App stores: South Korea breaks Apple and Google’s payment monopoly

By: MRT Desk

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App stores: South Korea breaks Apple and Google's payment monopoly

For the first time, a law threatens Apple and Google’s multi-billion dollar app store business models. On Tuesday, the South Korean National Assembly approved an amended version of the law for telecommunications transactions, against which the two US corporations were storming until the very end: It overturns Google and Apple’s mandatory requirement for the use of the in-house payment interface in apps via the two platform operators when selling digital content withhold a commission of up to 30 percent.

The law is intended to prohibit operators of large app stores in South Korea from forcing the integration of their in-app payment interfaces. Developers and app providers are therefore free to integrate their own payment options in apps. The amended version of the law also prohibits app store operators from unfairly delaying the approval of apps or from throwing them out, as the Wall Street Journal reported. President Moon Jae-in has yet to sign the law.

The sale of digital content via other payment interfaces has always been prohibited in Apple’s App Store, but in Google’s Play Store a similar requirement could be circumvented for a long time by using apps (except games).

Last September, Google banned such workarounds, which also led to considerable annoyance among app providers in South Korea and ultimately also to the change in the law that has now been initiated. The draft law was originally introduced by local media as an “anti-Google law”. Violation can result in penalties of up to 3 percent of the company’s annual local sales.

Google had warned in advance that the “hasty procedure does not allow an analysis of the negative effects on end customers and app developers in South Korea”. Apple sees the opening of the payment interface as a threat to security and data protection and an associated loss of trust that could lead to fewer in-app sales.

The South Korean law could have a signal effect for regulatory authorities in other countries that are already examining Apple and Google’s app specifications – including the EU Commission. In the United States, Fortnite maker Epic Games integrated a direct payment option into its game last year to provoke an expulsion from the App Store and Google Play and immediately sued both companies. A first verdict in the Epic vs. Apple case is expected shortly.

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