Bipartisan bill targets Apple and Google’s ability to profit from app stores

A new bipartisan bill announced on Wednesday aims to bring more competition to the app store market, which is currently dominated by Apple and Google.

The Open App Markets Act, led by Sens. Marsha Blackburn, R-Tenn., And Richard Blumenthal, D-Conn., And Amy Klobuchar, D-Minn., Would change the business model of both companies’ app stores and structure on the Turn their mobile operating systems upside down.

The bill partially targets the in-app payment systems for companies that own app stores with more than 50 million users in the United States. According to the bill, companies like Apple and Google are not allowed to condition the distribution of an app via their app stores whether the developers use their in-app payment system.

They would also be prohibited from preventing developers from communicating with app users about “legitimate business offers” or from penalizing developers for using different pricing terms through a different system. Developers have complained that they are unable to advertise lower prices that customers could get from the apps, which would allow them to bypass app store fees.

The bill would aim to prevent app stores from penalizing certain developers and to allow third-party app stores. While third-party app stores are available to Android users from Google, Apple only allows app downloads through its own store.

The bill would also allow apps to sideload, meaning they don’t have to be downloaded from an official app store. Apple in particular has raised concerns that sideloading could open consumer phones to security vulnerabilities.

The legislation leaves Apple and Google room to argue that their in-app payment systems and other tools or protocols are required for security reasons. The bill states that any platform that falls under the law will not break the law if it needs some measure to protect user privacy or safety, prevent fraud, or comply with federal or state laws.

Blumenthal said in an interview with CNBC’s “Power Lunch” on Wednesday that Apple and Google’s arguments that tight control of their app stores will protect user safety are “a pretext to maintain their monopoly.”

“Not only is it insincere, it’s ironic because it is they who are actually invading privacy and stealing data from the developers and saying, ‘Oh, well, we are the privacy advocates,'” said Blumenthal . “In fact, in Section 4 of our legislation, there is a specific provision protecting privacy even more than it does now. So that kind of argument is completely wrong, and I think it will be perfectly transparent that privacy would actually be better “protected by this law.”

App developers have complained in Congress and in court that Apple and Google are firmly in control of their businesses through control of their app stores, which are the gatekeepers for access to mobile app consumers. Companies like Epic Games and Spotify have grappled with company commissions for purchases made by customers in their apps.

For example, Apple would cut 15-30% of the payment a customer makes to upgrade to Spotify Premium through the iOS app. Apple has also prevented companies from promoting their apps that customers can get lower prices by buying through a different channel so the developer can avoid the fee.

Apple and Google say the commissions they charge on app purchases are market-rate and that it costs money to build and operate the app stores they run. Many developers say they don’t refuse to pay some fees to cover these costs, but the current ones are unreasonably high.

Developers have also made allegations that app store operators are using knowledge of their markets to compete with them. Spotify, for example, is among the loudest opponents of Apple, which has its own competing music streaming service. Spotify has alleged that Apple “routinely rejects bug fixes and app improvements that would improve the user experience and functionality of the app” while refusing to put such “obstacles” in front of its own service.

In a 2019 statement, Apple denied Spotify’s claims of blocking its app updates, saying, “We only requested adjustments when Spotify tried to circumvent the same rules that every other app follows.”

The Open App Markets Act would prohibit large app store owners from using non-public business information from a third-party app to compete with it. The law would also forbid these companies to “improperly favor or rank” their own apps or those of their business partners over others.

Blackburn said on Power Lunch that it envisions other consumer app store options and more innovation under the bill. She sees the current situation as an “opportunity cost” that keeps some developers out of the market.

Under the bill, the Federal Trade Commission and attorneys general could take action against the platforms. Developers also have the right to sue for injunctive relief.

“Since our inception, we have always put our users at the center of everything we do, and the App Store is the cornerstone of our work to connect developers and customers in a safe and trustworthy manner,” an Apple spokesman said in a statement. “The result was an unprecedented engine for economic growth and innovation that now supports more than 2.1 million jobs in all 50 states. At Apple, our focus is on maintaining an app store where people can trust that every app has to meet our strict guidelines and that their privacy and security are protected. “

A Google spokesman declined to comment.

Corie Wright, vice president of public policy at Epic Games, which is currently involved in a lawsuit with Apple and Google over their app stores, said the introduction of the bill was an “important milestone in the ongoing battle for fairer digital platforms.”

“Passing it would allow developers to obtain injunctions for violating the law, which will help improve the playing field for small businesses facing monopolists who abuse their market power,” Wright said. “This will make it easier for developers of all sizes to challenge these harmful practices and take retaliation, be it during litigation or simply for daring to speak up.”

Spotify’s chief legal officer, Horacio Gutierrez, also praised the law in a statement.

“These platforms control more commerce, information and communications than ever before, and the power they wield has enormous economic and social implications,” he said. “That is why we urge Congress to swiftly pass the Open App Markets Act. If no action is taken, we can expect Apple and others to continue changing the rules in favor of their own services, causing further harm to consumers, developers and the digital economy. “

Subscribe to CNBC on YouTube.

WATCH: Apple’s battle with Epic Games is part of a larger cartel battle

Comments are closed.