A bipartisan bill, the Open Apps Market Act, has been introduced that would reduce the control that Apple and Google have over their respective app stores.

Introducing the bill Wednesday (Aug. 11) were Sens. Richard Blumenthal (D-Conn.) and Amy Klobuchar (D-Minn.), joined by pretty much their polar political opposite, Marsha Blackburn (R-Tenn.). While they may be far apart on most issues, they agree that there need to be "fair, clear, and enforceable rules" governing the app marketplace.

Also Read: Big Tech Version of Net Neutrality Bill Proposed

The senators argue, and with some reason, that Google and Apple have "gatekeeper control" of the dominant operating systems and app stores, power they use to dictate terms, inhibit competition and restrict choice, they argue. For example, they said "Apple has prevented the creation of third-party app stores on iPhones, required that apps exclusively use their own expensive payment system, and penalized app developers for telling users about discounted offers."

The explicit goal of the bill is to "reduce gatekeeper power in the app economy, increase choice, improve quality, and reduce costs for consumers."

The bill, which reads like an app net neutrality rule for edge providers, would prevent a covered company from restricting the use of alternative in-app payments systems; or from favoring their own terms of distribution, pricing or conditions of sale; or penalize developers for using different pricing terms or conditions via another in-app payment system.

The bill prevents a Google or Apple from using info derived from a third-party app to compete with that app.

In general, reads the bill, "a Covered Company shall not provide unequal treatment of apps in an app store through unreasonably referencing or ranking the apps of the covered company or any of its business partners over those of other apps." "Unreasonable referencing" includes algorithms that prioritize apps apps owned by the covered company or its partners but does not include "clearly disclosed" ads.

Violations will be enforced by the Federal Trade Commission since they will be considered unfair methods of competition, which the FTC has section 5 authority to police. In addition, any state attorney general can also bring a civil action based on a violation of the act and there is also a private right of action so that any developer can also sue, and get treble damages if the win.

“For years, Apple and Google have squashed competitors and kept consumers in the dark—pocketing hefty windfalls while acting as supposedly benevolent gatekeepers of this multi-billion dollar market," said Blumenthal. "I’m proud to partner with Senators Blackburn and Klobuchar in this breakthrough blow against Big Tech bullying. This bipartisan bill will help break these tech giants’ ironclad grip, open the app economy to new competitors, and give mobile users more control over their own devices.” 

Sen. Blackburn was singing from the same hymn book. 

“Big Tech giants are forcing their own app stores on users at the expense of innovative start-ups,” she said. “Apple and Google want to prevent developers and consumers from using third-party app stores that would threaten their bottom line. Their anticompetitive conduct is a direct affront to a free and fair marketplace. Senator Blumenthal, Klobuchar, I are committed to ensuring U.S. consumers and small businesses are not punished by Big Tech dominance.”

The North Dakota state senate voted down a bill that would have enabled companies headquartered in the state to avoid paying app fees to Google and Apple.

The bill would have required companies making more than $10 million a year from app stores—basically, Apple and Google—to offer alternative payment processors for purchases through their respective app stores.

The senate voted 36-11 against the bill, which was lobbied for by Epic Games. The online video game company is currently battling Apple and Google in court over a policy that requires the firm to share 30% of its sales generated by its apps sold in Apple’s App Store and Google’s Play Store. 

Also read: Google Tells Netflix and Spotify They Can No Longer Bypass Play Store In-app Fees

Also lobbying for the bill was the Coalition for App Fairness, a group of over 50 digital companies, including Spotify and Epic Games, which are pushing back on the app fees. 

Republican state senator Kyle Davison introduced the bill, suggesting that it would be a nifty way to lure technology companies to North Dakota. 

“North Dakota has a chance to be a leader. We have a chance to send it across the hall for further discussion,” Davison told CNBC. “It’s an economic development bill, because if this bill gets across the hallway, there isn’t enough hangar space to fly the private jets in from California.”

The bill didn’t die a partisan death—about 80% of North Dakota’s state legislature is Republican. Maybe that explains the fear-based perspective of lawmakers who drove the bill’’s rejection? Lobbying in opposition were Apple and Google, two companies with combined market capitalization of over $3.6 trillion, and which together made $33 billion in app commissions in 2020, according to Sensor Tower data. 

The annual gross domestic product of North Dakota is only around $54 billion. 

“We don’t want to put the state in a position where we need to spend our taxpayer dollars in litigation, because these are some very big companies,” Jerry Klein, a Republican state senator, said on the senate floor Tuesday. “Let’s stay out of the courts.”

Georgia, Arizona and Massachusetts are considering similar legislation, and lobbyists are pushing for nearly identical bills in Minnesota and Wisconsin. 

TikTok and WeChat will have to be out of app stores by Sept. 20, according to the Commerce Department.

Commerce is implementing President Trump's executive order banning the Chinese-backed social media aps from the U.S. Commerce said that both social media aps collect "vast swaths" of data and search histories and that both are
"active participant[s] in China’s civil-military fusion and subject to mandatory cooperation with the intelligence services of the [Chinese Communist Party]."

Related: Imagining a U.S. Based TikTok
 
“Today’s actions prove once again that President Trump will do everything in his power to guarantee our national security and protect Americans from the threats of the Chinese Communist Party,” said U.S. Department of Commerce Secretary Wilbur Ross. “At the President’s direction, we have taken significant action to combat China’s malicious collection of American citizens’ personal data, while promoting our national values, democratic rules-based norms, and aggressive enforcement of U.S. laws and regulations.”

Specifically banned as of Monday (Sept. 20):

1. "Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S.;

2. "Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S."

In addition, as of Sept. 20 for WeChat and Nov. 12 for TikTok, also prohibited are:

1. "Any provision of internet hosting services enabling the functioning or optimization of the mobile application in the U.S.;

2. "Any provision of content delivery network services enabling the functioning or optimization of the mobile application in the U.S.;

3. "Any provision directly contracted or arranged internet transit or peering services enabling the function or optimization of the mobile application within the U.S.; and

4. "Any utilization of the mobile application’s constituent code, functions, or services in the functioning of software or services developed and/or accessible within the U.S."

The digital news business has joined Epic Games in pushing back on Apple for the revenue-sharing terms it demands for distribution through its App Store. 

“The terms of Apple’s unique marketplace greatly impact the ability to continue to invest in high-quality, trusted news and entertainment particularly in competition with other larger firms,” wrote Jason Kint, CEO of Digital Content Next, in a letter sent Thursday to Apple CEO Tim Cook.

Digital Content Next is a trade organization representing the New York Times, Washington Post and the Wall Street Journal and other news publishers. (The Wall Street Journal originally reported on the letter.)

Also read: Apple Escalates Epic Games Tiff, Threatens to Pull Developer Access

Kint’s letter comes a week after Epic Games, publisher of the popular online video game Fortnite, sued both Apple and Google over an industry-wide practice in which the app stores of the tech giants collect 30% of first-year subscription fees when apps for paid services are downloaded through their digital stores. (The rev share rate drops to 15% after year one.)

For Digital Content Next, one of the major points of consternation is that not everyone pays 30%. 

In his letter to Cook, Kint cited an email sent from Apple services chief Eddie Cue to Amazon CEO Jeff Bezos, outlining a 15% revenue split for Amazon Prime Video subscribers when they download the Prime Video app through Apple’s App Store. (Bezos also owns the Washington Post.)

“I ask that you clearly define the conditions that Amazon satisfied for its arrangement so that DCN’s member companies meeting those conditions can be offered the same agreement,” Kint wrote.

Apple hasn’t publicly responded to DCN’s letter. Apple did respond last week, when it pulled Epic Games’ app from its digital following the game maker’s bold, strategic move to direct its users to its own site to purchase in-store game currency, instead of buying it through Apple. That was the move that kicked off this whole app-store revolt.

“Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services,” Apple said in an August 14 statement. 

Whether this pushback continues to grow, or is quashed by Apple and Google, has significant implications for the video streaming industry, most of which is subject to the same 30% revenue share dogma that dates back to the early days of video gaming, when Japanese console manufacturers charged game makers for the rights to have game cartridges supported by their platforms. 

Epic Games, which generates a reported $1 billion in annual revenue from selling in-game extras, has called the app store fees a “tax.”

Notably, Netflix already started pushing back several years ago, when it disabled new users from signing up for its SVOD services through apps it downloaded from Apple’s App Store, instead directing them to its own website. 

Netflix has officially cut Apple’s iTunes Store out of its business.

“We no longer support iTunes as a method of payment for new members,” a Netflix spokesperson told MCN in an email. “Existing members who currently use iTunes as a method of payment can continue to do so. Apple is a valued partner with whom we work closely to deliver great entertainment to members around the world across a range of devices including the iPhone and Apple TV.

Related: Netflix Cuts Apple Out of In-App Purchase Revenue

Apple recoups 15% - 30% of all subscription revenue, current and moving forward, when a user signs up for a service through its iTunes App Store and uses its billing system.

Last summer, Netflix began testing a scheme whereby new users had to sign up directly on the streaming service’s website, thus bypassing iTunes. Last week, Venture Beat reported that Netflix had gone ahead with the plan.

For both Netflix and Apple, the revenue consequences are significant.

According to Sensor Tower, which tracks the app business, the Netflix app was the No. 1 grossing app in the U.S. for Apple’s App Store in November. The Netflix app generated $243.7 million in the third quarter, a 90% year over year increase.

Netflix has collected an estimated $1.4 billion through app marketplaces on Apple and Google to date. 

Netflix is testing a new app for Apple smartphones and tablets that lets the streaming giant avoid the charges Apple applies to companies using its app store to sell subscription-based services.

As first reported by Indian tech news site Gadgets 360, Apple is testing in 30 countries an app that gives customers the option to go directly to Netflix via their iOS mobile device web browser and sign up for the streaming service with no middleman.

“We are constantly innovating and testing new signup approaches on different platforms to better understand what our members like,” Netflix said in a statement. “Based on what we learn, we work to improve the Netflix experience for members everywhere.”

Related: Netflix Orders Season Three of ‘GLOW’

Apple’s app store generated $11.5 billion, much of it coming through money billed to companies that distribute their apps through the virtual store.

When a customer makes an in-app purchase of a Netflix subscription—or any other service—through Apple’s app store, the tech giant with the trillion-dollar market cap recoups 30% of the first-year subscription price, and 15% for subsequent years. Some critics of this policy have referred to the charge as a "tax."

Notably, Apple restricted in May the ability for customers to sign up within its app store for subscriptions through Google Play. Apple now tells those customers to go directly to Google Play over the internet.