SEOUL: South Korea's parliament on Tuesday (Aug 31) approved a Bill that bans major app store operators such as Google and Apple from forcing software developers to use their payment systems, effectively stopping them from charging commissions on in-app purchases.
It is the first such curb by a major economy on the likes of Apple and Alphabet's Google, which face global criticism for requiring the use of proprietary payment systems that charge commissions of up to 30 per cent.
The final vote was 180 in favour out of 188 attending to pass the amendment to the Telecommunications Business Act, dubbed the "Anti-Google law."
"We'll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store, and we will share more in the coming weeks," a Google spokesperson said in a statement to Reuters.
Google added Google Play provides far more than payment processing, and its service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world.
"It's a model that keeps device costs low for consumers and enables both platforms and developers to succeed financially. And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store."
Apple responded to an email reiterating a statement issued last week.
"We believe user trust in App Store purchases will decrease as a result of this proposal - leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW8.55 trillion to date with Apple," Apple said in a statement.
But the South Korean move raises the stakes for Apple and Google who face similar legislation in the United States that was introduced earlier this month by a bipartisan trio of senators.
"It's time the US follow suit to reduce Big Tech's app store influence. I urge Congress to swiftly pass my Bill with Senators Blumenthal and Klobuchar that will help ensure fair competition for innovative startups," said Senator Marsha Blackburn in a statement.
Based on South Korean parliament records, the amendment bans app store operators with dominant market positions from forcing payment systems on content providers and "inappropriately" delaying the review of, or deleting, mobile content from app markets.
It also allows the South Korean government to require an app market operator to "prevent damage to users and protect the rights and interests of users", probe app market operators, and mediate disputes regarding payment, cancellations or refunds in the app market.
"Today's historic action and bold leadership by South Korean lawmakers mark a monumental step in the fight for a fair app ecosystem. The legislation passed today by the Assembly will put an end to mandatory in-app purchase in South Korea, which will allow innovation, consumer choice, and competition to thrive in this market," a spokesperson at Match Group, which owns the popular dating app Tinder, said in a statement.
The Korea Internet Corporations Association, a nonprofit group representing Korean IT firms, also welcomed parliament's decision.
"We hope that the passage of this Bill will ensure the rights of creators and developers, and create a fair app ecosystem, where users can enjoy diverse contents at lower prices."
Apple on Thursday agreed to loosen App Store restrictions for small developers, allowing developers to promote payment options outside Apple's payment system.