Google Play to Support Alternative Billing in South Korea
Google to Allow Alternative Payment Systems in South Korea
In response to the enactment of new legislation in South Korea – often referred to as the “anti-Google law” – Google has declared its intention to adhere to the requirements. This will involve enabling Android application developers utilizing Google Play to present users with alternative payment options in addition to Google’s established system.
A First-of-its-Kind Mandate
This legislation marks a significant moment, representing the initial instance of a government successfully compelling app stores to integrate third-party payment systems for purchases made within applications. This shift has the potential to influence the revenue streams of app stores, as developers explore avenues to circumvent the standard commissions imposed by major technology companies.
According to a statement published on Google’s blog, developers operating within South Korea will have the capacity to incorporate an alternative in-app billing solution alongside Google Play’s existing billing infrastructure for their mobile and tablet applications. Customers will then be presented with a choice regarding which billing system they prefer to utilize during the checkout process.
Potential Limitations of Alternative Systems
Google cautioned that utilizing alternative billing systems may not provide the same level of security or features as Google’s own system. Features such as parental controls, family payment methods, integrated subscription management, support for Google Play gift cards, and access to the Play Points rewards program may be absent.
The company highlighted that 1.5 million users in South Korea utilized Play Store gift cards this year alone, and over 12 million participated in the Play Points program.
Justification for Commission Fees
Google reaffirmed its position on the justification for collecting a commission on in-app purchases. The company maintains that these revenues are crucial for funding the ongoing development and maintenance of Android, the Play Store, developer tools, and related initiatives.
Further details regarding the implementation of these third-party billing systems will be disseminated to developers in the coming weeks, Google stated. However, it was also noted that these third-party transactions will be subject to a commission, albeit at a reduced rate of 4%.
Global Scrutiny of App Store Practices
The enactment of this law in South Korea coincides with increased scrutiny from governments worldwide regarding the antitrust practices of both Apple and Google. Many are considering new regulations concerning their respective digital payment systems.
In the United States, Epic Games, the creator of Fortnite, is currently engaged in legal action against both companies, seeking the right to offer its own in-app billing system. Epic contends that Apple and Google are functioning as monopolies. The outcome of Epic’s case against Apple is currently under appeal, following a prior ruling that did not designate Apple as a monopolist, but mandated changes to App Store policies to permit links to alternative payment systems.
Legislative Action in South Korea
In South Korea, the issue was addressed through legislative means rather than protracted legal battles. On August 25, 2021, the National Assembly approved revisions to the Telecommunication Business Act, effectively opening up the app stores to competition.
Apple’s Response and Ongoing Legal Challenges
Similar to Google, Apple had previously expressed concerns that such legislation could compromise consumer protection against fraud and safeguard user privacy. Following South Korea’s decision, Apple updated its App Store Guidelines, but only to comply with the terms of a class action settlement with U.S. app developers who sought the ability to communicate with their customers outside the App Store regarding alternative payment options.
Apple is scheduled to appear at a hearing concerning the Epic Games lawsuit to determine whether it can postpone the implementation of links to alternative payment mechanisms pending the outcome of its appeal.
Currently, Apple has not yet implemented changes to comply with South Korea’s law, but asserts that its existing policies are already in alignment with the regulations.
Commission Reductions by Tech Giants
In recent months, both technology companies have proactively sought to preempt forthcoming regulations by reducing their app store commission rates. Google recently lowered its commissions to 15% for subscription-based applications and as low as 10% for media applications.
Apple has not yet mirrored this move. However, both companies have previously adjusted commissions for smaller businesses, and Apple introduced a new, reduced commission structure this summer for news publishers participating in Apple News.
