By allowing app users to pay software makers directly for the software they use, legislators in South Korea have passed a new law that will effectively end the fat commissions that tech giants Apple and Google earn from app sales. This affects the business model with which these companies operate and with which they make so much revenue from commission on app sales.
Before this new legislation was passed in South Korea, software users were, like everyone else across the world, compelled to pay for applications through the payment gateways provided on Google’s Play Store and Apple’s iOS platforms. Similarly, developers also could only get paid for application sales through these payment systems.
What comes next is the signing of the legislation into law by South Korean President Moon Jae-in. He is widely expected to sign it into law because his party threw their weight behind the new rule. The legislation was passed in South Korea’s national assembly despite the efforts of representatives of tech giants to stop it from being passed into law.
A direct assault of this magnitude on Google and Apple’s lucrative app sale commissions is unprecedented, despite the popular backlash against the quasi-monopoly practice of the tech giants. Google and Apple sometimes earn as much as 30% of app sale revenue, a practice the companies attempted to justify in the past by claiming the huge commissions help them to keep the app stores running optimally.
South Korea’s new legislation basically forces the tech companies to permit the inclusion of alternative payment means on their platforms. Backers of this controversial rule in South Korea say it will create an enabling environment for competition, as the legislation will check the monopoly enjoyed by each tech giant.
While Google and Apple are certainly the companies most affected by it, they’re not the only ones because the law affects app store operators as well, so companies like Microsoft are affected too. In a move to protect app developers from the wrath of Google and Apple, the new rule also makes app stores approve applications promptly and checks the power wielded by them in erasing apps from their platforms.
The rule also makes operators accept the alternative payment solutions, and prohibits them from compelling developers to use their preferred gateways and solutions. Failure to comply with South Korea’s new legislation is also addressed by the law A maximum of 3% of the revenue that erring companies earn in South Korea will be forfeited as a fine.
In accordance with the brewing concerns about the power yielded by Google and Apple on their platforms, the new legislation in South Korea is expected to have a ripple effect across the world as regulators and decision-makers are likely to examine it closely in a bid to end the app store monopolies of the tech giants.
Google’s move to announce the compulsion of its payment gateway for applications that aren’t games reportedly fueled the regulation, as there was a widespread backlash following the announcement