[W Forum] Challenges After the In-App Payment Act

Hyun Kyung Kim, Professor at the Graduate School of IT Policy, Seoul National University of Science and Technology

The so-called "Google Gapjil Prevention Act (Amendment to the Telecommunications Business Act)," which prohibits in-app payments that deprive application (app) developers of the choice of payment systems and force the use of the company's own payment system, passed the National Assembly on the 31st of last month. As the world's first legislation of its kind, there is heightened interest in its enforcement. Google will no longer be able to enforce its planned mandatory in-app payment system, at least in South Korea, starting next month. Apple has been forcing in-app payments for app transactions and charging a 30% commission, but going forward, app developers must be allowed to choose their payment methods.

For this law to be enforced in line with its legislative intent, the following points must be considered. First, such regulations should not be applied to general platform markets where market dominance is not clear. Under the Telecommunications Business Act, an "app market operator" refers to a business that provides value-added communication services by registering and selling mobile content and intermediating transactions so that users can purchase mobile content. Depending on interpretation, almost all transaction platforms such as webtoons, Coupang, Ably, and Naver Shopping could be considered app market operators. However, according to the legislative intent, an app is an application program (or software) developed to perform a specific task, and an app market is a service that reviews and registers such application programs so that general users can download them. To uphold fairness in platform markets, regulations should not be hastily extended to markets unrelated to this amendment.

Also, this law is not aimed at specific companies but regulates "acts of unfair use of transactional status." The reason why mandatory in-app payments are unfair is not because Google or Apple are app market operators, but because they have a superior transactional position that can exert unfair influence based on the vertical integration of the operating system and app market. In China, where more than 400 app markets compete, companies do not force their own in-app payments but support linking with WeChat Pay and Alipay for in-app payments, and in-app payment fees are known to be less than 1%. If app markets in South Korea also had fierce competition among various operators beyond just Google and Apple, there would be no reason to prohibit the business practices of specific companies.

The background of Google and Apple's dominant position is closely related to the dominant market share of their mobile operating systems (OS), Android and iOS, respectively. Google Android is installed on 85% of smartphones worldwide. Google has exercised unfair dominance by pre-installing its own apps using this. The spillover of Google's OS monopoly affects not only app markets but also search services, network access fees, and various value-added services and network policies. Although the enforcement of this Telecommunications Business Act prevents Google from exercising its Android dominance in the app market, the ripple effects should be closely monitored.

More fundamentally, it is time to consider mid- to long-term measures for moving away from Android. China's recent declaration of OS independence through "Hongmeng OS 2.0" is noteworthy. Of course, this is partly due to the increasing difficulty in procuring Google's Android OS amid escalating digital technology rivalry between the U.S. and China, but considering the markets that 5G, artificial intelligence (AI), and the Internet of Things (IoT) will create in the future, efforts toward moving away from Android?such as Samsung-Tizen, Tmax OS, Ministry of the Interior and Safety's Open OS, and the recent Hyundai-Naver collaboration?are commendable.

Kim Hyun-kyung, Professor, Graduate School of IT Policy, Seoul National University of Science and Technology