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

A new bipartisan bill announced Wednesday seeks to bring more competition to the app store market 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 shake up the business model of both company’s app stores and the structure of their mobile operating systems.The bill targets, in part, the in-app payment systems for companies that own app stores with more than 50 million users in the U.S. Under the bill, companies like Apple and Google would not be allowed to condition distribution of an app on their app stores on whether the developers use their in-app payment system.They also would be prohibited from keeping developers from communicating with app users about “legitimate business offers,” or from punishing developers for using different pricing terms through another system. Developers have complained of being unable to advertise lower prices that customers could receive off of the apps, which would allow them to circumvent app store fees.The bill would aim to keep app stores from disadvantaging certain developers and allow for third-party app stores. While third party-app stores are available to Google’s Android users, Apple only allows app downloads through its own store.The bill would also allow for apps to be sideloaded, meaning they don’t need to be downloaded from an official app store. Apple in particular has expressed concern that sideloading could open consumers’ phones to security vulnerabilities.The legislation does leave room for Apple and Google to make the case that their in-app payment systems and other tools or protocols are necessary for security purposes. The bill says that any platform covered by the legislation would not be in violation if an action is necessary for user privacy or security, a fraud prevention effort or a way to comply with federal or state law.Blumenthal said in an interview Wednesday on CNBC’s “Power Lunch” that Apple and Google’s arguments that tight control of their app stores protect users’ security is a “pretext to maintain their monopoly position.””It is not only disingenuous it’s ironic because they’re the ones who are actually invading privacy and stealing data from the developers and all the while they’re saying, ‘Oh, well, we’re the privacy protectors,'” Blumenthal said. “In fact, our legislation in Section 4 has a specific provision that protects privacy, even more than it is now. So this kind of argument is totally bogus and I think it is going to be absolutely transparent that, actually, privacy would be better protected with this legislation.”App developers have complained to Congress and in court that Apple and Google maintain a tight grip over their businesses through control of their app stores, which are the gatekeepers of access to mobile app consumers. Companies like Epic Games and Spotify have taken issue with the companies’ commissions on purchases customers make in their apps.For example, Apple would take a 15% to 30% cut of the payment a customer makes for upgrading to Spotify Premium through the iOS app. Apple has also prevented companies from advertising through its apps that customers can get lower prices by buying through a different channel so that the developer can avoid the fee.Apple and Google say that the commissions they charge from app purchases are standard for the market and that it costs money to build and run the app stores they operate. Many developers say they don’t oppose paying some fees to cover those costs, but that the current ones are unreasonably high.Developers have also launched allegations that app store operators use knowledge of their markets to compete with them. For example, Spotify has been among the most vocal opponents of Apple, which has a competing music streaming service of its own. Spotify has charged that Apple “routinely rejects bug fixes and app enhancements that would improve user experience and the app’s functionality” while declining to put such “obstacles” in front of its own service.In a 2019 statement, Apple denied Spotify’s claims that it blocked its app updates, saying, “The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows.” The Open App Markets Act would prohibit large app store operators from using nonpublic business information from a third-party app to compete with it. The act also would prohibit those companies from “unreasonably preferencing or ranking” its own apps or those of its business partners ahead of others.Blackburn said on “Power Lunch” that she envisions other app store choices for consumers and more innovation under the bill. She said 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 state attorneys general could take action against the platforms. Developers would also be entitled to sue for injunctive relief.”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,” an Apple spokesperson said Wednesday in a statement. “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. 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.”A Google spokesperson declined to comment.Corie Wright, vice president of public policy at Epic Games, which is currently engaged in litigation with Apple and Google over their app stores, said the bill’s introduction is an “important milestone in the continued fight for fairer digital platforms.””Its passage would enable developers to seek injunctions for violations of the Act, which will help level the playing field for small companies standing up to monopolists who are abusing their market power,” Wright said. “This will make it easier for developers of all sizes to challenge these harmful practices and seek relief from retaliation, be it during litigation or simply because they dared speak up.”Spotify’s chief legal officer, Horacio Gutierrez, also praised the bill in a statement. “These platforms control more commerce, information, and communication than ever before, and the power they exercise has huge economic and societal implications,” he said. “That’s why we urge Congress to swiftly pass the Open App Markets Act. Absent action, we can expect Apple and others to continue changing the rules in favor of their own services, and causing further harm to consumers, developers, and the digital economy.”Subscribe to CNBC on YouTube.WATCH: Apple’s fight with Epic Games is part of a larger antitrust battle


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