The Peninsula

Lawmakers look to create space for competitors

What Happened

• Last September, Google sought to force all apps downloaded from Google Play Store to use its billing system.
• Mounting criticism from app developers prompted Google to lower its commission rate for its billing system from 30% to 15% for app developers whose annual sales amount to less than USD 1 million.
• Recently, Democratic Party (DP) lawmakers pushed ahead with legislation to remove Google’s ability to impose its billing system on all app developers on its mobile Android operating system.

Implications: South Korea’s policy towards the digital industry aims to create space for new potential higher-value entrants in the market. DP lawmakers’ refusal to accept Google’s offer to lower its commission for in-app purchases suggest their goal goes beyond simply addressing domestic app companies’ complaint of their shrinking profit margins. Instead, DP lawmakers appear focused on preventing Google from using its existing market share to maintain control of the digital distribution space. If the lawmakers succeed, South Korea’s domestic internet companies may be better incentivized to create indigenous app distribution platforms like ONE store. Industry observers attribute the existing concentration of users on Google Play to ONE store’s struggle to convince game companies to adopt their new platform.

Context: Google has been embroiled in U.S. Department of Justice (DOJ) antitrust lawsuits for allegedly muscling out the competition. It is facing at least 3 major antitrust bills in the Google-dominated areas of web search, digital advertising, and smartphone software. In particular, the ban on displaying the company’s own products ahead of a competitors’ (“self-preferencing”) could impact Google’s Play Store. Google has been accused of using its dominant market share in mobile operating systems to advance its own apps like Google Maps. 36 states and Washington, DC have also joined the antitrust lawsuits against Google’s policy of charging a 30% commission rate for purchases on Google Play Store. Last year, makers of the popular game Fortnite also filed a lawsuit against Google when the internet company removed the game after it added an option for users to make direct purchases without using the Google platform. Echoing complaints in South Korea, the game maker alleged that Google’s payment restrictions were a monopoly.

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 Sean Blanco, Marina Dickson, and Jina Park. Picture from the flickr account of  Byoung Wook