Analyzing the Open App Markets Act

A second bipartisan competition bill targeting Big Tech firms is advancing through the Senate Judiciary Committee, with a markup scheduled for February 3rd.

Overview

The Open App Markets Act (S.2710) is the second major piece of competition legislation that the Senate Judiciary Committee will consider (and likely approve) in 2022. Originally introduced in August 2021 by Senators Richard Blumenthal (D-CT), Marsha Blackburn (R-TN), and Amy Klobuchar (D-MN), the Open App Markets Act is scheduled to be marked up by the Senate Judiciary Committee on February 3rd. With a diverse set of bipartisan cosponsors that also includes Sens. Marco Rubio (R-FL), Cynthia Lummis (R-WY), Cory Booker (D-NJ), Lindsey Graham (R-SC), John Kennedy (R-LA), Mazie Hirono (D-HI), Josh Hawley (R-MO), and Richard Durbin (D-IL), the bill is likely to draw broad support, similar to the American Innovation and Choice Online Act (S.2992) that advanced through the Judiciary Committee on a 16-6 vote on January 20.

A bipartisan House companion bill (H.R.5017) to the Open App Markets Act was also introduced in the House of Representatives last August.

How it Works

Currently, iPhone or Android devices are preinstalled with proprietary app stores—the Apple App Store or the Google Play store, respectively—and several other apps that cannot be removed. If the Open App Markets Act is enacted, consumers’ experience with pre-installed apps and app stores may fundamentally change.

The bill would effectively allow app developers to circumvent Apple and Google’s current 15-30% charge for purchases made through their app stores. The bill would prevent a “covered company,” and their app stores, from requiring developers to use their in-app payment systems as a condition of distribution in an app store. A “covered company” is defined as one with more than 50,000,000 U.S.-based users. Thus, the bill would most significantly impact the Apple and Google app stores, which house approximately 2 million and 3.5 million apps respectively and are the leading players in an industry that saw $133 billion worth of mobile app purchases in 2021.

The bill would also allow consumers to download third-party applications or third-party stores and hide or delete apps or app stores that were preinstalled on their devices. For example, iPhone users could delete the pre-loaded Apple App Store from their device and use third-party app stores like the Google app store instead. While some Apple and Google users or developers may prefer the current app store arrangement—Apple with more rigid guidelines and Google more flexibility for developers—there would likely be a large change in the Apple app store, making it less controlled through the inclusion of third-party apps, often called “sideloading.”

The bill would also prohibit covered companies from “punitive action or otherwise impose less favorable terms and conditions against a developer” for listing their apps at different prices, or with different conditions of sale, in different app stores, or using different payment methods. The bill also prevents “unreasonable preference” in-app store rankings – for example, a covered company would not be able to preference its own apps or those of its subsidiaries arbitrarily or without a clear designation as advertising.

Finally, the bill would prohibit covered companies from using “non-public business information” obtained from third-party developers for the purpose of competing with those developers in the app marketplace. It would also allow developers access to operating system interfaces and development information to support cross-developer app functionality.

Enforcement would be delegated to the Federal Trade Commission (FTC), the U.S. Attorney General, and/or to state attorneys general, acting through the Federal Trade Commission Act or the Clayton Act. The bill also creates a limited private right of action for app developers in federal court, with the ability to award injunctive relief and recover three times actual damages. However, the complainant must post a bond before injunctive relief is granted, and damages would be calculated based only from the date on which a complaint is filed in court, thus enabling covered companies to avoid significant monetary penalties if they quickly cease the offending conduct. Punitive damages would not be permitted under this provision.

Arguments in Support of the Bill

Senator Richard Blumenthal (D-CT) has championed this bill as a way to “tear down coercive anti-competitive walls in the app economy, giving consumers more choices and smaller startup tech companies a fighting chance.” Senator Amy Klobuchar (D-MN), one of the bill’s original co-sponsors, views it as a tool to prevent a few gatekeepers from controlling which apps consumers can access, level the playing field across the app marketplace, and increase consumer choice. Another original co-sponsor, Senator Marsha Blackburn (R-TN), has echoed similar sentiments, calling Apple and Google’s current actions “an affront to a free and fair marketplace.”

Supporters believe by breaking down barriers to entry and differences between the Apple App Store and Google Play store, and by expanding third-party download opportunities, consumers may have more choices for apps and lower prices as developers potentially compete with users across app ecosystems. Switching from an Android to an Apple phone (or vice-versa) may be easier if consumers’ favorite apps benefit from cross-platform access and compatibility. Supporters believe developers will have the opportunity to avoid paying fees-per-download, to compete for new users, to compete in an open marketplace without facing bias from app store operators, and to potentially integrate features and user interfaces that may have not been translated across different app ecosystems in the past.

Arguments Against the Bill

Opponents of this legislation highlight potential risks across the security landscape, challenges to competition, harm to the existing ecosystem, and ultimately lowering visibility for developers. First, several industry groups have raised concerns about third-party apps and “sideloading” in app stores. By opening existing app stores to third-parties, opponents claim that malware, malicious apps, and other cyber vulnerabilities may be able to enter what is a relatively stable app ecosystem in its present incarnation.

Opponents also dismiss the bill’s concerns about competition and market domination by Apple and Google. They compare the current app store situation to that of airplane manufacturers Boeing and Airbus, claiming that while those companies may be a duopoly, there is still rigorous competition across the industry. Furthermore, opponents claim that the Windows Store’s 600,000 apps and Amazon’s 460,000 apps provide adequate competition for the millions of apps that exist in the Apple App Store and the Google Play store.

Dubbed a “salvo against Americans who enjoy iPhones and Android phones” by the American Enterprise Institute, the bill has caused opponents to also express concern about the potential changes to the preexisting app stores present on both Apple and Google platforms, citing the possibility that creating more uniform apps across app stores could actually decrease consumer choice and lead to lower visibility for smaller app developers in the new – and presumably larger – app ecosystems that could emerge across operating systems.

What Comes Next

The Open App Markets Act is currently scheduled to be marked up by the Senate Judiciary Committee on February 3. With its strong bipartisan support from Judiciary Committee members, the bill will likely advance to the full Senate.