South Korea set to ban Google, Apple in-app payment dominance
In this article (5)
South Korea is likely to bar Google and Apple from requiring software developers to use their payment systems, effectively stopping them from charging commissions on in-app purchases, the first such curbs on the tech companies by a major economy.
An amendment of the Telecommunications Business Act, dubbed the “Anti-Google law,” that takes aim at app store operators with dominant market positions, is being considered by lawmakers in South Korea, who have pushed the issue of the commission structure since mid-2020.
In a statement, Apple said the bill “will put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases.”
The iPhone maker said it believes “user trust in App Store purchases will decrease as a result of this proposal — leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW8.55 trillion to date with Apple.”
Adam Hodge, the spokesman for the U.S. Trade Representative’s office, said U.S. officials were still considering how to balance the views of the U.S. tech companies with the Biden administration’s push to increase competition in the industry.
“We are engaging a range of stakeholders to gather facts as legislation is considered in Korea, recognizing the need to distinguish between discrimination against American companies and promoting competition,” Hodge said.
Both Apple and Google have faced global criticism because they require software developers using their app stores to use proprietary in-app payment systems that charge commissions of up to 30% on in-app purchases.
“For gaming apps, Google has been forcing app developers to use its own payment system … and it wants to expand its policy to other apps like music or webtoon,” said Kwon Se-hwa, a general manager at the Korea Internet Corporations Association, a nonprofit group representing Korean IT firms.
“If the new bill becomes the law, developers will have options to use other independent payment systems,” Kwon said.
“If the new bill becomes the law, developers will have options to use other independent payment systems,”
Naomi Wilson, vice president of policy for Asia at the Information Technology Industry Council, a trade group that includes Apple and Google, said the legislation would violate South Korea’s multilateral and bilateral trade commitments.
“If enacted, the bill would present challenges both for app developers and app stores seeking to do business in the Korean market,” she said, urging Korean legislators to re-examine the obligations for app markets and ensure they do not disproportionately affect U.S. companies.
The European Union last year proposed the Digital Markets Act, taking aim at app store commissions. The rules are designed to affect large companies, but some European lawmakers are in favor of tightening them to specifically target American technology giants.
Earlier this month in the United States, a bipartisan trio of senators introduced a bill that would rein in app stores of companies that they said exert too much market control, including Apple and Google.
In South Korea, the home market of Android phone maker Samsung Electronics, Google Play Store earned revenue of nearly 6 trillion won ($5.15 billion) in 2019, according to a government report published last year.
Earlier this year, Google said it would lower the service fee it charges developers on its app store from 30% to 15% on the first $1 million they earn in revenue in a year. Apple has made similar moves.
For Apple too, commissions from in-app purchases are a key part of its $53.8 billion services business and are a major expense for some app developers.
In May, an antitrust lawsuit filed by the maker of the popular game Fortnite against Apple revealed that the game maker paid $100 million in commissions to Apple over two years.
Questions & Answers
Q.What specifically would the proposed South Korean law prohibit Google and Apple from doing?
What specifically would the proposed South Korean law prohibit Google and Apple from doing?
The amendment to the Telecommunications Business Act would stop Google and Apple from requiring software developers to use their proprietary payment systems. This effectively prevents the tech giants from charging commissions on in-app purchases within their app stores.
Q.What concerns has Apple raised regarding the proposed legislation?
What concerns has Apple raised regarding the proposed legislation?
Apple stated the bill could expose users to fraud and undermine privacy protections. It also believes user trust in App Store purchases might decrease, potentially reducing opportunities for Korean developers who have earned significant revenue through Apple.
Q.Why does the Korea Internet Corporations Association support the new bill?
Why does the Korea Internet Corporations Association support the new bill?
Kwon Se-hwa from the association noted that Google forces gaming apps to use its payment system and wants to expand this policy. The new bill would give developers the option to use independent payment systems instead, increasing choice.
Q.Has any other major economy proposed similar measures against app store commissions?
Has any other major economy proposed similar measures against app store commissions?
The European Union proposed the Digital Markets Act last year, which targets app store commissions. In the United States, senators also introduced a bill earlier this month to regulate app stores from companies with significant market control.