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Press Note | ADIF's Letter to South Korean Ministry on the Proposed Revision to the Telecommunications Business Act
South Korean National Assembly moves closer to pass a law restricting App Stores’ abuse of dominance in In-app purchases
ADIF extends support to South Korea’s proposed revision to the Telecommunications Business Act
ADIF recommends similar provision in Indian context to protect app developers from abusive practices of BigTechs
In an attempt to rein in app stores from abuse practices of high fees for In-app purchases (IAP), Korean’s parliamentary committee in charge of science, technology and communications policies passed an amendment to Telecommunications Business Act on July 20, 2021. With Korean National Assembly passing the amendment in its next session, Korea would become the first country in the world to pull the much-required strings against tech supergiants, which are enforcing IAP upon app developers. This is a major step to counter app marketplaces from owning all in-app transactions and charging an unfairly high commission on all in-app purchases. This will usher a new precedent globally and will push other nations to follow suit. The main provisions of the amendment are focused at:
Prohibiting app stores to force the app developers to use a specific payment method.
Prohibiting app stores from wrongfully delaying the evaluation/registration of apps.
Prohibiting app stores from unfairly deleting contents from the app market.
The move is being seen as a response to the predatory practices of global tech giants like Google and Apple Inc. The law would give app developers the right to use in-app payment services other than those offered by app stores.
Globally, Apple and Google control more than 95 percent of the app store market share through iOS and Android, respectively. The abuse of dominance by these market leaders through high margin rate of 30% in IAP is a concern globally. Though many start-ups have been able to reach global audiences due to these market service providers, it is hard to comply if Google and Apple deliberate higher fees or refuses to list created content. Due to this, Match Group, Spotify, Epic Games, and others are in against the battle against Google and Apple in the U.S. The House Judiciary Antitrust Subcommittee has also passed 5 sets of legislations dealing in the antitrust practices of these BigTechs.
These concerns are relevant from Indian perspective too. In 2021, Google announced updating Terms & Conditions for its Play Store which would require all apps to route their revenues through the Google Play Store and pay a 30% fee to Google (15% on first $1M (USD) of annual revenue). These changes make Google’s Play Store operations on lines of Apple’s App Store, wherein apps will be individually reviewed for content, security. This is similar to Korea’s concerns, where the proposed legislation provides app developers a relief by prohibiting app store’s unwarranted scrutiny in evaluating an app and not mandating payment from their own payment methods only.
The proposed amendment in South Korean Telecommunication Business Act could be a lifeline for all startups in general and Indian startups in particular. Alliance of Digital India Foundation (ADIF), a voice of the start-up sector of India, has come out in full support of the move and has sent a communication to Science, ICT, Broadcasting and Communication Committee, South Korea applauding the proposed amendment. The Indian startup community has united against this unfair practise and several representations have been made by the Indian startups to the Indian Government against this anti-competitive practise of Big Tech companies. This is a major step to counter app marketplaces from owning all in-app transactions and charging an unfairly high commission on all in-app purchases. This could be a lifeline for Indian startups who have a business model based on subscription feature. Previously, the developers could communicate with users on alternative purchase options, but only outside of the app: via email marketing and other channels outside of the app to provide subscription offers and even special pricing. However, this was bound to impact the user experience and create friction, because instead of allowing customers to make an in-app payment, companies were forced to send payment communication through e-mail.
ADIF believes that this initiative by South Korea may become the standard which will be followed in other countries including India, so that the anti-competitive practise of Big Tech can be curtailed and startups can fight on a level footing with Big Players.
Sh. Ajay Data, Secretary General, ADIF stated, “The proposed amendment to Telecommunications Business Act which would give app developers the right to use in-app payment services other than those offered by app stores, is the need of the hour and we hope that similar practice may be followed in other countries including India to enable Indian startups compete on a level footing with Big Tech players”