Technology companies such as Facebook and Amazon have faced antitrust criticism from Congress for years, and Apple has received far fewer questions. But that changed on Wednesday, when Congress finally got its teeth into Apple as part of a hearing titled “Antitrust Applied: Examining Competition in App Stores.”
The hearing brought in representatives from companies such as Spotify, Tile and Match Group, a dating app company, to explain how Apple’s App Store fees and walled-garden business strategy is hurting their businesses. All three companies gave hard testimony, accusing the iPhone maker of anti-competitive behavior due to the heavy fees it charges some app developers in the App Store.
The timing couldn’t be worse for Apple, just a day after the company announced an iPhone-linked item tracker, the AirTag, in direct competition with Tile. Speaking to Congress, Kirsten Daru, Tile’s General Counsel, said that as soon as Apple decided to develop its own asset tracking devices and services in 2019, the friendly relationship between the two companies was broken.
“If Apple turned us on, it could turn anyone on,” Daru told lawmakers. “And Apple has shown that it won’t change unless someone makes them, which makes legislation so crucial.”
Apple’s evolving platform relationships were a theme at the hearing, with each company testifying how quickly Cupertino’s joint reach could become competitive. Jared Sine, Match’s chief legal officer, told lawmakers that app store fees are the company’s largest spend, totaling about one-fifth of the company’s total revenue. Spotify’s Head of Global Affairs and Chief Legal Officer Horacio Gutierrez said Apple’s business model was “a classic bait and switch,” luring developers to the app store and suddenly changing terms in favor of the iPhone maker.
“We all appreciate app stores and the role Apple and Google have played in helping create many of the technologies that have defined our time,” Senator Amy Klobuchar, chair of the subcommittee, said Wednesday. “We’re not mad about success … it’s about new products coming onto the market. It’s about new competitors emerging. This situation does not seem to happen to me. “
WHAT IT MEANS
Sen. Klobuchar, who chairs the committee, is using these hearings to get support for her competition and antitrust laws, which she introduced in February. The bill’s provisions don’t perfectly address the App Store issue, but there are a few key provisions that would make it easier for companies like Tile to push back against Apple. In particular, the bill would make it less difficult for law enforcement officials to sue technology companies for “ foreclosure behavior, ” something Senator Klobuchar was keen to point out in interviews.
“I don’t think people realize that there is a 15 to 30 percent tax on big companies that people like to get music from, like Spotify, which Apple or Google assess is all of this exclusionary behavior going on,” Klobuchar said. Axios on Wednesday.
The companies giving their testimony seemed to be largely in agreement. At the hearing, all three representatives argued that legislation is necessary for companies like Apple to change their behavior. But Spotify and Tile argued that the committee should also look into proposing federal legislation specifically targeting app stores.
“We respectfully ask that attention be paid to app stores at this point,” said Daru van Tile in light of the discussion of Klobuchar’s larger bill.
Outside of federal law, states like Arizona have put in place their own measures to make developer-friendly changes to Google and Apple’s app stores. Many of these bills, like Arizona’s, have failed after intense lobbying efforts by techies.
“They are fighting so hard because it is at the heart of maintaining their monopoly,” Sine said.
THE HIGHLIGHT
Biden’s nominee to become the next Democrat in the Federal Trade Commission is also poised to turn up the heat on the App Store. During Lina Khan’s hearing on Wednesday, Klobuchar Khan asked about energy companies such as Apple and Google regarding their app stores:
Khan: It really is the source of the power. Essentially there are two main options so that in some cases these companies have the power to really set the term in this market. I think you are absolutely right that certain terms and conditions really do not have any favorable justification. So I think we have to be particularly skeptical in those cases and really look closely.
WHAT’S NEXT?
Earlier this year, Klobuchar said the committee would hold a series of hearings targeting competition in the tech sector, including Facebook and Google’s dominance in the advertising market. The hearings have yet to be scheduled.