Over the past few years, lawmakers in both chambers of Congress have been lining up to address alleged anti-competitive and anti-consumer harms caused by big tech. Among the latest bills to be considered in the Senate is the Open App Markets Act (OAMA) that would impose a litany of new rules regulating application stores like Google’s play store or Apple’s App store.
While lawmakers are rallying around OAMA, they should perhaps recognize the profound damage the bill could cause to consumers and developers who depend on unfettered access to app stores.
Plowing ahead with OAMA shows a dangerous disregard for empirical evidence and a reckless disregard for consumers and developers. The Senate must reject OAMA.
If the Senate passes OAMA and the House passes its companion, it would designate application stores with over 50,000,000 users as a covered company and impose numerous restrictions on how these stores operate. Once designated a covered company, these app stores cannot self-preference their own apps over competitors, mandate the use of in-app purchasing systems, and must allow consumers the ability to access other application stores.
The political desire to crack down on how application stores operate comes despite the 2020 House Democrats’ investigation into digital markets that found “there are no competitive constraints on the power Apple and Google have over” application stores. While ignoring the investigative findings, a number of house members went on to propose anti-competitive constraints, such as onerous terms and conditions and mandating the use of in-app purchasing systems.
The mandated use of in-app payment systems, however, ensures sensitive consumer information remains secure and out of the hands of cybercriminals. While Apple does charge a 30% commission, these fees have enabled the tech giant to develop one of the most secure payment processing systems on the planet.
Specifically, when “Apple Pay receives your encrypted transaction and re-encrypts it with a developer-specific key before the transaction information is sent to the developer or payment processor.” Additionally, transactions over Apple Pay require authentication by password or touch ID.
These protections are only made possible because of the investments big tech companies have made in protecting financial information and most likely could not be made by small developers. The risk here is that by prohibiting the use of just one in-app payment system, lawmakers are inadvertently legislating unnecessary vulnerabilities that could see sensitive financial information fall into the hands of cybercriminals more easily.
The ban on self-preferencing could also see consumers pay for apps that they can currently access for free. Owing to their considerable financial and technological resources, companies like Apple and Google can offer a range of applications to consumers for free. Banning self-preferencing would almost certainly force these companies to put their free apps below more expensive alternatives in search results, making it harder for consumers to find and access free options readily available.
Finally, OAMA could also be harming developers who depend on unfettered access to app stores. Rather than complying with the onerous restrictions imposed by OAMA, application stores could easily remove other developers.
The prospect of removal from application stores would not only deny developers access to the millions of Americans who use Apple or Android devices, but it would also deny them the opportunity to generate significant revenue. For example, Apple recently announced its app store had allowed developers to raise over $72.3 billion in revenue in 2020 and $38.6 billion for developers on the Google play store in 2020.
Losing access to millions of consumers and the revenues app stores provide will almost certainly be a death blow to current and future developers.
While lawmakers are clamoring to impose new rules on how app stores operate, they should perhaps pause and reflect on the extreme but avoidable damage they are about to inflict on consumers and developers.