South Korea’s app store sandbox is worth a visit

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The WhatsApp and Facebook Messenger icons can be seen on an iPhone in Manchester, UK on March 27, 2017. REUTERS / Phil Noble

HONG KONG, Sept. 1 (Reuters Breakingviews) – South Korea’s new assault on large app stores is the antitrust version of a sandbox – a place where developers test new code without risking destroying the system as a whole. A new bill will allow local app developers to bypass the typical 30% sales commissions charged by Apple (AAPL.O) and Google. South Korea has some unique characteristics, but other countries should be watching to see if this benefits end users.

Historic legislation effectively says that Apple and Alphabet’s (GOOGL.O) subsidiary Google, which are already under regulatory control in their home country, the United States, can no longer enforce their payment systems on apps. distributed through their mobile stores. This means the pair won’t be able to take a slice of every South Korean in-app sale of extra lives in video game, music and video streaming subscriptions, and other digital offerings.

With South Korea’s population of only 52 million, or one ninth that of Europe, it would be a painful trend if it were repeated elsewhere: App Store revenue from Apple is expected to reach $ 21 billion this year, according to analysts at Bernstein. Meanwhile, the matchmaker Match (MTCH.O) laments that it spends nearly $ 500 million a year in such fees.

South Korea’s relative speed in targeting app stores is largely due to its burgeoning mobile industry, which quickly rallied to support the so-called anti-Google law. It helps make protecting local content, including Korean pop songs and video games, a national priority. When Google announced changes to its App Store billing policies last year, South Korean businesses hesitated. $ 63 billion web portal company Naver (035420.KS) and $ 60 billion Kakao (035720.KS), whose all-in-one messaging app has more than 46 million users in the countries, have lobbied other groups and startups for regulators to step in – paving the way for the latest legislation.

It’s hard to see the same momentum happening in Europe, which lacks large internet companies. In the United States, the dominance of Apple and Google has largely remained unchallenged, but they are then national champions, but with many detractors.

The real question is whether the South Korean bill does what antitrust regulation should do, offering better or cheaper services. Apple says its ecosystem of app stores protects users against data misuse and fraud. Google’s payment fees subsidize other services, like its free Android operating system. And there’s no guarantee that companies like Naver and Kakao will pass the cost savings they realize on to consumers. The South Korean experience is worth watching, but for now, an experience really is what it is.

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NEWS CONTEXT

– The South Korean parliament approved a bill on August 31 that prohibits major app store operators from forcing software developers to use their payment systems.

– This move effectively prevents Apple and Google from requiring the use of proprietary payment systems that charge commissions on in-app purchases of digital products of up to 30%.

– The bill also prohibits dominant app store operators from “inappropriately” delaying the review or removal of mobile content, and requires them to protect the rights and interests of users, according to Reuters.

– Alphabet subsidiary Google said it would “consider how to comply with this law” in a statement to Reuters. Apple said the week before that the bill would hurt user confidence in App Store purchases and developers.

– Google and Apple stores together distribute 88% of all available apps in South Korea, according to the Korea JoongAng Daily, citing a 2019 government study.

Editing by John Foley and Marjorie Backman

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