Combating App Market Dominance: A New Legislative Push

South Korean lawmaker Choi Soo-jin has introduced a meaningful amendment to the Telecommunications Business Act, targeting what she describes as unfair practices within the app market. The proposed changes seek to address both mandatory in-app payment systems adn the avoidance of network usage fees by major content providers (CPs). This legislative effort aims to dismantle the existing monopolistic structures and safeguard the interests of digital content creators and consumers alike.

Key Provisions of the Amendment

The amendment focuses on two primary areas:

1. Prohibition of Discriminatory Payment Practices: The amendment explicitly prohibits app market operators, such as Google and Apple, from engaging in discriminatory practices related to in-app payments versus external payment options.This includes preventing them from favoring in-app payment systems or penalizing users who opt for alternative payment methods.
2. Sanctions Against Fee Evasion: the amendment introduces provisions to penalize CPs that fail to pay or unjustly avoid network usage fees. This is designed to ensure that all companies contribute fairly to the infrastructure that supports their services.

Addressing Loopholes in Existing Legislation

While South Korea amended the Telecommunications Business Act in 2021 to ban the enforcement of specific payment methods by app market operators, critics argue that companies like Google and Apple have circumvented the law. They allegedly impose high fees on external payments or restrict functionality, effectively maintaining the dominance of their in-app payment systems.

Google is onyl formally open to external payments, and actually imposes higher fees to bypass the law.
Choi Soo-jin, National Assembly Member

The new amendment seeks to close these loopholes by explicitly defining such avoidance tactics as prohibited evasion. It also bans the imposition of unreasonable or discriminatory conditions on users who choose external payment options. Furthermore, it addresses concerns about punitive damages imposed on mobile content providers who challenge unfair terms, such as delays in content screening or distribution.

Tackling Network Fee Evasion by Major Content providers

Another crucial aspect of the amendment targets the avoidance of network usage fees by large CPs. The intention is to prevent global giants like Google and Netflix from evading their obligation to pay a fair price for network usage or compelling others to provide networks on their behalf. This issue has gained prominence as streaming services consume increasing amounts of bandwidth, placing a strain on network infrastructure.

Currently, network usage fees are a contentious issue globally. For example, in the United States, the debate continues regarding whether large tech companies should contribute to the infrastructure costs they heavily rely on. Some argue that these companies should pay their fair share, while others fear that such fees could stifle innovation and harm consumers.

The information and communication network is not unlimited public goods.
Choi Soo-jin, National Assembly Member

The amendment draws support from international legal precedents. Recently, a German court recognized the right to claim network usage fees, ruling in favor of Deutsche Telekom. Similarly, a South Korean court dismissed Netflix’s lawsuit challenging its obligation to pay network fees.

Towards a healthier Digital Ecosystem

The proposed amendment represents a significant step towards creating a more equitable and sustainable digital ecosystem in South Korea. By addressing unfair practices in the app market and ensuring that major content providers contribute fairly to network infrastructure, the legislation aims to foster innovation, protect consumers, and promote a level playing field for all players in the digital economy.

We will correct reverse discrimination and market failure caused by platform monopoly and free rides, and create a healthy digital ecosystem.
Choi Soo-jin, National Assembly Member