US Senate to vote on stopping Big Tech extracting 'monopolist rent' from app developers
Billions in profits at stake for Apple and Google's money-making machines
The US Senate Judiciary Committee on Thursday voted to pass the Open App Markets Act, despite intense lobbying from Apple and Google.
The bill, S.2710 [PDF], limits the kinds of restrictions major app platforms can impose on competitors, developers, and customers, will now be considered by a full Senate vote.
If approved, along with its companion bill H.R. 5017 [PDF] introduced in the House of Representatives last year, and then signed by President Biden, the legislation will remake an app economy that generates well over $100bn annually.
During the committee hearing in Washington DC, Senator Richard Blumenthal (D-CT), the bill's sponsor, likened Apple and Google to past US railroad monopolies.
"There's been a groundswell of enthusiasm and support for this bill because the American public recognizes that the mobile market is broken," he said.
"Today the simple stark fact is that Google and Apple own the rails. They own the rails of the app economy much as the railroad companies did at the start of the last century."
He described how a Microsoft executive once reportedly said the company wanted to use its dominance over the personal computing market to collect a "vig" – a payment – for every transaction on the internet that used Redmond's technology.
Microsoft, he said, was never successful in doing that, in part thanks to US antitrust enforcement. But now after decades of lax enforcement, "Apple and Google now have managed to do what Microsoft couldn't at the peak of its monopoly powers," he said. "They collect a vig on nearly every transaction in our app economy."
Citing House Judiciary Committee investigative data, Blumenthal said that Apple makes $15bn in profit from its App Store at a cost of less than $100m.
"Apple makes 150 times in profit what it takes to run the App Store," he said. "That is what we call monopolist rent."
A rare display of bipartisanship
"The passage of the Open App Markets Act out of the Senate Judiciary committee brings us one step closer to having this legislation signed into law," said Senator Marsha Blackburn (R-TN), one of the bill's co-sponsors, via Twitter. "This bill will let people download apps directly from outside companies rather than being forced to go through official app stores."
The proposed legislation will do more than that. It prevents large app platforms with at least 50 million users in the US – namely Apple's iOS App Store and Google Play – from requiring that other companies and individual developers use their respective in-app payment systems.
It requires support for installing third-party apps and app stores from a source other than the platform App Store (which could be interpreted as third-party stores rather than individually authorized "sideloading"), for making third-party apps act in place of default apps, and for hiding or deleting pre-installed default apps.
Apple for months has been warning about the calamity of allowing sideloading – despite the fact that it supports sideloading on macOS – and both companies sent last minute letters to lawmakers hoping to stave off a future that now looks rather likely.
The Chamber of Progress, a technology trade group headed by a former Google lobbyist and supported by Amazon, Facebook, and Google, among others, also expressed concern about the advancement of the bill.
"By mandating sideloading, this bill would guarantee iPhone access to the worst apps out there – both security threats and hate speech services," said Chamber of Progress CEO Adam Kovacevich in a statement. "It poses a serious threat to content moderation – eliminating Apple’s ability to stop the spread of apps that promote misinformation and hate speech."
The Coalition for App Fairness, a group representing app developers, applauded the legislative markup and urged the full approval of the bill by both the Senate and House. "This bipartisan, bicameral legislation will hold gatekeeper platforms accountable, increase fair competition, and benefit consumers across the nation with greater choice and innovation," said executive director Meghan DiMuzio in a statement.
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Kosta Eleftheriou, an app developer who has been critical of Apple's practices, disputed Kovacevich's claim that Apple would be unable to remove fraudulent or malicious apps under the requirements of the bill. Eleftheriou observed that Apple has access to security controls on its mobile devices that are separate from its platform rules.
"Apple can both do malware screening for apps, as well as disable apps after they’ve been distributed via a 'kill switch,'' he told The Register.
"This is how notarized (non-App Store) apps work on macOS today, and exactly how they could work on iOS too. The security and privacy protections that people often bring up are all enforced on the device itself."
"Another way to think about this is that Apple already does all this malware screening for App Store apps as part of its App Review process, and that part isn’t done by humans," Eleftheriou explained.
"Humans can’t tell if there's malware or a virus inside an app. So Apple could simply supply this non-human part as a malware scanning service, the same exact way they have been offering on macOS for years now."
Yes, about that Apple - Schneier's peeved
Cryptographer and security expert Bruce Schneier argues Apple's security worries are disingenuous. In a letter sent to Senate Judiciary Committee members about the Open App Markets Act and the S. 2992, the American Innovation and Choice Online Act (which limits platform self-preferencing).
"I would like to address some of the unfounded security concerns raised about these bills," he wrote. "It’s simply not true that this legislation puts user privacy and security at risk. In fact, it’s fairer to say that this legislation puts those companies’ extractive business-models at risk. Their claims about risks to privacy and security are both false and disingenuous, and motivated by their own self-interest and not the public interest."
The bills don't prevent platforms from implementing security and privacy measures, Schneier says, a point also made in a Consumer Reports letter sent in support of S.2710 to members of the Senate Judiciary Committee.
Schneier also points out that the language of the statute does not require "sideloading" in the strictest definition of the term – the ability to install arbitrary apps without an intermediary. Rather it requires platforms to provide a way to "install third-party Apps or App Stores through means other than its App Store."
"This interoperability does not require one-click installation of random apps from the Internet, only that companies relinquish their monopoly control over app stores," explained Schneier. "Alternative stores could have the same, or even more, security restrictions than Apple."
He also addresses Apple's claim that it is defending user choice, saying the company's argument is exactly backwards.
"Our devices are our own, and interoperability will allow us to use them as we choose," Schneier wrote in his letter. "Any user who prefers to use only Apple-approved applications will have no trouble doing so. But S.2710 will finally give users the freedom to leave the walled garden: to build, share, and install software that hasn’t been approved by Apple’s moderation machine." ®