South Korea forces Apple and Google to let app makers use alternative App Store payments

Apple and Google are no longer allowed to force developers to exclusively use their own payment system (and consequentially be subjected to service fees), at least in South Korea.


STORY HIGHLIGHTS:

  • South Korea rules Apple and Google must let app makers use alternative payments
  • It sets a precedent for lawmakers in other countries to potentially follow
  • Apple can no longer ban Koran apps over using other payment systems

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South Korea breaks Apple’s monopoly on app store payments

It’s official now, as The Wall Street Journal reports that Apple and Google must now permit developers to use other payment systems other than the companies’ own. If the companies don’t comply, the country’s media regulator has the power to slap them with a fine of up to three percent of their all revenue earned in South Korea.

Apple’s and Google’s responses

Apple argued in a statement that the bill will erode user trust in App Store purchases if developers are allowed to use alternative payment systems.

The Telecommunications Business Act 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. We believe user trust in App Store purchases will decrease as a result of this legislation, leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW8.55 trillion to date with Apple.

A Google spokesperson provided the following statement:

Just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store. We’ll 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.

Apple, too, has argued that its transaction fees are necessary to cover the costs associated with running the store, marketing, bandwidth and some such. But with the App Store’s revenue in Apple’s fiscal year 2020 ballooning to more than $53 billion (of Apple’s $274.5 billion total revenue), we don’t think no one is buying Apple’s arguments anymore.

Is this good news for developers?

In simpler terms, Apple and Google are no longer allowed to force developers to exclusively use the companies’ own payment systems that come with hefty fees. As a result, developers in South Korea who choose to use alternative payment systems will likely see more money left in their pockets—Apple, as you know, takes a thirty percent cut (or fifteen percent provided certain conditions are met) on App Store sales and in-app purchases.

The Wall Street Journal reports the bill will be signed into law by President Moon Jae-in.

Even though this law only applies to Apple’s and Google’s respective app stores operating in South Korea, it doesn’t take a rocket scientist to figure out that it sets a dangerous precedence. Now lawmakers in other countries can look up to the government of South Korea and put an end to the companies’ exclusive commission as well.

What does the Korean ruling mean for Apple?

And considering the number of antitrust lawsuits and legal filings focused on app stores continues to grow, we may be very likely witnessing the end of exclusive in-app payment systems from Apple and Google.

How to see all your App Store ratings and reviews

Apple has tried to mitigate some of the inevitable fallout by announcing a bunch of changes to the way developers conduct business on its App Store. But most of the new rules amount to almost nothing, with the only noteworthy change designed to let developers inform about alternative subscription options available outside the app.

Justified or not, the regulation of app stores is now stepping up.