Less than a week after I wrote that Apple and Google were testing the limits of a South Korean law on in-app payments systems by charging a 26% commission that renders the use of alternative payment systems unprofitable for app developers, there's an unmistakable casus belli. It looks like we will soon see a non-compliance decision and fine, which in turn will presumably be challenged in court.
Korean media outlet News1 reported (in Korean only) that Kakao Corp.'s recent submissions of updated Android versions of its KakaoTalk (카카오톡; commonly referred to as KaTalk; 카톡) messaging app have been rejected because they send users to the company's website for in-app purchases, as opposed to going through Google's billing API.
While Kakao Corp. hasn't "pulled an Epic" by submitting a version of the app that would pass app review but later change its IAP-related behavior as a result of a hotfix, the company hasn't caved to the tyrannical monopolist either: instead, it offers its updates only outside of the Google Play Store, such as by means of what Google pejoratively calls "sideloading." Maybe the app is also available through some device makers' stores.
By sending users to a website to make purchases, KaTalk circumvents Google's app tax regime all the way: Google gets neither the usual 30% nor the 26% it charges for using other payment processors (with the 4% differential being at a level with the cost of using those other services). And Google doesn't even get any reports of who pays how much for what.
I applaud Kakao Corp. for standing up to the bully. With 93% of South Korean smartphone owners using that messaging app, it's a household brand and most people will presumably trust it enough to ignore Google's excessive and exaggerated pop-up warnings against "sideloading." But some users may still be dissuaded by Google's scare and FUD (Fear, Uncertainty, Doubt) tactics from downloading updates.
Kakao Corp.'s courageous action now gives the Korea Communications Commission an additional reason not to condone Google's bad-faith compliance with the in-app payments-related parts of the country's Telecommunication Business Act (TBA). It's time to impose sanctions (a 2% fine, which may not serve as a strong deterrent per se, but endless non-compliance won't be a viable option for Google either).
As I've said on previous occasions, I wish the Korean legislature had made last year's TBA amendment waterproof. It now depends on how the courts will interpret it. There's a legalistic and a pragmatic way to look at it: in a legalistic sense, Google (and Apple) can argue that the law literally just requires them to allow alternative payment processors but doesn't preclude them from imposing virtually the same app tax and all sorts of conditions and restrictions; from a pragmatic perspective, however, the whole idea--and legislative intent does matter--was to give app developers choice. Consumers already had the choice between different ways to remit money to Google and Apple. But app developers had to use only one billing system that subjects them to an app tax. The objective was to let app developers bypass the app tax.
Korea is clearly a key battleground to watch now. I wish to encourage Korean app makers to contact me with information about new developments--I'm an app maker, too, and while I'm personally even more concerned about Apple's and Google's app review tyranny, I also oppose the app tax.
There is pressure in various jurisdictions on Apple's and Google's app distribution terms, policies, and practices. While Apple is usually even less prepared to make concessions than Google, it's possible that in South Korea there's more at stake for Google than for Apple. That may be the reason why Google is playing hardball with KaTalk.
Both try to get away with cosmetic concessions such as the latest sham settlement of a U.S. class action against Google (modeled after a similar deal with Apple). But some class actions may make an impact. Let's see what will come out of the Australian cases against Apple and Google--and in the UK, a class action against Apple has passed a plausibility test.
The South Korean legislature deserves credit--even praise--for its pioneering effort in curbing app store abuse. That example has encouraged, and will continue to encourage, lawmakers in other jurisdictions, including the two largest markets (U.S. and EU). This week a 98% supermajority of the European Parliament adopted the EU's Digital Markets Act, which is like 100 times more detailed than the Korean in-app payments rule and will open up the Android and iOS app markets. Enforcement will also be stricter, with a draconian proposal having emerged in Germany--from a government-appointed group of competition experts--that even contemplates criminal charges against executives of digital gatekeepers if they fail to abide by the DMA's behavioral provisions.
Meanwhile, preparations are progressing for a FOSS Patents podcast on security in open and closed app markets.
