The act, which would essentially dismantle the app market duopoly held by Apple and Google, would have huge implications for tech regulation.
4 minute read
Google and Apple are painting a pearl-clutching apocalyptic picture of the ramifications of the Open App Markets Act. They’re quick to say their walled-garden app stores are necessary for our safety and privacy. But the reality is, they’re greedy, monopolistic rent-seekers, terrified at the prospect of being forced to open their platforms, and more crucially, at parting with some billions of dollars of pure profit.
Most people don’t realize that Apple and Google collect 30% of every app store purchase, microtransaction, and subscription. And while both have moved to reduce that to a “generous” 15% in some cases, this feint toward self-regulation still leaves a great deal to be desired.
While still in the introduction phase, the Open App Markets Act would, if passed, essentially dismantle the app market duopoly held by Apple and Google. This act is one cog in a larger wheel of reform, the American Innovation and Choice Online Act, which targets big tech companies for antitrust and consumer choice violations.
It’ll provide numerous victories for app developers, as well as anyone interested in curbing anticompetitive behavior in the free market (hint: that should be most of us). The biggest change would be that Apple (or similar companies) can no longer require developers to use or enable in-app purchases as a condition of the app’s distribution. App stores will also no longer be able to require price matching of hosted apps.
It’ll also prohibit punitive action against developers for using different pricing terms. And it’ll mean app stores can’t stop developers from speaking directly to their users about alternative pricing or payment methods. Phones would no longer default to the manufacturer’s app store, and developers would have additional protection against competitors using non-public information to develop copycat apps. Finally, the act would force Apple to allow sideloading and alternate app stores, like those we might see for gaming platforms like Steam and Epic. You can see why Apple is lobbying so hard against it.
The act would have huge implications for big tech companies and tech regulation, and it could alter the outcome of some current cases. Right now, Epic Games is appealing the Epic v. Apple decision from 2021. The lawsuit stemmed from Epic Games sidestepping the 30% processing fee that Apple imposes on all developers for in-app purchases. Epic drove users of Fortnite to purchase its in-game currency directly from Epic Games instead of Apple’s App Store payment system. Apple demanded that Epic update its app and ultimately removed Fortnite from the store when Epic refused. The judge ruled in favor of Apple, stating that Epic didn’t experience irreparable harm because of the app store removal.
Taxing other people’s hard work and innovation in app development feels intrinsically unjust and is, quite frankly, exasperating. That is what this act is coming out against, and that is exactly why Epic sued Apple and is appealing the ruling. Another of the act’s aims is to regulate big tech and protect the future of technology. It’s the Wild West right now, which is how companies like Apple, Google, and Amazon have monopolized the industry so far.
The new law would level the playing field: App developers and consumers alike would have alternative avenues through which to distribute and download apps. The dreaded “Apple tax” would no longer be compulsory, as app stores could no longer force people on in-app purchases for subscriptions. This would change the market economics of the App Store itself and provide a boost to startups, no longer handcuffed by the 30% charge.
It’s worth calling out Apple and Google’s fear-mongering around this act as exactly that. We already have a perfect example to the contrary in our computers: Windows and OS X allow us to install and run whatever software we want. Apple and Google are arguing that their mobile operating systems are intrinsically and inviolably also an ecosystem, but that’s simply not true.
Even if the Open Markets Act passes, I don’t foresee an en masse shift of consumers from the core app stores on their devices. The first-party integrations still provide some nice features, namely convenience around cancellation and certain privacy enforcement. Passage would initiate a sea change in mobile gaming, though. Apple and Android both make a significant amount of their revenue from mobile gaming, and if they’re forced to allow the likes of Steam and Epic onto their phones, they won’t be happy. Perhaps more important, the change around in-app purchases will empower a new generation of startups.
At this point, the power is in Congress’ hands. The language and details of the bill are swinging for the fences by taking away the in-app purchase requirements and allowing external app stores to emerge. The act’s enforcement allows plaintiffs (app developers) to go aggressively against app stores. Essentially, as an app developer, you could follow in Epic Games’s footsteps and point to how in-app purchases and other existing app store rules and restrictions prevented your success and then seek damages for it. App developers’ ability to sue is a game changer.
For me, what this act essentially boils down to is that taxing someone else’s innovation and creativity is wrong and that restricting what we can install on our devices feels anti-competitive. The Big Tech companies got a little too comfortable with the massive profits they’ve been reaping; with this act, they’ll be forced to contend with the underdogs.