How the Open App Markets Act wants to remake app stores
Last week, the Senate Judiciary Committee passed the Open App Markets Act, one of legislators’ latest attempts to limit big tech companies’ power — a big step toward opening up iOS and Android’s app stores. But the proposal has raised questions about moderation and security alongside praise from anti-monopoly watchdogs, mirroring a tech world debate about the perks and harms of walled gardens.
The bill is aimed at increasing competition in mobile computing, a field where plenty of people agree a few companies have too much power. But as a series of proposed amendments demonstrated, though, not everyone agrees where that power should stop.
What is the Open App Markets Act?
You can read the Open App Markets Act or S. 2710 for yourself — unlike some omnibus tech reform bills, it’s not that long. But basically, it says companies that operate app stores with more than 50 million US users shouldn’t engage in certain potentially anti-competitive behaviors. That includes:
- Requiring developers to use the company’s own in-app payment processor as a condition of using the store
- Penalizing a developer for offering better prices on another app store
- Restricting developers from directly contacting customers with business offers
- Using private analytics data from third-party apps to build its own competitors
- “Unreasonably” preferencing its own apps in search results
If a company that owns an app store also controls the underlying operating system, it also has to make it easy for users to perform the following tasks:
- Install third-party apps without using the App Store
- Choose third-party apps and app stores as system defaults
- Uninstall or hide preinstalled apps
Companies that break the rules could be subject to antitrust enforcement from the Federal Trade Commission, the Attorney General, and state attorneys general, as well as civil lawsuits from “any developer” who was harmed by the banned conduct.
Notably, the bill doesn’t explicitly cover app stores on every device. It defines the term as a “publicly available website, software application, or other electronic service” on “a computer, a mobile device, or any other general purpose computing device.” That seemingly exempts consoles like the Microsoft Xbox and Sony PlayStation, which feature locked-down app stores but are specialized gaming devices.
Sens. Richard Blumenthal (D-CT), Marsha Blackburn (R-TN), and Amy Klobuchar (D-MN) introduced the Open App Markets Act in August of 2021 as part of a bigger antitrust reform effort that includes the American Innovation and Choice Online Act. But it clearly responds to complaints from iOS and Android app developers, who say Apple and Google charge unfair fees on in-app purchases (e.g., the dreaded “Apple tax”) and lock down their iOS and Android platforms to either completely disable or heavily discourage installing apps outside their stores. While some states have introduced similar legislation, this is the first serious federal effort.
Government agencies and developers have already sued and argued that these practices violate existing antitrust law — most prominently Fortnite publisher Epic Games, which went to court with Apple last year. But Epic’s lawsuit was shot down, and other cases haven’t yet been decided, while this bill would establish the practices as clearly illegal.
In opening statements, Blumenthal compared the in-app purchase charge to Microsoft’s attempts to charge a “vigorish” on every Windows-based internet transaction in the 1990s — saying that where Microsoft failed, mobile platform makers had succeeded. “Google and Apple own the rails of the app economy much as the railroad companies did at the start of the last century,” claimed Blumenthal. “If you’re a consumer, what this measure means to you is cheaper prices, more innovation, better products, and more consumer safeguards by opening the walled garden.”
Who’s supporting the bill?
Google and Apple predictably aren’t fans. Apple has said it’s “deeply concerned” about the legislation, focusing on the potential risks of letting consumers sideload apps and use alternative app stores — something that could let developers bypass Apple’s privacy and security safeguards. Public policy VP Mark Isakowitz has said the bill could “destroy many consumer benefits that current payment systems provide and distort competition by exempting gaming platforms, which amounts to Congress trying to artificially pick winners and losers in a highly competitive marketplace.”
Conversely, the companies’ biggest critics — and competitors — largely favor it. The antitrust-focused American Economic Liberties Project strongly urged the Senate to pass the bill, calling it “part of a growing movement from policymakers to rein in Big Tech’s monopoly power.” The Biden administration has also signaled support, lauding “bipartisan progress” on antitrust reform.
In the tech industry, Microsoft president Brad Smith congratulated lawmakers on Twitter, saying it would “promote competition and ensure fairness and innovation in the app economy.” (Google chief legal officer Kent Walker called it “disappointing that Microsoft would lobby so hard for a law targeting its competitors while carving out its own exception for Xbox.”)
But the battle lines aren’t quite as clear as “Apple and Google versus the world.” Even people who support the legislation’s overall goal may disagree on whether it succeeds at carefully targeting monopolistic business practices or if it would create collateral damage in other areas.
That sounds like an excuse a monopolist might use. Are there actually substantive criticisms?
Well, there’s an ongoing discussion about the safety of sideloading — something that’s come up repeatedly in legal and policy challenges — and tech industry groups like NetChoice say the bill doesn’t adequately address the security risks of opening platforms up.
The bill’s sponsors have defended its security bona fides; during markup, Klobuchar called claims that it would hurt user privacy and security “simply not true.” The language includes an exception for actions that are “necessary to achieve user privacy, security, or digital safety” or “taken to prevent spam or fraud,” and app store owners can defend themselves from anti-competition claims by arguing that they apply consistent rules to both their own apps and those of competitors. (At least one prominent security expert, Bruce Schneier, has come out in favor of the legislation.) The sponsors also adopted a manager’s amendment that tweaked the bill’s security language, although the changes haven’t silenced the criticism.
Then there’s an arguably more complicated debate over something that isn’t explicitly discussed in the bill: moderation. Shortly before the vote, a coalition of researchers and advocacy groups warned that the Open App Markets Act could penalize companies for exercising basic editorial judgment on their app stores. They warned that in their current form, the rules against preferencing apps could be “misused to pressure mainstream platforms to carry extremist content, hate speech and misinformation.”
If the rule were active when Google kicked a social platform like Parler off its Play Store, for instance, Parler could claim Google was favoring other social apps, including its own YouTube app. The coalition argues that even if this argument didn’t ultimately fly in court, the Open App Markets Act could drag a lawsuit out and discourage stores from removing even apps that violate their policies. As a solution, it’s suggested rewording the preferencing rules to make clearer they apply only “based on a criterion of ownership interest” — in other words, developers would need to make a case for discrimination on economic grounds rather than editorial ones.
For conservative lawmakers like Sen. Ted Cruz (R-TX), meanwhile, editorial control is an explicit selling point of the bill; in fact, they think it doesn’t go far enough. Cruz proposed an amendment during markup to make app stores exercise “neutrality” based on apps’ political content, tweaking an antitrust-focused bill to address online culture wars as well. Like all amendments, except the initial manager’s amendment, Cruz’s proposal was shot down, but the issue is likely to keep cropping up.
What are this bill’s odds of passing — and of making a difference?
There’s one important caveat to the “Apple tax” since it’s a key element of the Open App Markets Act: getting rid of in-app purchase requirements wouldn’t necessarily kill it. The Epic v. Apple ruling established that Apple could theoretically collect a commission from developers through methods besides a payment processing fee. After Dutch regulators told Apple to start letting some app developers use alternative payment systems, Apple proposed precisely that solution. Developers who opt out of Apple payments would simply pay a separate 27 percent fee on in-app purchases — a whopping 3 percent savings for a system that users might find more complicated.
At the same time, in requiring Apple and Google to soften their stance on third-party app loading and stores, the bill could substantially change the way that mobile computing operates. And after its nearly unanimous committee vote, with only Sen. John Cornyn (R-TX) voting against, there’s a lot of momentum behind it. But the bill still needs a House of Representatives equivalent — H.R. 5017 — to get a similar vote and then for both to get a final vote in their respective houses.
Regardless of the outcome, there’s growing international pressure on current app store practices. The Dutch regulations above target “walled garden” mobile arrangements, and South Korea passed similar rules as well. But the US is these companies’ home turf — and its rules could be about to change.