Apple and Google should enable builders to make use of different fee methods, explains a brand new Korean regulation

South Korea has passed a law to prevent large platform owners like Google and Apple from restricting app developers to integrated payment systems, reports the Wall Street Journal. The bill is now due to be signed by President Moon Jae-in, whose party campaigned for the law.

The law is a blow to Google and Apple, both of which require in-app purchases to flow only through their systems and not through external payment processors, allowing the tech giants to get a 30 percent cut. If tech companies fail to comply with the new law, they face fines of up to 3 percent of their South Korean sales.

The bill is an amendment to South Korea’s Telecommunications Business Act and could have a huge impact on how Google’s Play Store and Apple’s App Store do business around the world. The South Korean National Assembly passed the law on Tuesday.

No company is happy about it

No company is happy about it. In a statement, Google defended its service fees, which “help keep Android free” and provide developers with “the tools and global platform to access billions of consumers around the world”.

“Just as it costs developers money to create an app, it costs us money to build and maintain an operating system and an app store,” said a Google spokesman. “We’re going to think about how we can comply with this law while maintaining a model that supports a high-quality operating system and app store, and we’ll share more about it in the coming weeks.”

An Apple representative did not immediately respond to a request for comment from The Verge. However, before the law was passed, the company sent the following statement.

The proposed Telecommunications Business Act will expose users who purchase digital goods from other sources to the risk of fraud, undermine their privacy, make it harder to manage their purchases and make features such as “ask to buy” and parental controls less effective. We believe this suggestion will reduce user confidence in App Store purchases – resulting in fewer opportunities for the 482,000+ registered developers in Korea who have earned more than KRW 8.55 trillion to date with Apple.

Lobbyists from the two companies have reportedly argued to American officials that Korean law is in violation of a trade agreement as it seeks to control the actions of US companies.

South Korea isn’t the only country trying to subdue American tech giants to its will. Russia is demanding that gadgets come pre-installed with apps from Russian developers, and Australia is looking into regulating services like Apple Pay and Google Pay. Some in the US government have even proposed laws similar to South Korea’s. The Wall Street Journal notes that South Korea’s new legislation may be quoted by regulators in other countries.

Both Apple and Google have attempted to block such actions by changing their store policies. Apple launched its App Store Small Business Program, which halved Apple’s cut of developers making less than $ 1 million a year in its store. It was also agreed that developers could inform their users about payment options outside of the app store by using the email addresses provided by the users. Google said it would use 15 percent of developers’ first million dollars instead of 30 percent.

Both Apple and Google faced legal challenges despite the changes, the most notable of which came from Epic Games. Epic argued that Apple and Google used their dominant positions to dictate what could and could not be done with their phones. While Epic’s argument against each company is different, they share the same core complaint: Apple and Google’s dominance of app stores. Both cases are still ongoing.

Update Aug. 31, 7:21 a.m. ET: Added new statement from Google.

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