On 14 September, 2021, the proposed amendments to the Telecommunications Business Act (TBA) – more affectionately termed the “Anti-Google Law” – were enforced in South Korea. The proposal to amend the TBA was introduced in July 2020, following Google’s decision to impose its own in-app payment system (beyond that used by other mobile game apps) to all digital content on its Play Store, effective October 2021. Despite delays in the legislative process due to a lack of support for the amendments from the opposition party, the ruling party pushed through with the proposed amendments, citing the promotion of fair competition among participants in the app marketplace and acknowledging the request of digital content creators and app developers. The passage of the “Anti-Google Law” is expected to be a global benchmark, as other nations pursue similar moves.
Amendments of the Telecommunications Business Act
The amendments introducing new legislation prohibit app marketplaces like Apple and Google from unfairly using their bargaining positions to impose a particular payment system on content providers. Furthermore, the amended Act prohibits delaying the review of mobile content as a retaliatory measure against content providers which use different payment systems. In addition, the amendments require app marketplaces to state details of payment and refunds in the terms and conditions, as well as allowing the Ministry of Science and ICT (MSIT) and the Korea Communications Commission (KCC) to conduct investigations on the operation of app marketplaces to protect content providers.
The turf war between the KCC and Korea Fair Trade Commission (KFTC) was a factor for the delay. The contention between the KCC and KFTC on which body should be in charge of regulating online platforms, and the concern of overlapping regulations with the Monopoly Regulation and Fair Trade Act governed by the KFTC, delayed the amendments. As an eventual compromise, the original proposed articles, prohibiting app marketplaces that unfairly force mobile content to be registered in the app, or imposing unfair conditions and restrictions on content providers, were deleted.
The promulgation process took less than 15 days since the bill was transferred to the government on 3 September, 2021, in light of President Moon’s explicit support for the amendments. After the “Anti-Google Law” was passed at the plenary session of the National Assembly and transferred to the government, the Ministry of Government Legislation prepared a draft promulgation for the State Council’s consent and President’s approval. The main article of prohibiting a certain type of payment system was enacted as soon as the bill was promulgated, while other articles requiring the legislation of the enforcement decree will come into effect within six months of the promulgation. Upon the amendment’s enactment, the anticipated annual payment commission fee of approximately KRW 160 billion (USD 140 million) from non-gaming apps to Google is at risk.
Local sentiments on the amendment
The strong sentiment from local industry associations for digital content creators and providers was key in Korea becoming the first country to regulate app marketplaces. As the digital content industry is growing more than ever due to the effects of the pandemic, industry stakeholders have become more vocal about how app marketplaces determine the delivery of their content and access by consumers. According to the Mobile Internet Business Association’s survey of about 250 Korean app companies, approximately 95% of them use Google’s Play Store and 71.5% use Apple’s App After Google’s announcement to impose in-app payment on all digital content, the Korea Internet Corporations Association, mainly led by Naver and Kakao —two major local digital content providers — and the industry associations for web cartoons and novel writers, closely worked with the Science, ICT, Broadcasting, and Communications Committee. Stakeholders of local app marketplaces, like the One Store (owned by the three major mobile carriers and Naver), and the Galaxy Store of Samsung, are already celebrating the expansion of their app marketplaces.
Rather than viewing the recent events in South Korea through a simplistic lens of a crackdown on Big Tech, the recent amendment to the TBA in South Korea may instead be symptomatic of governments’ focus on regulating gatekeepers and its delivery to the public. Apple and Google’s imposition of a 30% commission rate on in-app payments through their app marketplaces is not new, nor the catalyst for the passage of the “Anti-Google Law”. Game and app developers have long accepted this rate, as app marketplaces have proved a safe means to provide content to end users until a few years ago. In China, Huawei reportedly charges a 50% commission rate, but the government has not made any move to regulate this thus far. Despite Apple and Google having more than a 90% share of the market through their app marketplaces, the recent policy interventions in South Korea signals that it is not simply a matter of market dominance but what businesses do with their market dominance.
Regulators are increasingly scrutinizing the behaviours of gatekeepers of digital content in terms of how they manage and curate the way consumers access digital content. This is in line with the recent passage of a media law in Australia, which requires digital platforms to pay local media for news content in February 2021, as well as the Japan Fair Trade Commission’s agreement with Apple to allow external links for account setup and management. And regulators across the region are generally welcoming this tipping point in South Korea. According to reports, the Competition Commission of India will open an investigation into Apple for the same issue, while the Australian Competition and Consumer Commission has also noted the possibility of considering similar measures depending on a broader regional push.[3] The efforts to mould gatekeepers’ behaviours can be witnessed not just in Asia, but also in the US, where the Open App Markets Act was introduced last month. Alongside the regional push, the passage of the “Anti-Google Law” will also encourage a push for platform regulation in South Korea, where there are already various acts proposed to control online platforms and protect end users.
The potential for increased scrutiny of gatekeepers, whether it be a local or foreign entity, also exists. After the passage of the amendments to the TBA, the ruling party’s National Assembly members pointed out how local gatekeepers shall also consider adjusting their behaviours to address digital content creators’ concerns. The impact is already evident from Kakao and Naver’s share prices plummeting after the ruling party leader cautioned Kakao against ignoring fair competition. It was also caused by the financial authorities’ regulation of Kakao Pay and Naver Financial, which required them to be registered as brokerages by the end of September, pursuant to the Act on the Protection of Financial Consumers. With a presidential election scheduled next year, the ruling party will continue tightening its oversight of gatekeepers of the tech industry. Amid these increasing pressures within and outside South Korea, it now depends on whether and how the gatekeepers take the initiative to adjust their behaviours to starve off the calls for tighter regulatory measures, including (but not limited to) a wider Big Tech crackdown.
References
[1] https://www.moiba.or.kr/mobile/bbs/info p.11 of the ‘Investigation Report on the Business Status and Countermeasures Following Google’s In-App Payment Policy Change’ by the Mobile Internet Business Association (MOIBA).
[2] https://www.moiba.or.kr/mobile/bbs/info p.3 of the ‘Investigation Report on the Business Status and Countermeasures Following Google’s In-App Payment Policy Change’ by the Mobile Internet Business Association (MOIBA)
[3] https://www.theguardian.com/technology/2021/aug/19/australian-watchdog-considers-regulating-apple-and-google-to-boost-app-store-competition
