We're staring at a rather defining moment in smartphone history. The smartphone landscape, as it stands right now, is split between Apple and Google. Both adopt different approaches in how they handle their ecosystems, and through these starkly different approaches, both have undeniably grown to their biggest sizes in their own history. The past year has seen several antitrust investigations being initiated in several key markets, and lawsuits also have followed against these Big Tech companies. All of these policy and judicial movements are slowly inching their way towards a result, and both Apple and Google aren't happy about it.
Yesterday, the Senate Committee on the Judiciary announced that it will consider the Open App Markets Act (S.2710) for debate on Thursday. There is also a Senate debate scheduled for Thursday over the American Innovation and Choice Online Act (S.2992). In short, expect some very interesting points to be put forward tomorrow, ones that can potentially change the entire smartphone landscape as we know it right now. Apple and Google have put forth their own thoughts about this, and we'll take a look at those as well. But first, let's take a step back and see what these legislations are.
Explaining the proposed Bills
Open App Markets Act
The Open App Markets Act (S.2710) is a Bill that proposes to stop companies with App Stores that exceed 50 Million users in the US (defined as "Covered Companies") from doing the following:
- Requiring app developers to use an in-app payment system that is controlled or owned by the Covered Company, as a precondition for allowing distribution on the App Store or an OS.
- Requiring that pricing terms of conditions of sale be equal or more favorable on their App Store as against other app stores.
- Taking any punitive action or imposing punitive terms on developers that use a different in-app system or those that offer different pricing on other stores.
- Imposing restrictions on communications from app developers to their app users outside of the App Store.
- Using non-public business information derived from a third-party app in order to compete with that very app.
- Self-preferencing in search, by unreasonably ranking their own apps over other competing apps (except for clearly disclosed advertising).
Further, Covered Companies need to also open up their OS to allow users to choose and install alternative app stores, and hide and delete apps and app stores that were pre-installed on the device. And even further, the Bill proposes "Open App Development", which envisages "access to operating system interfaces, development information, and hardware and software features that are equivalent or functionally-equivalent" to those used by the Covered Companies' own apps.
If you've followed the wording so far, this Bill proposes radical changes to the very fabric of the app stores that we have right now, both, the Google Play Store and the Apple App Store.
It's easy to see the bits that are in opposition of Apple's current App Store practices, such as allowing sideloading of app stores, bypassing IAP systems (one of the fundamental points of contention in the Apple vs Epic Games lawsuit), and more.
And these proposed changes affect Google too: even though Android as an OS is a more "free" and "liberated" OS (used very loosely in this context), Google does exercise considerable control over the Google Play Store as well on devices sold with the Google Play Store (i.e. devices shipping with GMS (Google Mobile Services), governed through the MADA (Mobile Application Distribution Agreement) signed with the phone OEM). Requirements envisaged under the Act, such as bypassing IAP systems, form some of the very basis of lawsuits such as the Epic vs Google lawsuit over Fortnite. Documents that were produced for the lawsuit process revealed further practices such as the Premier Device Program which allegedly involved the exchange of more favorable terms to OEMs if they did not ship phones with a competing App Store.
There's more to discuss on the Bill/Act and the ramifications on Apple and Google, but it's worth waiting on the Senate Judiciary Committee debate to happen.
American Innovation and Choice Online Act
The American Innovation and Choice Online Act (S.2992) is a Bill that proposes to stop large companies (defined as "Covered Platforms") from various self-preferential acts, such as:
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Unfairly preferencing their own products, services, or lines of business, and thus harming competition.
- Includes Search or Ranking functionality
- Unfairly limiting the ability of other products, services, or lines of business to compete with the Covered Platform's own products, services, or lines of business.
- Discriminating in the application or enforcement of the Covered Platform's terms of service among similarly situated business users in a manner that harms competition.
- Conditioning access to the Covered Platform on the purchase or use of other products or services that are not part of or intrinsic to the Covered Platform itself.
- Using non-public data obtained generated on the Covered Platform by the activities of a business user, to compete with the products or services offered by the business user.
- Establishing contractual or technical restrictions that prevent the portability of a business user's data on the Covered Platform to other systems or apps.
- Materially restricting Covered Platform users from uninstalling software that has been preinstalled, or from changing default settings that direct or steer these users to products or services offered by the Covered Platform -- unless necessary for the security or functioning of the Covered Platform.
- Retaliating against a business user or Covered Platform user that raises concerns with law enforcement authorities about potential violations of law.
It's easy to see why Big Tech (beyond Apple and Google) and other large companies would not be very happy about this Bill either. The entire premise of the Bill/Act would be to stop a large company from using a near-monopoly situation to pass on unfair advantages to its other goods and services. The wording is broad, but we can also see it including search engines and app stores within its ambit, especially within search and ranking functionality.
Reactions
Both Apple and Google have had strong reactions before the debate.
Apple
As 9to5Mac reports, Apple has sent a letter to the Senators, presenting its views on how the proposed changes would undermine user security and privacy.
These bills will reward those who have been irresponsible with users’ data and empower bad actors who would target consumers with malware, ransomware, and scams.
Apple claims that the App Store is "dramatically more secure than systems offering non-centralized, open distribution, including our own MacOS", and forcing iPhones to allow sideloading could lead to hundreds of thousands of additional mobile malware infections per month. Apple further argues that the increased risk is not because consumers will knowingly choose to accept the risks and download questionable apps -- it will be because "without a centralized vetting mechanism like the App Store, many consumers will be deceived into in- stalling unwanted malicious software".
Apple urges that these Bills should not be passed in their current forms. Instead, it says that these bills should be “modified to strengthen consumer welfare, especially with regard to consumer protection in the areas of privacy and security.” One of these suggestions includes modifying the language to add an "affirmative defense for conduct that 'increases consumer welfare.'"
Google responded with a blog post that provides various examples of how Google's services will be affected to the detriment of end-users. For example, Google notes that Search and Maps would not be able to offer integrated and high-quality results, such as not being able to offer Google Maps directions when someone looks up location or business information in Search. Knowledge Panels and Text Snippets that Google offers directly on Search may also be impacted, as the company would also have to surface lower quality results. The Google Play Store would have to give equal prominence to spammy and low-quality services. And Google may even be stopped from offering SafeBrowsing service and spam filters in Chrome and Gmail to block pop-ups, viruses, scams, and malware.
Antitrust law is about ensuring that companies are competing hard to build their best products for consumers. But the vague and sweeping provisions of these bills would break popular products that help consumers and small businesses, only to benefit a handful of companies who brought their pleas to Washington.
All in all, Google's arguments play along the tight integration that we often see among Google services (but not on its Chat apps). These integrations are at the risk of breaking if the proposed legislations make their way through and become Acts.
We will have to see how the upcoming debate plays out. There's still a long way to go for the Bills to become Acts, from what I understand. For one, the Judiciary Senate Committee can suggest changes to the Bills, or they can approve of the current form. Then both chambers of Congress need to discuss and vote to approve the exact same version of the Bill. After that, the Bill moves forward to the President of the United States, who can assent or veto the Bill. So there's still a long road ahead. Nonetheless, we are staring at potential history in the making in the way we interact with our phones.