Korean telecom regulator considers W68b in fines on Google, Apple for violating in-app payment laws

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South Korea's telecommunications watchdog said on Friday it seeks to slap up to 68 billion won ($50.4 million) in combined fines on US tech giants Google and Apple for violating the country's in-app payment laws.

The move came after the Korea Communications Commission launched a probe into Google Play and App Store in August 2022 for forcing local app developers to use specific in-app payment methods and causing unfair delays in the review of local apps.

The commission called on the companies to implement corrective measures and will deliberate whether to impose a fine of 47.5 billion won on Google and 20.5 billion won on Apple under the country’s revised Telecommunications Business Act.

“The latest corrective measures are significant in that they create a healthy environment in the app market by severely punishing large platform operators for unfairly abusing their dominant position, while contributing to establishing a fair and open mobile ecosystem here,” a KCC official said.

The National Assembly passed a bill that bans app store operators from forcing in-app payment systems on developers in August 2021. South Korea became the first country in the world to introduce such legislation to promote fair competition in the app market.

The new rules have allowed developers to use third-party payment options for their in-app purchases. Both Google and Apple agreed to adhere to these rules in November 2021 and January 2022, respectively, while providing a 4 percent discount on app store fees for using alternative payment operators. However, they ultimately ended up breaching the country's in-app payment law.

Additionally, the KCC judged Apple's charging of fees only to domestic app developers under its policy to be discriminatory.

The telecom watchdog plans to finalize the amount of fines within this year after listening to the tech giants’ opinions and going through its deliberation procedures.

“Since app market operators unfairly using their status to force (developers) to use certain payment methods can harm the overall mobile ecosystem, we plan to create a healthy app ecosystem and ensure users' practical choices through strict law enforcement,” a KCC official said.

Later in the day, both Google and Apple released a statement, respectively, refuting the commission's probe results.

Google said it will decide on its next move after the regulator comes up with its final decision later this year.

The firm claimed that it has worked closely with the KCC since the beginning of the regulator's fact-finding investigation in August 2022 to explain how the company is complying with the new law whilst ensuring alternative billing options.

"What the KCC has shared today is the 'pre-notice' and we'll carefully review and submit our response. Once the final written decision is shared with us, we will carefully review it to evaluate the next course of action," the Google statement read.

Apple also said that it "disagrees" with the conclusions made by the KCC, adding that the App Store has complied with the Korea's Telecommunications Business Act.

“Apple has a great deal of respect for Korea’s laws and a strong history of collaboration with the country’s talented app developers, having helped build a vibrant local app ecosystem in the country that supports more than 18,000 developers with tools, resources, access to 175 storefronts globally, and a newly-opened Apple Developer Academy in Pohang. ... We will continue to engage with the KCC to share our views."

By Jie Ye-eun(yeeun@heraldcorp.com)