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[News Focus] Google’s new billing policy for Korea is under scrutiny again. Why?

US tech giant bypassing the law, indirectly forcing app developers to use its payment system, industry officials say

Google logo displayed on a tablet (AFP-Yonhap)
Google logo displayed on a tablet (AFP-Yonhap)

When Google announced on Nov. 4 that it was changing its controversial in-app payment policy in South Korea to comply with a revision to the Telecommunications Business Act, dubbed the “anti-Google law,” it appeared that Korea had become the first country in the world to check the US tech behemoth’s growing control of the app ecosystem.

But, less than a week after the announcement, Seoul officials are finding themselves caught in yet another tussle between Google and local developers. The developers say Google’s supposed change of policy is only a ruse. Due to Google’s high commissions, app providers will have to choose Google’s payment system over the other options, they argue.

On Wednesday, representatives of the Korea Internet Corporations Association, the Korea Startup Forum and the Korea Mobile Game Association visited the Korea Communications Commission’s office to convey those concerns, sources said.

The KCC plans to collect opinions from the private sector until next week, when it publishes the enforcement ordinance of the legal revision, which prohibits app market operators from forcing market participants to use specific billing systems.

An official at the KCC said it would make sure the enforcement ordinance prohibited app store operators, including Google and Apple, from using “indirect” methods to force the use of their own in-app purchase systems.

The government will intervene, the KCC added, if Google’s new commission policy is found to put developers at a disadvantage for using third-party payment systems.

Google said last week that it was allowing freedom of choice in payment options for digital purchases made on its app store in Korea. Developers that choose alternative payment systems will get a 4 percent commission reduction, the company added. This means Google will charge a 30 percent commission for payments made with its own billing system but only 26 percent for purchases made through other systems.

An industry source said the cost of using a third-party payment system would easily offset the 4 percent discount. The source also added that Google’s new policy is just an attempt to bypass the law.

Due to the expense of operating alternative payment systems on top of the 26 percent commission that Google charges, app developers will eventually return to Google’s in-app payment system, the source argued.

“Issues regarding app store operators’ high fees should have been dealt with more during the legislation process,” the source said. “(We) will have to wait and see how the enforcement ordinance will come out next week.”

Meanwhile, the KCC official said the government would also take a careful look at Google’s new proposal, which the company plans to submit this month.

While Google will hand in a detailed proposal to the government, Apple, the other major app store operator, has remained silent on its in-app payment policy.

Apple in October told the KCC that its policy already complied with the new law, and there was no need to make changes.

The government, however, dismissed Apple’s argument and demanded the company submit an alternative plan. The state-led commission said Apple could face punitive measures otherwise.

Apple has still not officially responded to the government’s request. However, it has been reported that Apple CEO Tim Cook indicated at an Apple board meeting the company’s unwillingness to comply with South Korea’s new law, according to officials from the National Assembly’s Science, ICT, Broadcasting and Communications Committee, who quoted a report from a US civic group.

The National Assembly in September passed the revision to the Telecommunications Business Act, making South Korea the first country to impose curbs on Google and Apple’s payment policies.

The new law has drawn international attention as it could be the first step toward stronger regulation of the tech giants, not just in South Korea but in other countries as well.


By Shim Woo-hyun (ws@heraldcorp.com)
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