Arizona Moves Forward With Law To Force Google & Apple To Open Up Payments In App Stores

Legal Issues

from the some-good-some-bad dept

Arizona appears to be moving forward with an interesting (though, potentially unconstitutional) bill to say that Apple and Google would need to allow alternative payment systems in their app stores. I think this bill means well in that it’s targeting what appears to be a real issue: the control that Apple (especially) and Google (to a lesser, but still significant extent) have over getting apps onto iOS and Android devices. Both companies take a pretty large cut out of in app-purchases — basically 30% (it’s a little more complicated than that).

The argument from both companies is that (1) it’s their system and their providing value by creating the very platform that effectively allows all these apps to exist in the first place, and (2) part of the value of having a single app store model is that it allows for more security and privacy protections for end users (that’s a big part of Apple’s argument, certainly). Google is slightly more open in that it does allow for sideloading and even third party app stores, but it strongly discourages such practices. And, there is some validity to that argument… but it’s also partially nonsense. For many apps, Google and Apple aren’t really adding that much value, and for them to demand such a large cut seems silly. 30% is also… quite a lot. It’s way more than other platforms in more competitive situations take, which often take closer to 5 to 10%. That certainly suggests some rent seeking.

That said, the bill has some issues as well. The biggest being that this is a state bill, which likely makes it unconstitutional. Regulating Apple and Google services like that likely violates the Commerce Clause, which limits the states’ ability to pass laws that regulate “interstate” commerce. It seems like if this kind of law is being written, it should be a federal law, rather than a state one.

The other big question is what are the downstream impacts of such a bill. If Google and Apple rely on their cut of these in-app sales for revenue, and those effectively go away with such a law, then they’re going to seek to make up that revenue elsewhere. Now, one hopes that they would do this by improving their offerings, adding additional value and figuring out ways to charge for those value-added features. And perhaps that would happen. But the fear is that the companies would seek to find a different revenue stream to tap — such as charging for access to dev tools or even just to list an app on the app store. And, the end result of that might be to shut down or shut out smaller app developers.

The other odd thing about this bill is that it literally exempts the equivalent situation with video game consoles (which also take a ~30% cut):

The bill specifically exempts game consoles ?and other special-purpose devices that are connected to the internet,? and it also bars companies like Apple and Google from retaliating against developers who choose to use third-party payment systems.

I don’t quite understand this. If this approach is good for mobile phone devices, why shouldn’t it also apply to video game consoles? I can’t see any consistent reason to not treat the two similarly.

So, there does seem to be a legitimate concern about Apple and Google’s effective control over the phone device software ecosystem. Perhaps it would be less of a problem if web apps had more access to core device functionality and could bypass the app stores entirely. Or, if sideloading was more common (or even allowed, as in the case with iOS). However, that doesn’t change the fact that this particular bill doesn’t seem like the best way of dealing with this particular situation.

Filed Under: app stores, arizona, commerce clause, competition, payment platforms, payments, state's rights
Companies: apple, google