South Korea has, as of Tuesday August 31st, become the first country in the world to create legislation that rules against payment platforms by tech giants Apple and Google. The ‘Telecommunications Business Act’ has been amended to now curtail the power that Google and Apple have over the app market, essentially serving the purpose of restricting them from making it a requirement for developers to use their payment systems in app stores. It also goes so far as to ban app store owners from unreasonably delaying the approval of apps or deleting them from the marketplace altogether.

Since several developers are left with no choice but to integrate Apple and Google pay into their app for purchases, it also forces them to pay commissions as high as 30% to these companies just to use the in-house payment systems. Developers claim that because Android and iOS largely dominate the smartphone operation platforms, they have no choice but to create apps that are compatible with these softwares and face the high charges that these companies impose on in-app purchases.

How did we get here?

While it’s no secret that Google and Apple are two of the biggest technology companies in the world, South Korea has taken a bold step in attempting to regulate the power that any of them have in that region. When Google announced that it was looking to make its payment service mandatory for any developers on the Google Play store, a significant amount of backlash came their way because of the steep 30% commission that the company charges for any purchases made.

Whilst the question of why such a law has been implemented is circulating, the fundamental purpose is largely to give South Korean technology companies an opportunity to enter the market and level out the playing field. The fact that a government has had to take such action only demonstrates the sheer dominance of Google and Apple in the app industry, and so the South Korean government has wielded its power to regulate payments and disputes regarding cancellations and refunds on these app stores.

How have Google and Apple responded?

Understandably, when these measures were first proposed in South Korea last year, the bill faced resistance and opposition from both companies. A representative from Apple had commented prior to the law being passed that such a measure will ‘put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases and features like “Ask to Buy” and Parental Controls will become less effective.’ However, there has been no other comment from the company since the bill passed.

On the other hand, Google has said that they will ‘reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store, and we will share more in the coming weeks’. Both companies are firm in their belief that the commission they charge is what helps them keep Android free, as well as ‘build and maintain an operating system and app store’.

Where will this lead?

The actions of the South Korean government could potentially kick off a wave of sentiment against monopolistic practices, with more and more regulation and scrutiny on companies that are dominating aspects of the tech industry. Even companies like Spotify and Tinder have remarked that Apple and Google should allow them to use their own payment systems instead, showing that the sentiment behind the actions of the South Korean government is backed by several other key players in the industry.

Countries like Russia and Australia have also shown initiative into the scrutiny of tech giants, from regulating Apple Pay to ensuring that apps come pre-installed with Russian-developed gadgets. Nevertheless, both companies have since decided that they would in fact cut their commission rates; while this implementation is yet to be seen, it will be important for both technology giants to act swiftly, as they control over 85% of the South Korean market and so could lose revenue faster than expected. The law has not yet caused any significant economic tension between the US and South Korea, however, as the consequences of a move this political begins to manifest itself, the Biden administration could soon start expressing concerns.

About the Author: Nandini Mehta

Nandini Mehta is a contributing Features Writer focusing on the development of technology and business practices around the world. Nandini has an in-depth knowledge of politics and international relations, and so writes pieces that utilise her interest for current affairs.