U.S. Regulators Impose $60 Million Fine on Google and Apple for Payment Practices

The Broadcasting and Communications Commission has determined that Google and Apple have abused their dominant positions in the Play Store and App Store by forcing app developers to use in-app payments.

While they do allow third-party payment methods, they impose a hefty 26% commission on those options and restrict access to key features, such as subscription management, when using their own in-app payment systems, effectively coercing developers.

In addition to excluding payment processing fees, they have imposed unfavorable conditions on app developers without considering the costs of building payment systems and settling fees. Google has limited the display of fees by payment method, while Apple has imposed unreasonable conditions, such as requiring separate app submissions.

Both companies have also failed to provide specific reasons for delays in app reviews and have not responded clearly to individual inquiries from developers.

Apple has charged discriminatory fees, applying a 30% commission based on the supply price excluding value-added tax for foreign app developers, while domestic developers are charged 30% based on the consumer price that includes VAT, resulting in higher fees. The commission deemed this practice as "unfairly discriminatory compared to other users."

Under the corrective order, Google and Apple must allow app developers to effectively choose payment methods beyond their in-app and third-party systems. They are required to submit a compliance plan within one month and complete improvements within three months.

This action marks the first enforcement of the revised Telecommunications Business Act, known as the "In-App Payment Prohibition Law," aimed at preventing unfair practices related to in-app payments, which was amended by the National Assembly in 2021.

The predecessor of the commission initiated a fact-finding investigation against Google and Apple in 2022 and subsequently determined that they violated the Telecommunications Business Act, notifying Google of a fine of 47.5 billion won and Apple of 20.5 billion won.

However, the commission was unable to reach a final conclusion due to its two-member operation. In the meantime, it recalculated the fines based on revenue, setting them at 42 billion won for Google and 21 billion won for Apple. After the new commission was established, it conducted another fact-finding investigation and, following consultations with Google and Apple in August, reached a conclusion nearly three years later.

Experts have expressed regret over the three-year delay in imposing fines on Google and Apple for in-app payment regulations, citing ongoing harm to app developers and the government's failure to take timely action. An adjunct professor at Chung-Ang University, Ahn, stated, "The review and decision should have progressed quickly after the fact-finding investigation and fine assessment were completed."

There are also calls for legal enhancements. Park Jeong-mun, a lawyer at Ilro Law Firm, noted, "The revised Telecommunications Business Act only prohibits the coercion of in-app payments, leaving loopholes. It’s like leaving the door open for external payments but setting up an expensive toll booth at the entrance," emphasizing the need for legal language to prevent circumvention.

Professor Ahn mentioned that the law currently allows fines of only 1-3%, suggesting that increasing the fines could enhance the effectiveness of legal sanctions. The commission has stated that it is reviewing regulations and enforcement guidelines related to fines.