Korea deals blows to Apple and Google’s payment policies

South Korea’s National Assembly has passed a bill that makes it the first country to impose restrictions on Apple and Google’s commission deduction policies.

Apple and Google often deduct commissions of up to 30% for each transaction on their app stores. Photo: Reuters

About 180 South Korean lawmakers present voted in favor of passing an amendment to the Telecommunications Business Act, according to Reuters.

The bill was passed on August 31 and will become law after South Korean President Moon Jae-in signs it into law.

Apple and Google often apply a payment policy that forces app developers to pay a commission of up to 30% for each transaction on their app stores.

Under the South Korean bill, app developers will be able to avoid the commission fees paid to major app store operators like Apple and Google, by directing users to pay through alternative platforms.

An Apple spokesperson said that the South Korean bill would make it possible for users to be scammed when purchasing digital goods from other sources, weakening the company’s privacy protections, making it difficult to difficult for purchasing management; it also makes features like “Ask to Buy” (a family sharing feature to manage kids’ spending – BTV) and “Parental Controls” less effective.

In addition, Apple also thinks that the trust of users when making purchases on the App Store may decrease due to the bill that South Korea has just passed.

Meanwhile, a Google spokesperson explained, the company’s commission deduction “makes Android work for free, providing app developers with global platforms and tools to reach consumers.” billion consumers in the world”.

“We’ll be giving careful consideration to how to comply with this law, while maintaining a high-quality app store and operating system support model, and we’ll share more in the coming weeks.” Google representative added.

The bill was developed by South Korea to prevent market-dominant app store operators from forcing app developers to use their payment system and delaying the review or blocking of apps. used “in an inappropriate way”, according to Reuters.

The bill also allows the Korean government to exercise the right to mediate disputes related to payments, cancellations, and refunds on the app marketplace.

Previously, the media reported that the Law and Justice Committee of the National Assembly of Korea approved an amendment in the bill to prevent application store operators from forcing application developers to use the system. their payment system.

Last year, Epic Games, the company behind the popular Fortnite game, built its own in-game payment system. In the last few years, a number of other companies such as Spotify and Match Group (owner of the online friend Tinder app) have petitioned Apple and Google to let them use their own payment systems.

A Match Group spokesman commented that the historic August 31 move and the bold leadership of South Korean lawmakers mark a major step forward in the fight for a fair app ecosystem.

“We look forward to the rapid signing of the bill and urge legislative bodies around the globe to take similar measures to protect their citizens and businesses from the exclusive gatekeepers who are limiting their access to the bill.” internet,” said a representative of Match Group.

According to Daniel Ives, Managing Director of Equity Research at Wedbush Securities, the authorities are getting tougher on app stores and the commissions that they charge. Apple and Google is collecting money from app developers, and South Korea’s move will likely be the first step towards closer scrutiny.

“This doesn’t necessarily make sense in itself, but it creates a ripple effect because it shows that they are not just words, but actually actions,” Mr. Ives commented on CNBC.

However, “the question is how the end consumer will decide. Because the path of least resistance is through the doors of Apple and Google – and that’s what consumers have long been used to.” , Mr. Ives worries.

Last year, Google said it would enforce a policy that requires app developers who submit products to the Google Play store to use its proprietary in-app payment system. That means, app developers don’t have other alternative payment method options.

Google’s payment system deducts 30% of the value of most purchases on its app store, similar to what Apple does for the App Store.

The move has drawn criticism from software developers and authorities who have been investigating the company’s ability to dominate smartphone operations. Apple and Google along with the commission they charge to app developers.

The majority of smartphones in the world run on Google’s Android operating system or on Apple’s iOS platform.

Following the response of app developers, the two US tech giants confirmed they would cut commission rates for certain developers.

Apple said it will halve the commission fee from 30% to 15% for software developers with less than $1 million in annual net sales on the App Store.

Similarly, Google announced in March that it would also reduce the deduction from 30% to 15% for the first $1 million in sales that app developers make from the Google Play platform each year.

However, Apple last week “changed its tone” and said, instead of going through Apple, App developers on the App Store will be allowed to email users and encourage them to pay directly – an action that has always been “banned” by the company.

Even so, if users are still used to paying through the App Store, app developers will still have to stick to Apple’s payment system and bear commissions.