Have you ever paid to download an app on your Apple iPhone or Google Android? Apple and Google have designed the downloading process to be effortless, provided the apps are purchased through them. With a tap of the screen, consumers can purchase and download apps or enroll in monthly subscription services using technology in the palms of their hands.

Many consumers are also familiar with Apple Pay, a payment application that, according to Apple, “replaces your physical cards and cash with an easier, safer, more private and secure payment method [to use] online, in apps, and in stores.”¹

Most app users, however, don’t realize Apple and Google can collect up to 30% from every completed purchase, subscription, and microtransaction,² which becomes particularly problematic considering the two tech giants’ roles within the market. Controllers of the two leading mobile operating systems (iOS and Android), Apple and Google maintain what is commonly referred to as a duopoly, in part, by utilizing what many antitrust attorneys contend are anticompetitive technological measures — making it difficult for consumers to download rival app stores, which ensures that developers participating in their app store collect payment exclusively via their app/software; implementing technological self-preferencing (for instance, Apple allows its own payment app to access communications but blocks access for third-party payment apps); and applying self-preferencing to searches by setting up algorithm preferences.³

Consumers and app developers are at the mercy of big tech, who set the terms for which apps are granted — or denied — space in top digital storefronts, the manner in which payment can be processed, and the types of information, if any, accessible to either party. Self-preferencing technology serves companies like Apple and Google by keeping many consumers in the dark as to other digital storefront options that may offer lower prices for apps and services. And because the two tech giants are free to change their terms at any time, app developers attempting to share promotional signage or advertisements regarding cheaper prices on alternative app storefronts could result in Apple or Google pulling the app from their stores. In essence, many antitrust experts contend Apple and Google have erected contractual and technological barriers that allow for little, if any, competition for distributing apps to iPhone and Android users, all but guaranteeing that the Google Play Store and Apple App Store continue to account for nearly all downloads from such mobile devices.

These are just some of the ways by which the terms and practices of Apple’s App Store and Google’s Play Store have raised eyebrows in an antitrust context. In 2021, the Open Apps Market Act (OAMA)⁴ was proposed in Congress specifically to combat self-preferencing by big tech, thereby increasing choice and reducing costs for consumers.

If passed, OAMA would significantly curtail this anticompetitive conduct, diversifying the dominant duopoly long maintained by the two tech giants by creating and promoting more competition among app stores by giving users the choice to shop around and download apps from storefronts not run by Apple or Google.

LEGISLATIVE BACKGROUND

OAMA and the American Choice and Innovation Online Act (ACIO) were introduced to curb anticompetitive conduct from big tech companies.

Introduced in June 2021,⁵ ACIO aimed to target big tech for antitrust and consumer choice violations. OAMA was introduced August 2021⁶ as an attempt “to promote competition and reduce gatekeeper power in the app economy, increase choice, improve quality, and reduce costs for consumers”⁷ Its narrower focus primarily targets app stores.⁸

Both bills stem from a 16-month U.S. House of Representatives Judiciary Committee investigation in 2020 that uncovered anticompetitive conduct among big tech companies. In a 450-page report, the committee found that four companies — Amazon, Apple, Google, and Meta, the parent company of Facebook and Instagram — wielded “monopoly power” and possessed “the incentive and ability to abuse their dominant position against third-party suppliers, workers, and consumers.”⁹ The subcommittee, led by then chair Rep. David Cicilline, D-R.I., collected more than a million documents from the companies, interviewed rival business leaders, and consulted with experts.¹⁰

Following the report’s release and legislative proposals, companies like Google and Apple pushed back, arguing their practices are justified to provide essential user security.¹¹ Apple CEO Tim Cook has publicly opposed antitrust legislation, stating that the company is “deeply concerned about regulations that would undermine privacy and security in service of some other aim.”¹² Google Vice President Mark Isakowitz has offered similar comments, stating that OAMA “could destroy many consumer benefits that current payment systems provide.”¹³

Countries like South Korea have already approved legislation banning app store operators such as Google and Apple from forcing developers to use their payment systems.¹⁴ The bill, popularly nicknamed the “Google power-abuse prevention law,” amended the country’s Telecommunications Business Act in 2021.

DIGITAL LANDSCAPE CHANGES

OAMA has been narrowly tailored to apply to companies like Apple and Google, who have more than 50 million subscribers.¹⁵ The bill would limit such companies from collecting certain fees for in-app purchases and prevent them from requiring apps be marketed solely from one storefront on their operating systems.

The measure would curb anticompetitive behavior in several major ways. It would prevent companies like Apple and Google from requiring that app developers use or enable in-app purchases as a condition of distribution. It would prohibit big tech giants from charging excessive fees to app developers. It would also prevent iOS or Android devices from defaulting to the manufacturers’ own app stores. Under OAMA, Apple and Google app stores would be prohibited from excluding or suppressing apps that compete with their own products.

In short, OAMA advocates contend it would level the playing field for smaller developers and give customers more choices when it comes to selection and purchase.

EPIC V. APPLE

Aside from its implications on the future of app distribution, OAMA also stands to alter the course of some of the country’s most closely watched ongoing litigation — specifically, the 2020 lawsuit filed in the Northern District of California challenging Apple’s App Store practices. Epic Games, Inc. v. Apple, Inc. raised questions about Apple’s restrictions preventing developers from offering in-app methods of purchase outside of the Apple Store.¹⁶

Epic Games modified its blockbuster game “Fortnite” in order to circumvent the Apple Store payment system, essentially steering users to purchase the game’s currency directly from Epic instead of through the Apple Store. For those who are not familiar, “Fortnite” utilizes an in-game currency called V-Bucks,¹⁷ which can be used to purchase in-game items such as outfits, pickaxes, gliders, wraps, character models/skins, and emotes, which are similar to emojis but describe action using words or images. V-Bucks can also be purchased at major retailers like Walmart.

As a result of Epic’s decision to divert users to purchase V-Bucks through its own digital storefront, Apple banned Epic from its app store. In turn, Epic filed its lawsuit¹⁸ alleging that Apple’s App Store policies violate federal and state antitrust laws and California’s unfair competition law. In the suit, Epic claims that Apple is an antitrust monopolist, citing its system of distributing apps on its devices in the App Store and its system of collecting payments and commissions from App Store purchases. Apple disputed the allegations and filed a counterclaim asserting Epic purposely breached its contract.¹⁹

In the 2021 bench trial, Epic lost on all but one of the 10 counts it brought against Apple.²⁰ In issuing her decision, U.S. District Judge Yvonne Gonzalez Rogers stated that Epic didn’t experience irreparable harm as a result of the app store removal. Rogers did, however, rule against Apple on the charge related to anti-steering provisions and issued a permanent injunction that blocked Apple from preventing developers from linking consumers to other storefronts within apps to complete purchases and/or notifying users of these alternative storefronts.

While the court conceded that Apple was breaking the law by forcing consumers to pay for apps and in-app items through the App Store, the overall resolution was far from what Epic sought. In an apparent win for Apple, the Northern District of California upheld the overall structure of the App Store as legal, asserting that the court “does not find that Apple is an antitrust monopolist in the submarket for mobile gaming transactions.”²¹

The succeeding appellate history has yet to result in any major shifts in the digital or legal landscape. On appeal, a coalition of 35 states, Microsoft, and several other groups filed amicus briefs in support of Epic’s position that Apple held a monopoly.²² Despite these efforts, the U.S. Ninth Circuit Court of Appeals disagreed in its April 2023 opinion,²³ agreeing that the lower court ruling should largely be upheld. Further, Apple’s subsequent success in navigating the appellate process has (at least temporarily) awarded the company additional time.

Apple filed a motion with the Ninth Circuit requesting suspension initiation of the April 2023 injunction pending submission of its petition for writ of certiorari with the U.S. Supreme Court, giving Apple 90 days to pursue an appeal and stalling enforcement of the requirement to provide in-app links to alternative payment systems.²⁴

To no one’s surprise, both Epic and Apple appealed to the Supreme Court in July 2023. Epic, displeased with the Ninth Circuit’s concession to pause Apple’s injunction while appellate proceedings developed, submitted an emergency request that the Supreme Court lift the order suspending the mandate, but Justice Elena Kagan denied its request in August 2023.²⁵

Finally, on January 16, 2024, the Supreme Court denied both Apple and Epic’s requests to appeal the lower court ruling regarding alleged anticompetitive behavior in Apple’s App Store,²⁶ meaning developers can now point customers to their websites to make purchases.

While considered a partial victory for developers, the Supreme Court decision means the lower court ruling still stands. Additionally, the decision not to hear the case came as a surprise as a unanimous jury verdict in December 2023 found Google guilty in a similar antitrust case with Epic.²⁷

BIG TECH’S JUSTIFICATIONS

As noted previously, throughout these legal battles, Apple and Google have maintained that their practices are justified to provide users more choice and security and have actually benefitted developers. In reply to Epic’s complaint for injunctive relief, Apple summarized its position that it has not been a monopolist of any relevant market:

“Competition both inside and outside the App Store is fierce at every level: for devices, platforms, and individual apps. Fortnite users can dance their Floss, ride their sharks, and spend their V-Bucks in no fewer than six different mobile, PC, and game-console platforms. And the business practices that Epic decries as exclusionary and restrictive — including “technical restrictions” on the App Store that have existed since it debuted in 2008 — have vastly increased output and made the App Store an engine of innovation, with the number and diversity of apps, the volume of app downloads, and the dollars earned by app developers increasing exponentially over time. All the while, Apple’s commission only decreased while software prices plummeted and barriers to entry evaporated.”²⁸

Apple further stated:

“Epic blasts as ‘pretext’ the idea that Apple’s curation of the App Store is ‘necessary to enforce privacy and security safeguards.’ Compl. ¶ 83. But Apple’s requirement that every iOS app undergo rigorous, human-assisted review — with reviewers representing 81 languages vetting on average 100,000 submissions per week — is critical to its ability to maintain the App Store as a secure and trusted platform for consumers to discover and download software. Epic knows this. Indeed, when Epic itself ‘sell[s] a product to customers, [it too] feel[s] [it] ha[s] a responsibility’ — in [EPIC CEO] Mr. Sweeney’s words — ‘to moderate for a reasonable level of quality, and also a reasonable level of decency.’ In the past, Epic has discharged that responsibility with mixed results. That Apple wishes to continue curating its own App Store — rather than outsource the safety and security of Apple’s users to Epic (or other third parties) — should come as no surprise, and it ensures that iOS apps meet Apple’s high standards for privacy, security, content, and quality.”²⁹

Thus far, Apple has successfully argued that there is nothing anticompetitive about charging commission for others to use one’s service.

CONCLUSION

OAMA advocates contend that it would address a competition crisis within the app marketplace. Its passage would provide numerous benefits to consumers, app developers, and others interested in curbing big tech’s monopoly in the free market. OAMA would give consumers a choice when it comes to which digital storefronts they decide to purchase from and for how much. Moreover, it would level the playing field for developers currently caught between a rock and hard place in terms of promoting their apps and capitalizing off their products. Finally, OAMA would bring some closure to ongoing litigation that has arisen from the anticompetitive practices of big tech companies like Apple and Google.