Google and Apple’s app stores are hit by South Korea’s new law

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South Korea passed a law that allows mobile phone users to pay software developers directly for their apps, and South Korea has become the first country in the world to attack the lucrative commissions charged by Google and Apple’s app stores.

Despite a lot of lobbying by the tech giants, the South Korean Congress passed the so-called “Anti-Google Act” on Tuesday, which will become law once President Moon Jae-in signs it.

The law prohibits Google, Apple, and other app store operators from requiring users to use their in-app purchase systems to pay for apps.

It also prohibits the app store from delaying the approval of apps or “inappropriately” removing them from the app store, as well as insisting on exclusivity with app developers. If they do not comply with the regulations, the app store may be fined up to 3% of their revenue in South Korea.

Currently, Apple and Google charge up to 30% commissions for selling digital goods and in-app purchases (such as subscriptions) through their app stores.

With growing concerns about Apple and Google’s monopoly on app distribution, the legislation may be subject to close scrutiny by other regulatory agencies around the world.

Tim Sweeney, the head of Epic Games, is suing Google and Apple, accusing them of anti-competitive behavior. Call The passage of this law is “an important milestone in the 45-year history of personal computing.”

David Heinemeier Hansson, Basecamp’s chief technology officer, called the bill “the first real big crack in the monopoly app store dam.”

Hansen played an important role in trying to pass similar legislation in Arizona and North Dakota, but to no avail. He said that he hopes South Korea can become a catalyst for other countries to take action. “South Korea will show that the world will not collapse, and all Apple’s arguments will be refuted by reality,” he said.

South Korea’s regulation was triggered by Google’s announcement last year that it would force its payment system to be used for non-gaming applications. The move triggered strong protests from software developers, claiming that it abused its dominant market position.

The app store has already brought huge profits to Apple and Google, so any action by global regulators to weaken its position as the gatekeeper of the mobile app economy could have a significant impact on its revenue.

Last weekend, several U.S. Attorneys General’s lawsuit against Google revealed that the company received 11.2 billion U.S. dollars in revenue and 7 billion U.S. dollars in operating income from the Play Store in 2019, including in-app payments and advertising. market.

This shows that the Play Store accounted for up to 20% of Alphabet’s operating revenue in 2019, although it contributed less than 10% of Google’s parent company’s total revenue.

The pending bills in the European Union and the U.S. Senate seek to ban app store commissions, while Brussels and Washington have also targeted Apple with Google, Respectively exceed the fees charged to application developers.

Wi Jong-hyun, a professor of business strategy at Seoul Central University, said that South Korean laws “will become an important precedent for the United States and European countries to strengthen their defenses against Apple and Google.” “Especially European countries, they are disgusted with US technology companies and are likely to be introduced. Similar bills may use this to put pressure on them.”

While Apple was awaiting a ruling, the law was passed Landmark litigation Fight against popular game maker Epic Games Fort nightAfter the game deliberately bypassed Apple’s payment system, it was removed from the App Store with a lower-priced alternative, which did not provide commissions to the iPhone manufacturer.

Last week, in the face of increasing legal and regulatory pressures due to suspected anti-competitive behavior, Apple Relax restrictions Somehow allow certain apps to advertise cheaper alternatives outside of the in-app payment mechanism.

Google said this year that it will halve the commission for the first $1 million developers earned through its app store within a year to 15%.Apple announced a Similar move.

The Korea Mobile Internet Business Association estimates that the country’s mobile application and content sales reached 7.5 billion won (US$6.4 billion) last year, and it is expected to increase by more than 20% in 2021. About 67% of sales last year were through Google’s Android operating system, while 22% was through Apple’s App Store.

Apple said last week that the bill would damage users’ trust in app store purchases, leading to reduced opportunities for local developers. Google said that the Play Store’s “Service charge Help keep Android free and provide developers with tools and a global platform to access billions of consumers around the world. It added that it will “reflect how to comply with the law [ . . . ] And share more content in the coming weeks. “

Additional reporting by Patrick McGee in San Francisco and Tim Bradshaw in London

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