According to legislation recently passed by South Korea, Google and Apple will have to allow app developers to use alternative payment systems. This could pave the way for similar action in other countries.
On Tuesday, the country’s National Assembly passed an amended Telecommunications Business Act with President Moon Jae-support. in’s party’s Once President Moon signs it, it will become law.
Developers will be able to choose which payment systems to use to process in-app purchases under the new law, potentially bypassing the two long-standing leaders’ hefty fees.
Apple, for example, charges up to 30% commission on some purchases made through its platform, and developers say they have no choice but to comply because Apple does not allow customers to download apps from anywhere other than the company’s official store.
The bill prohibits app store operators from “unfairly using their market position to force a particular mode of payment” on businesses in South Korea. Violations could result in fines of up to 3% of annual sales, as well as penalties of up to 300 million Korean won ($257,000).
The bill has been dubbed the “anti-Google law” in the country, with lawmakers claiming that the Silicon Valley behemoth has abused its long-standing dominance to undercut developers.
In July, South Korean lawmaker Jun Hye-sook urged parliament to move the bill forward as soon as possible, describing it as “a law to prevent Google from lording [its position] over others” and a move that would “protect IT developers from platforms lording over them.”
Both companies have retaliated, claiming that the law will ultimately harm app developers and consumers.
In a statement Tuesday, a Google spokesperson said that the company would “reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store.”
“Google Play provides far more than payment processing, and our service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world. It’s a model that keeps device costs low for consumers and enables both platforms and developers to succeed financially,” the representative added.
“And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store.”
According to Apple, South Korea has more than 482,000 registered app developers who have earned more than 8.55 trillion Korean won ($7.3 billion) with the iPhone maker to date.
“We believe that as a result of this proposal, user trust in App Store purchases will erode — leading to fewer opportunities for [them],” it said in a statement Monday, before the bill was passed. On Wednesday, the company referred CNN Business to that statement.
According to the most recent government study, Google (GOOGL) and Apple (AAPL) each made about $5.2 billion and nearly $2 billion in their respective app stores in South Korea in 2019.
Chairman of the South Korean Communications Commission Han Sang-hyuk, on the other hand, believes that new rules are required as platforms continue to exert “influence.”
“Those app market operators are gaining controlling power in the market. It is becoming necessary to regulate them,” he told lawmakers last week.
South Korea isn’t the only country in the region keeping a close eye on the two firms. Australia’s Treasurer, Josh Frydenberg, called for new rules on digital payments on Monday.
“Digital wallets such as Apple Pay and Google Pay are used to make contactless payments just like debit cards issued by a bank, but the parties are subject to different regulatory settings,” he wrote in an op-ed in The Australian Financial Review.
“If we do nothing to reform the framework, it will be Silicon Valley that determines the future of a critical piece of our economic infrastructure.”
Apple made concessions to developers in the United States last week, announcing that it would loosen some restrictions on how iPhone app developers could communicate with customers outside of the App Store.
“Developers can use communications, such as email, to share information about payment methods outside of their iOS app,” the company said on Thursday, as long as users consent to receiving the emails and have the option to opt out.
The change allows developers to collect payments from their customers without having to pay Apple’s in-app purchase commission. It was included in a proposed settlement in a class-action lawsuit filed in 2019.
As lawmakers and regulators focus on Apple and Google’s dominance over the iOS and Android operating systems, their app store fees have become increasingly scrutinized.
A bipartisan bill introduced in the US Senate earlier this month sought to prohibit app developers from imposing restrictions on their work.
The iPhone maker’s commissions are currently the subject of several legal battles, including a separate lawsuit filed by Epic Games, one of Apple’s biggest developers.
Apple has taken steps to reach out to developers, announcing last November that it would reduce developer fees from 30% to 15% if they made less than $1 million in the previous year.