Apple, Google app store fights move to the states

Both state Rep. Andy Vargas, a Democrat who is sponsoring similar legislation in Massachusetts, and Hawaii Democratic state Sen. Stanley Chang said they hoped legislation would help level the playing field between the tech companies and startups and entrepreneurs, who have no choice but to accept Apple’s and Google’s terms.

The state legislative fights are the latest manifestation of the long-running gripes that developers such as Spotify have aired to lawmakers and antitrust regulators in both Washington, D.C., and Europe about app store policies. Epic, the creator of the popular video game Fortnite, is also waging its own court fights against Apple and Google in an attempt to defang their app policies.

Both of the tech giants allow companies they classify as offering physical goods, such as Amazon, Uber and Airbnb, to process their own payments. But apps that sell only digital goods must use Apple’s and Google’s payment processing, from which the tech companies take 30 percent.

The tech giants also forbid the apps from telling consumers that their price might be cheaper if purchased directly. For example, a paid Spotify subscription costs $9.99 a month if users sign up on the company’s website, versus the $12.99 that users who signed up on their iPhone had to pay, as state Rep. Kasey Carpenter, the lead Republican sponsoring the Georgia legislation, noted during a hearing last month.

Bills are also pending in both chambers of the Minnesota state legislature and Hawaii.

The Coalition for App Fairness — which includes Spotify, Epic and Match — as well as Basecamp and Tile have spoken in state legislatures in favor of the bills, and national anti-monopoly and consumer rights groups are also backing the bills. David Heinemeier Hansson, Basecamp’s co-founder and a prominent Apple critic who testified in Arizona last week, called the bill “the most significant legislation against big tech since the term big tech was coined” and said the company might move its headquarters there from Illinois if the legislation passed.

In testimony before an Arizona committee, Apple’s Kyle Andeer said the App Store’s commission is more than just a credit card processing fee and is used by the iPhone-maker to help review and maintain apps. Most app developers pay no commission and the company charges others only 15 percent, he said.

“The bill is a government mandate that Apple give away the App Store,” said Andeer, Apple’s chief compliance officer. He added that the “30 percent is a market-based price; 15 percent is significantly below the going rate; and either is a much better deal than the 70 percent developers had to pay before” to sell physical copies of software.

Google declined to comment on the state bills, pointing instead to a blog post about the company’s stance on competition issues. The company noted that Android users can download additional app stores other than Google’s Play Store. The commissions that Google receives from developers help ensure consumers have “a trusted system that allows them to safely, securely, and seamlessly buy from developers worldwide,” the company said.

While Apple has testified against the bills in North Dakota and Arizona, Google hasn’t weighed in, though several trade associations of which it is a member have knocked the legislation.

Massachusetts’ Vargas said he would press forward with the legislation despite the pushback from Apple and Google.

“The forced 30 percent payment processing fee means consumers pay more, competition is stifled, and startups have a tougher time scaling because every piece of revenue they generate is undercut,” Vargas told POLITICO. “Consumers deserve fairness and our small app developers — especially people of color often left out of scaling startups — deserve equitable opportunities to pursue their big ideas.”

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