A threat to Apple and Google
Google and Apple face the first legal precedent of limiting the dominance of their payment systems in the Play Market and Apple Store app shops in South Korea. The presence of third-party payment systems will reduce companies' profits. Passage of the law could set an example for other countries.
South Korea's government on Tuesday passed the world's first bill to end full control of the two dominant app shops, Google's Play Market (GOOGL, GOOG) and Apple's Apple Store (AAPL).
The legislative restrictions would address the prohibition of payment system monopoly and how app developers hosted on these platforms make embedded sales in their apps.
South Korea's bill is due to be signed by the country's president and could come into force soon.
The law will also crack down on restrictions and discrimination against apps that use their own payment systems in embedded sales. Failure to comply with the law will result in a fine of up to 3% of company revenues in South Korea.
Stocks reacted modestly to the news, with Apple shares down 0.84% on Tuesday and shares in Google's parent company Alphabet (GOOGL, GOOG) up 0.07%.
South Korea's law could be a major precedent that could be repeated by lawmakers in other countries, with a more significant consumer market for the Play Market and Apple Store apps. In this case, companies' revenues and profits could be significantly affected, given that their app shops charge fees of up to 30% on transactions.
Authorities in Europe and the US have in recent years become more focused on curbing monopolistic and anti-competitive practices among technology companies.
This month, a bill was introduced in the US that would force Apple and Google to allow users to install apps from competing shops and allow developers to include their own payment systems. The Open App Marketplaces Act would also prevent app shop owners from favouring their own apps in search results.
Thus, a groundbreaking law in South Korea could set a precedent and begin to limit the dominance of the Play Market and Apple Store payment systems.
