A new bill introduced in the North Dakota Senate could have far-reaching consequences for app store operators. The bill, Senate Bill 2333, aims to ban stores like Apple’s App Store and Google Play Store from requiring developers to use only those app stores and their respective in-app payment systems. It also prohibits retaliation against developers in case they choose an alternative distribution channel or payment system.
“The purpose of the bill is to level the playing field for app developers in North Dakota and protect customers from devastating and monopolistic fees imposed by major technology companies,” said Sen. Kyle Davison (R-Fargo), who presented the bill before a Senate Committee on Tuesday, told reporters at a press conference yesterday, as reported by The Bismarck Tribune. Davison said the 30 percent tax imposed on application developers who sell software through the Apple and Google markets has the effect of “raising prices and limiting options for consumers.”
The account is quite simple and has three main restrictions for any “digital application distribution platform” that exceeds $ 10 million in annual revenue. This means that an app store cannot:
- “Requiring a developer to use a digital application distribution platform or digital transaction platform as the exclusive way to distribute a digital product.” This would likely mean that companies like Apple would have to allow the purchase of applications outside a single closed store.
- “Requiring a developer to use an in-app payment system as the exclusive way of accepting payment from a user to download a software application or purchase a digital or physical product through a software application.” This would allow an iOS version of Fifteen days, for example, to process in-app payments through Epic instead of Apple’s system.
- “Retaliating a developer for choosing to use an alternative app store or in-app payment system.”
As a state bill, the proposed legislation would only affect the operation of companies like the App Store in North Dakota. But the radical changes the project requires would likely require companies like Apple to make substantial platform-level changes that could affect software distribution on a national scale.
The use of alternative payment methods within the app is at the heart of an ongoing legal battle between Fornite developer Epic Games and Apple and Google, after Fifteen days was removed from the App Store and Play Store in August last year for presenting its own payment processing tool.
Epic purposely designed its Fifteen days update to circumvent the 30 percent cut in all in-app purchases required by Apple and Google as a form of protest, both for the standard 30 percent cut and specifically for Apple’s App Store rules that prohibit Apple stores iPhone third-party apps (Google allows Android users to sideload third-party software and developers to create alternative app stores for software distribution, although that makes it difficult.) Epic is now processing both companies for alleged antitrust violations.
Epic’s case is just one part of a growing antitrust movement in the United States that targets Big Tech. Each of the major U.S. technology companies, except Microsoft, is currently under increasing antitrust scrutiny by the U.S. Department of Justice and the Federal Trade Commission, as well as by state attorney generals, with varying levels of investigations underway. Although Apple is not under formal investigation, CEO Tim Cook testified last summer to the Senate Judiciary Committee during his technology antitrust hearing. In the meantime, the European Commission has two antitrust investigations underway on Apple’s App Store and Apple Pay.
Apple has already testified against the new North Dakota bill at a hearing on Tuesday with the North Dakota Senate Industry, Business and Labor Committee. Apple’s Erik Neuenschwander, its chief privacy engineer, told the committee that the project “threatens to destroy the iPhone as you know it” and that it “would undermine the privacy, security and performance built into the iPhone by design,” according to how Bismarck Tribune. “In short, we work hard to keep bad apps out of the App Store; (the account) may require that we let them in. ”
Basecamp co-founder David Heinemeier Hansson, who attended the hearing and testified in favor of the project, criticized Apple for exaggerating the threat the project poses to its business.
North Dakota’s SB 2333 is the first real, concrete legislative proposal I have seen that really gives me hope that technology monopolies will not rule the world forever. Fargo or Bismarck look like wonderful places to settle under a shield against abuse
– DHH (@dhh) February 9, 2021
Hansson became a critic of Apple’s App Store policies after a confrontation his company had with Apple last summer over Basecamp’s Hey email client. The disagreement focused on the functions of the Hey iOS email application, and Hansson and Basecamp CEO Jason Fried complained that the situation was emblematic of Apple’s inconsistently applied rules and the company’s efforts to ensure that developers do not break the 30 percent cut mandate. Although Apple and Basecamp reached an agreement, Hansson called for Congressional action, as well as stronger antitrust regulation, to try to force Apple to change its policies and reign over Big Tech in general.
In the written testimony that Hansson prepared before the hearing, he exposed his case to the Senate Bill 2333. “After the recitals, the 17 lines of the SB 2333 look like music. Written in a language that I can understand without hiring a lawyer to analyze it for me. It almost seems too good to be true! But I sincerely hope not, ”he wrote in his testimony, which he later released online. “That you will hear from small software developers across the country, who are tired of being bullied and shaken by a handful of big tech monopolists from Seattle and Silicon Valley.”
Hansson says the US needs a “fair digital market, free from monopoly abuse” and that “no change will have a bigger impact than giving small software makers like us a choice when it comes to in-app payment systems and protection against retaliation if we refuse the expensive business that the monopolists are offering ”.
Senator President Jerry Klein (R-Fessenden) said during the committee’s hearing that “there are still some considerations to be made” and that no action would be taken on the bill yet. Neither Apple nor Google responded immediately to requests for comment on this story.