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WASHINGTON – For months, Apple and Google have been battling a bill in the South Korean legislature that they say could jeopardize their lucrative app store businesses. The companies have appealed directly to South Korean lawmakers, government officials and the public in an attempt to block the legislation, which is expected to be the subject of a crucial vote this week.
Companies have also turned to an unlikely ally, who is also trying to crush their power: the United States government. A business-funded group has urged trade officials in Washington to push back the legislation, arguing that targeting U.S. companies could violate a joint trade deal.
South Korea’s legislation is said to be the first law in the world to require companies that operate app stores to let users in Korea pay for in-app purchases using various payment systems. It would also prohibit preventing developers from listing their products on other app stores.
The White House’s response to this proposal is a first test for the Biden administration: Will it defend tech companies facing an overseas antitrust review while applying the same review to domestic companies?
Washington has a long-standing practice of opposing foreign laws that discriminate against American businesses, sometimes even when it conflicts with domestic policy debates. But President Biden wants a consistent approach to his concerns about the incredible power of tech giants over commerce, communications and news. In July, it signed an executive order to stimulate competition in the industry, and its two main antitrust agents have long been fierce criticisms of companies.
The approach taken by the White House may have far-reaching implications for industry and for the shape of the Internet around the world. A growing number of countries are enforcing stricter regulations on Google, Apple, Facebook and Amazon, fragmenting the rules of the global Internet.
U.S. officials echoed some of the industry’s complaints about the proposal, saying in a March report that it appeared to target U.S. companies. But trade officials have yet to take a formal position on it, said Adam Hodge, spokesperson for the US Trade Representative. He said officials were still considering how to balance the claim that the legislation would discriminate against American businesses with the belief among tech critics in South Korea and America that the legislation would level the playing field. Game.
“We are engaging a range of stakeholders to gather facts as legislation is considered in Korea, recognizing the need to distinguish between discriminating against US companies and promoting competition,” Mr. Hodge in a statement.
Apple said it regularly deals with the United States government on a range of topics. During those interactions, she discussed South Korea’s app store laws with U.S. officials, including at the U.S. Embassy in Seoul, the company said in a statement.
The company said the legislation “would put users who buy digital goods from other sources at risk of fraud, undermine their privacy, make it difficult to manage their purchases” and put parental controls at risk.
Google spokeswoman Julie Tarallo McAlister said in a statement that Google was open to “exploring alternative approaches” but believed the legislation would hurt consumers and software developers.
The proposal was approved by a Korean National Assembly committee last month, despite opposition from some members of the Korean government. He could get a vote in the body’s judicial committee as early as this week. It would then take a plenary vote and the signature of President Moon Jae-in to become law.
The proposal would have a major impact on the Apple App Store and the Google Play Store.
The Google store accounted for 75% of app downloads worldwide in the second quarter of 2021, according to App Annie, an analytics company. Apple’s marketplace accounted for 65% of consumer spending on in-app purchases or subscriptions.
Software developers make money selling products directly in their apps, like Fortnite’s in-game currency or a New York Times subscription. Apple has been insisting for years that developers sell these in-app products through the company’s own payment system, which is up to 30% off many sales. Last year, Google said it would follow suit by applying a 30% reduction to more purchases than in the past. The developers say the fees are way too high.
After South Korean lawmakers proposed the bill to the App Store last year, the Information Technology Industry Council, a Washington-based group that counts Apple and Google among its members, urged the US representative to Commerce to include concerns about the legislation in an annual report highlighting “barriers” to foreign trade. The group said in October that the rules could violate a 2007 agreement that says neither country can discriminate against companies headquartered in the other.
Apple said it was not unusual for an industry group to provide feedback to the sales representative. The company said the government had explicitly requested comment on potentially discriminatory laws. In a statement, Naomi Wilson, the trade group’s vice president of policy for Asia, said she encouraged “lawmakers to work with industry to review the application market obligations set out in the proposed measure. to ensure they are not trade restrictive. and do not disproportionately affect ”US businesses.
When the trade representative’s report was released in March – just weeks after Mr Biden’s candidate was sworn in for the post – it included a paragraph that echoed some of the tech group’s concerns. The report concludes that “South Korean law’s requirement to allow users to use external payment services appears to specifically target US providers and threatens a standard US business model.”
The US report did not say the law would violate the free trade agreement with South Korea. But in July, the chief executive of a group called the Asia Internet Coalition, which names Apple and Google as two of its members, pointed to the report when he told Korea’s trade minister that the law “could cause trade tensions. between the United States and South Korea. “
“The Biden administration has already raised concerns,” the director said in a comment written in July.
US diplomats in Seoul have also raised questions about whether the legislation could cause trade tensions.
“Google said something like that, and a similar opinion was expressed by the US Embassy in Korea,” said Jo Seoung Lae, a lawmaker who supports the legislation. He added that the embassy had been in contact with its staff in June and July. Park Sungjoong, another lawmaker, also said the embassy had expressed business concerns about the law.
Mr Jo said a Google representative visited his office to voice his opposition to the proposal and that Apple also “provided its comments” against the legislation.
Mr Jo said he had asked the United States to provide their official position, but said he had not yet received one.
US trade officials sometimes defend companies even when criticized by other members of the administration. While former President Donald J. Trump attacked an accountability shield for social media platforms, known as Section 230, his trade representative wrote a similar provision in agreements with Canada, Mexico and the United States. Japan.
But Wendy Cutler, a former official who negotiated the trade deal between South Korea and the United States, said it would be difficult for America to argue that Korean rules violate trade agreements when the same Antitrust issues are debated in the United States.
“You don’t want to call a country for potentially breaching an obligation while at the same time your own government is questioning the practice,” Ms. Cutler said, now vice-president of the Asia Society Policy Institute. “This considerably weakens the case.”
South Korean and American app developers have run their own campaign for the new rules, arguing that it will not trigger trade tensions.
In June, Mark Buse, the senior lobbyist for the dating app company Match Group and a former board member of a pro-regulatory group called the Coalition for App Fairness, wrote to Mr Jo, the Korean legislator, to support the proposal. He said the Biden administration was aware of concerns about the tech giants, making trade tensions less likely.
Later in the month, Mr Buse attended a virtual conference on app store legislation hosted by K-Internet, a business group that represents major Korean internet companies like Naver, Google’s main competitor in Korea. of the South, and Kakao.
Mr Buse, who traveled to Seoul this month to advocate for the legislation on behalf of the Coalition for App Fairness, has made it clear his employer sees this as a high-stakes debate students. He listed the many other countries where officials were concerned about the practices of Apple and Google.
“And all of this,” he said, “follows the leadership of the Korean assembly. “
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