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Why regulators in South Korea and Netherlands are not satisfied with Apple’s App Store changes

The iPhone maker fell short of persuading regulators after providing insufficient details on alternative payment systems.

To comply with the local laws, Apple had submitted its plans to allow developers to use third-party payment options for all apps in South Korea and for dating apps in the Netherlands, but it appears that both the countries are not happy with Apple’s measures. The Dutch antitrust regulator on February 7 fined Apple 5 million euros for a third week in a row for not properly complying with its order and South Korea’s telecom regulator on February 3 sought more clarity on Apple’s plans.

Developers across the world have long complained that Apple and Google charge hefty commissions and place restrictions on directing users to alternative payment options, and South Korea and the Netherlands are the first two countries to mandate Apple to allow alternative payment. Many others including India and US, may follow suit and what Apple ends up doing in South Korea and Netherlands will serve as an indication of what is coming to the rest of the world.

Why is Apple being fined in the Netherlands?

Apple on January 14 said that it will allow dating apps in the Netherlands to offer non-Apple payment options to users in compliance with a recent order issued by the country’s Authority for Consumers and Markets (ACM), but the regulator on January 24 said that Apple has failed to satisfy the requirements of the order for the following reasons:

  1. Plan not in effect: Dating-app providers are still unable to use other payment systems because Apple is yet to modify its conditions. “At the moment, dating-app providers can merely express their ‘interest’,” ACM noted.
  2. Several barriers to developers: ACM also noted that Apple has raised several barriers for dating-app providers to the use of third-party payment systems which is at odds with ACM’s requirements. “For example, Apple seemingly forces app providers to make a choice: either refer to payment systems outside of the app or to an alternative payment system. That is not allowed. Providers must be able to choose both options,” ACM said.

Then, Apple on February 3 announced some more details on how Dutch developers can implement alternative payment methods, but ACM said that it was not receiving enough information from the company to assess whether it was actually complying.

“ACM is disappointed in Apple’s behaviour and actions,” the regulator said in a statement, according to Reuters.

What’s the issue in South Korea?

After the South Korean National Assembly passed a first-of-its-kind bill last year forcing Apple and Google to open their app stores to alternative payment systems, the Korea Communication Commission (KCC) said on January 11 that Apple has submitted its plans to comply with the law and that KCC and Apple are still ironing out finer details of the plan including the new commission fee rates and exact launch date

But on February 3, Reuters reported that KCC wants better compliance plans from Apple because the one submitted “still lacks concrete detail,” according to a KCC official.

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High commissions are sticky points in both countries

Apple’s 27 percent commission in Netherlands: Apple in its February 3 blog also revealed that it would still charge developers 27 percent commission even if they use alternative payment system, which is only slightly below the 30 percent it currently charges. The ACM is yet to comment on whether this is consistent with its order, but Apple is likely to face problems because the meagre savings might dissuade developers from using alternative options, which is against the spirit of the ACM order.

Google’s 4 percent commission reduction: In South Korea, KCC is waiting for more details from Google, which outlined its strategy to comply with the new law in November and said that it will reduce the developer’s service fee by just 4 percent. In response to this marginal decrease, the KCC official who spoke with Reuters said:

“As a result of any policy, if app developers find it realistically difficult to use an alternative payment system and resort to using the dominant app store operator’s payment system, it would not fit the law’s purpose.”

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