Epic Games v. Apple on App Store Payment Systems in South Korea

By: Inyoung Cheong

Why Did Epic Games’ CEO Claim to be South Korean?

As a South Korean, it felt surreal to see Oli London, a British YouTube influencer, claiming to be Korean following multiple plastic surgeries. Although Korean culture has been well-promoted by the band BTS (and more recently by the Netflix show, Squid Game), I never imagined that a non-Korean would ever want to be Korean. Soon after, more astonishing news came out. Tim Sweeney, the CEO of Epic Games, one of the most influential video game companies in the world, tweeted “I am a Korean!” Why is this high-profile figure so thrilled about my home country? 

How Epic Games Was Treated in the U.S.

Epic has been involved in a serious dispute with Apple since 2015 when Tim Sweeny questioned the necessity of digital marketplaces, like Apple’s App Store for iOS devices and Google Play, taking 30% of app-generated revenue. To avoid the 30% charge, Epic released an installer in mid-2020 for its massively popular video game, Fortnite “Season 4,” with a feature, codenamed “Project Liberty,” that offered a 20% discount for in-game money when users chose to directly purchase the game from Epic. Apple took down the app Fortnite for violating its App Store’s terms of service within hours, leaving iOS and macOS users unable to update their video game. Apple has claimed that in-app purchase policies “ensure that iOS apps meet Apple’s high standards for privacy, security, content, and quality.” However, app developers view this system as monopolistic and exploitative, one that allows companies like Google and Apple to make a quick profit without providing value to developers or consumers. 

Interview with Tim Cook on Sway, April 5 2021

In the United States, the U.S. District Court for Northern California did not fully agree with antitrust claims brought by Epic Games against Apple regarding this issue. While Judge Yvonne Gonzalez Rogers issued a permanent injunction in this case in September 2021 that requires Apple to allow app developers to communicate with users about alternative payment systems, Epic Games suffered a pyrrhic victory. Judge Rogers rejected the allegation that Apple’s App Store is a monopoly and ordered Epic Games to pay Apple 30% of all revenue collected through the system since it was implemented for breach of contract. This award amounts to a sum of more than $3.5 million. On Twitter, Tim Sweeney expressed his disappointment, saying “[t]oday’s ruling isn’t a win for developers or for consumers.” 

It’s important to also note that while the lawsuit was still ongoing, Apple lowered its commission from 30% to 15% for developers that make under one million U.S. dollars per year. 

The World’s First Law Directly Regulating In-App Purchase Systems 

In contrast to the United States District Court for the Northern District of California, South Korean lawmakers turned out to be more empathetic to app developers. In an exceptional move, South Korean lawmakers made the practice of forcing app purchases through particular virtual storefronts illegal. In August 2021, South Korea’s National Assembly enacted amendments to the country’s Telecommunications Business Act that commits the Korea Communications Commission (KCC) to preventing online platforms from requiring certain payment methods, unfairly delaying the review of mobile content, and unfairly deleting mobile content from the app market. In Apple’s case, an app-developer whose app was removed from Apple’s App Store can simply file a complaint with the KCC and seek an administrative penalty against the App Store instead of bringing a time-consuming lawsuit. Currently, it appears that South Korea is the only country on the planet to enforce this type of legislation, hence Time Sweeney’s jubilant cry, “I am a Korean!”

Debates Over the New Law in the South Korea’s National Assembly 

Predictably, both Google and Apple recently worked with local major law firms in appealing to the legislature to block passage of the bill. Global business organizations including the American Chamber of Commerce in Korea, NetChoice, Asian Trade Center, and Asia Internet Coalition also filed objections to the bill. All of these groups argued that compliance with in-app purchase policies contributes to creating safe, secure, and credible digital platforms that have enabled developers to sell their products abroad. 

Affected tech companies even turned to the U.S. government and accused the bill of being a non-tariff trade barrier in violation of a joint trade agreement, but the Biden administration did not take official action other than briefly mentioning the issue in the U.S. Trade Representative National Trade Estimate Report in March 2021. According to the New York Times, this inaction reflects the Biden administration’s critical attitude towards these tech giants’ incredible power over commerce.

In addition, legislative documents demonstrate disagreement between various Korean government agencies. The Korea Fair Trade Commission (Korea FTC) initially opposed this bill because “forcing payment systems” could be regulated by antitrust authorities as predatory conduct without introducing new telecommunication regulations. In the end however, Korea FTC reluctantly agreed to the KCC’s jurisdiction into this area after weathering President Moon and lawmakers’ relentless concerns and rebuke concerning the current disparity in app markets. 

Google and Apple Took Different Approaches 

Just after the enactment of the new law, Epic Games requested that Apple restore Fortnite to operational condition in South Korea, but Apple declined. Apple said, “we would welcome Epic’s return to the App Store if they agree to play by the same rules as everyone else.” The KCC then requested that Apple and Google submit compliance plans by October 2021. Both companies’ initial plans were, however, turned down by the KCC. 

Before submitting a new plan, Wilson L. White, Google’s public policy and government relations senior counsel, had a conference with a KCC chairman on November 4th. White committed to giving developers “the option to add an alternative in-app billing system alongside Google Play’s billing system for their users in Korea.” 

In contrast to Google’s move, Apple remains resistant. Apple is holding its ground, stating that its current policy is already compliant with the law, even though a KCC official made it clear that Apple’s position “goes against the law.” The South Korean local newspaper ETNEWS reported that Apple CEO Tim Cook ordered “we should not step back in South Korea.” It was also announced that Apple’s Korea unit chief Brandon Yoon resigned from his position. A South Korean lawmaker, Jo Seung-rae, opined that neither Apple nor Google are doing enough to comply with South Korea’s new law and called Apple’s claim that it complied with the law “nonsensical.”

Tim Sweeney’s Push and KCC’s Remaining Tasks 

Tim Sweeny gave a speech in South Korea on November, 15, 2021, saying “Apple is ignoring laws passed by Korea’s democracy. Apple must be stopped.” He also expressed his strong support for South Korea’s anti-monopoly push during a video conference with the Korea Communications Commission’s Chair, Han Sang-hyuk, on November 17. Chair Han said, “[f]or a platform ecosystem where everyone coexists, not only the government, but also platform companies, content producers, creators, and users need to participate in making changes.”

Last month, the KCC initiated notice-and-comment rulemaking procedures. The KCC notified the public about the implementation of an ordinance that allows the KCC to impose monetary penalties of up to two percent of a company’s revenues on companies that do not comply, although the precise definition of “revenues” has not been settled and it remains to be seen whether “revenues” applies to South Korea alone or the global market. While there are still shortcomings in the law and complexities to iron out, it is undeniable that this new Korean law has ignited meaningful policy discussions over mobile app market practices around the world.

Inyoung Cheong is a Ph.D. Candidate at the University of Washington School of Law and former Deputy Director of the Korea Communications Commission. 

Carpenter v. United States – What future for digital privacy?

Picture1By Jabu Diagana

On November 29th, 2017, the Supreme Court will hear Carpenter v. United States and decide whether the government violates the Fourth Amendment when it accesses a third party’s record of an individual’s cell phone location without a warrant.

Carpenter was a 2011 case where the defendant was convicted of a series of interstate robberies based on his phone location data, also known as cell-site-location information (CSLI). CSLI is maintained by wireless carriers and is a record of the cell towers our phones connect to every time we transmit calls, texts, emails, or any other digital information. It usually includes the precise geolocation of each tower as well as the day and time the phone tried to connect to it. The government obtained CSLI under the Stored Communications Act (SCA), a 1986 federal statute which provides that a “governmental entity may require a provider of electronic communication service or remote computing service to disclose” records using either a warrant, or, as in Carpenter, using a court order issued “if the governmental entity offers specific and articulable facts showing that there are reasonable grounds to believe that the contents of a wire or electronic communication, or the records or other information sought, are relevant and material to an ongoing criminal investigation.”

Stated differently, the real question is to what extent does the SCA allow the government to obtain CSLI without a warrant? Or to put it more bluntly, is the SCA unconstitutional?

The Sixth Circuit holding in Carpenter turned on the “third-party doctrine.”

The third-party doctrine originated in Smith v. Maryland, a 1979 case in which the Supreme Court found that installing and using a pen register to record a phone user’s dialed numbers was not an illegal search and didn’t merit Fourth Amendment protections. According to the Smith court, although the contents of our phone conversations are protected, information about the sender or receiver is not, since they willingly disclose that information to the phone company every time they place a call. Following this logic, the Sixth Circuit first found that the third-party doctrine also authorizes the government to access CSLI as “business records” directly from a cell phone company without a warrant. Additionally, it found that when a person uses their cell phone, they should be aware that their location data is shared with the service provider and should not have any “reasonable expectation of privacy” with respect to that data.

Although Carpenter is about users’ cell locations information, the principle at issue spans over other aspects of our digital privacy, given all the data we now share with third parties through the use of smartphones, wifi hotspots, apps, and cloud-based services. As Justice Sotomayor highlighted in her United States v. Jones concurrence, whatever our current societal expectations of privacy are, our citizenry can “attain constitutionally protected status only if our Fourth Amendment jurisprudence ceases to treat secrecy as a prerequisite for privacy.”

Whether Carpenter is affirmed or overruled, the court discourse will likely revolve around the impracticability of the “third-party doctrine” in the digital age. Does sharing with one mean sharing with many? It is tempting to recommend that the court abandons the “third party” doctrine, but that may be over simplistic. If the court choose to modify it, then where should the line be drawn? should there be a difference between information voluntarily conveyed to a third party or stored on the cloud? There is also a time component to this issue.  How long is continuous tracking too long? All these questions, a priori theoretical will be fundamental to the future of our privacy.

Jury Finds Facebook’s “Oculus Rift” Runs on Stolen Technology; $500 Million Verdict

By Adam Roberts

oculusOn February 1, 2017, a jury in the Northern District of Texas found that Facebook’s recently acquired virtual reality (“VR”) technology, “Oculus Rift,” infringed on copyrighted source code owned by ZeniMax Media LLC. Resultantly, the jury awarded ZeniMax $500 million in damages. This case comes as a significant blow to Facebook’s recent venture into VR gaming.  And as “Oculus Rift” is being outpaced in sales numbers by Sony’s “PlayStation VR,” and HTC’s “HTC Vive,” it is unclear where the future of the device stands.

But first, how did “Oculus Rift” get to this point? A little history:

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