A number of states are considering legislation endorsed by a coalition of companies such as Fortnite-maker Epic Games and Match Group that would allow developers to avoid paying Apple and Google’s controversial app store fees, the latest legal face-off in the ongoing battle between the tech giants and smaller firms.
When users make in-app purchases, they have to use Apple or Google’s payments processor, which takes a 15-30% cut of the transaction, a move critics describe as an anti-competitive tactic that helps maintain their monopoly and harms customers by forcing apps to raise prices to cover the fee.
Epic Games, Spotify, Match Group and a number of other smaller startups such as Tile, Basecamp and ProtonMail formed a non-profit last year called the Coalition For App Fairness, which has been dispatching lobbyists to convince state lawmakers to introduce bills addressing app store monopolies and allowing them to use the payment processor of their choice. (The Coalition For App Fairness did not immediately respond to a request for comment from Forbes.)
According to tech news outlet Protocol, the lawmaker sponsoring the Arizona bill was first approached by a local lobbyist representing Match Group and the Coalition for App Fairness, while a lobbyist for Epic Games and the Coalition for App Fairness gave draft legislation to a North Dakota state senator, according to the New York Times.
Bills have already been introduced in North Dakota, Arizona, Minnesota and Georgia over the last few months, and while the effort in North Dakota—which also would have forced Apple to allow alternative app stores—has already failed, a bill addressing the issue passed the Arizona House of Representatives this week.
The bills have gotten early support from Republicans who view their efforts as a way to rein in Big Tech, while Arizona Democrats questioned whether the state should get involved and argued the bill would mostly benefit companies like Epic Games and Match Group that already rake in millions.
Pushback from Democrats in Arizona was an unlikely twist, given that Democrats are behind a similar bill in Minnesota, which is backed by progressive groups and outspoken tech critics such as Elizabeth Warren, who is on the forefront of the federal effort, backed by Democrats, for tougher antitrust regulations.
While state Republicans have largely been receptive, libertatian groups, such as Koch-backed Americans For Prosperity and the R Street Institute, say the bills make unnecessary mandates on private companies. For their part, Apple and Google are strongly lobbying against any app store legislation. Erik Neuenschwander, Apple’s chief privacy engineer, said in testimony before the North Dakota State Senate that allowing third-party payment processors opens up Apple devices to bad actors who may jeopardize privacy and security. Kyle Andeer, Apple’s chief compliance officer, told Arizona lawmakers the bill “tells Apple that it cannot use its own check-out lane in the store we built.”
The issue of app store fees gained attention last year after Epic Games intentionally used its own payments system as a form of protest against Apple and Google, resulting in Fortnite getting kicked off both app stores. Epic then sued both companies alleging they violated antitrust law. Since both lawsuits are ongoing, part of the argument against the bill from Arizona Democrats centered on the idea that the states should not weigh in on the contentious court case. “It is not the obligation or the responsibility of the state legislature to get involved in the midst of litigation,” Democratic Rep. Cesar Chavez, said.
Both Apple and Google have retained a team of lobbyists to oppose the Arizona bill. Apple even hired the former chief of staff to Arizona Gov. Doug Ducey and speaker of the Arizona House of Representatives to try and kill the bill, Protocol reported.
What To Watch For
The Arizona bill, which is the furthest along, still needs to pass the State Senate and be signed into law Ducey.