"Google Gapjil Prevention Act" Regulatory Conflict: KCC Says "App Market Specificity Must Be Considered"

Google's Antitrust Law Passed the Final Hurdle
'Prevent Forced 30% Commission In-App Payments'
Fair Trade Commission Raises Concerns Over 'Overlapping Regulations' with Existing General Laws
Broadcasting Commission Says "Need to Consider the Unique Nature of App Markets as Two-Sided Markets"

[Asia Economy Reporter Cha Min-young] "Let's stop the forced policy of Google's in-app payment (a payment method developed by the app market operator itself) with a '30% commission'." Known as the 'Google Gapjil Prevention Act (Amendment to the Telecommunications Business Act),' it recently passed the critical stage, but as the Fair Trade Commission put the brakes on it, the Ministry of Science and ICT, the main ministry in charge, has stepped forward to assert the necessity of legislation directly.

On the 5th, the Ministry of Science and ICT held an online study session regarding the 'Partial Amendment to the Telecommunications Business Act related to In-App Payment.' The amendment to the Telecommunications Business Act (integrated bill), which was passed by the Science, Technology, Information and Broadcasting and Communications Committee, a standing committee of the National Assembly, on the 20th of last month, was undergoing a deliberation period including gathering opinions from the opposition party before being scheduled for the Legislation and Judiciary Committee. During this process, the Fair Trade Commission continuously raised issues. In response, the Ministry of Science and ICT took the initiative to explain directly.

The amendment to the Telecommunications Business Act includes ▲ establishing grounds for government departments to investigate the actual conditions of app markets, ▲ adding mediation targets for telecommunications dispute mediation, and ▲ creating new types of prohibited acts for app market operators. Among these, the Fair Trade Commission pointed out concerns about 'overlapping regulations' with general regulatory laws. Kim Jae-shin, Vice Chairman of the Fair Trade Commission, expressed opposition at the National Assembly's Science, Technology, Information and Broadcasting and Communications Committee plenary session, defining 'acts that unfairly force or induce not to register mobile content, etc., on other app markets (Article 10)' and 'acts that unfairly impose discriminatory conditions or restrictions (Article 13)' as overlapping regulatory items.

"App Markets Are Two-Sided Markets with Various A-B-C Relationships"

The Ministry of Science and ICT emphasized the uniqueness of the app market and argued that regulations should consider the characteristics of the industry. Jin Seong-cheol, Director of the Broadcasting Support Policy Division (former Director of the Telecommunications Market Survey Division), stated, "The legislative process must reflect the uniqueness of app markets, which are one of the value-added telecommunications services," emphasizing, "App markets are a special market area where digital content such as games is traded and distributed by connecting service providers and end users among value-added telecommunications services."

[Image source=Reuters Yonhap News]

Director Jin said, "App markets have the nature of a two-sided market rather than a typical linear market," and stressed, "Since the amendment targets such a special market area, it needs to be specifically regulated under the Telecommunications Business Act, a special law, rather than the general law of the Fair Trade Commission." The rapid changes in service models due to ICT industry development and frequent market entry and exit of operators are also unique characteristics of the app market ecosystem. From the perspective of content providers and users, if some are handled by the Ministry of Science and ICT and others by the Fair Trade Commission separately, the speed and efficiency of enforcement may decrease, lowering the overall efficiency of law enforcement.

"Financial Fair Trade Issues Are Handled by the Financial Services Commission"

They also argued that special laws take precedence over general regulatory laws regarding overlapping regulations within specific industries. For example, under the 'Financial Services Commission Establishment Act,' the Financial Services Commission is responsible for fair trade issues in the financial sector. The Ministry of Culture, Sports and Tourism also regulates matters related to creating a fair competition environment in the content industry under Article 5 of the 'Content Industry Promotion Act,' including content distribution and standard contracts. The Electricity Commission is responsible for creating a fair competition environment in the electricity business and protecting electricity users' rights under Articles 53 to 60 of the Telecommunications Business Act. Director Jin pointed out, "It is common for industry authorities to regulate first based on technical expertise, and if they cannot apply regulations, the Fair Trade Commission intervenes and applies general laws." There is also an overlapping regulation prevention clause under Article 54 of the current Telecommunications Business Act.

There have been past cases where the Ministry of Science and ICT and the Fair Trade Commission resolved conflicts arising from regulatory authority through inter-agency dialogue and cooperation rather than laws. To prevent overlapping regulations, the Ministry of Science and ICT signed a memorandum of understanding with the Fair Trade Commission in 2008. Director Jin said, "Regarding the issue of Naver Real Estate's excellent activity system pointed out during the 2018 National Assembly audit, the Fair Trade Commission had already started an investigation," adding, "Reflecting this, the Ministry of Science and ICT investigated the remaining cases, dividing roles between the two."

What Is In-App Payment?

In-app payment is a payment method using a system developed by app market operators such as Google (Play Store) and Apple (App Store) when purchasing paid content within an app. Last September, Google announced it would expand in-app payments, which had been applied only to game apps, to all apps and content starting this October, causing domestic repercussions. Especially with a 30% commission rate, a survey suggested that commissions in the digital content sector could increase by up to 156.8 billion KRW (54.5%). In response to domestic backlash, Google proposed delaying the application of in-app payments from April next year for some applicant companies, but this was criticized as an attempt to delay the bill's passage by only postponing for selected developers.

Meanwhile, the Ministry of Science and ICT stated that concerns about diplomatic and trade friction with countries like the United States due to the name attached to the amendment to the Telecommunications Business Act, called the 'Google Gapjil Prevention Act,' are unfounded. It is known that the U.S. government had expressed concerns through the U.S. Embassy in Korea. The Ministry explained that there is no violation of the Korea-U.S. Free Trade Agreement (FTA) because the regulation does not discriminate between domestic and foreign operators based on nationality in terms of the scope and method of application.