The story so far: On August 31, the South Korean Parliament passed an amendment to the country’s Telecommunications Business Act that has been dubbed the “anti-Google” law. The law prevents dominant app store operators — effectively Alphabet’s Google and Apple — from forcing South Korean app developers to use their in-store payment systems. This effectively prevents Apple and Google from charging commissions on payments made in their app stores. The law also empowers the South Korean government to intervene in payment disputes within app stores, and to haul up app store operators for delaying the publishing of apps or deleting them.
What have Google and Apple been doing?
Google’s Play Store and Apple’s App Store strictly regulate how apps in their environment charge money from their users. Till recently, app publishers had been allowed to deploy only Google’s and Apple’s proprietary payment systems to collect money from app store users for digital purchases, which include the apps themselves, or ‘in-app purchases’ such as additional content or services. Google and Apple charged a 30% commission on all such purchases. As many app developers started to push back against what they said was a steep commission, Google announced in March this year that it was cutting the commission to 15%. However, it later announced that the change was being postponed to March 2022. In November 2020, Apple cut its commission to 15% for developers with less than $1 million in annual sales on its platform. On September 2, in response to a fair trade probe in Japan, Apple changed its policy to allow some app developers like Netflix and Spotify to add links that will send their users outside the app to make payments, effectively bypassing its commission. Recently, in response to a U.S. lawsuit, Apple agreed to let app developers email users about other options of payment. On the apps front, Google has a more relaxed approach than Apple, which does not allow users of its iPhones to download apps from any other source than the App Store. Phones with Google’s Android can ‘sideload’ apps; that is, download and install apps from websites or other sources. Android phones also support downloads from multiple app stores.
What makes the South Korean law important?
It is the first legal restriction on Google and Apple’s control over how money changes hands within their app stores. This could become a template for the many countries that have been looking at ways to control the clout of these online behemoths that take a cut from the digital sales of everyone from the gaming industry to publishers. The European Union has a draft Digital Markets Act in the pipeline that would force large internet “gatekeeper companies” that act as platforms for others to conduct transactions to change their business practices and level the playing field for smaller companies. In the U.S., Senators have introduced a Bill similar to the South Korean one that would force Apple and Google to allow app makers to deploy different payment systems. There is more trouble brewing in the U.S. as a federal judge is set to rule on the case by Epic, the makers of the ‘Fortnite’ videogame, against Apple’s in-app payment practices. Epic has sued Google in a separate case but on the same grounds. Adding to Google’s woes is another case filed by 36 U.S. States. In another indication that the trend is spreading globally, Reuters is reporting that Apple faces a legal challenge to its in-app payment system in India. The case is reportedly being reviewed by the Competition Commission of India.
How have Apple and Google responded?
Both companies point to the cost of maintaining the app store environment to justify the commissions. Responding to The Verge, an American technology news website, on the South Korean law, Apple said opening up the payment system will expose users to fraud and security breaches. Google argues these charges are a major reason why it is able to keep its Android mobile phone operating system free, and hence lower the cost of phones running on it. “Just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store,” a Google spokesperson told The Verge. “We’ll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store.”
Published - September 05, 2021 02:15 am IST
