Sullivan
Brandon Sullivan
Professor Ryan Chang
Writing 39C (33303): Argument & Research
26 May 2022
Apple’s control over the IOS app store marketplace has become a cause for concern over the recent decades as more and more big tech companies enter the radar for potential monopolistic practices. For Apple, much of the antitrust efforts (laws seeking to maintain competition and regulate anti-competitive marketing practices) have been focused around their app store and their role as both gatekeeper and competitor. Notable past cases have included but are not limited to: Apple Inc. vs. Spotify, Apple Inc. vs. Pepper, and of course the most recent case against the popular game company and creator of Fortnite, Apple Inc. vs. Epic Games, Inc. These cases exemplify the growing issue with Apple’s app store policies, in that they have complete control over the IOS app market and in turn, complete control over access to the massive IOS user base.
In order to regulate Apple’s dominance over the marketplace, Several solutions have been proposed. The first, and most clear choice going into the future, is actually one that has already been implemented in court. During the case of Apple Inc. vs. Epic Games, Inc., the court decided that Apple’s 30% IAP (in app purchases) fee was anti-competitive due to the fact that it raised consumer app prices and therefore consumer prices as well. Besides this however, many of Epic’s claims against Apple were denied, resulting in minimal change besides one key implementation: “A nationwide injunction permanently restraining Apple from ‘prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app’” (Sullivan & Cromwell, 2021). This means that Apple will have to allow for apps on the IOS app store to have links to third party sites which can avoid the 30% IAP fee. This is the most effective and non-destructive solution to Apple’s monopolistic control over the app store.
The main debate in this article is over the open markets app and whether it would provide necessary control over app markets’ anti-competitive practices. The bill, approved by the senate judiciary committee on february 3 2022, would limit the control that app markets have over developers. The author states that there are positives to the bill including the “needed regulatory oversight for both antitrust enforcement and privacy and security for mobile apps” (MacCarthy, 2022). This means that Apple, as well as some other major corporate market providers would have to permit developers to be able to list apps on third party markets. In other words, developers would no longer need to pay the 30% sales tax on purchases made through apple applications. This would increase app revenue, which in turn should also theoretically lower app prices for consumers.
The other side of the argument comes from Apple itself. They argue that the 30% app tax is there to offset the price of higher security standards and user data protection on Apple devices. Using third party app markets would allow malicious apps onto Apple hardware and could compromise user data from other apps. Some scholars believe that it is necessary for Apple to have total control over their devices’ digital marketplaces due to these concerns. Although some believe that Apple’s operating system could prevent malicious activity, others disagree and warn that there are weaknesses in the operating system protection that could be exploited (MacCarthy, 2022). In contrast, some other scholars believe that the security challenges are overblown and security could be maintained or even improved through open app distribution. The author seems to be in favor of the open app markets bill, however they do not think that it is fully comprehensive yet and still needs some work to address potential concerns listed above.
This article goes over the 5 big tech bills announced in 2021 that the House claims will help rein in the tech giants. Democratic members of the House and Senate are now taking more action against big tech, noting that these companies’ economic power is now a center of concern (Ghaffary & Morrison, 2021). The 5 bills listed are: The American Innovation and Choice Online Act; The Platform Competition and Opportunity Act; The Ending Platform Monopolies Act; The Augmenting Compatibility and Competition by Enabling Service Switching Act; The Merger Filing Fee Modernization Act. The article goes on to give brief explanations on what each act does and their individual purposes.
This article covers the American Innovation and Choice Online Act. The act stops corporations from gaining an advantage over competition by gatekeeping other businesses who must go through them to reach customers (Edelman, 2022). The Act will give permissions to the FTC (Federal Trade Commission) to take action against corporations violating rules stated in the Act. The act would outlaw market providers’ self-preferencing in markets. It also “prohibits a company making ‘preferred status or placement on the covered platform’ dependent ‘on the purchase or use of other products or services’” (Edelman, 2022). This would keep companies such as Apple and Amazon from discriminating against third party sellers who choose to use other products or services, meaning no special treatment for developers who decide to pay Apple’s app tax and no fee in order to have prime delivery speeds.
A large advocate for competition and open app market policies is Richard Blumenthal, United States Senator for Connecticut. A member of the Democratic Party, Blumenthal is one of several key members who have introduced the Open App Markets Act and continue to push for fair, clear, and enforceable rules to protect competition and strengthen consumer protections within the app market (Blumenthal, 2021). Other contributors include but are not limited to: U.S. Senator Marsha Blackburn; U.S. Senator Amy Klobuchar.
Another large advocacy group called the Coalition for App Fairness works to promote open app marketplace practices. Their vision is to reduce app store exclusivity (developers forced to use only one marketplace to reach consumers), and promote equal access to services for all competition in a marketplace. They also specifically fight against self-preferencing among platforms as well as unreasonable or discriminatory fees that are sometimes required to gain access to a marketplace. They have done work on addressing Apple’s gatekeeper status in the IOS app store marketplace and oppose the 30% fee on in-app purchases in the Apple app store. They also endorse the Open App Markets Act as well as other policies that address anti-competition in app markets.
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