Feb 3, 2022 - Technology

Apple and Google could be forced to give up full control of their app stores

Illustration of a gavel smashing app icons.

Illustration: Annelise Capossela/Axios

Apple and Google’s control over the mobile apps market faces increasingly strong challenges, with a Senate committee poised to advance a tough new bill in the U.S. and the gatekeeper-app-store model showing signs of wear across the globe.

Driving the news: The Open App Markets Act, which Apple and Google are fighting, is expected to win Senate Judiciary Committee approval Thursday.

  • Should it become law, Google and Apple would essentially have to give up full control of their app stores. New rules could require them both to allow app side-loading — installing apps from non-sanctioned marketplaces — and alternative payment processing systems.

Context: The EU, the U.K. and Japan are all investigating Apple's App store practices, and the Netherlands fined Apple €5 million for not making sufficient changes to App Store policy.

  • Legislation passed last year in South Korea required the Google Play Store and the Apple App Store to allow third-party payment systems in its apps.
  • Last week the Department of Justice and 35 state attorneys general submitted filings challenging the court's decision in Fortnite maker Epic's suit against Apple over its App Store practices. The judge ruled Apple hasn't violated U.S. antitrust law, but the new filings argue she interpreted the law wrong.

Details: The bipartisan Senate bill was originally introduced by Sens. Richard Blumenthal (D-Conn.), Amy Klobuchar (D-Minn.) and Marsha Blackburn (R-Tenn.).

  • A House counterpart was introduced last August.
  • For it to become law, it will need to make its way through a crowded agenda to a full Senate vote, and then any differences between House and Senate versions would have to be resolved.

What they're saying: Apple has long made its opposition to the bill clear, arguing that the company's tight hold on the App Store is what keeps iPhones safe, secure and private.

  • In a letter written to committee leaders Wednesday, obtained by Axios, Apple senior director of government affairs Tim Powderly said the bill in its current form "erects a nearly insurmountable obstacle for all but the most basic [privacy] safeguards" and that side-loading would open the door to malware.
  • Google, whose Android store is already much less restricted than Apple's App Store, has also argued its policies are meant to protect consumers.
  • "This 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," Mark Isakowitz, Google vice president for government affairs and public policy, wrote in a letter to the committee Wednesday.

Meanwhile, companies have tried to get ahead of regulations by lowering app store fees for some developers and making other concessions, such as setting up a fund for small developers.

The other side: Left-leaning groups, competitors and some developers want to see the bill passed, arguing the two tech behemoths use "gatekeeper" power in their app stores and ultimately drive up consumer costs.

  • The Coalition for App Fairness, a group with members including Basecamp, Spotify, Match Group, Tile and Epic Games, argue the bill would bolster consumer choice and freedom and let companies communicate directly with customers.
  • "Mobile app marketplace gatekeepers use a vice-like group to control developers and impose terms and conditions that undermine competition," the group wrote in a letter to Senate Judiciary leaders last month.
  • Additionally, sources tell Axios that Microsoft is generally supportive of the bill and has been encouraging the committee's work on it.
  • Conservative and libertarian-leaning groups are split on the bill, with some praising it as a welcome check on Big Tech's power and others arguing it would weaken security and unfairly hurt U.S. companies.

What we're watching: The Senate Judiciary committee passed another antitrust bill, the American Innovation and Choice Online Act, last month.

  • Many senators who voted to advance it said they had reservations about its current form and that it needed work before hitting the Senate floor.
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