South Korea recently becomes the first jurisdiction to legally ban the monopolies that Apple and Google hold over payments on in-app purchases. The country’s National Assembly passed amendments to the ‘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.
Taking a cue from this, many top Indian digital firms are gearing up to petition the government to draw up similar rules to prevent Google and Apple from insisting on the use of their proprietary payment systems.
The Alliance of Digital India Foundation (ADIF), which was formed earlier this year to protest Google’s decision to impose a hefty commission for in-app purchases on its Play Store and claims to have 350 members, now believes it will re-engage with the new leadership at the ministry of electronics and IT, top executives told media. Reportedly, India also filed a complaint with the antitrust regulator against Apple for App Store policies.
The final vote in the South Korean National Assembly was 180 in favor 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%.
The Korea Internet Corporations Association, an industry lobby group that includes South Korea’s largest internet companies including search and online shopping giant Naver, welcomed the passage of the bill, which it said would create healthier competition and give users a wider variety of content at cheaper prices.
“Google Play provides far more than payment processing, and our service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world,” it said in a statement stating that it is considering how to comply with the legislation.
“And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store. We’ll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store, and we will share more in the coming weeks,” it said.
Meanwhile, regulators in Europe, China and some other markets worry about the dominance of Apple, Google and other industry leaders in payments, online advertising and other fields. Chinese regulators have fined some companies for anti-monopoly violations, while other governments are wrestling with how best to keep markets competitive.
Australia’s Competition and Consumer Commission is also said to be considering regulations for the digital payments systems of Apple, Google and WeChat.
In the U.S., Apple last week announced that it had agreed to let developers of iPhone apps send emails to users about cheaper ways to pay for digital subscriptions and media.
The concession was part of a preliminary settlement of a lawsuit filed on behalf of iPhone app developers in the U.S. It also addresses an issue raised by a federal court judge who is expected to rule soon on a separate case brought by Epic Games, maker of the popular video game Fortnite.
Sijo Kuruvilla, Executive Director of the Alliance of Digital India Foundation (ADIF), a startup alliance, welcomed the move by tweeting “Any legislation on the matter anywhere in the world will set a precedent for other nations to adopt and build on. To fair markets.
Commenting on the developments from the US, the Coalition for App Fairness (CAF), an industry association of apps, reacted positively, terming it a momentous step forward, with Meghan DiMuzio, the Executive Director of CAF saying, “South Korean lawmakers and President Moon Jae-in have made history and are setting an example for the rest of the world. This law will hold app store gatekeepers accountable for their harmful and anti-competitive practices. The Coalition for App Fairness hopes U.S. and European lawmakers follow South Korea’s lead and continue their important work to level the playing field for all app developers and users.”
Match Group that operates the largest portfolio of dating and social discovery app Tinder and OKCupid, said in their respective statement that the legislation “… marks a monumental step in the fight for a fair app ecosystem…” and “…will put an end to mandatory IAP in South Korea, which will allow innovation, consumer choice, and competition to thrive in this market…” The statement adds, “We look forward to the bill being quickly signed into law and implore legislative bodies around the globe to take similar measures to protect their citizens and businesses from monopolistic gatekeepers that are restricting the Internet.”
It’s still early days in the app ecosystem and the implications of the move in the Indian market (and other markets) remain to be seen. Moreover, Google Play Store and App Store will continue to exist, but experts believe a healthy market competition will make the digital payment system more robust and fair.