By: Jack Taylor
From their onset, large tech companies have been widely criticized for their ability to monopolize the app store industry and in turn, limit the ability of smaller firms to penetrate the market. One example that clearly illustrates this point is the practice where app store operators require app developers to use their own payment systems when their applications are downloaded onto a personal device, such as a smartphone. This policy has provided a major revenue source for companies like Google and Apple as they usually charge a commission fee as high as 30% per download. Recently, South Korea sent shockwaves throughout the global tech industry when it passed a controversial law banning big tech companies–like Google and Apple–from partaking in this practice.
Along with banning app store operators from forcing developers to use their own payment systems, the bill directs users to pay for their downloads via alternative independent platforms. In the case where app store operators fail to comply with these new requirements, the bill places a fine of up to 3% on all revenues earned from the South Korean market. Proponents of the bill, mainly app developers, claim the bill is a major step toward fairness in the app download ecosystem. In recent years, several app developers such as Epic Games, Spotify, and Tinder have clashed with Google and Apple over their attempts to implement their own payment systems. Epic Games in particular has reason to be upset, as Apple alone has collected $100 million in revenue from downloads of Epic’s mobile version of its popular game Fortnite. As a result, Epic Games and other companies are applauding the new South Korean bill and are advocating for similar legislation around the world, especially in Europe and the United States.
However, the bill does not come without its own criticisms as Google and Apple have been quick to point them out. Apple responded that the bill will “put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, [and] make it difficult to manage their purchases and features.” A Google spokesperson added that the commission fee “helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world.”
By passing this bill, the South Korean government has made the strategic decision to strengthen competition in the app store payment industry at the expense of companies like Google and Apple. In the long term, the bill will likely be successful in this endeavor as it will grant app developers more autonomy to control the processes of how their consumers interact with their products. Consumers may also benefit from this legislation. In theory, app developers will be able to reduce their download prices as they will not have to account for the high commission payments that Google and Apple charge. The criticisms that Google and Apple place on the legislation are unpersuasive when weighed against these benefits. Many of the alternative payment methods that the bill will advance are run by established companies that have procedures in place to protect against fraud and other privacy violations.
On the global stage, with the passage of this legislation South Korea has laid the framework for similar regulations around the world. Although the Asian nation possesses a powerful and dynamic economy, Google and Apple draw even more revenues from countries across Europe and North America, especially from the United States. Some American lawmakers–from both sides of the aisle–have called for the implementation of similar legislation. The South Korean bill will provide a useful test case for other countries as they attempt to regulate big tech and its monopolistic policies.
Although its effects remain to be fully developed, in passing this legislation, South Korea has placed itself in a leadership role in the global effort to limit big tech’s enormous power in the app store industry. The bill puts companies like Google and Apple in a tough position as they will lose a substantial source of revenue. However, the potential benefits to app developers and consumers makes similar legislation across the globe more likely. To conclude, one thing is clear, the bill demonstrates that the immense power and influence big tech companies have amassed over the years is not absolute.
Student Bio: Jack Taylor is a second-year law student at Suffolk University Law School. He is a staffer on the Journal of High Technology Law. Jack received a Bachelor of Arts Degree in Business Management from Merrimack College.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
