'Anti-Google law' makes progress through Assembly

A revision to the Telecommunications Business Act passed the Science, ICT, Broadcasting and Communications Committee on Tuesday. [NEWS1]

Korean lawmakers took a major step to counter Google's charging of a commission on all in-app purchases by pushing a bill dubbed the "Anti-Google law."

A proposed revision to the Telecommunications Business Act passed the Science, ICT, Broadcasting and Communications Committee on Tuesday and was passed to the Legislation and Judiciary Committee.

The changes — already being called the Anti-Google Monopoly Law — would ban app market stores from: mandating certain billing systems; forcing app developers to register their work only on their platform; postponing the registration of an app; and removing content from the app store without a just cause.

The amendment follows an uproar over changes to Google's in-app billing system announced last July. The U.S. tech giant said it would have all apps use its billing system and charge a 30 percent commission on all in-app purchases. It previously insisted that mobile games use the Google Play Payment System. That was supposed to be extended to all apps starting in 2021.

In November, it delayed implementation from last January to October and said it would reduce its commission to 15 percent. Google said it would still charge apps that made over $1 million annually a 30 percent commission for income above the $1 million level.

App developers immediately protested the decision as an abuse of Google's dominance of the market. Almost all apps are downloaded via Google, and to charge extra fees was profiteering, they said, at their expense and that of their users.

"What's worse is that if they enforce the billing system, they could raise the commission rate at any time," said an insider of a tech firm who asked not to be identified. "Google's imposition of an in-app pricing policy would raise the cost for digital content consumers, which would lead to people spending less. It would ultimately shrink the content industry and make conditions worse for younger creators."

According to a report by the Ministry of Science and ICT released last February, Google’s in-app commissions could cost Korean firms an additional 156.8 billion won ($136.4 million) this year, based on companies’ revenue projections for 2021. In-app purchases by Korean smartphone users totaled 7.5 trillion won in 2020.

Korean IT businesses and related organizations welcomed Tuesday’s legislative news as “fighting against unfair trade that threatens fair play in the digital market,” according to joint statements by organizations released after Tuesday's decision.

“We welcome the committee’s decision, which alleviates a big threat to the future of local start-ups and the content industry,” said the Korea Start-up Forum. “The bill would mean that the National Assembly straightens out foul play by app market providers to build an environment for fair competition.”

“In-app purchase enforcement has been accused of being unfair around the world, including in the United States and Europe, and that global consensus has gotten through to the National Assembly,” said the chairman of the Korea Internet Corporations Association (K-Internet) Park Seong-ho.

“We hope that the remaining process [of lawmaking] goes smoothly so that the Korean content industry and young content providers are properly protected.”

The content industry, especially storywriters and webtoonists, are strongly behind the new legislation. The Korean digital content market is rapidly growing, but to have such a large portion of revenues taken away could significantly hurt its momentum, the Korea Cartoonists Association and the Korea Webtoonists Association said in a joint statement.

“It is clear that the Google in-app purchase system would damage not only webtoon creators but also consumers and platforms,” the associations said. “A company is clearly abusing its power to raise its fees to 30 percent for using its platform, for which there are practically no other alternatives. This would bring a major change to the webtoon ecosystem in Korea.”

Google has not commented on developments in Korea, but Apple expressed dismay in a statement from its U.S. headquarters. Apple has not announced any raise in its in-app commissions, but apps on Apple’s iOS App Store had no other choice but to use Apple’s purchase system in the first place.

Banning the in-app purchase system would mean a significant loss in revenue for Apple.

“Apple created the App Store to be a safe and trusted place for customers and a great business opportunity for developers,” Apple said. “The proposed Telecommunications Business Act will put users 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."

Since last year, seven different teams of National Assembly representatives have put forward their own versions of the Anti-Google law to the National Assembly. Details of each bill differed, but shared the common goal of preventing Google from enforcing its in-app purchase system on all apps.

The Legislation and Judiciary Committee will decide whether the bill goes to a plenary session for a vote. This month’s legislation committee meeting is scheduled for Thursday. But bills usually go into a 5-day premeditative period before being taken up by the committee. So it's unclear whether it will be discussed on Thursday or be voted on in a July 23 plenary session.

“We will discuss with party leaders whether or not to complete the 5-day premeditative period,” said Rep. Jo Seoung-lae of the Democratic Party, a member of the science committee. The 5-day technicality can be skipped for “urgent and inevitable reasons” and DP members outnumber opposition PPP members on the legislation committee.

If passed this month, the law will go into effect after 15 days. The new in-app payment system is supposed to start in October, with exceptions for some developers who got extensions from Google until next April.

Concerns have arisen that the bill could be seen as unfair regulation of particular companies. Science committee members from the People Power Party (PPP) argued that it may go against the Korea-U.S. Free Trade Agreement (FTA) to have a regulation aimed at specific companies.

The counter-argument is that the amendment should not be seen as targeting specific companies — Google or Apple — but as preventing companies from imposing unjust fees, which is why it wouldn’t go against the FTA, a spokesperson from K-Internet said. Google already faces a lawsuit from 37 U.S. states over its in-app billing system enforcement, the spokesperson said, and Korea is just going a step further in legislating a law.

“Many countries don’t have any alternative apps markets like we do with One Store or Galaxy Store,” said Kwon Se-hwa, general manager of the policy bureau from K-Internet. “Apple already faces a lawsuit from Epic Games in the United States for enforcing an in-app payment system and now Google’s facing the same situation. Korea is the third-largest market for mobile apps in the world, so it’s meaningful that we’re taking these measures against a monopoly.”

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]