Last updated: April 15, 2011 6:32 pm

Google faces S Korea antitrust complaint

South Korea’s top internet providers have launched an antitrust complaint against Google, alleging that the US group is stifling competition in the domestic mobile search market.

NHN, which runs Naver, the country’s leading search engine, and Daum Communications filed a petition with the country’s Fair Trade Commission on Friday, asking the antitrust watchdog to look into Google’s business practices in Korea.

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They claim the US search company is limiting their access to smartphones that run on the Google Android operating system, by pressuring smartphone manufacturers and operators not to preload devices with NHN and Daum’s applications.

Android smartphones “have Google’s search engine installed as a default navigation tool, while they are systematically designed to make it virtually impossible to switch to another option,” NHN said.

The petition in South Korea comes as online companies try to grab a bigger share of the country’s fast-growing mobile search market, where the mobile phone penetration rate has topped 100 per cent.

Sales of smartphones in particular have increased sharply in South Korea since Apple’s iPhone was introduced at the end of 2009.

Nearly 70 per cent of the more than 10m smartphones sold in South Korea were based on the Android operating system, according to industry data.

Research firm Gartner forecast that the smartphone market would grow 58 per cent this year, with Android accounting for 39 per cent of the market.

Google’s mobile search market share grew from 12.6 per cent in March 2010 to 16.1 per cent in January, while its fixed-line presence remains at less than 2 per cent.

NHN’s Naver has a 52 per cent market share in the domestic mobile search market, followed by Daum with 15 per cent.

In personal computers, NHN and Daum together control about 90 per cent of the internet search market, analysts estimate.

The filing in South Korea is the latest in a series of antitrust complaints against Google.

The European Commission, Europe’s top competition watchdog, formally opened a wide-ranging investigation into Google’s practices last year, after receiving three complaints alleging the US company was abusing its dominant position in search.

This year, two more complaints have been filed – one related to another of the original complainants and the latest from Microsoft, accusing Google of a “pattern of walling off content and data” on the internet, to prevent competition.

Google’s opponents are also urging US regulators to open a similarly sweeping antitrust probe there.

But Google denied the accusation on Friday. “Android is an open platform and carriers and partners are free to decide which applications and services to include,” Google Korea said in a statement.

“We are looking forward to working with the FTC to address any questions they may have.”

The growing regulatory scrutiny of the search group was one reason given by Mark Mahaney, internet analyst at Citibank, for downgrading the company’s stock from a “buy” rating late on Thursday, after a sharp jump in operating costs at the company spooked investors.

Google’s shares were down 6.5 per cent in midday trading in New York on Friday.

Additional reporting by Nikki Tait in Brussels and Richard Waters in San Francisco

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