WASHINGTON — For months, Apple and Google have battled a bill in the South Korean legislature that they say could affect their lucrative app store business. The companies have directly appealed to Korean lawmakers, government officials and the public trying to block the law, is expected to face a key vote this week.
Companies have also turned to an unlikely ally, one that is also trying to stifle their power: the United States government. A group funded by companies has called on trade officials in Washington to roll back the law, arguing that targeting US companies could violate a common trade agreement.
The Korean law will be the first in the world to require companies operating app stores to allow users in South Korea to pay for in-app purchases using a variety of payment systems. . It will also ban developers from listing their products on other app stores.
The way the White House responds to the proposal poses an early test for the Biden administration: Will it protect tech companies that are facing antitrust scrutiny abroad while applying regulatory oversight. Do the same for domestic companies?
Washington has a longstanding practice of opposing foreign laws that discriminate against American companies, even sometimes at odds with domestic policy debates. But President Biden wants a consistent approach to his concerns about tech giants’ incredible power over commerce, media and news. In July, he signed an executive order to promote competition in the industry, and two of his top antitrust appointees have long been vocal critics of the companies.
The approach the White House chooses could have a broad impact on the industry and on the shape of the Internet around the world. More and more countries are pursuing stricter regulations on Google, Apple, Facebook, and Amazon, scattering the rules of the global Internet.
American officials echoed some industry complaints about the proposal, saying in a March report it appeared to be aimed at American companies. However, trade officials have yet to take an official position on the matter, said Adam Hodge, a spokesman for the US Trade Representative. He said officials are still considering how to balance claims that the law discriminates against US companies with the belief among tech critics in South Korea and the US that the law will level the playing field. .
“We are engaging a wide range of stakeholders to gather facts as the law is reviewed in South Korea, acknowledging the need to distinguish between discrimination against American companies and promote competition,” Hodge said in a statement.
Apple says that it regularly deals with the US government on a wide range of topics. During those interactions, the company discussed South Korean app store laws with American officials, including at the US Embassy in Seoul, the company said in a statement.
The company said the law would “place users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, and make it difficult to manage purchases.” their goods” and jeopardize parental controls.
Google spokeswoman Julie Tarallo McAlister said in a statement that Google is open to “exploring alternative approaches” but believes the law will harm consumers and software developers. .
The proposal was approved by a committee in South Korea’s National Assembly last month, in the face of opposition from some in the South Korean government. It could get a vote on the agency’s judicial committee as soon as this week. It would then require a vote from the full assembly and the signature of President Moon Jae-in to become law.
The proposal will have a major impact on Apple’s App Store and Google Play Store.
According to App Annie, an analytics firm, the Google store accounted for 75% of global app downloads in Q2 2021. Apple’s market accounted for 65% of consumer spending on purchases or subscriptions in application.
One way software developers make money is by selling products directly in their apps, such as Fortnite’s in-game currency or subscriptions to The New York Times. For years, Apple insisted that developers sell those in-app products through the company’s own payment system, which caused many sales to drop by as much as 30%. Last year, Google said it would follow suit by imposing a 30% cut on more purchases than before. The developers say the fees are too high.
After South Korean lawmakers proposed the app store bill last year, the Information Technology Industry Council, a Washington-based group that counts Apple and Google as members, urged Representative U.S. Trade addresses regulatory concerns in an annual report that outlines “barriers” to foreign trade. The group said in October that the rules could violate a 2007 accord that states that no country can discriminate against companies with headquarters in the other.
Apple says it’s not uncommon for an industry group to provide feedback to a trade representative. The company said the government had asked for explicit comment on potentially discriminatory laws. In a statement, Naomi Wilson, the trade group’s vice president of Asia policy, said it encouraged “legislators to work with industry to reexamine obligations to app marketplaces are specified in the proposed measure to ensure they are not trade-restrictive. and does not disproportionately affect “American companies.
When the trade representative’s report was released in March – just weeks after Mr Biden’s nominee was sworn in – it included a paragraph that echoed some of the tech group’s concerns. . The report concludes that Korean law “requires allowing users to use external payment services that appear to specifically target U.S. suppliers and threaten the standard business model of the United States.” USA”.
The US report does not say that the law would violate a free trade agreement with South Korea. But in July, the chief executive officer of a group called the Asian Internet Alliance, which lists Apple and Google as two of its members, pointed to the report when he told South Korea’s commerce minister. China that the law “could cause trade tensions between the United States and South Korea.”
“The Biden administration has signaled its concerns,” the director said in a written comment in July.
American diplomats in Seoul also raised questions about whether the law could cause trade tensions.
Jo Seoung Lae, a lawmaker who supports the law, said: “Google said something like that, and the same opinion was also expressed by the US Embassy in South Korea. He added that the embassy had been in contact with his staff throughout June and July. Park Sungjoong, another lawmaker, also said that the embassy had expressed commercial concerns about the law. .
Jo said a Google representative had come to his office to voice objections to the proposal, and that Apple had also “provided their response” to oppose the law.
Mr. Jo said he had asked the US for his official location, but he said he had not yet received it.
American trade officials sometimes defend companies even when they are criticized by others in the administration. While former President Donald J. Trump attacked an liability shield for social media platforms, known as Section 230, his trade representative wrote a similar provision into agreements with Canada. , Mexico and Japan.
But Wendy Cutler, a former official who negotiated a trade agreement between South Korea and the United States, said the US would be hard-pressed to argue that North Korea’s rules violate trade agreements when antitrust issues arise. Similar rights are being debated across the country.
“You don’t want to call on a country that is likely to breach its obligations when at the same time your government is questioning the practice,” Ms. Cutler said. now vice president at the Asian Institute of Social Policy. “It significantly weakens the case.”
South Korean and American app developers have run their own campaigns for the new rules, arguing that it will not cause trade tensions.
In June, Mark Buse, the top lobbying director of dating app company Match Group and a former board member of a pro-regulation group called the Coalition for Applied Equity, wrote to Mr. Jo, the South Korean legislator, in support of the proposal. He said the Biden administration is aware of concerns surrounding tech giants, making trade tensions less likely.
Later that month, Mr. Buse attended a virtual conference on app store law organized by K-Internet, a trade group representing major Korean internet companies such as Naver, a competitor main Google search in Korea and Kakao.
Mr. Buse, who traveled to Seoul this month to report the legal case on behalf of the Applied Equity Coalition, made it clear that his employer considers this a high-stakes argument. He listed many other countries where officials are concerned about Apple and Google’s practices.
“And all of this,” he said, “is following the leadership that the Korean council is showing.”