S.Korea set to curb Google, Apple commission dominance

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SEOUL, Aug 24 (Reuters) – South Korea is likely to bar Google and Apple from requiring software developers to use their payment systems, effectively stopping them from charging commissions on in-app purchases, the first such curbs on the tech giants by a major economy.

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The parliament’s legislation and judiciary committee is expected on Tuesday to approve the amendment of the Telecommunications Business Act, dubbed the “Anti-Google law,” that takes aim at app store operators with dominant market positions.

If the bill gets the committee’s approval, it will be put to a final vote on Wednesday. Lawmakers in South Korea have pushed the issue of the commission structure since mid-2020.

In a statement, Apple Inc (AAPL.O) said the bill “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.”

The iPhone maker said it believes “user trust in App Store purchases will decrease as a result of this proposal — 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.”

Alphabet Inc’s (GOOGL.O) Google was not immediately available for comment.

Both companies have faced global criticism because they require software developers using their app stores to use proprietary in-app payment systems that charge commissions of up to 30% on in-app purchases.

“For gaming apps, Google has been forcing app developers to use its own payment system … and it wants to expand its policy to other apps like music or webtoon,” said Kwon Se-hwa, a general manager at the Korea Internet Corporations Association, a nonprofit group representing Korean IT firms.

Google app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration

“If the new bill becomes the law, developers will have options to use other independent payment systems,” Kwon said.

The European Union last year proposed the Digital Markets Act, taking aim at app store commissions. The rules are designed to affect large companies, but some European lawmakers are in favour of tightening them to specifically target American technology giants, Reuters reported in June. read more

Earlier this month in the United States, a bipartisan trio of senators introduced a bill that would rein in app stores of companies that they said exert too much market control, including Apple and Google. read more

In South Korea, the home market of Android phone maker Samsung Electronics Co Ltd (005930.KS), Google Play Store earned revenue of nearly 6 trillion won ($5.15 billion) in 2019, according to a government report published last year.

Earlier this year, Google said it would lower the service fee it charges developers on its app store from 30% to 15% on the first $1 million they earn in revenue in a year. Apple has made similar moves. read more

For Apple too, commissions from in-app purchases are a key part of its $53.8 billion services business, and are a major expense for some app developers.

In May, an antitrust lawsuit filed by the maker of the popular game Fortnite against Apple revealed that the game maker paid $100 million in commissions to Apple over two years. read more

($1 = 1,165.1800 won)

Reporting by Heekyong Yang in Seoul, Additional reporting by Stephen Nellis in San Francisco Editing by Shri Navaratnam and Jonathan Oatis