THE South Korean Parliament on Tuesday passed a bill that was expected to rein in the control that Apple and Google have over payment systems in their app stores.
The legislation is awaiting the signature of the President of South Korea, Moon Jae-in.
The bill is the first major legislation in the world specifically to target in-app markets and payment systems, even as market giants Apple and Google are facing global criticism for mandating the in-app use of their proprietary payment systems, and charging commissions of up to 30% on the sale of apps and subscriptions through the app stores. Developers across the world have questioned these moves, and have demanded the freedom to choose alternative methods of payment and distribution, such as via third-party app stores installed on the iOS or Android operating systems.
On Tuesday, South Korean legislators voted to approve amendments to their Telecommunications Business Act, with the intent of promoting fair competition in the app market industry. The bill prohibits app market business operators from taking advantage of their dominant status to force developers to use a specific payment system. It also prohibits app store service providers from engaging in activities such as preventing apps from registering on their stores, inappropriately delaying app registration and unfairly deleting apps from the app market. The bill will also enable app developers to avoid hefty commissions, and thus reduce costs both for developers and end-consumers.
In addition, the bill empowers South Korea’s Minister of Science/Information Communication Technology and the Korea Communications Commission to conduct an inquiry into the operations of the app market, to help the government more actively identify app-market related disputes and prevent acts that hinder fair competition and consumer interests.
The move comes as regulators worldwide have turned their attention to app stores and the fees they are charging developers. In the US, three senators introduced a bipartisan bill in August to promote fair competition by regulating in-app purchases and preventing dominant players from excluding third-party app stores from their operating systems. In India, the Competition Commission has been investigating Google for potential abuses of its dominant position in the market to promote its proprietary payment services.
Apple and Google have both publicly opposed attempts to regulate their business practices through legislation.
Meanwhile, several industry players have reacted positively to the developments in South Korea.
Rakesh Deshmukh, the co-founder and chief executive of Indus App Bazaar, India’s largest third-party app store, shared his support for the move. He said that “policy needs to support innovation. We hope that Google enhances developer choice by allowing the listing of app distribution platforms like Indus App Bazaar on the Play Store. That would help us to formulate a B2C (business-to-consumer) journey. I hope that app stores like ourselves are allowed a fair play environment on Google Play and Android. Furthermore, in India, we need to look into developer choice for app distribution and payment gateways from a policy perspective.”
Sijo Kuruvilla, the executive director of the Alliance of Digital India Foundation, a start-up alliance, welcomed the move by tweeting: “Any legislation on the matter anywhere in the world will set a precedent for other nations to adopt and build on. To fair markets.”
Commenting on the developments from the US, the Coalition for App Fairness (CAF), an industry association of apps, reacted positively, terming it a momentous step forward, with Meghan DiMuzio, the executive director of the CAF saying, “South Korean lawmakers and President Moon Jae-in have made history and are setting an example for the rest of the world. This law will hold app store gatekeepers accountable for their harmful and anti-competitive practices. The CAF hopes US and European lawmakers follow South Korea’s lead and continue their important work to level the playing field for all app developers and users.”
Match Group, which operates the largest portfolio of dating and social discovery apps such as Tinder and OKCupid, thanked South Korean legislators in a statement, also saying that the legislation “ … marks a monumental step in the fight for a fair app ecosystem … ” and “ … will put an end to mandatory in-app purchases in South Korea, which will allow innovation, consumer choice, and competition to thrive in this market … ” The statement adds: “We look forward to the bill being quickly signed into law, and implore legislative bodies around the globe to take similar measures to protect their citizens and businesses from monopolistic gatekeepers that are restricting the internet.”
Meanwhile, many Indian players have noted these developments with interest, more so in context of opposition to Google’s “app tax” on in-app purchases and its impact on local players.
NFN Labs, the developers of popular apps such as Screeny and Vookmark and which have had their share of run-ins with Google, Twitter and Apple, have also welcomed alternative stores and a choice of payment gateways.
Rajesh Padmanabhan, the co-founder of NFN Labs, said in a statement: “For our Internet of Things product Vookmark, launching on Indus App bazaar has boosted our growth with a new set of engaged users … Additionally, we are exploring the ability to distribute and collect payments through alternative channels for our browser extensions Android and iOS packages. An alternative distribution that allows free uploads like Indus App Bazaar and lower commissions will certainly help to redirect funds for research and development and help us grow faster.”
The implications of the move in the Indian market remain to be seen, but Deshmukh feels there is more that can be done with app distribution in India.
“It’s about the choice of distribution. We all know that Google Play Store and App Store will continue to exist, but we need more competition. We believe that choice is central to competition, and hence when developers choose to distribute via our infrastructure, we allow a choice of payment gateway. This choice we believe would allow developers leverage to negotiate a reasonable fee with the two companies and payment gateway providers,” Deshmukh said.