The Peninsula

Korea Leads the Global Antitrust Challenge Against Digital Goliaths

*Since the below article was published, KakaoTalk decided to drop its challenge against Google’s control over in-app payments. However, Korea’s revised Telecommunications Business Act still sets the stage for future challenges with global ramifications.

Google suspended software updates for KakaoTalk, South Korea’s most popular mobile messaging app, after the latter refused the U.S. tech giant’s demand that all in-app purchases be made through its payment system. Simultaneously, Google’s demand directly violated South Korean law. The legal challenge that is likely ahead will shape the global digital services industry. While Korea is at the forefront of challenging the monopoly power wielded by a handful of big multinational companies, its lawmakers and companies are acting in concert with a surge of antitrust challenges put forward elsewhere around the world.

KakaoTalk’s decision to use its own in-app payment system was consistent with South Korea’s revised Telecommunications Business Act, which explicitly prohibits operators of app markets like Google and Apple from forcing mobile content providers to use specific payment methods. South Korean lawmakers drafted the revised law in 2021 after Google required apps on its platform to exclusively use its payment system, which charged a 30% commission.

Both South Korean lawmakers and KakaoTalk may be emboldened by Google’s recent offer to pay out USD 90 million to small app developers in the United States to settle a class-action lawsuit that claims that its in-app payment policies constituted a federal antitrust violation. Moreover, lawmakers in the United States and the European Union are considering adopting laws that would mandate mobile apps to be downloaded without going through a Google or Apple platform.

However, South Korea’s antitrust challenge is also risky as failure to force a change in its policies could result in hobbling the ambitions of companies like KakaoTalk to expand globally leveraging the country’s already-popular entertainment offerings.

Simultaneously, rewards for a successful resolution are also large. Breaking Google and Apple’s control over payments systems would create opportunities for domestic players to build in-app payments systems or even their own competing app market.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of  Jae Chang, Kaitlyn King, Yu Na Choi, and Mai Anna Pressley. Picture from the flickr account of  Byoung Wook