The Korea Fair Trade Commission (KFTC) said Google has hampered market competition by requiring smartphone makers such as Samsung Electronics (KRX:005930) Co Ltd to sign an "anti-fragmentation agreement (AFA)" when they enter into contracts with Google over app store licenses, Yonhap News reported.
Under an AFA, device makers are not permitted to install modified versions of Android OS, known as "Android forks" on their products, nor are they allowed to develop their own Android forks.
This has helped Google cement its market dominance in the mobile platform market and undermined innovation in the development of new OS for smart devices, according to the KFTC.
The regulator has ordered Google to ban its practice of forcing Android manufacturers to sign an AFA.
"We expect the latest measures will help set the stage for competition to revive in the mobile OS and app markets. This is also expected to help the launch of innovative goods and services in smart device markets," the KFTC said.
Google said it intends to appeal the fine, arguing that Android’s compatibility programme has spurred hardware and software innovation and brought success to Korean phone makers and developers.
“The KFTC’s decision released today ignores these benefits, and will undermine the advantages enjoyed by consumers. Google intends to appeal the KFTC’s decision,” a Google spokesperson told CNBC in a statement.