Government Regulation of App Stores Could Wind Up Costing Consumers
App stores are in the crosshairs of regulators around the world, threatening the privacy and security of consumers in jurisdictions throwing the red tape at companies. The E.U. has preliminarily found that Apple has a monopoly and is abusing its market power in the distribution of music streaming apps. In the U.S., several states are considering legislation to regulate the platforms. Epic Games is currently suing Apple in District Court in California. Regulating app stores is a bad idea at the continental, federal or state level. There simply isn’t the consumer harm to justify these regulatory interventions.
App stores are digital distribution platforms for apps, used mostly for mobile devices and tablets. End users can download apps from their device’s built-in app store or, in some cases, an alternative app store or website. App developers pay anywhere from nothing to 30% commission to the two biggest app stores, Apple’s App Store and Google’s Google Play, depending on the circumstance. That’s in line with industry averages for app stores and consoles.
This arrangement has surely generated profits for app stores, but it has also facilitated a great amount of wealth for app developers and third-party businesses. Apple, for instance, reports that $441 billion went to those parties via their App Store globally in 2019 alone. It’s hard to imagine that most companies could achieve that kind of distribution and revenue without the help reaching millions of potential customers app stores like Google’s and Apple’s provide. But any developer who doesn’t think so, has many alternative app stores that cater to specific types of apps or geographical areas available from which he can choose.
The European action against Apple’s App Store is yet another step in the E.U.’s long march against U.S. tech companies, but more specifically, it results from a 2019 antitrust complaint filed by Swedish-based music streaming service, Spotify. Spotify contends that Apple’s cut of the subscription service puts its own Apple Music streaming service at an unfair advantage.
There are advantages and disadvantages to any business decision, including Apple’s decision to invest in creating its own app store, but deeming those advantages objectively unfair or illegal seems suspect here. Spotify asking authorities to change the rules after they made a reported $670 million from iOS subscribers from 2015 to 2018 seems more like Swedish sour grapes than a legitimate competition problem.
But because the E.U. does not tether its antitrust action to finding consumer harm as the U.S. does, these complaints from competitors are entertained, even if regulations suppressing what Apple could charge Spotify may ultimately mean higher prices for consumers. If app stores were forced to let developers use the payment systems of their choice, Spotify might keep more money, but consumers will pay with less convenience, privacy and security. Handing your billing information over to Apple or Google is likely much safer than handing it over to each individual app developer. It’s certainly more convenient too. Likewise for canceling your subscription, demanding accountability if you’re dissatisfied with an app and feeling confident making in-app purchases.
Spotify and Fortnight creator Epic Games are busy lobbying for the same sort of government interference in the U.S. Several states have app store regulation legislation knocking around their capitols. A measure was recently defeated in North Dakota, but there are bills in various stages in Minnesota, Georgia, Hawaii, Arizona, Rhode Island, North Carolina, Florida, New York, Illinois, Massachusetts, and Wisconsin. For all the reasons app store regulation is bad public policy for European consumers, it is similarly harmful for U.S. app users. Add to the that the cost and complexity of potentially fifty different regulatory environments across the country and the idea fairs even worse.
The E.U. and state legislators in the U.S. should not interfere with the terms of business app stores and developers agree to just to appease a faction of malcontents. If Congress wants to protect U.S. app consumer’s privacy, security and convenience, they should consider federal preemption of state regulations on this topic.
Jessica Melugin is Director of the Center for Technology and Innovation at the Competitive Enterprise Institute, a free market think tank.