S. Korea cracks down on Apple, Google app store fees. Will U.S. follow?

After a global pushback against app store fees, Apple and Google's practice of forcing developers to use the tech companies' payment rails — at a rate of up to 30% of each transaction — will soon be illegal in South Korea.

U.S. legislators are considering a similar approach. Both tech giants have typically banned the use of other payment options on their app stores, and say their fees are necessary for the upkeep of their digital storefronts.

The South Korean National Assembly on Tuesday passed legislation that requires platforms such as Google and Apple to allow developers to use third parties for payment processing, making it economically untenable for Apple and Google to charge service fees for payments.

South Korean President Moon Jae-in's party supports the bill, which is an extension of South Korea's Telecommunications Business Act, so it will likely soon be signed into law. The measure includes a fine of up to 3% of an app store's revenue for noncompliance.

Apple did not return a request for comment. A Google spokesperson said: “Google Play provides far more than payment processing, and our service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world." Google's pricing covers the cost of building and supporting its operating system and app store, and the company will reflect on how to comply with the Korean law, the spokesperson said.

Bloomberg

Apple and Google face similar pressure elsewhere. In the U.S., Sens. Richard Blumenthal (D-Conn.) and Marsha Blackburn (R-Tenn.) have introduced the Open Markets Act, which would prevent Apple, Google and other large app stores from requiring use of their internal payment systems as a condition for inclusion on their platforms.

Apple and Google would additionally not be allowed to prevent developers from communicating with potential app users, making marketing potentially less expensive. The senators' offices did not return requests for comment.

At the state level, similar bills in Arizona, Georgia and Minnesota did not advance. The European Commission and regulators in the U.K. have also launched investigations into app store billing and payment practices at Apple and Google.

Amid the political pressure, Apple and Google have both made changes to their app store payment policies. Apple cut its payment fees to 15% for developers that earn less than $1 million on the app store; and Google reduced its cut to 15% for the developer's first $1 million in sales.

Epic Games, which operates Fortnite, sued Google and Apple over payment fees after Epic added its own payment system and got bounced from both app stores.

Apple and Google have used lobbyists to push back against the bills, contending the political pressure would disrupt the app store business models and make it harder to control their digital checkout processes. Google and Apple lobbyists told U.S. government officials the South Korean bill is in violation of trade policy because it tries to control U.S.-based companies, according to The New York Times.