K-Internet says Google in-app payment rate hike is illegal

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K-Internet says Google in-app payment rate hike is illegal

The Korea Internet Corporations Association, or K-Internet, reported Google headquarters and its Korean office to the Korea Communications Commission (KCC) on Monday, accusing it of violating domestic laws.
K-Internet is a nonprofit group representing Korean IT firms. Its largest members are Naver and Kakao, whose respective CEOs hold the chairman and executive vice chairman positions in the organization.
The complaint regards Google’s change of policy to expand commission fees for in-app transactions. The IT firm had originally charged around 30 percent of transaction volume as commission fees for in-app payments on mobile games. Last month, local media started reporting that Google would expand this policy to all mobile apps on its platform.
“Google’s policy change clearly violates Article 50 of Korea’s Telecommunications Business Act and may have a negative effect on not only start-ups, but the country’s IT industry as a whole,” the association said in a Monday statement.  
“Therefore we urge the KCC to thoroughly investigate and take action that follows this illegal act.”
Article 50 of Korea’s Telecommunications Business Act prohibits an operator from engaging in practice that undermines market competition or users’ interest, such as creating unfair conditions or prices. 
K-Internet pinpointed four issues that the KCC should look into, including whether Google’s “forced” payment method is a change of conditions of use without a clear reason or an act to refuse profit sharing with app developers by establishing unfair rules. It added that Google’s decision will affect fintech services that deal with in-app transactions on a daily basis.  
The association’s move follows a petition filed by the Korea Startup Forum on Aug. 19. 
A nonprofit group representing start-ups, the Korea Startup Forum requested the KCC launch an investigation on whether Google’s action breaks the law. The larger association’s complaint signifies that IT firms have decided to join the start-ups’ fight against Google.
“Google Play Store’s dominance and market share today wouldn’t have been possible if it wasn’t for the app companies that launched innovative and various services on the platform, with firm belief in Google’s open policy,” K-Internet’s statement added. “Now the company is using that power to change its policies against app developers and users.”
According to a 2019 study by the Ministry of Science and ICT, Google and Apple’s app stores distribute 87.8 percent of the available apps in Korea. Apple already imposes a 30 percent commission fee for in-app transactions on all mobile services.  
The in-app payment systems on Google and Apple’s app stores are convenient for users, but they are also the only payment option for mobile-based services that cannot be paid via computers. According to the Korea Startup Forum, the commissions fees Google and Apple ask for are four to 30 times higher than the commission required by other payment methods, like credit cards or bank transfers.
The higher commission fees could push app developers to raise prices, both associations warn, which would eventually burden users as well.  
Google, on the other hand, claims it needs the fees to invest in the security and infrastructure of Google Play.
BY SONG KYOUNG-SON   [song.kyoungson@joongang.co.kr]
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