South Korea has accused Google of misusing its power in the Android app store regarding 'Project Hug.'

      South Korea’s competition authority has accused Google of misusing its dominant position in the Android app market and indicated that it will recommend corrective actions along with a financial penalty. The Korea Fair Trade Commission (KFTC) announced on Wednesday that its Market Surveillance Bureau found practices impacting 14.16 trillion won, or approximately $9.1 billion, in related revenue, as reported by Reuters.

      The case revolves around an initiative that Google internally referred to as "Project Hug," officially known as the Games or Google Velocity Program. From July 2019 to March 2026, the KFTC claims that Google provided financial support to game developers, contingent on their agreement to launch games on the Play Store with terms that were at least as favorable as those offered by any competing store.

      The contracts incentivized loyalty, with support increasing as developers generated more revenue through Play, which the KFTC argues intensified the motivation to favor Google’s marketplace over rivals. The program's duration, nearly seven years concluding only in March, contributes to the substantial affected revenue figure, as well as the scale of the potential penalty.

      Reports from Korean media suggest that the alleged coercion affected the largest studios in the country. The Korea JoongAng Daily identified NCSoft and Netmarble as among the developers pressured to remain on Play and accept higher commission rates.

      The financial implications are significant. Under Korean fair trade legislation, abusing market dominance can incur penalties of up to 6% of the affected revenue. For the $9.1 billion figure, this would mean a maximum penalty of approximately 849.6 billion won, or around $547 million; however, a final amount would be established only if the full commission affirms the findings.

      This distinction is crucial, as the bureau’s report serves as an accusation rather than a final decision, and Google has the opportunity to respond before the commission makes its ruling. The company has eight weeks from receiving the examiner’s report to submit a written reply and review the evidence, as stated by the KFTC. The bureau plans to bring together the full commission to issue a final ruling once due-process rights have been respected.

      This case revives prior conflicts that Korea has had with Google. In 2023, the KFTC imposed about a $32 million fine on Google for preventing developers from launching games on competing platforms. Korea has also enacted legislation to address slow enforcement, passing a groundbreaking law that requires Google and Apple to allow alternative in-app payment methods, with regulators later cautioning that some of Google’s billing changes could still violate this law.

      The country remains proactive in its quest for reform, as lawmakers aim to dismantle the dominance of the two app stores. The pressure on Google is not limited to Seoul; the company faces antitrust actions across various continents, with recurring scrutiny regarding the economics of its Play Store, including a monopoly case led by US states.

      What distinguishes the Korean case is its emphasis on financial incentives offered to developers rather than the fees they pay. The argument is that these inducements, rather than just commission rates, can reinforce market dominance. Most previous app store evaluations have focused on the percentage taken by platforms at the point of sale. Korea is examining whether funds flowing from the platform to the developer, when linked to certain conditions, can be deemed anti-competitive.

      If the commission concurs, this could expand the scope of how regulators interpret platform loyalty agreements, potentially impacting sectors far beyond the gaming industry. Google has yet to acknowledge the validity of these claims and will now present its defense to the KFTC, with a final decision and any associated fines still months away.

      The gaming industry holds significant importance in Korea, where domestic studios are among the largest globally and Play is the primary storefront on most mobile devices. A ruling against Google would significantly impact the country's most valuable app category. For developers in Korea, the outcome will determine whether directing revenue towards Play remains a viable business strategy or shifts into a potential liability.