Apple and Google to allow developers to use outside payments under South Korean Bill

App marketplaces in South Korea are now banned from forcing developers to use their in-app purchase systems.

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South Korea's National Assembly has approved a Bill that will require Apple and Google to change the way its app store payment systems operate in the country.

The Bill is currently awaiting to be signed by South Korean President Moon Jae-In before it goes into effect.

The new law is an amendment to South Korea's Telecommunications Business Act, and will ban app store marketplaces from unreasonably delaying the approval of apps or deleting them from the marketplace.

The Bill will also ban app marketplaces from forcing developers to use their in-app purchase systems, with developers in South Korea now able to choose alternatives or create their own marketplaces while still being allowed to operate in existing app stores.

Companies that fail to comply with the new laws could be fined up to 3% of their South Korea revenue by the country's media watchdog, the Korea Communications Commission.

The new law marks the first time a government has addressed competition issues regarding the app payments market. Outside of South Korea, Australia's consumer watchdog is investigating whether the app stores of major providers such as Apple and Google are anti-competitive as part of its digital platforms probe.

In response to the new amendment, Google said its app payment processing model "keeps device costs low for consumers and enables both platforms and developers to succeed financially".

"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," a Google spokesperson said in an emailed statement.

Apple was starker in its response to the changes, saying the new laws would put users who purchase digital goods from other sources at risk of fraud, undermine privacy protections, make it difficult to manage their purchases, and features like Ask to Buy and parental controls would become less effective. 

"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 8.55 trillion won to date with Apple," an Apple spokesperson said in an emailed statement.

The legislative amendments come despite both Apple and Google over the past year making various changes to their app store policies as part of attempts to quell competition concerns. Google in March announced it would lower its current 30% commission fee to 15% for all in-app purchases, with that lowered fee set to apply in March 2022.

Apple, meanwhile, agreed to a class action settlement last week to allow apps developers to implement payment systems outside of the App Store and temporarily halve the commission fee it receives from developers that earn less than $1 million in revenue. It also introduced its Apple's News Partner Program on the same day, which similarly halves Apple's cut from publishers that join Apple News.

In the backdrop, both Apple and Google continue to face various lawsuits  from Epic Games. In all these lawsuits, Epic Games accuses the tech giants of conducting anti-competitive and monopolistic practices through their respective app stores. 

Updated at 10:22am AEST, 1 September 2021: added comments from Apple.

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