Apple CEO Tim Cook will deliver the keynote address at the 2020 Apple Worldwide Developers Conference at the Steve Jobs Theater in Cupertino, California, June 22, 2020.
Brooks Kraft | Apple Inc. via Reuters
The North Dakota State Senate voted 36-11 on Tuesday for not passing a bill that would have required app stores to allow software developers to use their own payment processing software and avoid fees from Apple and Google.
The vote is a victory for Apple, which says that the App Store is a central part of its product, and that the strict control over the rules protects iPhone users from malicious software and fraud.
The North Dakota bill targets Apple’s fees by requiring companies that make more than $ 10 million a year in the state through app stores – essentially just Apple and Google – to be required to offer alternative payment processors for in-app purchases so developers can avoid Apple or Google cuts. This will only apply to companies based in North Dakota.
Apple opposes the bill. Last week, Erik Neuenschwander, an Apple official who focuses on privacy technology, testified that the bill “threatens to destroy the iPhone as you know it”, and that Apple customers can buy other brands of smartphones if they want to. Phones running Google’s Android software can already use alternative app stores.
“Simply put, we work hard to keep bad apps out of the App Store. Senate Bill 2333 may require us to let them in,” Neuenschwander said. “For a store owner, it will be like the government forcing you to store your shelves with products you know lack quality, authenticity or even security.”
An Apple official declined to comment Tuesday.
One reason the North Dakota bill was closely followed is that it may inspire other states, such as Arizona, which is currently discussing legislation aimed at Apple’s commercial power.
North Dakota is a strange place for this legislation. It’s a small state, not a big app development center, and neither Google nor Apple is headquartered there.
“North Dakota has a chance to be a leader, we have a chance to send it across the hall for further discussion,” said Sen. Kyle Davison, who introduced and supported the bill. “It’s a law of economic development, because if this bill comes across the aisle, there’s not enough hangar space to fly private jets in from California.”
On Tuesday, the discussion of the law focused on Apple, which senators used to avoid naming because of decor rules, and instead referred to it as a “technology company” or, as North Dakota State Senator Randy Burckhard said, “the same fruit Adam and Eve became not asked to eat. “
“North Dakota is not the place to settle disputes between companies over what commission rates or payment systems should be,” said Jerry Klein, a state senator who opposed the bill.
Epic Games role
Last year, Epic Games, the gaming company that makes the popular shooter Fortnite, filed antitrust lawsuits against Apple and Google, which are currently working through the courts, focusing on many of the same issues, including alternative app stores and allowing software vendors to use their own payment processor.
Epic Games is part of an effort called the Coalition for App Fairness (CAF), which includes software companies such as Spotify, Match Group and 50 other companies that have chafed under Apple’s control of the App Store.
The Coalition for App Fairness is lobbying for the North Dakota bill, a coalition spokesman said Tuesday. A North Dakota lobbyist who worked on the bill represents Epic Games, Match Group and the Coalition for App Fairness, and helped Epic Games contribute testimony, said Tera Randall, Epics VP of Communications and Policy, in an email.
“The Coalition for App Fairness wants to see urgent changes in the App Store and supports political solutions at the state, federal and international levels,” CAF CEO Meghan DiMuzio said in a statement.
The New York Times first reported on Epic Games’ lobbying activities on Tuesday.
Match Group declined to comment. Epic Games pointed to Randall’s testimony last week.
“Competitive anti-competitive practices on mobile platforms today stifle innovation and expose mobile developers to crippling restrictions. This harms consumers by reducing choices and inflating prices,” Randall testified last week.
In October, the House Judiciary Subcommittee said in a report that Apple’s “monopoly power” over iPhone apps gives it excessive profits. In 2019, the Supreme Court ruled 5-4 against Apple in a case that opened up the possibility of consumer lawsuits against Apple’s app store for allegedly inflating app prices.
Last year, Apple introduced a new app that reduced the fee for selling the App Store from 30% to 15% for companies earning less than $ 1 million a year at Apple’s store.
While both Apple and Google run critical app stores for the two largest smartphone operating systems, iOS and Android, Apple has faced significantly more scrutiny of software distribution than its Silicon Valley rival.
One reason for this is that Apple does not allow competing app stores on iPhones, while Android makes it possible for stores such as Samsung. The North Dakota bill opened a door for competing app stores when it was introduced, but a change on Tuesday limited legislation to payment processing.