Governments around the world are scrutinizing how Google and Apple do business, thanks to outcry from developers both big and small. The arguments against Google and Apple are generally the same: They hold a monopoly on app distribution and payment options on their respective platforms, charge supracompetitive fees to developers, and unfairly restrict alternative app markets and payment options. While both Google and Apple have reduced their service fees in response to mounting pressure, neither have budged when it comes to allowing third-party payment options. However, government intervention in South Korea will force both companies to do just that.
As reported by the WSJ, a new law has just been passed by South Korea’s National Assembly which will force both companies to open up their app stores to alternative payment systems. The law, nicknamed the “Google power-abuse-prevention law”, amends South Korea’s Telecommunications Business Act, which regulates all telecommunications business in the country, to prohibit large app marker operators from requiring their in-app purchasing option. The law also blocks these operators from delaying the approval of apps or unfairly banning them from the marketplace, both of which are aimed at preventing retaliation from the operator. Failure to comply with this law can result in a fine of up to 3% of the company’s revenue in South Korea. The bill won’t become law until it’s signed by South Korean President Moon Jae-in, but given that his party endorsed the legislation, it’s unlikely to be vetoed.
Given how much money both companies make from their app stores (Google allegedly made $11.2 billion from the Play Store in 2019), it’s no surprise that they’ve been unwilling thus far to loosen their policies on payment options. Legislation like the one that just passed in South Korea threaten Google and Apple’s stranglehold over their respective platforms and could lead to a loss of billions of dollars in revenue if similar laws are passed in the U.S. and EU.
In a statement to The Verge, Google expressed disappointment in the new law.
“Just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store,” a Google spokesperson told the publication. “We’ll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store, and we will share more in the coming weeks.”
Apple, likewise, wasn’t happy about the law, offering the following statement to The Verge ahead of the law’s passing:
“The proposed Telecommunications Business Act 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, and features like ‘Ask to Buy’ and Parental Controls will become less effective. We believe 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.”
The outcome of ongoing litigation from Epic Games and U.S. State attorneys general offices as well as the lobbying efforts from groups like the Coalition for App Fairness will play a key role in determining the fate of similar legislation being passed in the U.S. and the EU.
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