Apple wins victory as North Dakota votes on bill to regulate app stores

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

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

The North Dakota bill is the first major U.S. statewide legislation to target Apple and Google app stores, charging up to 30 percent of app store sales, including digital app purchases. If the state senate had adopted it, it would still have been debated and voted on in the North Dakota House.

The North Dakota bill targets Apple taxes, requiring companies that earn more than $ 10 million a year through app stores – essentially just Apple and Google – to be asked to provide alternative payment processors for purchases through app store, allowing developers to avoid cutting Apple or Google. It would only apply to companies in North Dakota.

Apple opposes 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 buy other brands of smartphones if they want. Phones running Google’s Android software can already use alternative app stores.

“We’re just working hard to keep bad apps out of the App Store; Senate Bill 2333 could force us to let them in,” Neuenschwander said. “For a store owner, it would be like the government forcing you to store your shelves with products that you know don’t have quality, authenticity or even safety.”

An Apple representative declined to comment Tuesday.

One of the reasons this North Dakota bill has been closely monitored is that it could inspire other states, such as Arizona, which are currently debating Apple’s trade power legislation.

North Dakota is a strange place for this legislation. It’s a small state, not a major application development center, and neither Google nor Apple are headquartered there.

“North Dakota has a chance to be a leader, we have a chance to send him down the hall for further discussion,” said State Sen. Kyle Davison, who introduced and supported the bill. “It’s an economic development bill, because if this bill goes down the hall, there’s not enough space in the hangar to fly California private jets.”

On Tuesday, the discussion of the legislation focused on Apple, which senators tended to avoid naming because of decor rules, instead referring to it as a “technology company,” or, as the North Dakota senator put it. Randy Burckhard, “the same fruit Adam and Eve were not asked to eat.”

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

Last year, Epic Games, the gaming company that makes the popular Fortnite shooter, filed antitrust lawsuits against Apple and Google, which are currently working in court, focusing on many of the same issues, including alternative app stores and software options. to use your own payment processor.

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

The App Fairness Coalition has lobbied the North Dakota bill, 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 contribute testimonials, said Tera Randall, Epic’s vice president for communications and politics. -mail.

“The Coalition for the Correctness of Applications wants to see urgent changes in the App Store and supports political solutions at the state, federal and international levels,” CAF Executive Director Meghan DiMuzio said in a statement.

The New York Times first reported the Epic Games lobby on Tuesday in connection with the bill.

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

“Anti-competitive practices on mobile platforms today stifle innovation and put paralyzing restrictions on mobile phone developers. This is hurting consumers by lowering options and inflating prices,” Randall said last week.

In October, the Chamber’s judicial system subcommittee said in a report that Apple’s “monopoly power” over iPhone applications gave it excessive profits. In 2019, the Supreme Court ruled 5-4 against Apple in a case that opened the possibility of consumer lawsuits against the Apple app store because it allegedly inflated app prices.

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

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

One reason is that Apple does not allow competing app stores on the iPhone, while Android allows stores like Samsung. When it was introduced, the North Dakota bill opened a door for competing app stores, but an amendment on Tuesday limited the legislation to processing payments.