Apple and Google will be forced to allow app developers to use alternative payment systems under a new law passed by South Korea’s parliament Tuesday, threatening the companies’ lucrative commissions that are facing antitrust scrutiny around the world — including in the US.
TheSouth Korean bill — which is the first of its kind to pass in a major economy and is expected to be signed into law by President Moon Jae-in — marks a hard-won victory for developers like Fortnite maker Epic Games who have argued for years that Apple and Google’s payments systems are anti-competitive.
And while South Korea is far from Apple and Google’s most important market, some analysts say the country’s new law will motivate antitrust regulators and politicians elsewhere in their efforts to reign in the companies’ payments fees, putting billions of dollars in revenue at risk.
“This speaks to more regulatory scrutiny for Big Tech globally going forward both in the Beltway and Brussels,” Wedbush Securities managing director Dan Ives told The Post. “It could have a ripple impact.”
Currently, Apple and Google require app developers around the world who distribute their apps through the companies’ stores to use the tech giants’ systems for in-app payments.
These systems charge commissions of up to 30 percent and bring in billions of dollars annually for both tech giants. They are at the center of antitrust fights in the US and Europe, as well as the closely-watched legal battle between Apple and Fortnite developer Epic Games.
Under the new South Korean law, called the “anti-Google law,” large app store operators will now be banned from forcing developers to use any particular payments system — all but guaranteeing that many will flee Apple and Google’s payments systems for lower-priced alternatives.
If such rules were adopted on a wider scale, they would leave gaping holes in Apple and Google’s balance sheets.
Services revenue, which includes app store payment fees, generated $53.8 billion for Apple last year, making up about 20 percent of the company’s total global revenue, according to the Wall Street Journal. Google’s app store revenue store revenue, meanwhile, accounted for $21.7 billion, or about 12 percent of the company’s total revenue.
In a statement to The Post, Apple slammed the South Korean law, arguing that letting app developers use non-Apple payment systems would put users in danger.
“The Telecommunications Business Act will put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases, and features like ‘Ask to Buy’ and Parental Controls will become less effective,” the company said.
Google did not immediately reply to a request for comment but told Reuters that it would “reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store.”
Meanwhile, developers that rely on the companies’ app stores to distribute their products praised the South Korean law.
A spokesperson for Match Group, which owns the popular dating app Tinder, lauded the bill as a “monumental step in the fight for a fair app ecosystem.”
“The legislation passed today by the Assembly will put an end to mandatory in-app purchase in South Korea, which will allow innovation, consumer choice, and competition to thrive in this market,” the spokesperson said.
The legislation easily passed in South Korea’s parliament with the votes of 180 out of 188 lawmakers in attendance. Companies that do not comply with the bill could be fined up to 3 percent of all their South Korea revenue.
In the US, bipartisan lawmakers are pushing bills that are similar to the South Korean measure.
A pair of bills introduced in the US House and Senate earlier in August would bar Apple and Google from requiring app developers to use their payments systems.
“For far too long, companies like Google and Apple have had a stranglehold on app developers who are forced to take whatever terms these monopolists set in order to reach their customers,” said Republican Rep. Ken Buck of Colorado, who introduced the House version of the bill alongside Democratic Rep. Hank Johnson of Georgia.
The Senate version of the law was introduced by Democratic Sens. Richard Blumenthal of Connecticut and Amy Klobuchar of Minnesota, as well as Republican Sen. Marsha Blackburn of Tennessee.
Across the Atlantic, the European Union said last year that it is investigating whether Apple and Google’s app store payments policies unfairly squash competition.
With Post wires
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Apple and Google to lose lucrative payment fees under new South Korean law - New York Post
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