Apple wins as North Dakota slackens the law that would regulate app stores

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

The vote is a win for Apple, which says the App Store is a core part of its product and that strict control over its rules protects iPhone users from malware and scams.

North Dakota law is the first major US state-level legislation to affect the Apple and Google app stores, which charge up to 30% for sales in the app store, including in-app purchases from digital items. Had the Senate passed it, it would still have been debated and voted in the North Dakota house.

The North Dakota law targeted Apple’s fees by requiring companies earning more than $ 10 million per year in the state through app stores – basically only Apple and Google – to offer alternative payment processors for in-app purchases store so that developers avoid Apple or Google’s cutback. It would only apply to companies based in North Dakota.

Apple is against the bill. Last week, Erik Neuenschwander, an Apple official who focuses on privacy engineering, testified that the bill “threatens to destroy the iPhone as you know it” and that Apple customers can purchase other brands of smartphones if they wish. Phones with Google’s Android software can already use alternative app stores.

“Simply put, we are working hard to keep bad apps out of the App Store; Senate Law 2333 could require us to let them in,” said Neuenschwander. “For a store owner, that would be like the government forcing you to stock your shelves with products that you know lack quality, authenticity or even security.”

An Apple representative declined to comment on Tuesday.

One reason this law was closely watched in North Dakota is that it could inspire other states, such as Arizona, currently debating legislation aimed at Apple’s commercial 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 the chance to become a leader, we have the chance to forward it to the audience for further discussion,” said Senator Kyle Davison, who introduced the bill and supported it. “It’s an economic development bill, because if this bill goes through, there won’t be enough room in the hangar for the private planes to fly in from California.”

On Tuesday, discussion of the legislation centered on Apple, which senators usually didn’t name due to decorum rules, instead referring to it as a ‘technology company’ or, as North Dakota state senator Randy Burckhard said, ‘the same fruit Adam and Eve was not asked to eat. ‘

“North Dakota is not the place to settle a dispute between companies about what the commission rates or payment systems should be,” said Jerry Klein, a senator who opposed the bill.

Last year, Epic Games, the gaming company that makes the popular shooter Fortnite, filed antitrust lawsuits against Apple and Google that are currently in court, targeting many of the same issues, including enabling alternative app stores and software makers. to use their own payment processor.

Epic Games is part of an effort called Coalition for App Fairness (CAF), which includes software companies like Spotify, Match Group and 50 other companies that are under Apple’s control of the App Store.

The Coalition for App Fairness has lobbied around the North Dakota law, 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 testify, Tera Randall, Epic’s VP for communications and policy, said in an email.

“The Coalition for App Fairness wants urgent changes to the App Store and supports policy solutions at the state, federal and international levels,” CAF Director Meghan DiMuzio said in a statement.

The New York Times first reported on Tuesday that Epic Games lobbied around the bill.

Match Group declined to comment. Epic Games pointed to Randall’s testimony last week.

“The anti-competitive practices on mobile platforms today are hampering innovation and crippling mobile developers. This hurts consumers by reducing choice and driving prices up,” Randall said last week.

In October, the House Judiciary Subcommittee said in a report that Apple’s “monopoly position” on iPhone apps is generating too big profits. In 2019, the Supreme Court ruled 5-4 against Apple in a case that opened up consumer lawsuits against Apple’s app store for allegedly high app prices.

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

While both Apple and Google operate crucial app stores for the two major smartphone operating systems, iOS and Android, Apple has gained significantly more control over software distribution than its Silicon Valley rival.

One reason for this is that Apple doesn’t allow competing app stores on iPhones, while Android does allow stores like Samsung’s. The North Dakota law opened a door for competing app stores when it was introduced, but a change on Tuesday limited the law to payment processing.