[Why&Next] Google, Apple Fined KRW 63.7 Billion... Debate Over Slap-on-the-Wrist Penalties

Five years after the ban on forced in-app payments was introduced

Fines based only on domestic revenue... up to 36-fold gap with the EU

Law needs to be amended to make sanctions more effective

Google and Apple were fined a combined 63.7 billion won for unfair practices, including forcing developers to use in-app payments. The government reached its conclusion nearly four years after launching a fact-finding investigation in 2022. This is the first enforcement case since South Korea introduced the world’s first ban on mandatory in-app payments in 2021. The fines are substantial by domestic platform-regulation standards, but comparisons with overseas cases in which similar violations resulted in fines worth hundreds of billions of won have raised questions about the effectiveness of the sanctions.

Apple Store Gangnam in Seoul. Reporter Kang Jinhyeong.

On Oct. 28, the Broadcasting and Media Communications Commission found that Google and Apple had violated the Telecommunications Business Act and imposed fines and corrective orders of 42.9 billion won and 20.81 billion won, respectively. The two companies were found to have restricted app developers’ choices by allowing only in-app payments and third-party payments while preventing the use of other payment methods. In particular, although they allowed third-party payments, they charged app developers that adopted them fees of up to 26%, effectively forcing them to use in-app payments.

This is the first enforcement case under the amendment to the Telecommunications Business Act, introduced in 2021 to ban mandatory in-app payments. At the time, South Korea became the first country in the world to enact a law explicitly prohibiting app marketplace operators from requiring the use of a specific payment method. The move followed Google’s 2020 announcement that it would expand its in-app payment requirement to all digital content and charge fees of up to 30%.

Google and Apple expressed regret over the government’s fines and said they would consider how to respond. Google said, “We are disappointed that the BMCC’s decision does not fully reflect Google’s efforts to comply with the law or its contributions to supporting innovation and global growth among Korean developers.” Apple said, “We believe the measures we have taken to date comply with the Telecommunications Business Act. We are disappointed with today’s decision and disagree with it.”

Compared with platform sanctions previously imposed in South Korea, the fines are substantial. The combined 63.71 billion won in fines imposed on Google and Apple is about 26 times Agoda’s 2.424 billion won fine and about 49 times Adobe’s 1.309 billion won fine. However, the picture changes when the fines are compared with those imposed by major overseas jurisdictions. The European Union (EU) fined Apple and Google 500 million euros (about 746.2 billion won) and 430 million euros (about 641.7 billion won), respectively, for restricting guidance on external payment options.

India also fined Google 9.3644 billion rupees (about 150 billion won) in 2022 for, among other things, forcing users to make in-app payments. Brazil reached a corrective agreement with Apple that included allowing external payments. The agreement provides for a penalty of up to 150 million reais (about 38 billion won) if Apple fails to comply.

The difference in the size of the fines stems from limited calculation criteria. Because the revenue used to calculate fines is restricted to domestic revenue related to the violation, and the applicable rate is low, sanctions against Google and Apple, which generate enormous profits worldwide, are structurally bound to be relatively small. Under the Telecommunications Business Act, fines can be capped at 1% to 2% of domestic revenue related to the violation. By contrast, the EU’s Digital Markets Act (DMA) allows fines of up to 10% of a company’s worldwide revenue, while Japan can impose fines of up to 20% of revenue from products and services during the period of violation.

Some say South Korea’s sanction criteria need to be reviewed to determine whether they are sufficient to deter illegal conduct, given the market power and enormous profits of global big tech companies. Lee Seong-yeop, a professor at Korea University’s Graduate School of Management of Technology, said, “As the trend is to strengthen the punitive nature of fines to make sanctions more effective, the Telecommunications Business Act is also likely to change by raising the criteria for imposing fines.” The BMCC said, “We agree that firm action must be taken against legal violations by global big tech companies, and are reviewing various improvement measures.”

This content was produced with the assistance of AI translation services.