South Korea’s National Assembly on Tuesday passed a bill that would prevent owners of large platforms such as Google and Apple from restricting app developers to embedded payment systems. President Moon Jae-in is expected to sign the bill as his party is behind the bill.
The law is a slap to Google and Apple
The law is a blow to both Google and Apple, as both require in-app purchases to browse their systems on their own — not through third-party payment systems — of which Google and Apple claim a 30 percent stake. If tech companies do not comply with the new law, they risk fines of up to three percent of their sales in South Korea.
“Helps keep Android free”
Neither company was enthusiastic about the law. In a statement, Google defended its accusations that it “helps keep Android free,” giving developers “the tools and a global platform to reach billions of consumers around the world.”
Just as developing an app costs money, creating and maintaining an operating system and app store costs money. We will look at how to comply with this law while developing and maintaining a high-quality operating system and app store. We will share more in the coming weeks.
“NSUser trust in the App Store will decrease“
The proposed telecommunications law would put users who purchase digital goods from other sources at risk of fraud, undermine their privacy, make purchases difficult to manage, and reduce the effectiveness of parental controls and functionality. We believe that users’ trust in the App Store will decline as a result of the proposal – resulting in fewer opportunities for the more than 482,000 registered developers in Korea who have so far earned more than $8.55 trillion with Apple.
Lobbyists at the two companies are said to have argued to US authorities that the Korean law violates a trade agreement between the two countries because it seeks to control the actions of US companies.
Many countries want to break up monopolies
The law could affect how the Google Play Store and Apple’s App Store operate globally, as South Korea is not the only country trying to change the monopolistic business model of US tech giants.
Reference legislation for other countries
Russia requires tools to be pre-installed with applications created by Russian developers. Australia is considering regulating services such as Apple Pay and Google Pay. Members of the US government have proposed legislation similar to South Korean legislation. The Wall Street Journal wrote that the new legislation in South Korea could end up as reference legislation for competition authorities in other countries.
Apple and Google tried to make themselves edible
Both Apple and Google have tried to limit dissatisfaction with changes to store policies. Apple introduced the App Store Small Business Program, which halved Apple’s share of developers, bringing in less than $1 million in the store annually. Apple has also agreed to allow developers to inform users of payment options outside the App Store, albeit through email, rather than through the app. Google will “only” take 15 percent of the first million dollars for developers instead of 30 percent.
Both Apple and Google have faced legal challenges in the region, and the most talked about is Epic Games. Epic’s arguments against both companies differ, but they share a core core: app store dominance. Both cases are still pending.
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