Democrats are determined to pass something before the midterm elections and are employing the “spaghetti-at-the-wall” strategy. Unfortunately, that means a radical antitrust overhaul could be on the table, and a pressure campaign from the left is mounting to pass the misguided Open App Markets Act (OAMA/H.R. 7030). This legislation would undermine consumer choice, put consumer privacy at risk, and fail to create more competition.
This legislation would apply to a “covered company,” defined as owning an app store that has at least 50 million U.S. based users. While there are hundreds of app stores, the focus of this legislation is Apple and Google (but mostly Apple). OAMA would restrict a covered company’s ability to require the use of in-app payment processors owned by the company, mandate interoperability, and prohibit “self-preferencing” in search. However, the primary beneficiaries of these changes would be large app developers and competitors, not consumers.
Google and Apple are the dominant companies for mobile app stores and the fees charged to developers have been subject to scrutiny. Both companies have lowered the fees charged to app developers. Unsurprisingly, some large app developers would prefer not to pay fees, or to pay as little as possible, for being in these app stores. However, this bill would have the federal government put its thumb on the scales in a display of crony capitalism that is not better for small app developers or consumers.
App stores provide peace of mind and security for consumers by vetting apps. Notably, developers only pay a commission fee for sales made through the platform, so apps that are free or do not have in-app purchases are not subject to the fee. However, app stores still need to vet and approve apps for their app stores, even if they are not receiving a commission for in-app purchases. This current system is like a supermarket allowing a company to stock their shelves with products for free. Dr. Wayne Borough of R Street provides a helpful overview of how app stores work here.
Privacy is also a concern with the sideloading mandate. Sideloading is not inherently bad, which is why Google and others provide consumers with this option. However, sideloading is not without risks, and some consumers may be uncomfortable with the tradeoffs or simply not tech savvy enough to want the flexibility to use third party apps or app stores. There are positives and negatives to closed and open systems, but OAMA undermines consumer choice by mandating one business model. Not only would this punish a company who places a greater emphasis on the privacy and security of consumers, it also robs consumers of the ability to choose which type of service they prefer.
Mandating sideloading also won’t increase competition. Consumers are able to choose between a more closed or open system based on their preferences. Mandating one business model reduces the way companies are able to differentiate themselves in the marketplace. While Google and Apple are the prominent competitors in mobile app stores, consumers are still able to utilize other competing app stores, utilize browser extensions, or “jailbreak” their device. Neither Apple nor Google have a monopoly over apps.
OAMA would also prevent “self-preferencing” or unequal treatments of apps in the app store. Again, this is a change aimed primarily at boosting the prospects of competitors, like Spotify vs. Apple Music, rather than what consumers want. As Dr. Mark Jamison of AEI notes, unequal treatment of products is a normal business practice, like retailers selling private-labels to compete with name brands. If a consumer does not want to use Google Maps, they are free to scroll past it in the app store and download one of the numerous other map apps. Knowing this, app store owners want to make their product as user-friendly and innovative as possible. This is a boon to consumers, not something that Congress should legislate away.
Finally, this legislation would grant the Federal Trade Commission (FTC) with discretion on how it enforces OAMA. While there are some privacy protections included, the FTC would decide if the company can prove these actions were “narrowly tailored” and could not be achieved by less discriminatory means. This would empower the FTC to dictate business decisions for app store owners and define what “narrowly tailored” means. It’s unlikely the current FTC regime would enforce this requirement with the welfare of consumers in mind.
App stores are still relatively new, and lawmakers risk future innovations by imposing excessive regulations and overzealous antitrust legislation. There are concerning implications for OAMA, and unfortunately, the Senate marked up the bill without a hearing on the bill. The very least Representatives should do is hold a hearing(s) on the bill to discuss open questions. Privacy, security, and competition concerns are valid and deserve to be openly discussed so consumers can understand how these proposed changes would impact them.