South Korea is set to prohibit Google and Apple from charging software developers commissions on in-app purchases. South Korea will be the first major economy to do so. This will potentially jeopardize the tech giants’ lucrative revenue streams. On Tuesday, the legislature’s legislative and judiciary committee is set to approve an amendment to the Telecommunications Business Act.
The law prohibits app store owners with dominant market positions from forcing users to use specific payment systems. On Wednesday, there will be a final vote on the bill, if the committee approves it. Lawmakers in South Korea started raising the issue of the tech giants’ commission structure in the middle of last year.
Commissions are a large revenue source
According to a government study released last year, Google Play Store generated roughly 6 trillion won ($5.29 billion) in South Korea. Further, earlier this year, Google announced to lower the service fee it charges developers on its app store from 30% to 15% on the first $1 million they earn in revenue in a year. Apple has made similar moves. Earlier this month, a bipartisan group of senators in the United States filed a bill to regulate app stores run by the big tech. The Senators claim that tech companies like Apple and Google have too much market power.
In-app purchase commissions are a big component of Apple’s $53.8 billion services business. Additionally, they’re a big expense for some app developers. In May, the maker of the popular game “Fortnite” initiated an antitrust complaint against Apple. As per Fortnite, the game maker paid Apple $100 million in commissions over two years.
In India too, Indian startup players have united to explore an alliance and alternative to the Google Play Store. The government also introduced the Mobile Seva App Store, where business players will be able to list their applications, free of cost.