Recently, Alphabet's Google announced intentions to enable third-party payment services in South Korea to cope with new legislation, signifying the very first time the US internet giant has changed its procurement policy for a particular nation.
Google's disclosure comes in response to a request from the Korea Communications Commission for Google and Apple Inc to submit compliance plans for the new rule, which prohibits large app store operators from compelling software engineers to use their payment systems. The main part of the new legislation came into effect in mid-September.
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What Caused This Move
The restriction is the first of its kind imposed by a major economy on companies like Apple and Google, which have received international criticism for demanding the use of customized payment methods that incur up to 30% fees.
In late August, South Korea's parliament passed an amendment to the Telecommunications Business Act, dubbed the "anti-Google law," prohibiting big app store operators like Google and Apple Inc (AAPL.O) from trying to force developers to use their payment services, effectively prohibiting them from trying to charge a commission on in-app purchases.
"We appreciate the National Assembly's judgment, and we're needing to share some adjustments to respond to this new legislation, along with giving developers who sell in-app digital products and services the option of adding an alternate solution in-app payment system alongside Google Play's billing system for their South Korean users," Google said in a statement.
Google’s Current Payment Model
Google, currently who charges programmers a 15% service charge for app distribution, said it would decrease this to 11% of customers who choose an alternative paying system, understanding that developers would incur expenses to operate their own billing system. It was uncertain how advantageous this would be for programmers.
Google also said that other charging systems may not provide the same level of security, payment alternatives, or functionality as Google Play's billing system.
According to the KCC, Google's plans will be executed this year and will solely pertain to South Korea.
"We were competent to hold Google's devotion to complying with the law," stated KCC Director Han Sang-hyuk. "I consider (Google) would achieve this system change in a way that shows the legislative purpose of the modernized legislation."
Apple’s Move
In October, Apple informed the South Korean authorities this was already in accordance with the current legislation and that its app store policy did not need to be changed.
The KCC said that it will request a new policy permitting more payment method autonomy from Apple's South Korean subsidiary. If Apple fails to comply, it will be subjected to procedures such as a fact-finding inquiry as a prelude to potential fines or other penalties.
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