S.Korea curbs in-app payment plans by Google, Apple

The South Korean parliament has passed the world's first bill to ban
Google, Apple Inc. and other app store operators from forcing certain payment schemes like Google's in-app billing system on app developers.

Among the 188 members of parliament who attended the plenary session on Tuesday, 180 MPs voted for the revisions of the country’s Telecommunications Business Act (TBA). The revised law includes the bill to prohibit app store operators from requiring app developers to process the payments of digital content and services sold on their app stores through the operators' independent payment schemes. 

The bill was proposed by the ruling Democratic Party in September 2020, shortly after Google announced the full-scale adoption of its in-app payment system for all digital content listed on the Google Play Store from the start of this year.

In the face of strong resistance, however, Google had delayed the plan twice to eventually March of next year, as well as excluding small-sized app developers from the rules. Up to now, its mandatory in-app billing scheme had been limited to game developers.

The in-app payment systems of Google and Apple take a 15-30% commission from developers.

According to a survey of South Korean developers conducted by the Ministry of Science and ICT in 2020, they expected to pay between 88.5 billion and 156.8 billion won ($76 million-$135 million) in additional commissions annually to Google, if the Big Tech company enforced its own in-app billing system on all developers.

The legislation against dominant app store operators is expected to prompt other countries to follow suit.

The US state governments are working on similar bills. Earlier last month, US senators proposed a bill to bar big app stores from requiring app providers to use their app stores and payment systems. 

The Korea Internet Corporations Association Chairman Park Sung-ho welcomed the passage of the revised bill. He said the new legislation would protect the rights of creators and developers and contribute to building a fair web ecosystem where users can enjoy various content at reasonable prices.

Last week, Apple announced a number of changes to its app store operation to resolve a class-action suit brought forward by US developers. They included allowing the developers to use payment methods other than Apple's and the purchases taking place outside of its system will be exempt from a commission. 

Meanwhile, the ruling Democratic Party removed the clauses from the revised bill, in dispute between the antitrust Korea Fair Trade Commission (FTC) and Korea Communications Commission (KCC), a government agency, in order to accelerate the legislation against the dominant app store operators.

"Our top priority was on banning the mandatory introduction of in-app payment systems, so we put aside other issues in dispute, accepting the FTC's demand," a ruling party member said.

Write to Min-ki Koo at kook@hankyung.com
Yeonhee Kim edited this article.