Apple wins when North Dakota rejects a invoice that might regulate the app shops


Tim Cook, Apple CEO, delivers the keynote address during the 2020 Apple Worldwide Developers Conference at the Steve Jobs Theater in Cupertino, California on June 22, 2020.

Brooks Force | Apple Inc. via Reuters

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

The vote is a victory for Apple, stating that the App Store is a core part of their product and that strict control over its rules will keep iPhone users safe from malware and fraud.

North Dakota's bill is the first major US state law targeting Apple and Google app stores, which charge up to 30% in fees on app store sales, including in-app purchases of digital ones Articles. If the Senate had passed it, it would still have been discussed and voted on in the North Dakota House.

The North Dakota bill referred to Apple's fees by requiring companies that make more than $ 10 million a year through app stores in the state – essentially just Apple and Google – to offer alternative payment processors for purchases made through the App Store for developers to do Avoid the Apple or Google cut. This only applies to companies based in North Dakota.

Apple rejects the bill. Last week, Erik Neuenschwander, an Apple official who focuses on privacy technology, testified that the bill "threatens to destroy the iPhone as you know it" and that Apple customers can buy other brands of smartphones if they want. Phones with Google's Android software can already use alternative app stores.

"Put simply, we're working hard to keep bad apps out of the App Store. Senate Bill 2333 could require us to let them in," Neuenschwander said. "To a shopkeeper, it would be like forcing the government to fill your shelves with products that you know lack quality, authenticity, or even safety."

An Apple representative declined to comment on Tuesday.

One reason this North Dakota bill has been watched closely is because it could inspire other states, like Arizona, that are currently debating laws aimed at Apple's trading power.

North Dakota is a strange place for this legislation. It's a small state, not a major app development center, and neither Google nor Apple are headquartered there.

"North Dakota has a chance to be a leader. We have a chance to send it across the hall for further discussion," said Senator Kyle Davison, who introduced and endorsed the law. "It's a bill for economic development because when that bill comes down the hall, there isn't enough hangar space for the private jets to fly in from California."

On Tuesday, the legislative discussion focused on Apple, which the senators tended not to name due to propriety rules. Instead, it was called a "tech company" or, as North Dakota State Senator Randy Burckhard said, "the same fruit that Adam and" Eve was not asked to eat. "

"North Dakota is not the place to resolve a corporate dispute over commission rates or payment systems," said Jerry Klein, a senator who spoke out against the bill.

The role of Epic Games

Last year, Epic Games, the game company that makes the popular shooter Fortnite, filed antitrust lawsuits against Apple and Google that are currently in court. This covered many of the same topics, including alternative app stores, and the ability for software makers to use their own payment processor.

Epic Games is part of an action called Coalition for App Fairness (CAF), which includes software companies like Spotify, Match Group and 50 other companies that have scraped their app store under Apple's control.

The Coalition for App Fairness has campaigned for the North Dakota bill, a coalition spokesman said 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 share testimony, Tera Randall, Epic’s vice president of communications and politics, said in an email .

"The Coalition for App Fairness wants urgent changes in the App Store and supports political solutions at state, federal and international level," said Meghan DiMuzio, Executive Director of CAF, in a statement.

The New York Times first reported on the lobbying work of Epic Games on Tuesday.

The playgroup declined to comment. Epic Games pointed out Randall's statement last week.

"Anti-competitive practices on mobile platforms today are stifling innovation and crippling restrictions on mobile developers. This harms consumers by reducing choice and increasing prices," Randall testified last week.

In October the House Justice Subcommittee said in a report that Apple's "monopoly power" over iPhone apps is generating oversized profits. In 2019, the Supreme Court ruled 5-4 against Apple in a case that opened consumer lawsuits against Apple's App Store for allegedly increasing app prices.

Last year, Apple introduced a new program that reduced its App Store sales fee from 30% to 15% for businesses that make less than $ 1 million a year in the Apple Store.

While both Apple and Google operate important app stores for the two most important smartphone operating systems iOS and Android, Apple has scrutinized software distribution much more closely than its rival in Silicon Valley.

One reason for this is that Apple doesn't allow competing app stores on iPhones, while Android allows stores like Samsung. The North Dakota bill opened a door to competing app stores when it was introduced, but an amendment on Tuesday restricted the legislation to payment processing.


Katherine Clark