On August 31, 2021, South Korea’s National Assembly approved the amendments to the Telecommunications Business Act (전기통신사업법), which essentially imposes new restrictions and mechanisms of greater regulatory scrutiny over the operators of app markets (e.g., Apple’s ‘AppStore’ or Google’s ‘Play Store’). Hailed as the first successfully implemented measure against the giants operating global app markets, the new law – which Koreans informally call ‘Preventing Google’s Gapjil (갑질; abuse of power)’ – has drawn much attention.
The new law is not merely a one-off response to a pressing policy issue. Within the South Korean context, it points to the larger attempt by Seoul to exercise greater influence over global tech giants, which is a much bigger story than the amendments to the Telecommunications Business Act, and a scope that goes beyond South Korea, in a world where governments are trying to make sense of the new technologies and establishing governance frameworks on new issues related to the Fourth Industrial Revolution. Here, South Korea’s capacity to successfully introduce a potential ‘watershed’ or ‘landmark’ legislation is a relevant story for all.
So, what does the law do?
First, the law prohibits the operators of the app markets from leveraging their positions to force specific methods of payment to mobile content providers (i.e., app developers), or unfairly deleting or delaying the evaluation of mobile contents (Art. 50, 9-11). These provisions came into effect on September 14, 2021.
Further, the law specifies the responsibilities of app market operators to protect the rights of their consumers and empowers the minister of science and ICT and the Broadcasting and Communications Commission to conduct investigations about the app markets as needed for the protection of the consumers. These provisions will come into effect in March 2022.
Apple, Google, Anti-competition . . .
The new law is a huge blow to both Apple and Google, but a generally welcome news for the independent app developers, who have been paying around 30% fee for in-app payment processing. Essentially, Google and Apple had been saying that the provision of the platform is a costly business, and that they need to charge so that they can continue providing quality services to the content developers and, ultimately, consumers. Further, Apple and Google have emphasized that controlling payments for apps on their platforms is a critical tool for regulating the behaviours of the app developers.
The challenge in this context is that Apple and Google control such large shares of mobile app markets that app developers do not have the choice to leave these platforms and take their businesses somewhere else. In South Korea, for instance, and AppStore (2.6 trillion won) control more than 90% of the app market (10.66 trillion won). So, the policy discussions around this issue have been articulated as a matter of creating a fair market environment for the developers by curbing what have been accused of being anti-competitive practices by the global tech giants.
The introduction of the legislation was prompted by Google’s 2020 announcement that it would require all apps that charge their users to only use Google’s in-app payment system, instead of allowing the app developers to charge their users directly.
It was not just in South Korea where Google’s announcement prompted a response, which underscores the global element of the big tech problems. In the U.S., for instance, Apple’s infamous spat with Epic Games, which refused to comply with the in-app payment requirement and eventually had their product, Fornite, removed from the AppStore, underscored the anti-competitive behaviours of tech giants. In August 2021, senators Richard Blumenthal, Amy Klobuchar, and Marsha Blackburn sponsored a similar bill to the South Korean legislation, which would ban app market operators such as Apple or Google from forcing their own payment systems on app developers. Similar initiatives or discussions are taking place in Europe, Australia, and Japan as well.
Within South Korea there has been criticism from the conservative opposition, People Power Party, which has argued that this creates a regulatory framework that is too burdensome and highlighted the potential trade tensions with the United States, which has indeed expressed concerns about the law to the South Korean counterparts during the earlier legislative stages in 2020 through the U.S. Trade Representative (USTR). In addition, others have expressed concerns over the actual effectiveness of the legislation, which may not match the heightened expectations of the public.
However, the new law has generally been hailed as a watershed moment, and the South Korean media has highlighted the element of leadership that Seoul has shown in addressing a global issue as other leading jurisdictions around the world prepare similar responses. Further, the narrative within South Korea has taken up the language of gapjil by big tech, highlighting their “unjust” behaviours in a manner that alludes to a society that remains hypersensitive about the abuse of power in all levels of society.
There are also larger stories to take into consideration. At one level, the new law could be interpreted as Seoul’s attempt to curb the influence of the foreign tech companies in South Korea. In 2020, Seoul amended the Telecommunications Business Act (informally known as the ‘Netflix Law’) to have streaming companies such as Netflix or YouTube pay their fair share for profiting from the South Korean market and internet infrastructure, which entailed a discussion that had a strong nationalistic tone. Similarly, Apple and Google have been labeled as the ‘bad foreigners’ extracting from creative South Korean content makers within this case. In the latest showdown, the South Korean Fair Trade Commission also levied the fine of 207.4 billion won on Google for forcing the use of its version of the Android OS on manufacturers such as LG or Samsung by leveraging access to Play Store.
On the other hand, this might just be reflective of Seoul’s proclivities towards heavier regulations, accentuated by the new questions and challenges raised by the novelties of the digital world. For instance, Seoul introduced the infamous ‘real-name net law’ back in 2007, which required internet users to post with their real names to curb offensive comments and behaviours on the web (struck down by the Constitutional Court in 2012). More relevantly for this case, Seoul has been cracking down on start-ups despite its broader policy of promoting entrepreneurship. Tada, which was once the ‘Korean Uber,’ was shut down with an amendment to the Passenger Transport Service Act in 2020, a decision upheld by the Constitutional Court in June 2021.
There are additional proposals in Yeouido that target tech companies. The Broadcasting and Communications Commission is pushing for a legislation that would impose further regulations on platform services and establish a dispute resolution commission specializing on this issue, and the Fair Trade Commission has proposed to enforce more transparent practices with user agreements. Further, the South Korean tech giants, Naver and Kakao, are both in the crosshairs of regulators and politicians.
Big tech and platform economy regulation are issues that have provoked heated debates in the Western world as well, and advocates are pressing for prompt response to issues that range from taxation of global tech firms to Twitter or Facebook’s influence over public discourse. In this context, South Korea has definitely shown the agility and initiative in pushing forward the new law to curb anti-competitive behaviours of tech companies such as Apple and Google, and more broadly, addressing the challenges arising from new technologies.
If these efforts work, South Korea’s leadership could potentially benefit it in the long run, but these also have the potential to backfire. The more likely scenario, however, will see Seoul grappling and adjusting as they move forward. Again, this is a much bigger story than a single piece of legislation and Seoul’s movement on broader tech regulation will continue providing useful indicators and insights (either through their success or failure) on thorny new problems of relevance to other jurisdictions around the world.
Dongwoo Kim is a Contributing Author at the Korea Economic Institute of America and a J.D. candidate and Massey College Junior Fellow at the University of Toronto. The views expressed here are the author’s alone.
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