US lawmakers introduce bill requiring Apple and Google to allow third-party app stores and payment systems

Called the Open App Markets Act, the bill proposes a slew of measures that benefits third-party app stores but might compromise users’ safety; it is the latest in America’s crackdown on big tech. 

“For years, Apple and Google have squashed competitors and kept consumers in the dark—pocketing hefty windfalls while acting as supposedly benevolent gatekeepers of this multi-billion dollar market,” US Senator Richard Blumenthal said while introducing a new bill targetted at Apple’s App Store and Google’s Play Store. The bill titled Open App Markets Act is co-sponsored by US Senators Marsha Blackburn and Amy Klobuchar, and it aims to address issues that third-party app developers have long complained about.

“This bipartisan bill will help break these tech giants’ ironclad grip, open the app economy to new competitors, and give mobile users more control over their own devices,” Blumenthal said.

Why it matters? The introduction of this bill comes at a time when Apple and Google are facing multiple legal battles across the world with respect to their app store practices and big tech, in general, is facing increased scrutiny. The main allegations against these platforms are that they charge high commissions and impose unreasonable restrictions on third-party developers. Both of these, along with many other concerns, are addressed by this new bill, which if passed, will upend the world of apps and cause a huge dent in the revenues of Apple and Google. The proposed measures also carry many safety and privacy concerns that have been inadequately addressed by the bill.

Who does the bill target?

App stores catering to 50 million or more users: The bill defines a “covered company” as “any person that owns or controls an App Store for which users in the United States exceed 50,000,000.” This would include Apple and Google whose respective app stores cater to more than the prescribed number of users and it will exclude companies running smaller app stores. It also covers some large online game stores like Valve. The following provisions apply to all covered companies, but I’ve used Apple and Google as examples for the sake of convenience.

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What does the bill propose?

• Operating systems must allow third-party app stores: The bill stipulates that Google and Apple must allow users to download third-party app stores through means other than their own app stores. Users should also be allowed to choose third-party app stores as default and to hide or delete preinstalled app stores. Currently, Google allows third-party app stores with some restrictions, but Apple does not.
• Developers allowed to choose their choice of in-app payment system: The bill stipulates that developers cannot be forced to use the payment systems owned or controlled by Apple and Google for in-app purchases. Currently, Apple and Google require apps to use their proprietary payment system and charge 30 percent standard commission on in-app purchases of digital goods, but with developers allowed to freely choose their in-app payment system, they can direct the user to payment systems that charge less commission. Apple’s and Google’s battle with Epic Games in the US is fighting for exactly what this bill proposes here.
• Pricing for various app stores or in-app payment systems can be determined by developers: Google and Apple cannot require developers to price apps to be equal or more favorable on their app stores than other app stores. These platforms also cannot take punitive action or otherwise impose less favorable terms and conditions against a developer for offering different pricing in another app store or in-app payment system. This rule ensures that if a developer is able to offer the app at a cheaper rate on another app store because of a lower commission, they can do so without facing any repercussions.
• Developers can freely communicate pricing offers with users: Apple and Google cannot impose restrictions to prevent developers from reaching their apps’ users for business offers, pricing terms, product or service offerings. Currently, Apple does not allow apps like Netflix and Spotify to reach out to their users asking them to directly subscribe on their website in a bid to avoid Apple’s commission.
• Google and Apple cannot use non-public data to build competing apps: The bill stipulates that Google and Apple cannot use non-public business information derived from a third-party app for the purpose of competing with the app. Recently Tile, which makes tags to find lost objects, complained that once Apple made its own such tags it began making it more difficult for Tile products to work on Apple devices. Other apps have also complained about how Apple launched its own competing apps and pre-installed them on devices, making it harder for third-party developers to survive in the market.
• No self-preferencing in app stores: Apple and Google cannot give more preference to their own or their business partners’ apps and services over third-party ones in app store rankings.
• Third-party developers must be provided the same access to developer tools: Apple and Google must give all developers the same access to operating system interfaces, development information, and hardware and software features that it gives to its own apps or its business partners.

What about the security and privacy of users?

Apple’s main argument for not allowing third-party app stores has been that the security and privacy of its users will be adversely affected. Apple has contended that it has been able to safeguard its users by maintaining a comprehensive app review process and third-party app stores, if allowed, will not operate with the same priorities and values.

The new bill keeps this argument in mind and stipulates that Apple and Google are not in violation of the above requirements for an action that is

1. necessary to achieve user privacy, security, or digital safety
2. taken to prevent spam or fraud
3. taken to prevent a violation of, or comply with, Federal or State law

However, the bill also states that if Apple and Google use the above reasons to justify their actions, they must establish by clear and convincing evidence that their action is

1. consistently applied to all apps
2. not used as a pretext to exclude, or impose unnecessary or discriminatory terms on, third-party apps, in-app payment Systems, or app stores
3. narrowly tailored and could not be achieved through a less discriminatory and technically possible means.

But these measures do not go far enough in addressing safety and privacy. For example, how exactly should Apple and Google prove that what they’re doing is for safety and privacy and not to deter competition?

What else is the US doing to crack down on big tech?

Five bipartisan bills aimed at breaking up big tech: On June 11, US lawmakers debuted five bipartisan draft bills that are aimed at curbing the power of tech giants like Apple, Google, Facebook, and Amazon. “The legislation represents the most comprehensive effort to reform century-old antitrust laws,” CNBC reported. The bills are aimed at preventing dominant companies from unfairly disadvantaging rivals, preventing companies from owning a platform and offering services on it that pose a conflict of interest, preventing dominant online platforms from buying companies they perceive as competitive threats, and making it easier for consumers to port data between platforms.

Appointment of Lina Khan as FTC Chair: The US government on June 15 appointed Lina Khan as the Chair of the Federal Trade Commission (FTC) who has been hailed as a big tech critic. Khan was an associate professor of law at Columbia Law School where she taught and wrote about antitrust law and the antimonopoly tradition. Her scholarship on antitrust policy has influenced important public debates on the topic.

Biden’s executive order: In July, US president Joe Biden signed an executive order (EO) that sought to promote competition by directly putting big tech in the US administration’s crosshairs. The order called on several US agencies like the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) to implement 72 specific provisions on topics such as restoring net neutrality provisions that were repealed during the Trump administration; codifying “right to repair” rules, data collection/surveillance by big companies and increasing big tech scrutiny.

What is India doing on this front?

The Competition Commission of India (CCI) is currently investigating Google over its Play Store practices, with regards to Play Store’s exclusivity and Google Pay (GPay) services. CCI is also investigating the dominance of Amazon and Flipkart in the e-commerce space, the dominance of Google in the smart TV space, and the new privacy policy of WhatsApp. In a recent event, the CCI Chairman Ashok Gupta spoke at length about the characteristics of market power in the digital space and what CCI is doing to address competition harm in digital markets. “CCI has prioritized and stepped up its scrutiny against online platforms across particulars,” Gupta said.

Updated (13 Aug, 8:50 am): Added clarification that the bill applies to app stores other than Google and Apple as well

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Updated (25 Aug, 1:106 pm): Corrected error that CCI is not investigating any of the app stores. It is in fact currently investigating Google Play.