S. Korean developers unite against excessive transaction fees of Google and Apple’s app stores

Posted on : 2020-09-10 18:06 KST Modified on : 2020-09-10 18:06 KST
Duopoly in app market charges a 30% rate, 10 times higher than standard credit card fees
A graphic for the co-litigation platform Angry People, where members have continually complained about excessive transaction fees for Google and Apple’s app stores. (Kim Seung-mi)
A graphic for the co-litigation platform Angry People, where members have continually complained about excessive transaction fees for Google and Apple’s app stores. (Kim Seung-mi)

“Even if we recognize Google and Apple’s contributions in creating an app ecosystem, the fact that the app store transaction fees [of 30%] are 10 times higher than those of ordinary credit card companies is excessive.”

“A,” a developer of education-related mobile apps, recently vented on the online co-litigation platform Angry People that transaction fees for the Google and Apple app stores border on the oppressive.

“Their attitude is, ‘If you don’t like it, don’t use our store.’ But leaving the app market would mean having to shut down, so we have no choice but to suck it up and pay the transaction charges,” A complained.

Google and Apple’s high transaction charges are a source of intense controversy not only among such South Korean IT heavyweights as Naver and Kakao but also among small-scale app developers, who claim that the two companies are leveraging their dominance of the app marker to charge unjustifiably high fees. As of late 2019, Google and Apple respectively accounted for 63.2% and 24.8% shares of the South Korean app market -- meaning that nine out of every 10 consumers use one of the two stores. It’s an undeniable fact that Google and Apple hold significant sway over the app market.

The problem is the result of the two companies effectively forcing app store businesses to pay a 30% transaction charge through “in-app purchasing,” which only allows for the use of the companies’ own payment system. When companies refund the app purchase price to consumers, Google and Apple keep the amount paid for transaction charges -- compounding the disgruntlement for the participating businesses. The controversy rose to the fore recently after Google applied the 30% transaction charge rate to all apps after previously applying it only to game apps.

“When Apple first came out with its App Store where apps could all be sold and purchased in one place, developers were grateful to have such a historic service, even with the across-the-board 30% charge,” explained a source acquainted with the industry situation.

“The controversy looks to be about companies like Google developing an oligopoly and then forcing a transaction fee hike on users without giving them any options,” the source concluded.

According to this account, the app developers’ attitude has changed over the years since the app stores first arose over a decade ago, when they were welcomed by businesses as a new source of profits.

FTC remains cautious about referring to fees as unfair or in violation of antitrust laws

South Korea’s Fair Trade Commission (FTC), the country’s antitrust authority whose chief duties involve the prevention of monopolies and oligopolies, has maintained a similarly cautious stance. A senior FTC official agreed that the “lack of competition in the app market has been a root cause of conflict,” but went on to say that it was “difficult to conclude that the ‘30%’ number alone represents an unfair action in a case like Apple, which set the 30% rate early on in the app store’s history and built an ecosystem through voluntary participation by businesses.”

As the controversy has worn on, some developers have started pursuing collective action in earnest. The online co-litigation platform Angry People is currently recruiting victimized businesses through Oct. 23 to report Google and Apple’s excessive transaction charges to the FTC. Angry People told the Hankyoreh that while they cannot disclose the exact number of participating businesses due to concerns about the possibility of negatively impacting them, they already had several names of businesses registered as of Sept 9. The platform claims that the collective outcry will also have a positive impact for consumers -- its argument being that if Google and Apple charge high transaction fees, app developers have no choice but to charge high usage fees.

Observers are watching to see whether the collective pushback leads to companies being driven out of the app stores. Indeed, after the major US game developer Epic Games created an indirect payment system to protest Apple’s transaction fee policies, its globally popular game Fortnite was deleted from the app store, as was the company’s account. Epic Games responded by filing in a US court for an injunction to prohibit the game and developer account deletion; as of Aug. 24, support had been granted in terms of a ban on developer account deletion. In its ruling, the court stressed that “the economy is in dire need of increasing avenues for creativity and innovation, not eliminating them.”

Sharing the ruling with the Hankyoreh, Jeong Jong-chae, an attorney working with Angry People, explained, “The US court concluded that the 30% transaction fee is excessive and may very well be in violation of competition [fair trade] law.”

By Hong Seock-jae and Choi Min-young, staff reporters

Please direct comments or questions to [english@hani.co.kr]

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