Google to allow for third-party payments in South Korea: Apple is slowly following suit

Google says it will allow third-party in-app payment systems in South Korea to comply with a new law. This marks the first time the US tech giant has changed its payment policy for a specific country. In January 2022, Apple took steps to follow suit.

The Alphabet-owned company made the announcement on Thursday. It came after South Korea’s parliament amended the nation’s Telecommunications Business Act, dubbed the “anti-Google law”, banning major app store operators from forcing developers to use proprietary payment systems.

The Korea Communications Commission (KCC), the country’s media regulator, requested Google and Apple to find ways to comply with the country’s new law passed in September.

“The Korean government recently passed a law regarding app stores and billing systems for users in Korea,” wrote Google’s senior director of public policy Wilson White on the company’s Google Developers blog Thursday.

“We respect the decision of the National Assembly, and we are sharing some changes to respond to this new law, including giving developers that sell in-app digital goods and services the option to add an alternative in-app billing system alongside Google Play’s billing system for their users in Korea.”

South Korea’s law is the first of its kind passed by a major economy to curb Apple and Google’s dominance in the app economy. The two giants have come under fire globally for using in-app billing systems that charge commissions of up to 30%.

By the end of 2021, developers in South Korea will be able to add third-party payment systems giving customers a choice of payment options within apps. The exact date of when the new policy will be implemented has not been set yet.

In March, Google offered an olive branch to smaller software developers by dropping its commission fee from 30% to 15%. With the new policy, Google said it would further lower this to 11% when users choose an alternative payment system. This is to help developers cover the costs that incur from using their own billing systems, Google said.

“As we always have, we’ll continue to listen to feedback from our Korean developer ecosystem and continue to invest to help them thrive on Google Play,” the company added.

Following Google’s announcement, KCC chairman Han Sang-hyuk responded with a press release:

“We were able to confirm Google’s intention to abide by the law, and we hope that the new plans are fully in line with the new law.”

“We hope that Google fulfils its social duties as a big tech company and become an exemplar to other overseas companies operating in Korea,” the statement added.

In October, Apple claimed that it was already in compliance with the South Korean law and that it did not need to amend its app store policy.

The KCC rejected this claim and asked Apple’s South Korea unit to implement a new policy allowing greater autonomy in payment methods. If Apple fails to comply with the law, the watchdog will consider additional measures such as a fact-finding investigation as an initial step before potentially applying fines or other penalties.

In a previous statement to Verdict, Apple said South Korea’s App Store decision would put those 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.”

The spokesperson added: “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.”

In August, Apple made a small gesture agreeing to a settlement with small developers in the US, allowing them to share information on how to pay for purchases outside of the App Store and effectively avoid paying commission.

“While it’s good publicity for Apple, this is a small concession and it’s not going to pose any significant threat to Apple’s business model as it involves only small developers, thought to account for a tiny part of the App Store commissions,” Laura Petrone, principal thematic analyst at GlobalData, told Verdict at the time. “Also, developers will still be banned from informing customers about alternative payment methods other than through emails.”

South Korea’s law comes amid a global crackdown on Google and Apple’s monopolistic practices concerning in-app payment systems.

In a preliminary finding for its antitrust probe, the European Commission accused Apple of choking competition by forcing third-party developers to either agree to unfair rules or risk getting booted from the iPhone and iPad ecosystem.

The UK’s Competition and Market Authority also launched an antitrust probe into Apple’s App Store in March to establish whether it breaches the country’s competition laws.

Meanwhile, US senators introduced a new bill in August to rein in Google and Apple’s app store dominance. Separately, US courts have also spoken out about the tech giants’ competition-choking practices.

As part of the recent high-profile legal battle between Apple and Epic Games, a US judge told Apple to let developers include an external link or information directing customers to alternative payment options.

Last month, Russia also launched its own antitrust case against Apple, becoming the latest nation to condemn the Cupertino-based giant.

Sideloading

It is worth noting that users can install applications without going through the official app store through a practice called sideloading. Android users can install application packages in APK (Android Package) format, which are widely available for download online. This enables users to sidestep the Google Play store.

For Apple users, sideloading is also possible by installing apps in IPA format (iOS App Store Package). However, on iOS devices, this is slightly more complicated as a jailbreak method or a signing service would be necessary. This is a process that removes software restrictions imposed by the manufacturer.

Sideloading is not allowed by Apple and the company has repeatedly condemned the practice saying that it would “cripple” security protections.

At the Web Summit in Lisbon this week, the company’s software chief, Craig Federighi, once again doubled down on this argument. He objected to the EU draft guidelines that would allow customers to install software from outside the App Store, arguing that it would make iPhone a target for malware or hijacking by cybercriminals.

“Sideloading is a cybercriminal’s best friend,” he contended.

That’s despite Apple ranking sixth out of 44 companies for application software in GlobalData’s cybersecurity thematic scorecard and below Google and Microsoft – both of which manage their own app stores.

UPDATE 11 JANUARY

In early January 2022, Apple submitted its compliance plans to allow developers to use third-party payment options to the KCC. However, the regulator has also said that it plans to iron out further details about these plans, TechCrunch reported.