Senate Judiciary OKs App Store Bill 21-1

The Senate Judiciary Committee voted 21-1 Thursday to advance to the floor another major piece of legislation aimed at regulating the tech industry. Sen. John Cornyn, R-Texas, was the only member against the Open App Markets Act. S-2710 would open up app store competition for Apple and Google (see 2108110055). The committee passed a bill last week that would ban Big Tech platforms from unfairly self-preferencing products (see 2201200066).

“Armies of lawyers and lobbyists” will be against the just-OK'd bill, but the broad bipartisan support is a signal, lead sponsor Richard Blumenthal, D-Conn., told reporters. He introduced the bill with Marsha Blackburn, R-Tenn., and Amy Klobuchar, D-Minn. Six other Judiciary members sponsored the proposal along with Marco Rubio, R-Fla., and Cynthia Lummis, R-Wyo. Americans are paying a “30% tax” through the app stores, which is a “blatant misuse of monopoly power,” said Blumenthal. The bill is a “narrowly targeted and effective way to open competition.”

Cornyn, Thom Tillis, R-N.C., and Ted Cruz, R-Texas, failed to sway colleagues on several amendments. Cornyn offered one that would have clarified that companies aren’t required to open products to sideloaded, unvetted competitors that could upload malware to consumer devices. Cornyn cited cybersecurity concerns throughout the hearing. The amendment would create an exemption that would “swallow” the rule, said Blumenthal. Blackburn agreed, saying it would “basically gut” the legislation. Sen. Alex Padilla, D-Calif., said Cornyn is “onto something,” and the concept should be explored. Cornyn’s amendment failed 7-15. Ranking member Chuck Grassley, R-Iowa; Lindsey Graham, R-S.C.; Mike Lee, R-Utah; Ben Sasse, R-Neb.; John Kennedy, R-La.; and Tillis sided with Cornyn.

Padilla and Sen. Dianne Feinstein, D-Calif., raised concerns about the mandate during opening remarks. Feinstein credited a manager’s amendment, which passed by voice vote, for making technical changes to improve privacy and security. She still has concerns about the bill targeting a few companies like Apple and Google. It makes sense to adjust thresholds to apply to all companies of reasonable size, she said.

Feinstein voted for an amendment from Tillis that would have changed the definition of covered companies from 50 million users to 1 million. Blumenthal said he supports Tillis’ sentiment, but the change would significantly alter the focus of the legislation, which is gatekeeper monopolists. Tillis’ amendment failed 4-18, with Cornyn and Sasse siding with Tillis and Feinstein. Tillis filed 11 amendments but offered only three for votes. He failed to make changes to “better target competitive harm” with a “known standard of reasonableness.” He also failed to change the language of "app store" to "online software store." The language would have unintended coverage, sweeping all kinds of stores into the plan, said Blumenthal before the measure failed on a voice vote.

An amendment from Cruz that would bar app stores from discriminating against apps based on political views or religious faith failed 10-12. Blackburn voted no, saying there will be other opportunities to address that issue. Cruz’s amendment to allow app stores to include clear parental controls failed 11-11 on a party-line vote. Cruz successfully gained voice vote approval for a measure that directs the FTC, DOJ and GAO to report to Congress on the impact of the bill three years after enactment.

Cornyn said he wanted to offer an amendment nixing the inclusion of a private right of action, which he said benefits “payday lawyers.” He didn’t request a vote. The private right of action provision is limited to small app developers that are being “swallowed up by Big Tech,” said Blackburn. Grassley said he had concerns about the private right of action, too.

The House Judiciary Committee’s investigation last year showed Apple earns more than $15 billion per year in profit from its app store, which costs less than $100 million annually to maintain, said Blumenthal: “That is what we call monopolist rent.”

App stores have allowed consumers access to more than 2 million apps, most of which are free, said Computer & Communications Industry Association Vice President Arthur Sidney. “Regulations mandating interoperability would require companies to give their intellectual property to others, potentially weaken user privacy, and would limit the covered companies incentive to innovate.“ This is a “rushed resolution that threatens the privacy and security of Americans,” said NetChoice Vice President Carl Szabo. It could hinder the competitiveness of U.S. app stores, which currently lead international rivals, wrote CTA CEO Gary Shapiro Wednesday: The bill would “involve government directly in the design and operation of app stores to the detriment of consumers and American national security.”

The measure ensures openness, said Public Knowledge Legal Director John Bergmayer: “Mobile platforms should operate in a fair and nondiscriminatory way, and not favor their own offerings, or those of their partners, over those of competitors.” The bill introduces competition for payment systems on smartphones, said Consumer Reports Senior Researcher-Tech Competition Sumit Sharma: It “will enable app developers to freely inform consumers about these cheaper alternatives.”

Chairman Dick Durbin, D-Ill., said he looks forward to the committee voting next week on the Earn It Act (see 2202010019 and see S-3398) and the Eliminating Limits to Justice for Child Sex Abuse Victims Act (S-3103). The committee approved by voice vote Thursday the nominations of Sharon Bradford Franklin to lead the Privacy and Civil Liberties Oversight Board and Beth Williams to sit on the board (see 2201120062).