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Apple and Google Hit by South Korean App-Payment Law

Apple and Google in South Korea will be prevented from requiring use of their in-app purchasing systems.

Apple  (AAPL) - Get Apple Inc. (AAPL) Report and Alphabet's Google  (GOOGL) - Get Alphabet Inc. Class A Report will be required under a new South Korean law to open their application stores to alternative payment systems.

The bill was passed Tuesday by South Korea’s National Assembly, The Wall Street Journal reported, and it is the first in the world to dent the companies’ dominance over how apps on their platforms sell their digital goods. 

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The legislation amends South Korea’s Telecommunications Business Act to prevent large app-market operators from requiring the use of their in-app purchasing systems.

It also bans operators from unreasonably delaying the approval of apps or deleting them from the marketplace.

President Moon Jae-in, whose party strongly endorsed the bill, will sign it into law.

Companies that fail to comply could be fined up to 3% of their South Korea revenue by the Korea Communications Commission.

The bill in Korean has been nicknamed the “Google power-abuse-prevention law” by some lawmakers and media.

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The law was welcomed by groups representing South Korea’s internet-technology companies and startups, as well as local content developers and app makers.

Google’s Play Store accounted for 75% of mobile-app downloads globally in the second quarter. 

Apple accounted for 65% of app-store consumer spending on in-app purchases and subscriptions during the same quarter, the Journal reported, citing App Annie, a mobile-app analytics firm. 

Apple and Google are facing lawsuits and investigations in several countries.

Last month Google was sued by 36 states and the District of Columbia, focusing primarily on the control Google exerts on its app store.

The lawsuit alleges the company illegally abused its power over the sale and distribution of apps through the Google Play store so it could collect "extravagant" commissions of up to 30% on app purchases, the states said.

In December, the European Union proposed the Digital Markets Act, which seeks to prevent large companies from abusing their market power and allow new players to enter the market.

At last check Apple shares were off 0.4% to $152.52 while Alphabet was up 0.3% to $2,883.

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