Apple and Google mobile dominance faces tough test in South Korea

[SEOUL]

SOUTH Korea is expected to become the first country to pass a law ending Apple and Google's domination of payments on their mobile platforms, setting a potentially radical precedent for their lucrative app store operations everywhere from India to the US.

Apple Inc and Alphabet Inc's Google, the effective duopoly controlling most of the world's smartphones, face a raft of legislative measures in the US, rebuking their "gatekeeper control" and urging a curb on their power to dictate terms on app marketplaces. Both charge a fee of typically 30 per cent on purchases made through their stores and exclude alternative payment handlers, arguing this protects users from fraud and privacy invasion.

Now, Korea's government is taking direct action to end that dominance. The Telecommunications Business Act will mandate giving users a free choice of app payment providers. The bill, which is almost certain to pass an assembly vote given the ruling party's super-majority, opens the door for companies like Fortnite maker Epic Games Inc to transact directly with users and bypass the platform owner's charges. Epic has taken the iOS and Android owners to court in various jurisdictions arguing their fees are unfair.

The bill, originally slated for a vote on Monday, was delayed by other legislation and will now go before lawmakers at a future plenary session to be determined.

"This could presage similar actions elsewhere," said Omdia analyst Guillermo Escofet, who specialises in digital consumer platforms. "Regulators, lawmakers and litigators in North America and Europe are also scrutinising app-store billing rules, and the overriding political mood has become hostile to the enormous amount of power concentrated in the hands of the tech giants."

Korean lawmakers are making their move ahead of plans by Google to introduce its 30 per cent commission fee in October, reversing a years-long exemption for the country. Its announcement last year it would make its payment system mandatory for non-gaming apps is widely seen as the trigger for the new legislation - dubbed locally the anti-Google law.

The controversy over commissions goes to the heart of how Apple and Google sustain a dominance that has endured since the start of the global smartphone era over a decade ago. Apple settled a wide-ranging class-action lawsuit with US app makers last week, but without agreeing to major changes to its policies.

The revenue streams in question are central to profit growth for both Apple and Google. The iPhone maker's App Store feeds broader efforts to grow income from services and subscriptions, producing around US$20 billion annually, according to Sensor Tower. Google's Android is booming in user numbers as India's population gets online with the help of mobile devices, and app fees are a key way the company monetises its otherwise free software.

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