South Korea’s crackdown on the in-app billing processes that force companies like Apple and Google to open up their app stores to alternative forms of payment systems may be the first formal development with such restrictions on the tech companies but the decision may act as a precedent for other jurisdictions, including India, where now a complaint has been filed with the antitrust regulator against Apple for App Store policies.
South Korea Tuesday became the first jurisdiction to legally ban the monopolies that Apple and Google hold over payments on in-app purchases. The country’s National Assembly Tuesday passed amendments to the Telecommunications Business Act — nicknamed ‘Anti-Google law’ — in a landmark decision that could globally change how platform companies like Google and Apple force developers to use their billing systems for in-app purchases.
The final vote in the South Korean National Assembly was 180 in favour out of 188 attending to pass the amendments, Reuters reported. In their statements to the news agency, while Google said that its current model keeps device costs low for consumers by keeping Android free, Apple said that App Store purchases will decrease as a result of this.
The app ecosystem is a booming revenue stream for platforms such as Apple and Google, which run the most prominent app stores and mandate that all in-app payments go through their own processing system, on which they charge commissions ranging between 15% and 30%.
In some jurisdictions, their administrations have taken upon themselves to look into these practices, while in some places the app developers have been vocal against how these companies operate, including a major class-action lawsuit in the US against Apple where a settlement agreement has been proposed. This agreement includes a $100 million payout and Apple changing its App Store policies to allow developers to communicate to their users via email about payment options outside the App Store. Sectoral experts have argued that while this change may be potentially important for developers, Apple stops short of what the developers have been actually demanding — an alternative payments system, and a way to communicate this to the users from within the app.
Wednesday, Apple announced that it was rolling out even more tweaks to the App Store that would close an investigation by the Japan Fair Trade Commission (JFTC). Under this update, Apple would allow developers of “reader” apps to include an in-app link to their website for users to set up or manage an account. “While the agreement was made with the JFTC, Apple will apply this change globally to all reader apps on the store. Reader apps provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video,” Apple said, adding that the updates will be rolled out by early 2022. Reader apps are services like Netflix, Spotify, Amazon Kindle, etc.
Last year, Epic Games, developer of popular video game Fortnite, intentionally broke Apple’s rules and established its own payment processing system on Fortnite iPhone app. This led to Apple taking down the game from the App Store and in turn Epic Games filed a lawsuit against Apple terming the company anti-competitive. The case was filed in the US District Court of Northern California. Even in the European Union, Swedish music streaming app Spotify had filed a complaint against Apple for imposing unfair policies — and the bloc’s regulator has accused Apple of violating its antitrust law as a result of this.
In addition to the investigation by the European Commission into Apple’s practices Europe has also introduced the Digital Markets Act, as per which large tech companies could attract massive fines for offenses that include giving priority to their own services and products over smaller competitors.
US senators, too, have introduced a new bipartisan bill that is looking to ban restrictions by Apple and Google on app developers. The proposed legislation by Senators Richard Blumenthal, Amy Klobuchar and Marsha Blackburn would outlaw certain contractual obligations that app developers say they are forced to accept from major app stores in order to reach consumers.
Earlier this year, Google said it will reduce its service fee for Play Store, which it charges app developers, to 15% for the first one million (USD) of revenue. The 15% charge applies to all app developers that offer in-app products or subscriptions or goods and will be applied for each year. For instance, a gaming app, which offers items for in-app purchase, will have to pay 15% revenue to Google for the first $1 million revenue it makes. For developers who make more than this amount, the service fee will be at 30%.
But the announcement hadn’t come before the company faced considerable criticism from Indian developers when it announced plans to charge developers 30 percent fee from the Play Store for any kinds of digital goods being sold within the app. It also wanted developers to implement the Play Store billing system to facilitate these in-app transactions. Founder CEO of India’s largest payments app Paytm Vijay Shekhar Sharma has repeatedly termed this fee as a ‘tax’ and cited need for developers in India to have their own app store. Sharma has also called for the government and the regulators to step in to resolve this issue.
The Alliance of Digital India Foundation (ADIF), which has also often raised the issue with Apple’s and Google’s commissions on app payments, welcomed South Korea’s decision. “Any legislation on the matter anywhere in the world will set a precedent for other nations to adopt and build on, and we hope this will now expedite similar legislations by other governments as well. The matter has always been about the anti-competitive practices of forcing a payment option as well as of forcing out other payment providers. We exhort the Apples and Googles of the world to uphold the spirit of the legislation and adopt fairer policies going forward. Unfair markets and anti-competitive practices stifle innovation and adversely impact market outcomes in the long run,” said Sijo Kuruvilla George, executive director, ADIF.
Mails sent to Apple and the Competition Commission of India did not elicit any response.