Last year, South Korea became the first country to approve legislation changing Google and Apple Inc.’s policies on how apps on their platforms sell subscriptions, in-game items, and other online content. The law forbids Google and Apple from forcing apps to use their own in-app payment systems, giving developers more options and potentially avoiding service fees of up to 30%. The law governing app stores went into effect in September of last year. However, the Korea Communications Commission (KCC) did not issue definitive enforcement instructions until March. Google and Apple are still working on a regulatory compliance strategy to satisfy the Korean authorities.
Google had recently attempted to prohibit app developers from giving an in-app link to an external website to purchase digital goods. This practice is known as “outlinking,” and it avoids Google’s fees. According to Google, those that provided external links would be unable to update their apps starting this month, and their apps may be removed from the Google Play Store by June 1. However, the KCC released legal guidance stating that Google’s actions would violate South Korea’s app payment law by forcing apps to utilize a single payment method and making it difficult to provide alternative options.
In South Korea, Google and its Android operating system have a substantial market share. According to Counterpoint Research, a digital industry research organization, Samsung Electronics Co., the hometown brand that runs Android, controls 72 percent of the local smartphone market, compared to Apple’s 21 percent.
According to Google, the company is studying the KCC guidance and will look for ways to continue investing in the Android ecosystem while working with local app developers to improve customer choice. The tech company previously stated that it would continue to charge 4 percentage points lower costs on in-app payments handled via third-party payment providers to help them with the additional costs that developers incur to support their billing systems. According to Google, the commission may be as low as 6% for eBook providers when users choose alternative systems, instead of 10% using Google’s Billing system, and as high as 26% for popular mobile game apps.
Nevertheless, according to the Wall Street Journal, Apple, which charges a 30% fee for in-app purchases around the world, has yet to implement policy modifications compliant with South Korean legislation. According to the KCC, Apple has expressed a desire to cooperate. Apple has yet to respond to the KCC’s new legal instructions.
The regulatory and competition policy world is likely to follow the development of how Korea’s law is enforced. There are several legislative projects that follow the Korean example. For instance, we have covered the development of the Open App Markets Act in the U.S.
According to the proposed bill, app stores with more than 50 million users in the United States won’t be authorized to make developers utilize the platform’s payment system as a condition of distribution. Furthermore, app stores will have no power to ban or penalize developers who sell their programs at different price points in different locations. Besides, the bill mandates that retailers permit developers to communicate directly with users for legitimate commercial purposes. Google and Apple have spoken out against the plan, claiming that it could jeopardize consumer privacy and result in poor user experience.