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South Korea passes law targeting Google and Apple’s dominance in app payments

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The amended telecommunications business law was passed by the country’s National Assembly on Tuesday, with the support of President Moon Jae-in’s party. It will become law once President Moon signs it.

Under the new law, developers will be able to select the payment systems that will be used to process purchases from the app, meaning they will be able to avoid the heavy charges imposed by the two longtime leaders.

Apple commissions, for example, up to 30% in some purchases made through the company’s platform, and developers say yes little choice but to comply, as Apple does not allow customers to download apps from any source other than the company’s official store.

South Korea’s bill prohibits app store operators from “making unfair use of their market position to force a certain form of payment” on companies. Once enacted, violators could receive a fine of up to 3% of their annual sales, in addition to up to 300 million Korean won ($ 257,000) in penalties.

The legislation has been dubbed the “anti-Google law” in the country, as politicians argue that the Silicon Valley giant has taken advantage of his long-lasting domination and reduced developers.

In July, South Korean lawmaker Jun Hye-sook urged parliament to move the bill forward quickly, calling it “a law that prevents Google from dominating [its position] above others “and a measure that” would protect IT developers from the platforms that dominate them. “

Both companies have responded, arguing that the law could harm app developers and consumers in the long run.

In a statement Tuesday, a Google spokesman said 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.”

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“Google Play provides much more than payment processing, and our service fee helps keep Android free, providing developers with the tools and global platform to reach billions of consumers around the world. It’s a model that it keeps device costs low for consumers and allows both platforms and developers to be financially successful, ”the representative added.

“And just as developers cost money to build an app, it costs us money to create and maintain an operating system and an app store.”

According to Apple, there are more than 482,000 registered app developers in South Korea and they have earned more than 8.55 trillion Korean won ($ 7.3 billion) so far with the iPhone maker.

“We believe that user confidence in App Store purchases will decrease as a result of this proposal, which will result in fewer opportunities for [them]”He said in a statement on Monday, before the bill was approved. The company forwarded that statement to CNN Business on Wednesday.

According to the most recent government study available, Google (GOOGL) i apple (AAPL) earned about $ 5 billion and nearly $ 2 billion, respectively, in each of its app stores in South Korea in 2019.
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However, South Korean Communications Commission chairman Han Sang-hyuk argues that new rules are needed as the platforms continue to exert their “influence”.

“These app market operators are gaining controlling power in the market. It becomes necessary to regulate them,” he told lawmakers last week.

South Korea is not the only country in the region examining the two companies. On Monday, Australian Treasurer Josh Frydenberg called for new regulations on digital payments.

“Digital wallets like 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 configurations,” he wrote in a op. ed a la Australian Financial Review.

“If we do nothing to reform the framework, it will be Silicon Valley that will determine the future of a critical piece of our economic infrastructure.”

Mounting pressure

Last week, Apple announced concessions to U.S. developers, saying it would relax some restrictions on how iPhone app makers could communicate with customers outside of their App Store.

On Thursday, the company said that “developers can use communications, such as email, to share information about payment methods outside of their iOS app,” as long as users consent to the receipt of those emails and have the right not to participate.

The move gives developers more leeway to collect payments from their customers without having to pay Apple’s commission for in-app purchases. It emerged as part of a proposed settlement in a class action lawsuit filed in 2019.

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Apple and Google app store rates have come under increasing scrutiny as lawmakers and regulators have narrowed their dominance over iOS and Android operating systems.

Earlier this month, a bipartisan U.S. Senate bill he also targeted both players trying to ban restrictions on app developers.
Currently, the iPhone manufacturer’s commissions are the focus of several legal conflicts, including a separate demand from one of Apple’s biggest developers: Epic Games.

Apple has taken steps to contact developers, announcing last November that it would reduce the fees it charged them from 30% to 15% if the developer earned less than $ 1 million the previous year.

– Gawon Bae, Yoonjung Seo, Rishi Iyengar, Brian Fung and Lauren Lau contributed to this report.

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