S.Korea lawmaker says Apple, Google not doing enough to comply with app store law

3 minute read

A 3D printed Google logo is placed on the Apple Macbook in this illustration taken April 12, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

Register now for FREE unlimited access to Reuters.com

SEOUL, Nov 16 (Reuters) - Apple Inc (AAPL.O) and Alphabet's (GOOGL.O) Google are not doing enough to comply with a South Korean law that bars dominant app store operators from forcing app developers to use their payment systems, a lawmaker who spearheaded the amendment told Reuters.

South Korea, the first country to impose legislation curbing the tech companies' payment policies, is expected to make public the initial details of what it takes to comply with the law on Wednesday, an official at the Korea Communications Commission (KCC) said.

It amended the Telecommunication Business Act in August to try to curb the tech majors' market dominance and stop the big app store operators charging commissions on in-app purchases.

Register now for FREE unlimited access to Reuters.com

The law went into effect in September but details of what would constitute compliance are being drafted by the KCC in an enforcement ordinance.

Apple had told the South Korean government that it was already complying and did not need to change its app store policy. Google said it planned to allow third-party payment systems in South Korea, but will only reduce its service charge to developers by 4 percentage points when users choose an alternative billing system.

The tech companies charge developers as much as 30% of their sales in in-app transactions.

"Frankly, we are not satisfied... Apple's claim that it's already complying is nonsensical," lawmaker Jo Seoung-lae who spearheaded the amendment said.

"Excessive fees take away developers' chances for innovation ... parliament is to be closely informed as the government drafts detailed regulations to make sure there is accountability," Jo said.

Apple and Google did not immediately respond to requests for comment.

FIRST IN WORLD

"This is the first legislation worldwide with the chance to transform the market from a duopoly with Apple and Google," Tim Sweeney, CEO of "Fortnite" creator Epic Games and a vocal Apple critic told Reuters.

Last year, "Fortnite" was kicked off Apple and Google's app stores after Epic introduced a new payment system.

But even if Apple adopts a similar position to Google by imposing a fee while allowing outside payments, Epic Games would not accept the stance, as Apple and Google charging any fee or imposing control over competing payment services "ruins the point of competition", he added.

The KCC is drafting "finely woven" regulatory details for the ordinance that will be reported to a parliamentary committee on Wednesday and put into practice by March next year, KCC Vice Chairman Kim Hyun told a conference on app ecosystem fairness on Tuesday.

However, it is not clear what the penalties will be if the rules are breached.

An early draft of the enforcement ordinance seen by Reuters details a fine of up to "2% of revenue" as penalty for an infraction of the law by app market operators.

"We've seen in other jurisdictions that these monetary penalties actually don't deter companies like Apple and Google because to them, it's a drop in the bucket," said Meghan DiMuzio, executive director of advisory group Coalition for App Fairness.

Register now for FREE unlimited access to Reuters.com
Reporting by Joyce Lee; Editing by Jacqueline Wong and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.