[2020 National Audit] "Be evil" turned Google... Threat controversy over bill push saying "Must rethink business model"

Lim Jae-hyun, Executive Director of Google Korea, appeared as a witness at the comprehensive government audit on the Office for Government Policy Coordination held at the National Assembly's Political Affairs Committee on the 22nd, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Joesulgina] "We will comply if the bill (Telecommunications Business Act) passes. However, if the bill proceeds like this, we may have to reconsider our business model. (Lim Jaehyun, Managing Director of Google Korea)"

"You are not coming to the National Assembly hearing to intimidate us, so are you saying that ultimately the burden will be shifted to the public and developers? (Han Junho, Democratic Party lawmaker)"

"Isn't this a threat? (Yoon Young-chan, Democratic Party lawmaker)"

Google, which dominates the domestic application ecosystem, stated on the 22nd at the National Assembly Science, Technology, Information and Broadcasting and Communications Committee (STIBC) audit that regarding the amendment to the Telecommunications Business Act, which aims to prevent the 30% commission fee and mandatory in-app payments, "(If passed by the National Assembly) we may have to reconsider our business model." Google, which holds a market share of 70%, mentioned the possibility of changing its business model that could have a wide-ranging impact on the domestic ecosystem during the audit, drawing criticism that it was effectively making threatening remarks using developers and consumers as leverage.

Google says it will comply with local laws but "may change business model"

In the afternoon, following the Political Affairs Committee, Lim Jaehyun, Managing Director of Google Korea, who appeared as a witness at the STIBC audit, said, "Google complies with local laws in every country," and added, "If the Telecommunications Business Act passes as it is now, we will have no choice but to comply with the law."

Regarding the so-called 'Google Abuse Prevention Act,' which is the amendment to the Telecommunications Business Act being promoted, he said, "We have heard many concerns from many developers and small to medium-sized developers," and added, "If possible, I hope the voices of those participating in the ecosystem are heard more and that the bill passes after sufficient review." When Hong Jung-min, a Democratic Party lawmaker, asked, "Does that mean the voices of small and medium developers were not included in the bill?" he explained, "The app ecosystem itself is vast. If there are places that could not voice their opinions, it would be good to listen to them."

Furthermore, in response to Hong Jung-min's request to comply if authorities such as the Fair Trade Commission and the Korea Communications Commission issue corrective measures against Google for violating the law, Lim said, "No such bill has ever passed anywhere in the world, so the headquarters has not been able to conduct sufficient review and investigation," and added, "97% of apps do not handle digital content and do not use in-app payments. Only 3% of developers pay such commissions, and if the bill proceeds like this, we have concerns that we may have to reconsider our business model to take responsibility for users and developers."

In response, lawmaker Han Junho said, "I was surprised. Are you saying that if such a thing happens, the responsibility will be shifted to the business model change and ultimately to the public and developers?" and asked, "You are not intimidating us at the audit, so are you saying that ultimately the burden will be shifted to the public and developers?" Lim replied, "That is not what I meant," and explained, "Continuous investment is necessary, and this is to maintain that." Lawmaker Yoon Young-chan also pointed out that it was a "threatening remark."

Earlier, Google decided to enforce the use of its payment method (in-app payment) for app developers listed on Google Play starting next year and to take a whopping 30% commission in the process. Unlike the Apple App Store, Google expanded the commission policy, which had been applied only to games, to all content and apps. This is feared to threaten the survival of domestic app developers and lead to price increases for major content such as webtoons and music.

Unable to give clear answers on 30% commission rate... Criticized as "monopoly, collusion"

In response to People Power Party lawmaker Hwang Bo-seung-hee's criticism that the 30% commission charge is excessive, Lim said, "If there are different payment systems, it causes considerable inconvenience to users," and added, "From the developer's perspective, more than 30,000 developers are expanding overseas. I think there is a reason why they choose Google Play."

Regarding concerns that the commission burden will be passed on to domestic users and harm startups and small businesses, he repeatedly explained that "fewer than 100 developers in Korea will be affected, and the change in sales will not be significant," emphasizing that the commission policy already applies to 97% of developers worldwide and that the impact of the policy change is not large. He also stressed that most app markets, including Apple and Amazon, adopt a 30% commission. When People Power Party lawmaker Park Sung-joong asked, "Isn't the 30% commission just following Apple?" he acknowledged this as well.

As Google repeatedly explained that the impact of this policy change is not significant, lawmaker Han Junho pointed out, "You said that even if in-app payment is enforced domestically, the increase in sales is not significant, so why do it? You said you don't know the appropriate 30% rate and that you do it because it's done worldwide. This is called monopoly and collusion."

Democratic Party lawmaker Jo Jung-sik also referred to the U.S. Department of Justice's antitrust lawsuit against Google, criticizing, "Google's motto is 'Don't be evil,' but it is becoming 'be evil.'" Jo said, "If in-app payment and the 30% commission are enforced, the same thing as in the U.S. will happen," expressing concern about the shock Google's monopolistic commission policy will have on developers and consumers. In response, Lim said, "I am sorry that the in-app payment issue has become a big social problem," and added, "We will listen to opinions from various sectors and think more about how to reduce the impact."

Google says "developers refusing in-app payment will be expelled"... denies abuse allegations

Google also reaffirmed its policy to expel developers who do not follow its payment system. On this day, lawmaker Hong Jung-min mentioned the case of global game developer Epic Games, which was expelled from Google Play after opposing Apple and Google's payment systems and building its own system, and asked, "If domestic content companies refuse, will they be expelled?" Lim replied, "There is a grace period of about one year until the end of September next year. It is a period for developers to merge systems," and added, "From September next year, those who do not comply with the policy will inevitably be blocked."

Google also drew a line on the abuse controversy that had been simmering beneath the surface. In recent years, in the domestic game industry, there have been ongoing controversies that Google, which virtually dominates the app market, imposes tacit sanctions on developers by limiting first-page (featured) exposure when new games are simultaneously launched on Google Play and domestic app markets. On this day, lawmaker Han Junho asked Lim whether Google Korea had ever engaged in abusive behavior such as forcing exclusive releases on developers, and Lim answered, "No (there was no abuse)." When People Power Party lawmaker Park Sung-joong asked, "Have you ever given disadvantages if an app was listed on One Store?" Lim answered, "No."

Choi Ki-young, Minister of Science and ICT, said, "I think pre-installing app stores could be an abuse of superior position," and added, "It is not certain, but I hope there is no unfair trade such as preventing registration on other app stores. We are monitoring such matters."

Meanwhile, the National Assembly STIBC plans to pass the amendment to the Telecommunications Business Act, which prevents Google's mandatory in-app payment, by the 23rd through bipartisan agreement. Lee Won-wook, chairman of the STIBC, said in the morning, "There was an agreement between the ruling and opposition floor leaders and me to hold a standing committee before the audit on October 23 to pass the bill through the subcommittee and the standing committee."