Apple’s Grip on App Store Challeged by Senate Bill Action

(Bloomberg) -- The Senate Judiciary Committee on Thursday approved legislation that, if passed into law, would force Apple Inc. to let users install apps from outside of the App Store.

The bipartisan 21-1 vote is a strong endorsement for the bill from Connecticut Democrat Richard Blumenthal, Minnesota Democrat Amy Klobuchar, Tennessee Republican Marsha Blackburn and eight other cosponsors, but it still faces a long road to get a vote in the full Senate.

The bill seeks to loosen the duopoly that Apple and Alphabet Inc.'s Google have over mobile app distribution, part of Congress's push to curb the power of U.S. technology giants.

“Google and Apple own the rails of the ap economy, much as the railroad companies did at the start of the last century, said Blumenthal, who estimated the value of the app store market at about $100 billion a year.

The measure, S. 2710, would require Apple to let users install apps on their phones and other devices from sources on the web or alternative app stores, a process that's called sideloading.

This provision would most impact Apple. While Google offers its Play Store on mobile devices, it doesn't bar users from downloading Android apps elsewhere. Sideloading, which Apple has said poses security risks for consumers, would allow apps to avoid Apple's commissions, which range from 15% to 30%.

The bill also would force app marketplaces to allow third-party app developers to communicate with customers outside the platforms about cheaper ways to subscribe and alternative ways to pay for services. Last year, Apple said it will allow this as part of a class action settlement in the U.S. with app developers.

The committee adopted an amendment addressing security concerns put forth by tech companies that would allow platforms to actively manage their systems to oversee cyber security and privacy. The second amendment that was adopted requires the Federal Trade Commission, Justice Department, and Government Accountability Office to submit an impact report three years after enactment of the statute.

Apple has lobbied hard against this bill, arguing that it would make the iPhone ecosystem more similar to Android, limiting consumer choice for what it calls a more secure and closed environment.

Apple and Google urged the panel to reject the bill in separate letters obtained by Bloomberg, both sent on Wednesday to Senate Judiciary Chair Dick Durbin and ranking Republican Chuck Grassley.

Earlier: Apple Urges Senate to Reject Bill That Allows Outside App Stores

Apple's Chief Executive Officer Tim Cook personally met with several senators in December, including Klobuchar, Durbin and Grassley, about this bill and other antitrust proposals, according to a person familiar with the meetings. Cook was set to speak with Blackburn Wednesday before the committee hearing, but the meeting was re-scheduled, according to a Senate aide.

The bill “amounts to Congress trying to artificially pick winners and losers in a highly competitive marketplace,” said Mark Isakowitz, head of Google's government affairs and public policy.

Companies like Spotify Technology SA, Tile and Match Group Inc. support the changes in the proposal, which they say would leave them less dependent on Apple and Google to reach customers. Microsoft has also thrown its weight behind the bill, according to a person familiar with the company's position.

Some of the app-store practices addressed by Thursday's bill were also challenged by Epic Games Inc. in the video game-maker's lawsuit against Apple. The judge in that case found that Apple has engaged in some anticompetitive conduct and ordered the iPhone maker stop preventing developers from steering users to alternative payment methods.

Apple has appealed the ruling and an appeals court stayed the decision.

The judge in the original Epic case also found that Apple's dominance of the market for mobile apps doesn't violate U.S. antitrust law. Epic is appealing that part of the decision with the support of 35 states, civil society groups and Microsoft Corp.