South Korea passes legislation limiting Apple and Google’s management over App Retailer funds

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Visitors look at Apple Inc. iPhones and iPads on display in the SK Telecom Co.T Factory flagship store in Seoul, South Korea on June 11, 2021.

SeongJoon Cho | Bloomberg | Getty Images

The South Korean parliament has passed a bill making it the first country to impose restrictions on Google and Apple’s payment policies, forcing developers to use only the tech giants’ proprietary billing systems.

The law will come into effect after the signing of President Moon Jae-in, whose party has loudly spoken out in favor of the bill.

Apple and Google guidelines typically require developers to pay tech giants a commission of up to 30% on every transaction.

The bill, approved on Tuesday, means developers can avoid paying commissions to large app store operators – like Google and Apple – by instructing users to pay through alternative platforms.

A Google spokesman said its service fee “helps keep Android free and gives developers the tools and global platform to access billions of consumers around the world”.

“We’re going to think about how we can comply with this law while maintaining a model that supports a high-quality operating system and app store, and we’ll share more about it in the coming weeks,” added the Google spokesman.

Apple did not immediately respond to CNBC’s request for comment.

The bill, sometimes referred to as the anti-Google bill, was brought to parliament last August, according to Yonhap News.

180 out of 188 lawmakers in attendance voted to pass the amendment to the Telecommunications Industry Act, Reuters reported.

According to media reports last week, the National Assembly’s Legislative and Judiciary Committee approved revisions to a bill aimed at preventing app store operators from forcing developers to use certain payment systems.

Regulatory review

Regulators around the world are focusing more on the app stores and fees that Google and Apple are charging developers – and the ruling in South Korea will likely be the first step in more scrutiny, according to Daniel Ives, managing director of equity research at Wedbush Securities.

“It’s a potential turning point,” Ives said Monday ahead of the Seoul decision in CNBC’s Street Signs Asia. “Not necessarily for what that actually means, but for the ripple effect that shows that it’s not just about words, but about actions.”

Ives added that while there might be opportunities for others, such as telecommunications service providers, to monetize, it ultimately depends on how consumers would react.

“The question is, what will consumers ultimately do? Because the path of least resistance is to go through Apple and Google – and that’s what consumers are used to, ”he said.

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