South Korea Enacts Law to Scuttle Apple, Google App Stores Dominance

South Korea Enacts Law to Scuttle Apple, Google App Stores Dominance

While the US is still deliberating around legal bottlenecks in its efforts to break up the big tech and scuttle their dominance, an Asian country has scored a major win with a new legislation that will change how American companies, Apple and Google run their app stores.

On Tuesday, South Korea’s parliament passed a bill that would rein in the dominance Google and Apple exert over payments on their app stores, becoming the first nation in the world to enact such a law.

South Korean lawmakers voted to approve the amendments to the Telecommunications Business Act, which bars app market operators from forcing certain payment systems on mobile content businesses by abusing their market positions.

App store operators will also be restricted from unfairly delaying reviews of mobile content.

The move comes amid growing global scrutiny against Google and Apple, who maintain a strong grip over mobile ecosystems, for requiring developers on their app stores to use their proprietary payment systems that charge fees of up to 30 percent when users purchase digital goods within apps.

Developers around the world have questioned app market operators’ exclusive in-app payment systems, opposing their relatively high commissions and demanding that they should be able to freely use other systems.

The latest legislation in South Korea is expected to give app developers the choice to use other payment systems, potentially signaling a major shift in how Google and Apple run their app markets.

The legislative movement in South Korea picked up after Google announced in September last year it would enforce its billing system on all developers on its Play store starting October this year.

Local tech groups vehemently opposed the move, calling it a monopolistic measure and saying it would likely lead to a price hike in the broader digital content industry.

South Korea is home to a robust mobile app economy, with total sales from Google’s Play store at around 5 trillion won (US$4.2 billion) last year and that of Apple’s App Store at 1.6 trillion won, according to the Korea Mobile Internet Business Association.

But the legislative movement initially faced fierce controversy amid concerns over a potential trade conflict with the United States as it essentially took aim at U.S. companies.

In March, the Office of the United States Trade Representative made mention of South Korea’s legislative movement in its National Trade Estimate report.

“The requirement to permit users to use outside payment services appears to specifically target U.S. providers and threatens a standard U.S. business model that has allowed successful Korean content developers to reach global audiences,” the report read.

Local experts say a trade dispute is unlikely, considering recent similar movements in the U.S.

“The United States is currently reviewing measures against such market dominance, so it’s unlikely for it to become a big problem for South Korea,” Ku Ki-bo, a professor of global commerce at Soongsil University, said. “The legislation will likely present an opportunity for local IT companies to expand their market presence.”

Earlier this month, U.S. senators introduced a similar bill that seeks to limit the dominant control Apple and Google have over their app stores.

The bill adds pressure on Apple and Google who are locked in legal disputes with hit video game “Fortnite” maker Epic Games Inc. over app market operations.

In July, 36 U.S. states also filed a lawsuit against Google, alleging anti-competitive behavior in its Play store operations to collect and maintain its commission.

South Korean app developers have high hopes for the revised legislation to resolve their long-held complaints against the commissions charged by app store operators.

“The legal amendment is expected to lead to an expansion of diverse payment methods for consumers within apps,” said Jung Mina, policy director at the Korea Startup Forum.

“We welcome the revision and its efforts to maintain a fair market order. We believe South Korea has become a leading example in a global movement (against app market operators’ dominance).”

Apple and Google have expressed concerns about the revisions, arguing that allowing other payment systems could lead to security and privacy risks for users.

Other international tech groups, including NetChoice, have expressed that the revision would have a negative impact on the broader app ecosystem, according to National Assembly documents.

The bill’s passage also comes after multiple attempts from Apple and Google to appease developers.

Last week, Apple reached a class action settlement in the U.S. with developers who have accused it of exerting dominance in app content distribution.

Under the settlement, Apple said it would allow developers to share information about payment methods outside of apps with its users — a move the iPhone maker had previously limited.

Apple has also cut its 30 percent commission by half for app developers that earn up to $1 million annually at the start of this year.

Google has taken similar measures, lowering its commission to 15 percent for the first $1 million of revenue earned by developers from July.

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