Impact on native Melon from Google app fee hike... Prelude to platform crackdown with '42.1 billion won fine'

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As Google's influence grows, the position of native companies is shrinking. Although the Fair Trade Commission and others have imposed fines worth hundreds of billions of won on Google, it seems difficult for native companies to reclaim the market share lost to Google.

On the 11th, the Fair Trade Commission decided to impose a fine of 42.1 billion won on Google. It was revealed that Google used its monopolistic market position to force game companies to release games exclusively on the Google Play Store. The latecomer app market, One Store, lost a fair chance to compete.

The period during which Google abused its dominant market position was from June 2016, when One Store was launched, until April 2018, when the Fair Trade Commission began its investigation. One Store was created by the three major telecom companies?SK Telecom, KT, LG Uplus?and Naver. With the emergence of One Store, Google anticipated a hit to its Korean business revenue and adopted a strategy to abuse its market dominance by blocking simultaneous game releases.

Most of the app market revenue comes from games. One Store suffered a direct decline in sales as it failed to attract new games normally. Google's market share in the domestic app market increased from 80-85% in 2016 to 90-95% in 2018, while One Store's share dropped from 15-20% to 5-10%. The Fair Trade Commission estimates that Google earned about 1.8 trillion won in revenue through such practices.

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Google's high market dominance is creating a vicious cycle. The forced in-app payment system is a representative example.

Last year, Google enforced a 30% commission on in-app payments. It implemented a policy refusing app updates if payment methods other than the in-app payment processed within the Google Play Store were used. Due to Google's overwhelming market dominance, all participating companies had no choice but to comply. As the payment commission increased, content prices also rose consecutively.

As content prices increased, the position of native companies diminished. Melon, the number one domestic music app, is on the verge of being overtaken by YouTube Music. Some surveys even show that Melon has lost its top spot. Price hikes were the main cause. Melon raised its monthly subscription fee by 10% last year due to the increase in in-app payment commissions.

YouTube Music, operated by Google, did not raise its fees even after the enforcement of the in-app payment system. There is also the issue of 'bundling.' Originally, users had to pay around 8,000 won per month to use YouTube Music, but Google offers the YouTube Music service free of charge to YouTube Premium subscribers (around 10,000 won per month), who can watch videos without ads.

The Fair Trade Commission is also investigating this issue. 'Bundling,' which allows platform companies to easily monopolize related markets, is subject to regulation.

As the monopoly problem of platform companies like Google continues, the government has begun discussions on regulation.

In January, the Fair Trade Commission's Online Platform Policy Division formed the 'Expert Task Force for Improving Online Platform Regulation,' consisting of 17 experts in economics and law, and has held three meetings so far. The Fair Trade Commission is discussing the need to amend the current Fair Trade Act to regulate anti-competitive acts resulting from the abuse of monopoly power by platform companies.

Related regulatory discussions are also ongoing overseas. The European Union (EU) will implement the Digital Markets Act (DMA) starting in May. The DMA contains provisions to preemptively regulate anti-competitive behaviors of large platform operators providing core services such as search engines, online intermediaries, messaging, and advertising.

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