Apple and Google’s Struggle in Seoul Tests Biden in Washington

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WASHINGTON — Apple and Google have been fighting in the South Korean legislature for months over a bill they say could jeopardize lucrative app store businesses. The companies appealed directly to South Korean lawmakers, government officials and the public. Try to block the law, which is expected to face a critical vote this week.

Corporations have also turned to an unlikely ally trying to break their power: the United States government. A corporate-funded group has urged trade officials in Washington to withdraw the law, arguing that targeting American firms could violate a common trade agreement.

South Korean legislation will be the first in the world to require companies operating app stores to allow users in Korea to pay for in-app purchases using various payment systems. It also prohibits preventing developers from listing their products on other app stores.

How the White House has responded to this proposal poses an early test for the Biden administration: Will it defend tech companies facing antitrust scrutiny abroad, while applying the same scrutiny to companies at home?

Washington has a longstanding practice against foreign laws that discriminate against American firms, even if it sometimes conflicts with domestic policy debates. But President Biden wants a coherent approach to his concerns about the tech giants’ incredible power over commerce, communications and news. signed in July enforcement order to promote competition and his two most notable antitrust appointees were longtime corporate critics.

The approach chosen by the White House could have far-reaching implications for the industry and the shape of the internet worldwide. A growing number of countries are implementing stricter regulations on Google, Apple, Facebook and Amazon, which are breaking the rules of the global internet.

American officials reiterated some of the industry’s complaints about the proposal, saying it targeted American companies in a report in March. But U.S. Trade Representative spokesman Adam Hodge said trade officials have yet to take an official position. He said officials are still considering how to balance claims that the legislation discriminates against American companies with the belief that the legislation will level the playing field among tech critics in South Korea and America.

“Since the law in Korea is considered, we are working with a number of stakeholders to gather the facts, recognizing the necessity of the distinction between discriminating against American companies and promoting competition,” Mr Hodge said in a statement.

Apple said it is in regular conversations with the United States government on a variety of issues. The company said in a statement that during these interactions, it discussed South Korean app store law with American officials, including the US Embassy in Seoul.

The company said the legislation would “put users who purchase digital products from other sources at risk of fraud, weaken privacy protections, make purchases harder to manage” and compromise parental controls.

Google spokesperson Julie Tarallo McAlister said in a statement that Google is open to “exploring alternative approaches” but believes the legislation will harm consumers and software developers.

The proposal was approved by a committee in the Korean National Assembly last month, amid opposition from some in the Korean government. It could be voted on as soon as this week in the body’s judicial committee. It would then require a full parliamentary vote and the signature of President Moon Jae-in to become law.

The offer will have a huge impact on the Apple App Store and Google Play Store.

According to App Annie, an analytics company, the Google store accounted for 75 percent of global app downloads in the second quarter of 2021. Apple’s market accounts for 65 percent of consumer spending on in-app purchases or subscriptions.

One of the ways software developers make money is by selling products such as Fortnite’s in-game currency or The New York Times subscription directly in their app. Apple has insisted for years that developers sell these in-app products through the company’s own payment system, resulting in up to 30 percent cuts in many sales. Last year, Google said it would do the same, with a 30 percent cut to more purchases than in the past. The developers say the fees are too high.

After South Korean lawmakers proposed the app store law last year, the Information Technology Industry Council, a Washington-based group that has accepted Apple and Google as members, has urged the U.S. Trade Representative to include “regulatory concerns in an annual report that highlights barriers to foreign trade.” . The group said in October that the rules could violate a 2007 agreement that said no country could discriminate against firms located in the other.

Apple said it’s not unusual for an industry group to provide feedback to a trade representative. The company said the government openly seeks comment on potentially discriminatory laws. Naomi Wilson, the trade group’s vice president for Asia policy, said in a statement that she “encourages lawmakers to work with industry to reconsider obligations to app markets outlined in the proposed measure to ensure they are not trade-restrictive. and does not disproportionately affect American companies.

When the trade representative’s report was published in March – just weeks after Mr. Biden’s candidate for the position was sworn in – it contained a paragraph reiterating some of the tech group’s concerns. The report concluded that the South Korean law “obligation to allow users to use foreign payment services specifically targets US providers and threatens a standard US business model”.

The American report did not say that the law would violate its free trade agreement with South Korea. But in July, the chief executive of a group called the Asian Internet Coalition, which lists Apple and Google as its two members, pointed to the report when he told Korea’s commerce minister that the law “could provoke trade tensions between the United States and the United States.” South Korea.”

“The Biden administration has already raised its concerns,” the director said in a written comment in July.

American diplomats in Seoul also raised questions about whether the law would cause trade tensions.

“Google said such a thing, and a similar view was expressed by the US Embassy in Korea,” said Jo Seoung Lae, a lawmaker who supports the law. He added that the embassy was in contact with its staff throughout June and July. Another lawmaker, Park Sungjoong, said the embassy had expressed business concerns about the law.

Mr Jo said a Google representative visited his office to express his opposition to the proposal, and that Apple had also “given feedback” against the law.

Mr. Jo said he has requested the United States to provide his official position, but has not yet taken a position.

American trade officials sometimes defend companies even when criticized by others in management. Former President Donald J. Trump attacked a liability shield for social media platforms known as Section 230, while the trade representative wrote a provision similar to deals with Canada, Mexico and Japan.

But Wendy Cutler, a former official who negotiated the trade agreement between South Korea and the United States, said it would be difficult for America to argue that Korean rules violate trade agreements while the same antitrust issues are being discussed in the state.

“You don’t want to call out to a country because your government is questioning the practice while at the same time potentially violating an obligation,” Ms Cutler said. now vice president at the Asian Institute for Social Policy. “It significantly weakens the case.”

South Korean and American app developers have campaigned for the new rules, arguing they won’t trigger trade tensions.

In June, Mark Buse, senior lobbyist at dating app company Match Group and former board member of a pro-regulation group called the App Justice Coalition, wrote to Korean lawmaker Mr. Jo in support of the proposal. He said the Biden administration was aware of the concerns about the tech giants, making trade tensions less likely.

Later that month, Mr. Buse attended a virtual conference on app store legislation hosted by K-Internet, a trade group that represents major Korean internet companies like Google’s main search competitor in South Korea, Naver, and Kakao.

Buse, who traveled to Seoul this month to file a lawsuit for the law on behalf of the Enforcement Justice Coalition, made it clear that his employer views it as a high-risk debate. He listed several other countries where authorities are concerned about Apple and Google’s apps.

“And all this,” he said, “follows the leadership shown by the Korean assembly.”

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