Illinois State Democrats Push App Store Legislation

Illinois Democrats introduced a bill Wednesday to allow app developers to deal directly with customers and avoid app store fees from Apple and Google. This is similar to a bipartisan bill the Senate Judiciary Committee is expected to mark up soon. Sponsors of the Illinois bill told us legislators in Arizona, Georgia, Florida, Rhode Island and North Dakota are having similar conversations.

Introduced by Illinois state Sen. Sara Feigenholtz (D) and Rep. Edgar Gonzalez (D), the Freedom to Subscribe Directly Act (SB-3417) is an effort to address app store fees that can be as high as 30%. Legislators at the state and federal level have called the fees and the dominance of Apple and Google anti-competitive.

Big Tech can be “intimidating,” and small developers don’t push back for fear of losing business through the app stores, Feigenholtz said during an interview with Gonzalez. It’s “hugely problematic,” she said: “This is a free marketplace.”

The Senate Judiciary Committee added the Open App Markets Act (S-2710) to its agenda for Thursday, and it’s expected to be held over one week. Introduced by Sens. Richard Blumenthal, D-Conn., and Marsha Blackburn, R-Tenn., S-2710 would protect developer rights to “tell consumers about lower prices,” allow “sideloading of apps” and open “competitive avenues for startup apps.”

Feigenholtz said she introduced a similar plan last year, which drew a “swarm” of tech lobbyists. Gonzalez said tech groups contacted him about the bill Wednesday. Apple and Google didn’t comment.

What Apple and Google are doing with their app stores makes Microsoft’s anticompetitive behavior in the 1990s look like “child’s play,” said David Heinemeier Hansson, co-founder of Illinois app developer Basecamp and hey.com. He discussed Apple’s threats to throw his company off the app store over efforts to deal directly with customers. Google and Apple are in “lockstep on rates” because they know they don’t face competition, he said.

Bipartisan support for reining in Big Tech is growing at the federal level, but Illinois can be a battleground, a starting point, said Gonzalez. Apple and Google reported $110 billion in app store revenue in 2021, said Feigenholtz. She noted the companies don’t pay corporate income tax to Illinois from their app store revenue, while in-state app store developers do.

It’s a system that funnels money from Illinois residents to California, said bill sponsor Sen. Robert Peters (D). He called it an “abuse” of gatekeeper power that fundamentally needs to shift. Sen. Steve Stadelman (D) noted the impact on local journalism. Newspapers would benefit from the legislation by being able to directly deal with subscribers, he said. While local news audiences grow, Big Tech platforms are reaping the benefits, said News Media Alliance Executive Vice President Danielle Coffey. App developers aren’t even allowed to tell consumers about potentially lower prices based on current app store rules, noted American Economic Liberties Project State and Local Policy Director Pat Garofalo.