Mobile app stores could be US lawmakers' next Big Tech antitrust target

As bipartisan support builds for more regulatory oversight of U.S. technology companies, policy experts say it is increasingly likely that federal lawmakers will introduce legislation to crack down on the dominance of Google LLC's and Apple Inc.'s app stores.

App store antitrust concerns, recently the subject of a Senate hearing, are expected to be targeted by one or more bills in the next year or so, with Sens. Amy Klobuchar, D-Minn., and Mike Lee, R-Utah, among those considered most likely to introduce such legislation. The offices of the two senators did not return requests for comment.

The courts are also weighing in: Apple and app developer Epic Games Inc. just kicked off opening arguments in what is expected to be a three-week trial examining whether Apple's App Store policies resulted in a monopoly. Tech analysts expect the trial's outcome to have wide-ranging implications both for the two companies' revenues and for regulators' considerations of whether future antitrust actions will stand up in court.

Alex Petros, policy counsel for Public Knowledge, a Washington, D.C.-based public interest group, said any new federal legislation is likely to address growing concerns that Apple and Google are undercutting competitors and charging developers exorbitant rates to distribute apps on their app platforms.

Petros said it is plausible that Klobuchar may team up with Rep. David Cicilline, D-R.I., on a bill that allows developers to bypass the payment systems of Google and Apple to distribute their apps.

"Sen. Klobuchar has talked about an app store bill, and I wouldn't be surprised if she introduces one soon," Petros said.

Several states are already ahead of federal lawmakers on this topic.

Matt Stoller, director of research at the American Economic Liberties Project, said his organization has counted six or seven states with legislation pending that would ban companies from operating an exclusive app store or one that forces app developers to utilize its payment system. Apple's and Google's mobile operating systems are run by the vast majority of smartphones worldwide, giving the companies outsize influence to set policies in the app marketplace.

Stoller said he expects that any federal bill would mimic proposed state legislation designed to help developers who want to use payment systems not controlled by Apple and Google.

Petros, of Public Knowledge, said a specific app bill may also allow developers to install apps outside of app stores, a strategy called "side-loading." The goal is to encourage more competition in the app market, Petros said.

"Congress wants to step in now so we don't end up with something like our search market or our social media market, where it's one-stop shopping," Petros said.

Lawmakers could also decide to fold Klobuchar's Competition and Antitrust Law Enforcement Reform Act, introduced in February, into a series of broader antitrust proposals that would strengthen antitrust law "to address the market power of these app stores," Stoller said. Klobuchar's bill seeks to strengthen prohibitions against anti-competitive mergers and direct more funding to the enforcement budgets of the U.S. Justice Department’s Antitrust Division and Federal Trade Commission.

While pushback on any proposal is likely, there may be enough bipartisan support to pass legislation as early as this year, said William Kovacic, a law professor at George Washington University and former chair of the Federal Trade Commission.

Many Democrats and Republicans "have a single-minded antipathy toward the big platforms, and that can generate a consensus at some point on new legislative measures to control them," Kovacic said.

According to mobile research company SensorTower, Apple generated $72.3 billion in revenue from its App Store in 2020, up 30.3% from $55.5 billion in 2019. Google's Google Play store revenues reached $38.6 billion in 2020, up about 30% from $29.7 billion in 2019.

Because Apple derives more from its store than Google does from its own, the Cupertino, Calif.-based tech company is more vulnerable to laws restricting the App Store, which is the only app store available on iOS devices such as iPads and iPhones, said John Freeman, vice president of equity research at CFRA, who covers internet and enterprise software.

"I think Google's got a much better position here, and Apple might be a little more in trouble," Freeman said.

Freeman noted that Google's business is more tied up in search results and advertising than app-related revenues from its Android open-source operating system, and Google does not require developers to preinstall or download Google's apps or other services to use Android. Google Play users downloaded 108.5 billion apps in 2020, up about 28% from 2019, according to SensorTower. Meanwhile, Apple users downloaded 34.4 billion apps in 2020, up 12.1% from 2019.