Even Apple Lowered Its Fees... Google Feels Awkward

[Asia Economy reporters Seulgina Jo and Hanjinju] Apple’s sudden announcement to reduce its commission fees starting January 1 next year has left Google, which had been pushing for commission fee increases under the logic of "Apple is doing it too," in an awkward position. With Apple proactively changing its stance, Google has lost its justification altogether. The so-called ‘Google Abuse Prevention Act (Amendment to the Telecommunications Business Act),’ which has been at a deadlock in the National Assembly’s Science, ICT, Broadcasting and Communications Committee, is also expected to reach a new turning point.

◆Google loses justification amid Apple’s 'commission fee reduction'

On the 19th, domestic app developers and content creators welcomed Apple’s app commission fee reduction policy revealed the previous night, stating, “Since Apple has actively stepped up amid the app ecosystem crisis caused by COVID-19, Google must also make a decisive move.”

Apple’s newly announced support program for small and medium developers includes lowering the paid and in-app purchase commission fees from 30% to 15% starting January 1 next year. The program applies to developers whose app revenue, excluding App Store commissions, was $1 million (approximately 1.1 billion KRW) or less last year. A representative of a content startup said, “Recently, the cost of in-app keyword advertising has increased significantly, so I was considering reducing development resources, but the commission fee reduction is very welcome news.”

Apple particularly cited “a decision for the app ecosystem” as the background for this support program. It explained that Apple is stepping up to support the app ecosystem, which is striving for innovation despite the unprecedented global economic crisis caused by COVID-19. Currently, 1.8 million apps developed in various countries worldwide are traded on the Apple App Store. It is estimated that the majority of these apps generate less than $1 million in revenue and will be eligible for this commission fee reduction.

This is in stark contrast to Google, which has announced an increase in commission fees starting next year. Google declared that from January 20 next year, it will enforce in-app payments on its app market, Google Play, and take a 30% commission fee.

Now, industry attention is focused on Google. With Apple, which had maintained a 30% in-app payment and commission fee policy since its launch in 2008, stepping back, there are predictions that Google will eventually follow suit and reduce its commission fees.

Kim Jaehwan, Director of the Korea Internet Corporations Association, pointed out, “This shows that the 30% commission fee is not an immutable truth.” There are also continuous criticisms that Google has lost its justification for following the logic of “following other app market operators (Apple).” The native app store One Store abolished mandatory in-app payments and reduced commission fees earlier in July 2018. Regarding this, Google stated, “Nothing has been decided yet.”

*The number of Apple app fees within the table is based on the criteria before the announcement of the Small and Medium Developer Support Program.

◆Google claims only 100 apps affected? Industry refutes, saying "there are more"

One of Google’s reasons for insisting that its commission fee increase policy is not problematic, which sparked controversy over legal amendments in Korea, is that only 1%, about 100 apps, will be affected by this policy change. However, the industry argues that this explanation has not been specifically verified.

Kim Hyungyu, Vice Chairman of the Korea Mobile Game Association, pointed out at a public hearing, “It will be much more than 100.” He argued, “Google monopolizes this market except for the Apple Store, and in a structure where developers bear all marketing and operational costs besides the commission fee, a 30% platform commission fee is excessive.”

It is estimated that more than 100,000 creators are engaged in app-related fields where price increases are inevitable, such as music and webtoons. Given the platform’s characteristic of distributing revenue at a fixed rate, a decrease in creators’ income and an increase in content prices are inevitable.

The Korea Creative Story Writers Association expressed concern, saying, “If Google abuses its global market dominance and forcibly takes a 30% commission fee in the future, the fruits of creators’ hard work and sweat will go entirely to Google, which has not contributed at all,” adding, “We fear that Korea’s digital content industry may become a mere money-making tool for global giant platforms like Google.”

The Korea Internet Corporations Association is concerned that if Google enforces its app toll policy, domestic mobile content sales could decrease by more than 3 trillion KRW. The day before, Kakao CEO Cho Sooyong also strongly criticized Google’s enforcement of a specific payment method as problematic.

◆Will the ‘Google Abuse Prevention Act’ at a deadlock gain momentum again?

The Google Abuse Prevention Act, whose passage within this year had become uncertain, has reached a new turning point due to Apple’s commission fee reduction. The ruling party in the National Assembly’s Science, ICT, Broadcasting and Communications Committee aims to pass the Google Abuse Prevention Act by the plenary session on the 26th, as Google’s in-app payment enforcement is scheduled for January 20 next year.

Currently, the ruling party has proposed referring the Google Abuse Prevention Act to the Agenda Adjustment Committee as the ruling and opposition parties remain at an impasse over its passage. According to the National Assembly Act, if there is a need to reconcile differences on an agenda, an Agenda Adjustment Committee can be formed upon the request of more than one-third of the total members and can deliberate for up to 90 days.

This is because the opposition party, which had agreed on the passage of the Google Abuse Prevention Act even during the National Assembly audit period just over a month ago, suddenly put the brakes recently, saying “sufficient review is necessary.” There are suspicions that lobbying from the U.S. embassy and major law firms was behind this. A ruling party official in the Science, ICT, Broadcasting and Communications Committee pointed out, “Despite more than six related bills being submitted, no discussions have taken place,” adding, “If it is difficult to reconcile differences, the bill should be referred to the Agenda Adjustment Committee.”

◆In-app payment issues remain... concerns over potential loopholes

Some voices argue that Apple’s support program focuses only on commission fee reduction, and concerns over unfair practices such as forced in-app payments remain. One official expressed concern, saying, “Even if the Google Abuse Prevention Act passes, Google has many ways to compensate for related revenue.” The earlier mention of changing business models if the law passes during the National Assembly audit was also interpreted as a warning to the industry.

However, since the U.S. Congress is also sharpening its scrutiny of antitrust practices by app market giants like Google and Apple, it is expected that related offensives will continue globally.

Additionally, there are concerns that loopholes such as app splitting to meet Apple’s $1 million commission fee threshold may arise. An industry insider said, “When commission fees are reduced, there tends to be a change in the corresponding revenue model, and phenomena like app splitting to meet the $1 million threshold may occur, causing a concentration effect due to the commission fee reduction.”

This content was produced with the assistance of AI translation services.