Domestic small and medium-sized game companies have applied for class arbitration in a U.S. court against mobile app market operators Google and Apple, arguing that the in-app payment fees are excessive. They claim that Google and Apple effectively force the in-app payment system and impose fees of up to 30%, causing them significant losses.
According to the gaming industry on the 18th, game company PangSky submitted a class arbitration application to the U.S. Northern District Court of California on behalf of over 140 game companies on the 16th. Class arbitration is a procedure to conclude the lawsuit through reasonable agreements between Korean game companies and Google and Apple. Since arbitration focuses on recovering damages, it can yield results in a short time compared to litigation, thereby reducing impacts on both sides. In their arbitration application, game companies, including PangSky, pointed out that Google and Apple have abused their dominant market position by imposing in-app payment fees of up to 30%. They are expected to request a partial refund of the 30% in-app payment fees through class arbitration.
The reason underlying domestic small and medium-sized game companies' opposition to app market fees is the excessively high fee rates. Google and Apple leverage their monopoly, reaching up to 85% in the domestic app market, taking up to 30% as fees from payment amounts. According to the Korea Industrial Union Forum, it was confirmed that domestic game companies paid 9 trillion won to these two companies in in-app payments over the four years from 2020 to 2023. Particularly, smaller game companies are finding survival increasingly difficult. A recent investigation by the Korea Communications Commission into the financial trends of small mobile game companies showed that sales fees and marketing expenses from the Google and Apple app markets accounted for over 50% of their revenues on average annually. During the same period, the average operating profit margin recorded an annual average of -16.1%, showing a loss.
Among these developments, a ruling in the United States that mandating in-app payments in app markets constitutes a violation of antitrust laws has impacted the domestic industry. A prominent case involves the global popular game "Fortnite." The developer of Fortnite, Epic Games, enabled players to purchase game items directly within the game to avoid in-app payment fees from Google and Apple. In response, Google and Apple removed Fortnite from their app stores in 2020, claiming it violated their "platform policies," and Epic Games filed an antitrust lawsuit against them.
In response, a U.S. court ruled in December 2023 that Google's policies constituted illegal acts violating antitrust laws worldwide, excluding China. The court ordered the company to ensure that users can download app stores other than Google Play on Android phones and to allow third-party payment methods. It also prohibited Google from requiring specific app developers to exclusively launch apps on the Google app market or to launch them first while sharing some revenue.
A similar ruling was made against Apple. A U.S. court issued a ruling last year prohibiting Apple from imposing a separate fee of 27% on external links leading to third-party payments. Previously, Apple had responded to a court order not to enforce in-app payments by imposing a fee of 27%, which was not much different from the 30% charged in the app store. The European Union (EU) also implemented the Digital Markets Act (DMA) last year, which serves as a big tech antitrust regulatory law, and imposed a penalty surcharge of 500 million euros (approximately 810 billion won) on Apple for enforcing in-app payments.
In Korea, the "In-App Payment Enforcement Prohibition Act" was implemented in March 2022 as the first of its kind in the world, but it has been criticized as effectively "meaningless." Google and Apple continue to impose a fee of 26% while allowing the application of external payment systems under the pretext of privacy protection. Additionally, a 5% fee to payment agencies pushes the total to over 30%, effectively mandating in-app payments. Although Korea was quick to introduce regulatory measures, the criticism arises from its ineffectiveness.
An official in the game industry said, "Domestic small and medium-sized mobile game companies, which heavily rely on app market revenues, feel threatened by the high fee rates, so they seek to normalize the fee rates by participating in class arbitration." He noted, "While domestic laws have become ineffective, there is growing anticipation for results globally as actual adjustments to fee rates are being implemented alongside the ruling."