South Korea Intensifies Scrutiny of Apple and Google In-App Purchase Fees
South Korea is increasing pressure on Apple and Google regarding their in-app purchase (IAP) policies, with potential for significant financial repercussions for the tech giants and a shift in the global platform fee landscape. A collective mediation process initiated by domestic game companies, seeking refunds for excessive fees, is gaining momentum, and lawmakers are actively involved in questioning company executives.
Growing Calls for Fee Reductions
The core of the dispute centers around the 30% commission charged by both Apple and Google on in-app purchases made through their respective app stores, Google Play and the App Store. Korean game developers argue that this fee is excessive and stifles innovation, particularly for smaller companies. The Korea Mobile Game Association has likened the fee to a “platform toll tax,”1 with concerns that Apple’s additional VAT on top of the 30% fee effectively raises the burden to approximately 33%.
Mediation and Potential Refunds
Currently, 253 domestic game companies are participating in a collective mediation effort, requesting the return of funds collected above what they deem a fair commission rate – estimated to be between 4-6%.1 Internal Google documents revealed during the 2023 Epic Games v. Google antitrust lawsuit reportedly indicated a similar assessment of 4-6% as a competitive market standard.1
Damage assessments completed for 157 companies total $4.805 billion (approximately 7 trillion won) paid to Apple and Google over the past decade, with $1.411 billion (approximately 2.09 trillion won) identified as excessive.1 The potential refund amount is expected to increase as assessments are completed for the remaining 96 companies.
Government and Legislative Action
The Korean government implemented a law in March 2022 prohibiting app store operators from forcing developers to use their in-app payment systems.2 The National Assembly’s Science, ICT, Broadcasting and Communications Committee has summoned senior executives from both Google and Apple for questioning regarding their IAP policies.1 Specifically, Google Vice President Markham Erickson, Google Korea Country Director Kim Kyoung-hoon, and Apple Korea Vice President Ahn Cheol-hyun have been called to testify.1
Concerns extend beyond the commission rates themselves. Developers have highlighted issues with app store operation transparency, including unclear screening criteria and lengthy review delays.1 There are likewise worries that the fee burden is passed on to consumers through higher in-game prices.
Broader Antitrust Implications
The situation in South Korea mirrors broader global antitrust scrutiny of Apple and Google’s app store practices. Recent legal developments in the United States include a U.S. Court of Appeals affirming a jury verdict against Google for monopolizing Android app distribution and billing services.3 Apple has also faced legal challenges regarding its app store policies, with ongoing class action litigation and a recent Department of Justice lawsuit alleging anticompetitive conduct.3
Looking Ahead
The outcome of the mediation process in South Korea could have significant implications for global platform fee policies. The extent of participation from larger game companies will likely influence the negotiating power of the developers. Even as Apple has not yet committed to mediation, industry observers anticipate they may follow suit depending on the results of the Google negotiations. Given the potential for punitive damages in antitrust cases, both companies are expected to prioritize reaching a negotiated settlement.