Senators introduced a bipartisan bill Wednesday that seeks to rein in the control Google and Apple Inc. have over their respective mobile-app stores, part of a larger wave of antitrust legislation in congress.
The Open App Markets Act bill’s co-authors — Sens. Richard Blumenthal, D-Conn., Marsha Blackburn, R-Tenn., and Amy Klobuchar, D-Minn. — would set rules to protect competition and strengthen consumer protection in the app market currently dominated by Alphabet Inc.’s Google
Among the rules: Apple and Google would no longer be able to require developers to exclusively use their app payment systems nor would the two companies be allowed to favorably price and rank their apps against competing brands.
Developers would be allowed to sue for injunctive relief.
“They [Apple and Google] are so beyond the pale in their abusive tactics. It is a blatant, craven textbook abuse of economic power,” Blumenthal told MarketWatch in a phone interview shortly before the bill was introduced. “Sometimes the abuses by Big Tech are abstract, but here the impact is very direct on consumers [via a 30% commission fee] and in the stifling of innovation through ‘copy and kill’ app tactics.”
Apple and Google reach billions of consumers through the App Store and Google Play Store, respectively. But their onerous commission fees of up 30% for developers have sparked high-profile lawsuits and constant grumbling. Equally vexing for developers is a tendency by Apple and Google to offer their own versions of popular apps from third-party developers.
“Big Tech giants are forcing their own app stores on users at the expense of innovative startups,” Sen. Blackburn added in a statement. “Apple and Google want to prevent developers and consumers from using third-party app stores that would threaten their bottom line. Their anticompetitive conduct is a direct affront to a free and fair marketplace.”
Apple and Google make billions from their respective app stores. Apple recorded gross profit of $35.5 billion on revenue of $53.8 billion last fiscal year in its Services segment, which includes App Store sales along with subscription services and other online offerings, and has already cleared nearly as much in the first three quarters of its current fiscal year, $34.8 billion in gross income on revenue of $50.1 billion. Google’s Play Store revenue is included with other services as well, and the segment produced sales of $21.7 billion last year and more than $13 billion in the first half of this year.
Google declined to comment on the bill, but the company has said Android provides choice that others — presumably Apple — do not. This includes the ability of device makers and carriers to preload competing app stores alongside Google Play on their device, as well as the ability of consumers to “sideload” apps, which means they can download them from a developer’s website directly without going through Google Play.
In a statement, an Apple spokesperson defended the company’s approach.
“Since our founding, we’ve 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 way that is safe and trustworthy. The result has been an unprecedented engine of economic growth and innovation, one that now supports more than 2.1 million jobs across all 50 states,” an Apple spokesperson said in an emailed statement. “At Apple, our focus is on maintaining an App Store where people can have confidence that every app must meet our rigorous guidelines and their privacy and security is protected.”
Blumenthal pointed to a Senate hearing in April, when executives from Tile Inc., Spotify Technology
and Match Group Inc.
testified to the frustrations and antagonisms in working as developers on Apple and Google’s platforms.
Jared Sine, Match’s chief legal officer, claimed Google called Match the night before his testimony became public to press why his testimony differed from Match’s comments in its latest earnings call. Blumenthal quickly jumped on the call as “potentially actionable.”
“Big Tech are gatekeepers who operate their own platforms and products,” Blumenthal told MarketWatch on Wednesday. “It’s like the Lords during Medieval times saying how well serfs did under their benevolent control.”
The bill was in the works before Epic Games Inc., maker of the popular Fortnite game, sued Apple over its App Store policies in an attempt to operate its own payment service within the App Store, according to Blumenthal. A decision in the Epic-Apple case could come as soon as this month.
Epic vs. Apple: The (predicted) verdict is in
The app store bill joins a raft of Congressional legislation. In June, House Democrats, led by Rep. David Cicilline of Rhode Island, introduced a package of bills to shake up the U.S. antitrust climate. The most aggressive would let prosecutors sue to break up major tech companies by forcing the platforms to sell off lines of business if they represent a conflict of interest. Another bill under consideration would prohibit online platforms such as Amazon from giving their own products or services an advantage over those of rivals that depend on the same platforms to reach consumers.
Meanwhile, Klobuchar, chairwoman of the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, is working on broad, general antitrust reform that would seek bipartisan support. Antitrust experts expect Klobuchar’s legislation to apply to tech and other industries.