South Korea passes world's first law to curtail Apple, Google app store dominance

SEOUL, Aug. 31 (UPI) -- South Korean legislators passed a bill Tuesday that breaks the iron grips of Apple and Google over their app stores, becoming the first country to rein in the tech giants' dominance of the mobile economy.

The pending law, a revision of the country's Telecommunications Business Act, prevents the companies from requiring mobile developers to use their proprietary payment channels, which take commissions ranging from 15% to 30% on in-app purchases of digital content.

The bill, which allows the country's media regulator to fine violators up to 3% of their annual South Korean revenue, is expected to be signed into law by President Moon Jae-in.

Rep. Han Joon-ho, of the majority Democratic Party, said in a written statement that the law would "strengthen domestic content competitiveness, protect users' rights and interests and grow K-content into a global leader in the long term by blocking fee abuse."

Korean app developers and content creators had long been pushing for the legislation and welcomed its adoption.

"With the passage of this law, both startups and creators of app developers who are striving for innovation are feeling proud that a fair foundation for the app market has been laid in Korea for the first time in the world," Jung Mi-na, policy director of the Korean Startup Forum, said in a statement.

"[We] can expect healthy growth in the future through this law."

In reaction to the law's passage, Google defended its business model, saying its service fees help keep the Android operating system free, "giving developers the tools and global platform to access billions of consumers around the world."

"And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store," a Google spokesperson said in a statement.

"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 said last week that the law would put users at risk of fraud, undermine their privacy protections and weaken features such as parental controls.

"We believe user trust in App Store purchases will decrease as a result of this proposal -- leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW 8.55 trillion [$7.4 billion] to date with Apple," the company said in an emailed statement.

Known locally as the "anti-Google law," the legislation was introduced last year after the search giant announced plans to begin expanding its commissions from online games to all content payments in South Korea.

The pending law may be the first domino to fall in a global push to curb the app market dominance of the two tech powerhouses, whose Android and iOS operating systems power virtually all of the world's smartphones.

A bipartisan trio of U.S. senators introduced legislation earlier this month that would force large tech platforms to allow third-party app stores and payment systems, while European lawmakers continue to investigate antitrust violations by Apple in its music streaming app marketplace.

Google also faces an antitrust lawsuit by 37 U.S. state attorneys general over its Play Store dominance. Developer Epic Games sued Apple and Google last year when its hugely popular Fortnite was removed from app stores after the company began to offer its direct payment system.

The Coalition for App Fairness, a Washington-based group representing developers, praised the passage of the South Korean bill.

"South Korea's new app store law is a significant development in the global fight to bring fairness to the digital economy," Meghan DiMuzio, executive director of CAP, said in a statement.

"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."