App Store on iPhoneSource: iMore

What you need to know

  • New South Korean legislation could change the face of Apple's App Store forever.
  • The country is likely to pass a law that would ban Apple from making developers use its in-app purchases system.
  • It could stop Apple from taking a cut of transactions on its platform.

South Korea is "likely" to pass a law that would stop Apple and Google from making developers use their respective in-app payment systems, cutting them off from a key revenue stream in a huge upset to their ecosystems.

Reuters reports that the country is "expected on Tuesday" to approve an amendment to the Telecommunications Business Act, colloquially known as the "Anti-Google law". If approved it will be put to a final vote on Wednesday. The legislation could be cataclysmic for Apple's App Store, as it would effectively prevent Apple from taking a 30% (or 15%) cut of transactions made on its App Store for digital goods, as developers would be allowed to use other payment systems beyond in-app purchases.

The measure is one of the core arguments at the heart of Apple's fight with Epic Games, the Fortnite-maker claiming that developers should be allowed to choose how they let customers pay for their digital goods. Currently, App Store developers must use in-app purchases, of which Apple takes a cut, either 15% or 30% depending on how much the developer earns.

The legislation is similar to emerging bills in both the EU and the US, which have emerged following increased scrutiny of Apple, Google, and their respective App marketplaces.

The move is not likely to go unchallenged by Apple. In court during the Epic Games trial, Tim Cook stated that if developers were allowed to use alternative methods of payment on its App Store the company would still collect commission on those transactions, or at least that it would try to. From our May report

Then Cook dropped a bombshell:

"Also, we would have to come up with an alternate way of collecting our commission. We would then have to figure out how to track what's going on and invoice it and then chase the developers, it seems like a process that doesn't need to exist".

The revelation from Cook was a huge development, Epic Games is in part arguing in favor of an iPhone ecosystem where developers can offer users the chance to use alternative payment methods to pay for digital goods like V-Bucks, presumably so that they can bypass Apple's commission. Yet in court Cook clearly stated that Apple would still take a commission on those purchases. Whether this would be an antitrust issue of its own, or indeed legal is a totally separate matter. However, the point remains that Apple believes it would be entitled to take a commission on any and all digital goods transactions on the iPhone, regardless of how the payment was processed.

Legislation passing in South Korea would mark the first time a government has successfully legislated against antitrust allegations leveled at Apple and could prompt a wave of similar measures in other countries. The news will be an unwelcome distraction for the company as it prepares for the launch of iPhone 13 next month, which is shaping up to be the best iPhone the company has ever made.