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Tech

Google’s in-app billing system ignites power play among Korean regulators

Google and Apple are at the center of a power game between the country’s media regulator and antitrust body

By Aug 09, 2021 (Gmt+09:00)

3 Min read

Korea Communications Commission (KCC) is a government body that regulates the media industry.
Korea Communications Commission (KCC) is a government body that regulates the media industry.

South Korea’s attempt to prohibit global app store operators from forcing certain in-app payment schemes has hit a bumpy road due to power play between two key regulators, the Korea Fair Trade Commission (KFTC) and the Korea Communications Commission (KCC).

Legislative experts say that the internal feud within the government may delay the relevant bill’s approval at the National Assembly.

Last week on Aug. 5, the media regulator KCC made an open argument that the app market operators such as Google Inc. and Apple Inc. should be regulated under its control.

“We believe that we have the authority to regulate the overall unfair business practices of the app market players such as Google,” said the KCC on Aug. 5 at a media roundtable held to outline the key proposed revisions of the country’s Telecommunications Business Act (TBA).

Many interpreted such claim to be a direct challenge to the position held by South Korea’s antitrust regulator KFTC, which has been opposing the expansion of the KCC’s regulatory rights.

The proposed revision to the TBA was mainly driven by the political and industry consensus that interventions were needed to ban the app store operators like Google from forcing unfair in-app payment schemes to the app developers.

Some of the unfair practices pointed out by the regulators and the app developers include forcing the use of Google’s and Apple’s payment system when selling digital products and services on Google Play and Apple Store, as well as taking 30% of the sales as commissions.

The revised bill prohibits the app market operators from abusing their superior bargaining position to force certain payment schemes on the app developers. The bill, if voted into law, will deprive Google of additional income of about 600 billion won ($520 million) per year from South Korea, where it is estimated to have earned 1.5 trillion won ($1.3 billion) last year in commissions from app store sales.

The KCC and the KFTC are fully aligned in that KCC has the authority to investigate and penalize the app store operators regarding the payment system. However, they have sharp disagreements in other two key areas: restricting the app developers from registering their apps to other app stores, and other unfair discriminations.

The KFTC is raising a strong voice regarding the two areas. The antitrust regulator is claiming that these two actions fall under its traditional turf of “unfair business practices.” The regulator also says that if the KCC can intervene in these areas, their scope of regulation may overlap.

The battle of the agencies is not expected to end anytime soon, with the KCC refuting the antitrust regulator’s claims in detail.

“The app market is a highly specialized market, which requires relevant expertise. KCC, with its deep expertise in the areas of information and communication, should regulate it,” said the KCC.

The media regulator also added that it is the Financial Services Commission (FSC), not the KFTC, that regulates unfair practices in the capital markets.

The KFTC expressed regret regarding the KCC’s open claims, highlighting that the disagreements between the public bodies should be discussed internally within the government rather than through an open debate involving the media.

“I believe it’s more desirable for government bodies in disagreement to engage in bilateral discussions than to make public claims in a unilateral manner,” said a KTFC official.

Write to Min-jun Suh at morandol@hankyung.com
Daniel Cho edited this article.
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