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Big Tech set to defend app stores in antitrust hearing

Big Tech set to defend app stores in antitrust hearing
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Apple and Google’s market power over digital app stores will be in the hot seat Wednesday at the Senate Judiciary antitrust subcommittee’s hearing on app store fairness.

The Silicon Valley giants have come under fire over their app stores’ policies, especially over the 15 to 30 percent fees they collect from app developers. Without alternatives to the Google and Apple stores on the companies’ products, developers are largely reliant on the systems they’re critical of to reach consumers. 

As Congress continues to weigh the market power of the companies, their controversial app store policies have prompted proposed state legislation to allow apps to circumvent the fees, as well as a key court case between Epic Games and Apple that is set to go to trial next month.

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“The abusive practices in the App Store are blatantly anti-competitive,” Mark Cooper, director of research at the Consumer Federation of America, told The Hill.

“The platform operators and owners don’t really try to hide that they’re getting an advantage. They say the advantage is good for consumers, which is, in my view, simply not true,” he added.

Cooper is among the witnesses scheduled to testify at Wednesday’s hearing. He said he will urge Congress to take action to “reboot” antitrust laws in a way that will help spur innovation, both from the app developers and the larger tech companies.

“There appears to be good bipartisan support. The question is, what should they do?” Cooper added.

Democrats and Republicans in Congress have been scrutinizing the top tech companies over their market power but have not necessarily come to a consensus on bipartisan solutions to address their mostly shared concerns.

Wednesday’s hearing is the latest antitrust hearing held by the Senate Judiciary Committee. It follows a similar series of antitrust hearings the House antitrust subcommittee held earlier this year on proposals to modernize antitrust laws.

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Lawmakers have already butted heads with Apple ahead of the hearing. Sens. Amy KlobucharAmy Klobuchar Why isn't Washington defending American companies from foreign assaults? Republicans float support for antitrust reform after Trump Facebook ban upheld Washington keeps close eye as Apple antitrust fight goes to court MORE (D-Minn.) and Mike LeeMichael (Mike) Shumway LeeRepublicans urge probe into Amazon government cloud-computing bid: report Allowing a racist slur against Tim Scott to trend confirms social media's activist bias Senate passes bipartisan B water infrastructure bill MORE (R-Utah), respectively the chairwoman and ranking member of the Judiciary Committee’s antitrust subcommittee, joined together earlier this month in a letter to Apple criticizing the company over its “refusal to provide a witness” and urging them to do so.

The lawmakers later said that Apple confirmed it would be sending a witness, chief compliance officer Kyle Andeer, to the hearing. Google’s senior director on the government affairs and public policy, Wilson White, is also scheduled to testify.

Spokespeople for Apple and Google did not respond to requests for comment from The Hill. 

Lee specifically has pressed the companies over actions taken to take fringe social media site Parler off their stores after the Jan. 6 riot at the Capitol. Apple, however, on Monday told the Republican in a letter that the app would be allowed back on after making approved content moderation changes. 

The issue may still arise at Wednesday’s hearing, with Google not making the same commitment to bring the app back to its Play Store.

Amid backlash to Google and Apple’s commission fees, the companies have updated their policies to cut the amount they take from app developers.

Apple announced an updated policy in November to put in place a 15 percent commission fee on apps that brought in $1 million or less, down from its 30 percent fee. Google followed suit, announcing in March it would cut its commission on developers to 15 percent for the first $1 million of revenue every developer earns each year.

“They operate as a cartel when it comes to these rules,” David Heinemeier Hansson, founder and CTO of Basecamp, said Monday during a press conference organized by the Coalition for App Fairness.

The Coalition for App Fairness brings together a group of apps with varying business sizes, including Fortnite developer Epic Games, Spotify and Match Group. Spotify and Match Group are also sending witnesses to testify at Wednesday’s hearing.

The group is pushing for increased regulation of the app store market, including calling for developers to be able to use outside payment systems and for app developers to have access to app stores as long as they meet “fair, objective and nondiscriminatory standards.”

“The fees are only one part of the conversation,” said Meghan DiMuzio, executive director of the coalition.

In lieu of federal legislation, state proposals have emerged that address some of the concerns app developers have raised regarding the fees.

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A bill introduced by a Republican in Arizona passed the state House in March in a tight 31-29 vote. The bill would allow app developers to bypass fees from the Apple and Google stores. The bill, however, was pulled in the state Senate weeks later when it was slated for a vote.

App fairness legislation has also been introduced this year in North Dakota, Georgia, Rhode Island, North Carolina, Illinois, Minnesota, Hawaii, New York and Massachusetts, according to the Coalition for App Fairness.

The issues over the app store fees will also take center stage next month when Epic Games’ lawsuit against Apple goes to trial. The lawsuit is centered on Apple’s decision to pull the company’s popular Fortnite game from the store after the game installed its own payment system, which is not allowed under the App Store rules.

Apple argues its system helps optimize the customer experience and protect the security and privacy of users, according to a court document filed in the Epic Games case.

Adam Kovacevich, executive director of Chamber of Progress, a coalition representing some of the largest tech companies, published a blog post Tuesday defending the app store system. Google is a corporate partner that supports the Chamber of Progress.

He argued it is a “safer and more reliable way” for users to purchase and install apps and that updates to the system would not benefit consumers.

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Proposed changes, he said, “could worsen the customer experience, due to the friction and unreliability introduced by app store alternatives. But this debate has no bearing on what consumers pay for apps and subscriptions.”

Cooper, however, said the existing system is impacting consumer choice and pushed back on arguments in favor of the existing app store system.

“The app stores [are] constraining consumer choice under the bogus argument that, ‘Hey, this is the only way to deliver a secure high quality product,’” Cooper said. “That’s rubbish. The way we get secure high-quality products is we keep constant pressure on both sides of that line to innovate. That’s what we really need.”