Arizona poised to upset the app store apple cart

Google and Apple use their app store duopoly to prevent developers from using any in-app payment methods other than their own. That’s anti-competitive.

The core issue is ‘fremium’ apps, especially games. Nobody has a problem with the platform holders taking a piece of the action when an app is sold, although 30% is on the generous side. But mobile games increasingly offer themselves for free initially, then try to derive revenue from in-game purchases. Apple and Google are understandably keen to ensure they still get their tax and do so by compelling developers to use their payment systems.

The biggest such developer is Epic, which makes the game Fortnite. It has been moaning about the current state of affairs since the middle of last year and recently brought the fight to Europe. Back at home, however, some legal precedent is in the process of being set that could compel platform holders to allow alternative payment options.

An amendment to a law called HB 2005 proposes that platform holders not be allowed to impose payment systems on developers, nor to punish them if they choose an alternative one. The Arizona House of Representatives has just voted to approve that amendment, which means it goes to the states of law-making. If it does eventually pass into state law, that will set a precedent that could be followed by others.

“Bills like the one approved by the Arizona House today would help address the range of harms that gatekeepers like Apple and Google pose to small businesses, entrepreneurs, consumers and local communities,” said Pat Garofalo, Director of State and Local Policy at the American Economic Liberties Project. “That the bill successfully passed is proof that there is a growing desire to rein in the power of the big tech companies that hold sway over key areas of commerce.

“The dominance of big tech firms has resulted in many tangible harms to small businesses and local communities by choking innovation, depressing business dynamism, and undermining job growth. Small businesses exist at the whims of platform monopolies that can arbitrarily crush them overnight, with no warning or recourse, if they don’t agree to turn over a significant cut of their revenue in order to access their own customers. Bills such as HB 2005 are one part of addressing those harms.”

As the above quote indicates, a lot of the support for this kind of law making isn’t so much sympathy with Epic, but the growing realization that the digital economy is dominated by a few giants. By definition they are able to distort the markets they operate in and place their thumb on the scales to disadvantage their competitors. This is, in effect, monopolistic behaviour and its good to see legislators belatedly wake up and smell the coffee.

UPDATE – 12:45 4/3/21: It looks like the Coalition for App Fairness’s European lobbying has persuaded the UK Competition and Markets Authority to open an investigation too. The global dragnet is tightening.