Korea's National Assembly questions Apple and Google executives about fees for in-app purchases

Google Korea Country Director Kim Kyoung-hoon (left) takes the oath during a review by the National Assembly on October 21, 2022 in Seoul. Second from right is Apple Korea Vice President Ahn Cheol-hyun. Korea Times file

The chances of big tech companies changing their fee policies remain slim

By Nam Hyun-woo

The National Assembly's Science, ICT, Broadcasting and Communications Committee will invite senior executives from Google and Apple to question them about their policies regarding the 30 percent fee for in-app purchases, a practice used by the Korean government has been struggling for years.

According to the committee, Google Vice President Markham Erickson, Google Korea Country Director Kim Kyoung-hoon and Apple Korea Vice President Ahn Cheol-hyun have been called as witnesses for the committee's review of relevant government agencies, which will begin on Monday.

Kim and Apple Korea CEO Peter Denwood are also on the list of witnesses called to a separate review by the assembly's National Policy Committee.

Lawmakers are expected to question them on several issues related to their business practices in Korea, including fees for in-app purchases.

Google and Apple app store logos / Korea Times file

Google and Apple receive a 30 percent commission from in-app purchases, thereby leveraging their dominant market position on Google Play and the App Store. According to the Korea Industry Forum, the costs incurred by Korean gaming companies due to in-app payment fees charged by these platforms will be approximately 9 trillion won ($7.9 billion) from 2020 to 2023.

To curb such practices, the Korean government passed a law in March 2022 that prohibits app store operators from forcing developers to use their in-app payment systems. This law received international attention as the first regulation of its kind in the world.

Because the law aims to force developers to use certain in-app payment systems, Google and Apple have circumvented the law by allowing third-party payment systems while charging fees of up to 27 percent, citing privacy protections .

The Korea Communications Commission (KCC), which oversees the country's internet service companies, warned Google and Apple on October 6, 2023 that they would be fined a total of 68 billion won – 47.5 billion won for Google and 20.5 billion won for Apple – for Violating the law.

However, this was only a warning and the fines will be finalized after the KCC hears companies' responses to its decision and completes other review processes. Both Google and Apple immediately lodged objections with the KCC, and the agency has been reviewing them for a year.

Explaining the reasons for the extended review, Lee Jin-sook, then a candidate for KCC chairman, said during her confirmation hearing in July: “The review is in its final stages and the KCC is still considering Google's appeal, since the company has filed long-term declarations.”

Acting Chairman of the Korea Communications Commission Kim Tae-kyu attends a news conference at the commission's headquarters in Gwacheon, Gyeonggi province, Aug. 30. Yonhap

However, it remains uncertain whether the KCC will finalize its fines against Google and Apple in the near future.

The Commission has been mired in political conflict over the ideological fairness of the KCC for over a year and has been paralyzed. The chairwoman is currently suspended from her position due to ongoing impeachment proceedings. The seven-member commission now has just one member, acting chairwoman Kim Tae-kyu.

The outlook is also pessimistic regarding the question of whether the executives from Google and Apple who were invited to the audits will appear at the meeting. The country's law requires people summoned as witnesses to an audit of the assembly to appear in person unless they have “justified reasons” for their absence, which must be formally documented.

If a witness fails to appear without a valid reason, he or she could face up to five years in prison or a fine of between 10 and 50 million won. However, this usually results in fines, with business tycoons, corporate owners and other influential figures in many cases choosing to pay fines rather than appear for exams.

Another reason for concern is possible “retaliation” from Google or Apple. In 2022, Korean internet services company Kakao planned to launch a third-party payment system a month after the law took effect, but withdrew its plan in July of the same year after Google pressured Kakao by restricting updates to the Kakao Talk app.

“In December last year, the US determined that Google’s collection of the 30 percent fee was unlawful. However, Korean companies cannot even count on government protections and remain reluctant to take legal action against Google and Apple for fear of retaliation,” Citizens' Coalition for Economic Justice, a citizens group, said in a statement.

“We call on domestic game studios and other app developers to participate in class action lawsuits in the US before it is too late.” The assembly should also consider introducing punitive compensation measures, and the government must ensure effective enforcement measures against large technology companies .”