U.S. Complaining about Telecommunications Business Act Amendments

The Korea Institute for International Economic Policy (KIEP) said in its report on April 13 that the Office of the United States Trade Representative complained about the Telecommunications Business Act amendments of South Korea to block the mandatory in-app payment policies of app market operators such as Google.

“The amendments are new digital trade barriers,” the office said in its National Trade Estimate Report on Foreign Trade Barriers submitted to the U.S. Congress last month. This is the first time that the United States mentioned the amendments as digital trade barriers. At present, the National Assembly of South Korea is handling multiple Telecommunications Business Act amendments to that end.

“Once the amendments are passed, settlement services integrated with the mobile app market cannot be provided, which is worrisome,” the office said in the report, adding, “In addition, the amendments will cause foreign service providers to bear more costs and adversely affect app developers.” At present, Google is applying its own settlement system to Google Play Store apps and content in certain countries and those are subject to mandatory in-app payment equivalent to 30 percent of the settlement. In South Korea, the mandatory payment is currently applied to game apps and Google is planning to apply the policy to every content app from September this year onwards.

According to the KIEP, the office also expressed concerns over the amendment to the Telecommunications Business Act that was passed in May last year. “The so-called Netflix Act forces U.S. content providers to ensure network stability and stipulates domestic proxy appointment requirements,” it said, adding, “These are targeting U.S. companies such as Google and Netflix and are in violation of the KORUS FTA.”

According to the act, communications service providers must prevent traffic overload so that consumers can use stable communications services in any environment. The duty is applied to every service provider with an average daily user count of one million or more, which includes Google, Netflix, Facebook, Naver and Kakao.

“The South Korean government has to examine the possibility of unnecessary trade disputes with the United States reiterating its complaints,” the KIEP advised.