Apple, Google may face $50.4 mn fine over in-app billing in Korea

Apple Inc. and Alphabet Inc.’s Google may be fined up to 68 billion won ($50.4 million) in South Korea for breaking the country’s in-app payment rule, but the fine is being criticized for just being a slap on the wrist given their dominant app market positions.

The Korea Communications Commission (KCC) said in a statement on Friday that it has concluded Apple and Google have breached the country’s telecommunications act by forcing app developers to use their payment systems at App Store and Google Play Store and unfairly delaying app reviews in an apparent abuse of their market dominance.

Upon its finding, the Korean communications regulator on the same day notified Google and Apple of corrective action and warned of their combined fine of up to 68 billion won – 47.5 billion won for Google and 20.5 billion won for Apple, which will be finalized after KCC hears out the companies’ response to its decision and other review processes, it said.

The decision comes more than a year after the Korean telecommunications watchdog began its investigation into Apple and Google’s possible violation of the country’s telecommunications act in August last year.

In September 2021, Korea became the first country in the world to bar app store operators from forcing software developers to use their payment systems after passing a revision to its Telecommunication Business Act.

Under the law, app developers are allowed to use third-party payment options for their in-app purchases, and Apple and Google agreed to abide by the law.

The two dominant app store operators previously required app developers to use their in-app billing systems, from which they received a 30% commission, and the new law aims to lower the US tech giants’ fees for local app developers.

Apple and Google were, however, accused of bending the rule with new guidelines for in-app purchases mandating certain payment methods with a separate 26% fee on app developers for using external payment systems.

Combined with separate commissions to credit card issuers, their new fees for external payment options are on par with or higher than their previous 30% in-app billing fee, causing protests from app developers.

This prompted KCC’s probe into their in-app purchase policies last year.

TOKEN PUNISHMENT

The Korean communication regulator on Friday condemned Apple and Google’s in-app payment practices, saying that they present grave concerns, as they could undermine the Korean telecommunications law’s purpose of promoting fair competition.

It also issued Apple a separate corrective order for charging extra fees to Korean app developers, which is a “discriminatory” practice, KCC said.

But not everyone is pleased with the telecommunications regulator’s latest measures, saying that the fine is not high enough given their monopolistic position in the app store market.

Google disclosed that it earned 344.9 billion won in revenue from its Korean operations last year but considering that its app store fees were not tallied as sales, the US tech giant is estimated to have raked in up to 6.4 trillion won in revenue from its Korean business last year.

Considering that Google has already hiked its commissions, the KCC’s fine is “a slap on the wrist,” an unnamed app developer also complained.  

Apple and Google are under scrutiny over their monopoly across the world.

The EU last year passed the Digital Markets Act to govern the world’s largest technology companies. Under the law, app store operators are prohibited from requiring developers to use a single payment method, similar to Korea’s Telecommunications Act.

In the US, Google and Apple are also facing multiple lawsuits for abusing their app market dominance, narrowing consumers’ choice of app stores.

Write to Seung-Woo Lee at leeswoo@hankyung.com

Sookyung Seo edited this article.