Arizona Moves Forward With Law To Force Google & Apple To Open Up Payments In App Stores

from the some-good-some-bad dept

Arizona appears to be moving forward with an interesting (though, potentially unconstitutional) bill to say that Apple and Google would need to allow alternative payment systems in their app stores. I think this bill means well in that it’s targeting what appears to be a real issue: the control that Apple (especially) and Google (to a lesser, but still significant extent) have over getting apps onto iOS and Android devices. Both companies take a pretty large cut out of in app-purchases — basically 30% (it’s a little more complicated than that).

The argument from both companies is that (1) it’s their system and their providing value by creating the very platform that effectively allows all these apps to exist in the first place, and (2) part of the value of having a single app store model is that it allows for more security and privacy protections for end users (that’s a big part of Apple’s argument, certainly). Google is slightly more open in that it does allow for sideloading and even third party app stores, but it strongly discourages such practices. And, there is some validity to that argument… but it’s also partially nonsense. For many apps, Google and Apple aren’t really adding that much value, and for them to demand such a large cut seems silly. 30% is also… quite a lot. It’s way more than other platforms in more competitive situations take, which often take closer to 5 to 10%. That certainly suggests some rent seeking.

That said, the bill has some issues as well. The biggest being that this is a state bill, which likely makes it unconstitutional. Regulating Apple and Google services like that likely violates the Commerce Clause, which limits the states’ ability to pass laws that regulate “interstate” commerce. It seems like if this kind of law is being written, it should be a federal law, rather than a state one.

The other big question is what are the downstream impacts of such a bill. If Google and Apple rely on their cut of these in-app sales for revenue, and those effectively go away with such a law, then they’re going to seek to make up that revenue elsewhere. Now, one hopes that they would do this by improving their offerings, adding additional value and figuring out ways to charge for those value-added features. And perhaps that would happen. But the fear is that the companies would seek to find a different revenue stream to tap — such as charging for access to dev tools or even just to list an app on the app store. And, the end result of that might be to shut down or shut out smaller app developers.

The other odd thing about this bill is that it literally exempts the equivalent situation with video game consoles (which also take a ~30% cut):

The bill specifically exempts game consoles ?and other special-purpose devices that are connected to the internet,? and it also bars companies like Apple and Google from retaliating against developers who choose to use third-party payment systems.

I don’t quite understand this. If this approach is good for mobile phone devices, why shouldn’t it also apply to video game consoles? I can’t see any consistent reason to not treat the two similarly.

So, there does seem to be a legitimate concern about Apple and Google’s effective control over the phone device software ecosystem. Perhaps it would be less of a problem if web apps had more access to core device functionality and could bypass the app stores entirely. Or, if sideloading was more common (or even allowed, as in the case with iOS). However, that doesn’t change the fact that this particular bill doesn’t seem like the best way of dealing with this particular situation.

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Companies: apple, google

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Comments on “Arizona Moves Forward With Law To Force Google & Apple To Open Up Payments In App Stores”

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22 Comments
Thad (profile) says:

I don’t quite understand this. If this approach is good for mobile phone devices, why shouldn’t it also apply to video game consoles? I can’t see any consistent reason to not treat the two similarly.

I can think of a couple of reasons, but they’re political.

One is, if they focus on just smartphones, then they stand a better chance of getting game publishers on their side. If they go after game consoles, then they’re going to get pushback from the console manufacturers (Nintendo, Microsoft, and Sony).

Another thing is, there’s not much political cost to throwing gamers under the bus. Games are regarded as inessential, frivolous toys, and politicians tend to be dismissive of gamers as a demographic. (Not for nothin’, we didn’t see right-to-repair legislation starting to catch on until DRM started affecting farmers. When it was just gamers complaining about it, politicians didn’t care.)

nez8 says:

Re: political reasons

This is obviously a very narrow special-interest legislation with no regard for the state or federal constitutional limits upon legislative authority.
Thus it’s a perfectly normal American legislative product.

The App Developers are essentially free-agent vendors to Apple– the terms of contract & payments are purely a private negotiation matter (unless statutory fraud is somehow involved by either contracting party).

Commerce Clause has nothing to do with it– this is basic civil and contract law that’s been around a lot longer than Arizona.

nasch (profile) says:

Re: Re: political reasons

Commerce Clause has nothing to do with it– this is basic civil and contract law that’s been around a lot longer than Arizona.

But if not for the commerce clause, states would be free to regulate contract law however they see fit, right? It’s the commerce clause’s preemption that makes this unconstitutional unless I’m missing something.

Anonymous Coward says:

Re: Re:

I don’t believe it has anything to do with the games angle. Games are the main market for in-app purchases anyway and the whole brouhaha started off with a game publisher (Epic).

I think game consoles are excluded with the intention of aiming the law specifically at Apple and Google and nothing more.

That One Guy (profile) says:

Next time just tattoo 'gullible' on your heads...

The bill specifically exempts game consoles “and other special-purpose devices that are connected to the internet,” and it also bars companies like Apple and Google from retaliating against developers who choose to use third-party payment systems.

Welp, sounds like at least one politician bought into Epic’s epicly bad, ‘it’s not fair to punish us for violating the rules’ argument.

Anonymous Coward says:

Re: Next time just tattoo 'gullible' on your heads...

Well, given your post history, I would expect that you would demand Epic build their own games console, network, and other infrastructure to support their business. As you seem to hate level playing fields shared and accessible to all.

Ehud Gavron (profile) says:

Re: Re: Next time just tattoo 'gullible' on your heads...

Given you’re a nobody who won’t sign her name, I don’t expect anything from you and don’t think you "seem" anything.

Really if you can’t add anything at all AND can’t sign your name, just slink back to your PS3 and tell mom to make more mac and cheese before you go back to high school.

crade (profile) says:

I see no argument whatsoever against google. Nothing forcing anyone to use their play store and the only "control" they to the extent that people want to make use of the benefit the play provides by screening apps and making them convenient to install. Google "strongly discourages" is, I think a bit misleading. They take no action to prevent anyone from making their own app store, which others have done.. They warn about security issues with sideloading, but they are really just the messenger in that scenario

Apple is a different story as they are forcing people to use their app store, and you can’t circumvent it without suffering consequences from apple

"it’s their system" well It’s shouldn’t be their system once you give them your 600$ for it

Anonymous Coward says:

Re: Re:

I see no argument whatsoever against google. Nothing forcing anyone to use their play store and the only "control" they to the extent that people want to make use of the benefit the play provides by screening apps and making them convenient to install. Google "strongly discourages" is, I think a bit misleading. They take no action to prevent anyone from making their own app store, which others have done.. They warn about security issues with sideloading, but they are really just the messenger in that scenario

Samething applies to Android, only difference is that it’s the device manufacturers not Google that impose the restrictions. (Just try to buy a device made for the US market, not an international / "developer" model, that has an unlocked bootloader. I’ll wait.)

Sure you can "sideload" apps on some of them, but the ability to remove code is just as important as the ability to add it. Don’t want the carriers’s spyware on your device? If it was made for the US market, tough luck. That crap is on the forbidden "vendor" partition that the device owner can never touch. Want to upgrade the device kernel because it’s a 64bit device, but it has a 32bit kernel artificially limiting it’s abilities? Too bad, that’s on the forbidden "boot" partition that the device owner can never touch. There’s plenty of examples like this for Android devices.

"it’s their system" well It’s shouldn’t be their system once you give them your 600$ for it

Agreed.

crade (profile) says:

Re: Re: Re:

"Same thing applies to Android … Just try to buy a device made for the US market"
Sorry I’m not from the U.S., from Canada but every non apple device I have ever purchased has an unlocked bootloader, and have installed a replacement O.S. any time the manufacturer O.S. support started sucking for the device. The only ones I have seen that are locked are the ones where you get cheap phones in exchange for being locked to a carrier, and then they are bound to unlock such for you once you are out of dept.

Anonymous Coward says:

It’s way more than other platforms in more competitive situations take, which often take closer to 5 to 10%. That certainly suggests some rent seeking.

That’s false no platform/store takes that small a cut, even Epic takes a 12% cut. (At best some PC Key sites may take less than 10% but they can do that because they only supply keys and don’t need to bother with the actual infrastructure to supply or support the games).

A 30% cut is pretty much standard across all digital stores;
https://www.analysisgroup.com/globalassets/insights/publishing/apples_app_store_and_other_digital_marketplaces_a_comparison_of_commission_rates.pdf

Similarly suggesting the fee’s for IAP/Subscriptions are only processing payment fee’s is disingenuous, they generally charge the same fee for these as upfront purchases because the bulk of apps offering these options are free, and if they didn’t charge for IAP/Subs then every app in the store would be free with IAPSub instead of an upfront fee.

I’d also be careful with what you wish for as if the stores are expected to carry apps for free then most likely they’ll just revert to the old business model which involved making devs pay thousands upfront for access to the SDK, include a large fee to get listed on the store which would kill off the small devs who cannot afford these upfront fees all so Epic can make even more money.

Koby (profile) says:

Abscence

…likely violates the Commerce Clause, which limits the states’ ability to pass laws that regulate "interstate" commerce. It seems like if this kind of law is being written, it should be a federal law, rather than a state one.

Currently, many states have regulations on the books in the area of finance which impact how entities from other states may engage in commerce within their state. Although it may be possible for a federal law to be crafted which could override a state law, the wording would need to be carefully crafted to actually prohibit greater protections enacted by individual states.

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faceless (profile) says:

I don’t quite understand this. If this approach is good for mobile phone devices, why shouldn’t it also apply to video game consoles? I can’t see any consistent reason to not treat the two similarly.

Gonna guess because consoles are sold at or near cost while phones are sold for profit. That’s a business model issue for the manufacturer though, not a developer problem so the rules should be the same.

This comment has been deemed insightful by the community.
Ehud Gavron (profile) says:

30,000 foot view (9.144 Km)

You buy a house to rent out. You rent it to ONE renter. The state comes along and says "Hey it shouldn’t be fair that they can only rent this house from you. It must be listed on VRBO or AirBNB or whatever so people don’t have to go through you to rent your house."

No they don’t.

Example2:

You open a store. You rent the building. You hire staff and you pay them. Then you make deals with vendors. Vendors provide products.

Simple, right?

Then you put out advertisements to let potential customers know they can buy THESE products from THESE vendors at YOUR store.

You don’t therefore create an obligation to allow other people (customers) to buy your (vendors’) products outside your store. That’s between the customers and the vendors.

Oh? Did you sign an exclusivity deal so only you can sell the vendors’ products and one assumes you get something in return? That’s lawful.

Pass a law requiring that you allow people to violate your exclusivity to sell whatever to whomever but you still have to do what you said in your exclusive contract? Nagh.

The State of Arizona (sorry, I live here) is wrong here 100%. We may not like Google or the other people taking 30% of a cut for setting up the agora… but they did, and vendors pay it, and so do customers.

Suck it up, Arizona.

Ehud
Tucson (Arizona)

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