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South Korea's new law is the first to dent Google and Apple's app store payments dominance

Wednesday, September 1, 2021 by Robinhood Snacks | Disclosures
"Provide alternative payment method" [Yuri_Arcurs/E+ via GettyImages]

"Provide alternative payment method" [Yuri_Arcurs/E+ via GettyImages]

Doing some Seoul searching... Big Tech. Yesterday, South Korea passed the first law in the world to dent Apple and Google's dominance over app store transactions. Quick refresher: Apple and Google typically take a ~30% cut of in-app purchases, downloads, and subs. Those in-app purchases must flow through Apple/Google's own payment systems. Now…

  • Not just Apple and Google Pay: South Korea will require the tech giants to allow payment systems from other payment processors and developers.
  • That threatens the 30% "App Tax" that Apple/Google collect. If they don't comply, the tech giants could be fined up to 3% of their South Korea revenue.

BRB, going app shopping... Don't sprain a finger. Apple says its current app store policies help protect user safety. But given recent scrutiny, the Fruit halved its 30% fee for developers earning less than $1M/year, and Google said it would only take 15% of developers' first $1M. This South Korean law is the biggest threat so far to their app store dominance — but it's not the first.

  • Fortnite-maker Epic Games added its own in-app payment system to bypass the "App Tax." Apple and Google responded by expelling Fortnite from their app stores, leading to the ongoing Epic trial saga.
  • Last month, a bipartisan group of US Senators proposed legislation similar to South Korea's. In June, a House Committee approved major legislation to curb Big Tech's dominance. Meanwhile, Australia is considering new regulations for Apple/Google Pay.
THE TAKEAWAY

Precedent is powerful... This South Korean law and its impact could be referenced by regulators in other countries to curb Apple and Google's dominance. Regulators will be watching to see how South Korea’s law pans out. For example: if it results in more fraud, as Apple has warned. Either way, Apple and Google’s app store payments dominance is no longer absolute.