Apple takes victory as North Dakota passes bill that would regulate app stores

The North Dakota State Senate on Tuesday voted 36 to 11 not to pass a bill that would have required app stores to allow software developers to use their own payment processing software and d ‘avoid the fees charged by Apple and Google.

The vote is a victory for Apple, which says the App Store is an essential part of its product and that its tight control over its rules protects iPhone users from malware and scams.

The North Dakota bill is the first major U.S. state-level legislation to affect Apple and Google app stores, which levy a fee on app store sales of up to 30%, including in-app purchases of digital items. Had the State Senate passed it, it would still have been debated and voted on in the North Dakota house.

The North Dakota bill targeted Apple’s fees by requiring that companies that earn more than $ 10 million a year in the state through app stores – essentially, Apple and Google – would be required to offer alternative payment processors for purchases through the App Store, allowing developers to avoid cutting out Apple or Google. This would only apply to businesses based in North Dakota.

Apple opposes the bill. Last week, Erik Neuenschwander, an Apple official who focuses on privacy engineering, said the bill “threatens to destroy the iPhone as you know it” and that Apple customers can buy. other brands of smartphones if they wish. Phones running Google’s Android software can already use alternative app stores.

“Simply put, we are working hard to keep bad apps out of the App Store; Senate Bill 2333 could force us to let them in, ”Neuenschwander said. “To a store owner, it would be like the government forcing you to stock your shelves with products that you know lack quality, authenticity, or even safety.”

An Apple representative declined to comment on Tuesday.

One of the reasons this North Dakota bill has come under close scrutiny is that it could inspire other states, like Arizona, which are currently debating legislation targeting Apple’s commercial power.

North Dakota is a strange place for this legislation. It’s a small state, not a major center for application development, 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 room for further discussion,” said State Senator Kyle Davison, who introduced the bill and supported it. “This is an economic development bill, because if this bill crosses the hall, there isn’t enough hangar space to bring the private jets in from California.”

Tuesday’s discussion of the legislation focused on Apple, which senators tended to avoid naming because of decorum, instead calling it a “tech company,” or as the senator put it. State of North Dakota, Randy Burckhard, “the same fruit Adam and Eve was not asked to eat.”

“North Dakota is not the place to settle a business-to-business dispute over what commission rates or payment systems should be,” said Jerry Klein, a state senator opposed to the bill. .

Last year, Epic Games, the games company that makes the popular Fortnite shooter, filed antitrust lawsuits against Apple and Google who are currently working in court, focusing on many of the same issues, including the stores. alternative applications and giving software manufacturers the ability to use their own payment processor.

Epic Games is part of an effort called the Coalition for App Fairness (CAF), which includes software companies like Spotify, Match Group and 50 other companies that have rubbed shoulders with Apple’s control on its App Store.

The Coalition for App Fairness has been lobbying around the North Dakota bill, a spokesperson for the coalition said on 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 testify, said Tera Randall, vice president of communications and policy at Epic, in an email.

“The Coalition for App Fairness wants to see urgent changes in the App Store and supports policy solutions at the national, federal and international levels,” CAF Executive Director Meghan DiMuzio said in a statement.

The New York Times first reported on Tuesday about Epic Games’ lobbying around the bill.

Match Group declined to comment. Epic Games pointed to Randall’s testimony last week.

“Anti-competitive practices on mobile platforms are now stifling innovation and subjecting mobile developers to crippling restrictions. It hurts consumers by reducing choice 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 was delivering outsized benefits. 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 launched a new program that cut its App Store selling fees from 30% to 15% for businesses that make less than $ 1 million a year on Apple’s store.

While Apple and Google operate critical app stores for the two major smartphone operating systems, iOS and Android, Apple has faced much more scrutiny in software distribution than its Silicon Valley rival. .

One of the reasons for this is that Apple doesn’t allow competing app stores on iPhones, while Android allows stores like Samsung. The North Dakota bill opened the door to competing app stores when it was introduced, but an amendment on Tuesday limited the legislation to processing payments.