Apple and Biden administration fail to stop South Korea's anti-Apple Tax law

Apple and the Biden administration has been lobbying South Korean lawmakers trying to stop an amendment to the Korean  Telecommunications Business Act which would force app stores, including Apple and Google, to give developers a free choice from payment providers in an app, allowing developers to bypass the 30% processing fee Apple and Google normally charges.

Those attempts now appear to have failed, as the bill has now been approved by South Korean legislatures, and is expected to be signed into law by President Moon Jae-in soon.

The law prohibits Apple and Google from preventing developers from using their own payment processor, and from unfairly delaying approval of the apps in the store; an anti-retaliation move. If the companies do not comply with the law they can be fined up to 3% of their South Korean revenue.

In a statement Google said:

“Just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store. We’ll reflect on how to comply with this law while maintaining a model that supports a high-quality operating system and app store, and we will share more in the coming weeks.”

It has recently been revealed that Google generated $11.2 billion in revenue and $8.5 billion in gross profit through the Play Store in the year 2019 from app sales, in-app purchases and revenue generated through ads on the Play Store. This is a profit margin of more than 60%.

In an earlier statement Apple said:

The proposed Telecommunications Business Act will put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases, and features like “Ask to Buy” and Parental Controls will become less effective. We believe user trust in App Store purchases will decrease as a result of this proposal—leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW8.55 trillion to date with Apple.

Both Google and Apple have recently cut their revenue share for smaller developers who generate less than $1 million in app store revenue, tacitly acknowledging that the companies have been skimming off monopoly profits for many years.

The policy is expected to be a prototype of what can be expected in other countries around the world, including the US and the EU, said Yoo Byung-joon, a professor of business at Seoul National University who researches digital commerce.

via the verge