Controversy Over Mandatory In-App Payments: Resolved in Korea but 'Steep Challenges' Remain in the US

Korea Passes World's First Google Abuse Prevention Law
But US Courts Rule Favorably for Apple and Google
Forbes: "No Winner Decided Yet"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] "It has set a precedent that will bring significant changes to the App Store business, a major revenue source for Apple and Google."

On the 31st of last month, the so-called 'Google Gapjil Prevention Act,' which fundamentally blocks the mandatory enforcement of in-app payments (a method that forces payment for paid content only through an internal payment system) by big tech companies, passed the National Assembly, marking the first such legislation in the world. Bloomberg News evaluated it this way.

Until now, the issue of major platform companies like Apple and Google forcing users and developers to use their own in-app payment systems has been a "hot potato" that intensified the monopoly controversy surrounding big tech companies.

The U.S. authorities have already considered the in-app payment issue of these companies as an abuse of market dominance and anti-competitive behavior, filing antitrust lawsuits. The European Union (EU) has also officially launched antitrust investigations into Google and Apple, declaring that resolving the in-app payment issue will be a top priority.

Amid this, there is speculation that Korea's passage of the world's first law banning mandatory in-app payments will trigger a chain reaction in other countries.

Daniel Ives of Wedbush Securities said in an interview with CNBC, "(The passage of Korea's Google Gapjil Prevention Act) is a significant turning point," adding, "It shows real action, not just words, and will cause a ripple effect in neighboring countries."

Although Korea has taken a proactive stance in resolving the in-app payment controversy, concerns are being raised that the process of resolving these issues in the U.S., the home country of Apple and Google, will not be easy.

These concerns became clearer on the 10th during the antitrust lawsuit between Epic Games, the U.S. game company famous for 'Fortnite,' and Apple.

Last year, Epic Games filed a lawsuit against Apple, arguing that Apple's mandatory in-app payment system, which charges a 30% commission on payment amounts, was excessive.

Regarding this, on the 10th when the first trial verdict was delivered, the court ordered Apple to allow app developers to guide consumers to use payment systems other than Apple's in-app payment system.

Team Sweeney Epic Games CEO
Photo by Reuters Yonhap News

The problem is that the court did not take issue with the 30% commission Apple collects from developers through mandatory in-app payments. In the ruling, the court stated that Apple did not engage in monopolistic behavior in the mobile ecosystem and ordered Epic Games, which used its own payment system instead of Apple's in-app payment system, to compensate Apple for damages.

Valerie Williams, a lawyer at the U.S. law firm Alston & Bird, evaluated, "This ruling brought a very favorable outcome for Google and Apple in antitrust lawsuits against big tech."

In fact, immediately after the ruling, the defendant Apple stated, "We are very satisfied with this ruling," while Epic Games CEO Tim Sweeney criticized, "Today's ruling is a loss for consumers and developers."

A notable aspect of the ruling was that the court largely represented Apple's position. The court emphasized that Apple operates a single App Store on its operating system, stating, "Apple filters illegal content and enhances security." The court further stated, "If a ruling is made to change Apple's in-app payment policy, it will threaten the enhanced security system and centralized app ecosystem provided by Apple."

Additionally, the court ruled that "the 30% commission rate was determined independently when the App Store was first created, not as a result of abuse of market dominance," concluding that Apple's actions were not monopolistic.

In other words, the court acknowledged the security enhancement justification Apple and Google have used to enforce mandatory in-app payments and clarified that the 30% commission rate was not intended as an abuse of market dominance.

Especially unlike Apple, Google's mobile operating system Android allows apps to be installed through routes other than its own app marketplace, the Play Store, leading to expectations that Google has effectively gained the upper hand.

Since the court has already sided with Apple, which operates a monopolistic App Store, the possibility of a favorable ruling for Google has increased.

Unlike Korea, where related legislation has already passed, the legislative process surrounding the in-app payment issue in the U.S. is sluggish, and with rulings favoring Apple and Google, the in-app payment controversy is expected to be prolonged.

Forbes diagnosed, "There is no clear winner yet in the lawsuit between app developers and Apple over the in-app payment issue," adding, "The damage to Apple from the lawsuit with Epic Games will be minimal."