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South Korea may ban Apple, Google from forcing store payment systems on app devs

Korean firms also keen to be your Seoul provider, says expert

South Korea is potentially on its way to tweaking its Telecommunications Business Act to stop Apple and Google from taking a cut of in-app purchases after a bill was approved by a committee of its National Assembly.

The bill was put to a vote on Wednesday by the country's legislation and judiciary committee, but it still has to go through a final vote in parliament, pencilled in for Monday.

If it does pass, the tweak to the Act will mean that companies with dominant market positions – like Apple and Google – will not be allowed to require software developers on their platforms to choose their respective app store's payment systems for users to download paid-for apps or make in-app purchases.

The move comes after Google clarified to Korean devs in September last year that they would be required to "use the Google Play payment system when offering in-app purchases of digital goods and pay a certain percentage of the purchase amount as a fee." In a conciliatory tone, it added that the policy was "only relevant for less than 3 per cent of Google Play app developers who... charge users for paid downloads or sell digital goods within the app. Google Play believes that this policy is fair."

We've asked Apple and Google for comment.

Professor Bronwen Dalton at Sydney's University of Technology's business school said of the move: "South Korea Korea's app developer community have long complained about the 30 per cent tariff they have to pay Apple and Google.

"Another issue is that Korean companies are seeking to adopt the same strategy. Like Apple and Google, they also want to build insular ecosystems where their company plays the ... guiding role in hardware, operating systems, payment systems and services.

"If approved, the [amendments to the] Telecommunications Business Act would mean that Korea would be the first such curb [to] these two US players by a major economy and market. Of course Apple and Google are worried that this could pave the way for other countries to do the same. Even losing Korea would mean the loss of a major revenue stream."

Dalton also noted that the passing of the law could also have implications for the development of autonomous vehicles in Korea. Hyundai Motor, Kia, and Hyundai Mobis are in talks with various manufacturers to develop AVs – reportedly calling off talks with Apple in February.

She added: "While the internal combustion engine vehicle industry allowed for some ecosystem monopolies, development costs [for electric] are huge and Korea will have to form collaboration with companies that own other technologies.

"Cooperation with tech giants like Apple will increasingly crucial in the era of EVs and AVs. The [amendment to the] Telecommunications Business Act may mess with Korea's big companies' [ability] to form the strategic partnerships with US technology companies they need to to develop the AV automobile industry."

While criticism has been mounting against the payment methods used by both Google and Apple in lawsuits across the world filed variously by other developers, consumers and governmental enforcers, the companies themselves have defended the revenue generated by their stores, saying they are used to maintain robust software security and pay carriers and other expenses on the platforms. Both Google and Apple have also made moves to lower the payment percentage they take from app users to 15 per cent for smaller developers (defined as those making under $1m annually).

One dev that definitely does not fit into this category, Fortnite maker and Unreal Engine maintainer Epic Games, objected to paying 30 per cent of in-app payments to Google and Apple to the point that in August last year, it violated the big firms' respective Play and App store rules by creating a loophole for players to buy in-game currency without using Cupertino and Mountain View's payment systems, thereby locking them out from taking a share of revenue.

The move resulted in the developer being booted out of both stores, following which it filed two lawsuits against Apple and Google [PDF]. It has alleged in the two suits that both Google and Apple are abusing their dominant positions and claimed anti-competitive practices by both tech giants. The Apple v Epic trial delivered its closing arguments in late May this year (here's The Reg's take) and awaits judgement in Oakland's Federal Court by Judge Yvonne Gonzalez Rogers. The Google vs Epic case is ongoing.

Google also has proposed class actions from consumers and developers to contend with, as well as enforcement actions from multiple states' attorneys-general, all accusing the company of monopolising the market for distributing apps on Android devices through its Play Store.

A senior director of public policy at Google yesterday told Reuters that "the rushed process hasn't allowed for enough analysis of the negative impact of this legislation on Korean consumers and app developers."

Other critics have claimed the move by legislators in Korea – as with the other antitrust moves around the globe – may have impact on bilateral agreements it has with the States. At any rate, devs in Korea and elsewhere will be listening closely on Monday for the rattle of the key to consumers' online wallets. ®

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