Apple wins when North Dakota rejects the law that would 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 which are charged by Apple and Google.

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

The North Dakota Bill is the first major statewide legislation in the U.S. to address Apple and Google app stores, which charge up to 30% on fees from app store sales, including purchases in the digital items app. Had the state Senate passed it, it would still have been debated and voted on in the North Dakota House.

The North Dakota bill focused on Apple’s tariffs by requiring companies to earn more than $ 10 million annually in the state through app stores (basically just Apple and Google) which should offer alternative payment processors for purchases through the app store, allowing developers to avoid the Apple or Google cut. It would only apply to companies based in North Dakota.

Apple opposes the bill. Last week, Erik Neuenschwander, an Apple official who focuses on privacy engineering, said the bill “threatens to destroy the iPhone as you know it” and that Apple customers can buy other smartphone brands if they want to. Phones with Google’s Android software can now use alternative app stores.

“Simply put, we work hard to keep bad apps out of the App Store; Senate Bill 2333 could require 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 security.”

An Apple representative declined to comment Tuesday.

One of the reasons this North Dakota bill was closely monitored is that it could inspire other states, such as Arizona, that are currently debating legislation aimed at Apple’s commercial power.

North Dakota is a strange place for this legislation. It’s a small state, it’s 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 it across the aisle for further discussion,” said state Sen. Kyle Davison, who introduced the bill and gave it. support. “It’s an economic development bill, because if that bill crosses the aisle, there’s not enough hangar space to fly private jets from California.”

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

“North Dakota is not the place to resolve 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 shooter Fortnite, filed antitrust lawsuits against Apple and Google that are currently working through the courts, focusing on many of the same issues, including retail stores. alternative applications and giving software manufacturers the option to use their own payment processor.

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

The Coalition for Applications Equity has lobbied around the North Dakota bill, a coalition spokesman said Tuesday. A North Dakota lobby that worked on the bill represents Epic Games, Match Group and the Coalition for App Fairness, and helped Epic Games testify, said Tera Randall, vice president of Epic communications and policies.

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

The New York Times first reported that the Epic Games lobby faced the bill on Tuesday.

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

“The anti-competitive practices of mobile platforms are drowning out innovation today and subjecting mobile developers to crippling restrictions. This is hurting consumers by reducing choice and inflating prices,” Randall said last week.

In October, the House Judiciary Subcommittee said in a report that Apple’s “monopoly power” over iPhone apps gives it excessive benefits. In 2019, the Supreme Court ruled 5-4 against Apple in a case that opened the possibility of filing consumer lawsuits against Apple’s app store for allegedly inflating app prices.

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

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

One reason is that Apple does not allow competing app stores on iPhones, while Android enables stores like Samsung’s. The North Dakota bill opened a door for competing app stores when it was introduced, but an amendment Tuesday limited the legislation to payment processing.