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Mandatory In-App Purchases By Google, Apple Monopolises Mobile Application Market: Assemblywoman Jungmin Hong

Previously, Google announced their policy to expand the mandatory in-app purchase and 30 per cent commission fee that were previously only applicable to games to other digital content areas such as webtoons, music and e-books

Mandatory In-App Purchases By Google, Apple Monopolises Mobile Application Market: Assemblywoman Jungmin Hong

Outlook Start-Up Desk

POSTED ON April 27, 2023 3:23 PM

On 31 August 2021, South Korea passed the world's first ‘IAP Act’ that bans mandatory in-app purchases. Mandatory in-app purchase is a policy by Google and Apple, which monopolise the mobile application market, to force consumers to pay only through their payment systems. This policy has been criticised as unfair because it involves a commission fee of up to 30 per cent. In the meantime, Google announced their policy to expand the mandatory in-app purchase and 30 per cent commission fee that was previously only applicable to games to other digital content areas such as webtoons, music and e-books, and this is how South Korea’s legislation was made, to protect consumers and safeguard the application ecosystem from the big tech's monopolistic dominance

South Korea's IAP Act momentum began in July 2020, when Assemblywoman Jungmin Hong, a member of the Democratic Party of Korea (DPK), first introduced the ‘IAP Act (Amendment to the Telecommunications Business Act (TBA))’ to prevent app market operators from forcing certain payment methods.

The main content of the bill was to explicitly stipulate the responsibilities and obligations of app market operators, such as preventing them from registering mobile content containing illegal information and preventing them from entering into unfavorable contracts with mobile content developers by unfairly using their business superiority, in order to reduce the damages of the users and mobile content developers.

However, despite the passage of the Bill and the preparation of detailed rules such as the Enforcement Decree, app market operators' responses were lukewarm. Google changed its policy but still collected high fees by circumventing the law, and Apple still stuck to its previous IAP policy. This has not only increased the cost for the users but also harmed the creative capacity of the content ecosystem.

The situation in India is similar to that of Korea. According to the directive from the Competition Commission of India (CCI) released in October 2022,  Indian consumers were enabled to choose user-selected payments option in all apps and games starting in February on a pilot basis. However, according to the Alliance of Digital India Foundation (ADIF), a policy think tank focusing on Indian Digital start-ups, Google has merely reduced 4 per cent of the commission fee from a total of 30 per cent, still effectively discouraging external payments considering various expenses necessary for third-party payments. ADIF played a key role in challenging unfair practices by big techs to ensure that start-ups in India can compete on a level playing field and was instrumental in filing a complaint with the CCI against Google’s unfair practice of mandatory in-app purchases. In other words, the case of Google circumventing the regulation prepared by the government in order to promote the healthy development of the application market has occurred in India, as well as in Korea. It is likely that these cases will be repeated in other countries as well.

The application market is a single giant market where content is created by developers around the world and consumed by users around the world. The creation and growth of this market has been driven not only by platform monopolies but also by the participation of app developers, content creators and users. If this market is tainted by the big tech’s monopolistic dominance rather than a fair competing environment, app developers will lose the economic incentive to release new services to the market, consumers will be overwhelmed by the high costs and new industries like fintech will fall behind.

Therefore, a fair system that does not just awards the monopolistic platform operators, but also ensures the revitalisation of the application ecosystem and a just reward for all market participants for their contributions is needed. I believe the tyranny of the monopolistic platform operators can only be stopped if multiple countries worked together instead of individual countries putting in their respective efforts. 

All in all, I strongly support the work of ADIF in India to resist the dominance of platform monopolies and create alternatives and I invite all relevant stakeholders to join our effort to reach international cooperation in achieving the transnational goal of protecting the content ecosystem and consumers from the dominance of platform monopolies, by standing together with groups such as the Coalition of App Fairness (CAF) from the U.S. 

Contributed by: Assemblywoman Jungmin Hong, Korea

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