South Korean law is first in the world to target Apple and Google’s app store dominance
Google and Apple could be forced to allow third-party payment options on their app stores thanks to a new law passed by South Korea’s National Assembly, a move that would let developers get around their 30% cut of in-app purchases.
The bill, if signed into law by South Korea’s President Moon Jae-in, would be the first in the first world to target how the two tech giants operate their app stores, The Wall Street Journal reported.
Apple and Google have come under increasing scrutiny for forcing app developers to use their own payment systems, which take a 30% cut of sales.
The backlash against those requirements has been spearheaded by Epic Games, the Cary-based video-game maker behind popular titles such as Fortnite.
Last August, Epic created a getaround in Fortnite that allowed it to bypass the 30% fee on both iPhones and Android smartphones. Apple and Google then kicked Fortnite off their app stores, leading to two high-profile antitrust lawsuits that are being heard in a California court.
Since then, U.S. regulators have also begun to increase attention on the two companies, and more than 30 state attorneys general, including Josh Stein of North Carolina, sued Google, accusing it of operating a monopoly via the Play Store, The News & Observer reported.
Stein told The News & Observer earlier this year that the 30% fee is artificially high because of Apple and Google’s app store monopolies. “When people buy things from payment processors the typical rate is 3%, and Google is charging 30%,” said Stein, a Democrat.
Google and Apple have both announced large expansion plans for the Triangle. The state has agreed to give Apple almost $1 billion in incentives to bring about 3,000 jobs to the area. Google plans to add about 1,000 jobs in Durham but has not sought state incentives.
The South Korean law, which was celebrated by Epic Games on Tuesday, could serve as a test case for other governments. One Senate bill, which would attempt to increase competition within app stores, has already been filed this month.
In response to the South Korean law, the Coalition for App Fairness, a group founded by Epic Games in response to Apple and Google, called the bill a significant development.
“South Korea’s new app store law is a significant development in the global fight to bring fairness to the digital economy,” the coalition said in a statement on Twitter. “We applaud South Korean lawmakers and President Moon Jae-in for setting an example for the rest of the world to hold app store gatekeepers accountable for their harmful and anti-competitive practices.”
“The Coalition for App Fairness hopes U.S. and European lawmakers follow South Korea’s lead and continue their important work to level the playing field for all app developers and users,” the group added.
Epic Games CEO Tim Sweeney also chimed in on Twitter, saying South Korea’s action represented a major milestone in personal computing.
“Korea is first in open platforms! Korea has rejected digital commerce monopolies and recognized open platforms as a right,” Sweeney wrote. “This marks a major milestone in the 45-year history of personal computing. It began in Cupertino, but the forefront today is in Seoul.”
In a statement, Apple said the Korean law would undermine its privacy protections. In its court battle with Epic Games, Apple has consistently talked about how opening up its App Store could lead to more fraud and malware on iPhones.
“The 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,” Apple said in the statement. “We believe user trust in App Store purchases will decrease as a result of this legislation — 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.”
Google, in its response to the law, said its Play Store fees help pay for tools that developers use on its platform.
“It’s a model that keeps device costs low for consumers and enables both platforms and developers to succeed financially,” the company said in a statement. “And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store. 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.”
In addition to preventing Apple and Google from requiring use of their payment systems, the South Korean law would also prevent them from delaying approval of apps or removing them from the app store — actions they both took against Epic Games last year.
Breaking the law could result in companies being fined up to 3% of their revenue in South Korea, The Wall Street Journal reported.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate.
This story was originally published August 31, 2021 at 10:30 AM.
