened that launching the Galaxy Gear 1 with 70 apps developed by other companies violates the AFA, Samsung had to give up its own fork OS for smart watches and switch to the Tizen OS even though there was no app ecosystem at all.
ㅇ Based on its hardware technology, Samsung could release smart watches installed with the Tizen OS up to the Galaxy Watch 3, but the company now faces limitations in building the app ecosystem with the Tizen OS.
ㅇ In the end, Samsung gave up the Tizen OS, which is the number one in the smart watch OS sector and released the Galaxy Watch 4 in August 2021, switching to Google’s smart watch OS “Wear OS”.
◆ If Samsung Electronics could release the Galaxy Gear 1 with its self-developed fork OS, competition in the smart watch OS market would have been a lot different from today.
④ (Smart speaker) LG Electronics LTE smart speaker
◆ Since November 2018, LG Electronics has planned to release LTE-enabled smart speakers with the fork OS for smart speakers.
ㅇ LG wanted to install Amazon’s voice recognition app “Alexa” on the speaker. But Google prohibited LG from releasing the smart speakers, citing that installing a third party app on devices running on the fork OS violates the AFA.
⑤ (Smart TV) Amazon smart TV
◆ Due to the AFA, Amazon also faced difficulties when releasing the Fire TV by licensing its Fire OS for smart TVs to many TV manufacturers.
ㅇ In order to increase sales of its smart TVs, Amazon tried to find global TV manufacturers that can install the Fire OS. However, most manufacturers including Samsung and LG Electronics had to decline Amazon’s offer due to Google’s AFA.
2. Results of action (Effects of anti-competitive practices)
□ As a result of these actions, Google has cemented its monopolistic position with the market share reaching
97％ in the mobile sector*.
* Changes in Google’s market share in the mobile market [Mobile OS market] (’10) 38% → (’12) 87.4% → (’14) 93.2% → (’19) 97.7% [Mobile app store market] (’12~’19) 95~99%
※ Apple’s iOS was excluded from calculation as it is exclusive to Apple, installed only on apple devices, not licensed
to other manufacturers (excluded the App Store for the same reason)
ㅇ New smart devices running on the fork OS such as smart watches and smart TVs were failed to be released
and innovation in OS development for other smart devices has been greatly undermined.
3. Measures
□ (Corrective order) Prohibited from forcing device manufacturers to sign the AFA as a precondition to the
Play Store licensing Agreement and the Early Access to Android source codes Agreement.
□ (Fine) KRW 207.4 billion (can change according to the amount of revenue confirmed in the future)
4. Significance and future plan
□ (Significance) These measures are significant as they can provide an opportunity to restore competitive pressure in the mobile OS and app store markets.
ㅇ In particular, our actions are highly significant as they can provide a basis for launching innovative devices and services in the growing smart device sectors, such as smart watches, automobiles, and robots.
□ (Future plan) All domestic and foreign businesses will be subject to the KFTC’s strict law enforcement if engaging in anti-competitive practices to maintain and strengthen their dominance.