The South Korean parliament has recently passed a law that will force Google and Apple to open their app stores to alternative payment systems. This threatens the commissions both companies receive on digital sales.
On Tuesday, the National Assembly passed one of the first laws in the world that directly threatens the dominance of tech giants like Google and Apple over how apps on their platforms make digital transactions. (Related: Google, Apple now colluding to "work as one company.")
A preliminary committee voted on Wednesday, Aug. 25, to push the bill to a final vote. It was passed thanks to the endorsement of the Democratic Party of Korea, which holds a majority of seats in the National Assembly. It will become law once it is signed by President Moon Jae-in, who is also a member of the Democratic Party.
Anti-Google Law directly attacks revenue of tech giants
The law amends the Telecommunications Business Act. It was nicknamed the "Anti-Google Law" and the "Google Power Abuse Prevention Law" by legislators and the South Korean media. The amendment prevents Google, Apple and other large app-market operators from forcing developers to use their in-app billing systems.
The amendment also bans app store operators from placing unreasonable delays in the approval of apps or deleting apps from their stores without reason. This provision was added to head off any potential retaliation against developers that divest from the in-app purchasing systems of the stores.
Failure to comply with the law will result in the violating company getting fined up to three percent of all the revenue it makes in South Korea by the Korea Communications Commission (KCC), the country's main media regulator.
The bill was welcomed by groups that represent South Korean internet and technology companies and startups, as well as local content developers and app makers.
Google and Apple have come under intense scrutiny over the very restrictive aspects of their app stores, both in South Korea and in other markets. The passage of the Anti-Google Law marks a milestone, as several other countries around the world are already considering passing similar measures.
Most prominently, the Australian Competition and Consumer Commission is considering placing regulations on the digital payment systems of Apple, Google and Chinese tech giant WeChat.
"As bills with similar implications are being proposed in the U.S. and Europe, South Korea's bill will become a cornerstone for legislating app market platform regulations worldwide," said KCC Chairman Han Sang-Hyuk.
"Korea's decision reflects a broader trend to step up regulation of technology-platform businesses, which have been criticized for having too much power," said Yoo Byung-joon, an expert on digital commerce and professor of business at Seoul National University.
Google, Apple claim new law will put Korean users at risk of fraud
In a statement, Apple said the new law "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."
Alphabet Inc., which owns Google, claimed the commissions it gets from in-app purchases allow the company to keep its Android operating system free. The company claims this provides developers free access to billions of users.
"We'll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store," said the company.
During the second quarter of this year, Google's Play store accounted for 75 percent of mobile app downloads globally. Apple accounted for 65 percent of all app-store consumer spending on in-app purchases and subscriptions around the world during the same quarter.
Learn more about the laws and regulations being proposed all over the world to combat the power of tech giants like Google and Apple by reading the latest articles at TechGiants.news.
Sources include:
Please contact us for more information.