New North Dakota bill would force Apple to allow alternative app stores and payment systems

Illustration by Alex Castro / The Verge

A new bill introduced in the North Dakota Senate might have far-reaching consequences for app store operators. The bill, Senate Bill 2333, seeks to ban stores like Apple’s App Store and the Google Play Store from mandating developers only use those app stores and their respective in-app payment systems. It also bans retaliation against developers in the event they choose an alternative distribution channel or payment system.

“The purpose of the bill is to level the playing field for app developers in North Dakota and protect customers from devastating, monopolistic fees imposed by big tech companies,” said Sen. Kyle Davison (R-Fargo), who introduced the bill before a Senate committee on Tuesday, told reporters in a press conference yesterday, as reported by The Bismarck Tribune. Davison said the 30 percent fee imposed on app developers who sell software through Apple and Google’s marketplaces has the effect of “raising prices and limiting choices for consumers.”

The bill is quite simple and lays out three key restrictions for any “digital application distribution platform” that exceeds $10 million in annual revenue. That means an app store cannot:

  1. “Require a developer to use a digital application distribution platform or digital transaction platform as the exclusive mode of distributing a digital product.” That would likely mean that companies like Apple would have to allow app purchases outside a single locked-down store.
  2. “Require a developer to use an in-application payment system as the exclusive mode of accepting payment from a user to download a software application or purchase a digital or physical product through a software application.” This would allow an iOS version of Fortnite, for instance, to process in-app payments through Epic instead of Apple’s system.
  3. “Retaliate against a developer for choosing to use an alternative application store or in-application payment system.”

As a state bill, the proposed legislation would only affect the operation of businesses like the App Store within North Dakota. But the sweeping changes the bill calls for would likely require companies like Apple to make substantial platform-level changes that could affect software distribution on a national scale.

The use of alternative in-app payment methods is at the heart of an ongoing legal battle between Fornite developer Epic Games and both Apple and Google, after Fortnite was removed from the App Store and Play Store in August of last year for introducing its own payment processing tool.

Epic purposefully engineered its Fortnite update to bypass the 30 percent cut of all in-app purchases required by Apple and Google as a form of protest, both to the standard 30 percent cut and specifically Apple’s App Store rules that bar third-party app stores from the iPhone. (Google does allow Android users to sideload third-party software and for developers to create alternative app stores for distributing software, though it does make doing so difficult.) Epic is now suing both companies for alleged antitrust violations.

The Epic case is just one part of a growing antitrust movement in the US that’s taken aim at Big Tech. Every one of the major US tech companies, save Microsoft, is currently under increased antitrust scrutiny from the US Department of Justice and the Federal Trade Commission, as well as state attorneys general, with various levels of investigations underway. While Apple is not under formal investigation, CEO Tim Cook testified this past summer before the Senate Judiciary Committee during its tech antitrust hearing. Meanwhile, the European Commission has two ongoing antitrust investigations into Apple’s App Store and Apple Pay.

Apple has already testified against North Dakota’s new bill in a hearing on Tuesday with North Dakota’s Senate Industry, Business and Labor Committee. Apple’s Erik Neuenschwander, its chief privacy engineer, told the committee the bill “threatens to destroy iPhone as you know it” and that it would “undermine the privacy, security, safety, and performance that’s built into iPhone by design,” according to the Bismarck Tribune. “Simply put, we work hard to keep bad apps out of the App Store; (the bill) could require us to let them in.”

Basecamp co-founder David Heinemeier Hansson, who attended the hearing and testified in favor of the bill, criticized Apple for exaggerating the threat the bill poses to its business.

Hansson has become a vocal critic of Apple’s App Store policies, following a showdown his company had with Apple last summer over Basecamp’s Hey email client. The disagreement centered on the functions of the Hey iOS email app, and Hansson and Basecamp CEO Jason Fried complained that the situation was emblematic of Apple’s inconsistently applied rules and the lengths the company goes to ensure developers are not sidestepping the 30 percent cut mandate. Although Apple and Basecamp reached a compromise, Hansson has since called for congressional action, as well as stronger antitrust regulation, to try to force Apple to alter its policies and to reign in Big Tech at large.

In written testimony Hansson prepared prior to the hearing, he laid out his case for Senate Bill 2333. “After the recitals, the 17 lines of SB 2333 read like music. Written in a language I can understand without hiring counsel to parse it for me. It almost seems too good to be true! But I sincerely hope that it is not,” he wrote in his testimony, which he later released online. “That you will listen to the small software developers from all over the country, who are tired of being bullied and shaken down by a handful of big tech monopolists out of Seattle and Silicon Valley.”

Hansson says the US needs a “fair digital marketplace free of monopoly abuse” and that “no single change will have a greater impact than giving small software makers like us a choice when it comes to in-app payment systems, and protection from retaliation, if we refuse the onerous deal the monopolists are offering.”

Chairman Sen. Jerry Klein (R-Fessenden) said during the committee hearing that “there’s still some mulling to be done” and that no action would be taken on the bill as of yet. Neither Apple nor Google have immediately responded to requests for comment for this story.

Comments

I think those rules are all pretty sensible, what the threshold amount could be debated. I think maybe 2 is not needed as long as 1 exists, though in Apple’s case certification/signing makes it more difficult. But if you allowed someone to install a store and let that store install apps (even if it’s onerous) that should be the end of it, which is why epics complaints about Google carry less water to me.

Users would also get the reliability and security of using Apple or Google’s payment processes if it went through their respective stores.

Well this seems like a horrible idea even if you like the idea. Manufacturers will simply refuse to sell in North Dakota until they relent because it’s too small a market to damage business models for. Then no one will attempt it again after this fails.

Nationally it would work, but on a state level? Seems pointless.

Point is get a bigger state to do it. NY, Texas, or CA and that’s the ballgame

Might work there (although California and NY seems unlikely to me) but even that is a bit of a long shot imo due to the massive international market for iPhones. When ND tries it and no one can buy an iPhone no state will want to go near it.

Alternatively, the hardware/OS makers could use their API as leverage. If Apple is forced to allow alternate distribution channels all they have to do is release a much more restrictive API. Just about everything in Apples hardware is proprietary. Want biometric authentication? Only possible for apps developed with Apples full blown SDK only available via official AppStore distribution.

We may end up seeing alternate stores only capable of delivering flimsy "apps" that really just render a webpage.

I mean Apple already does this even if you use their store (good luck using NFC for payments). But it becomes harder to limited API features to only those who use their store. Not impossible of course. But trickier and worse for everyone.

Aren’t such cases the basis of complaint in the current case EU v Apple?

Either way… ND might be too small on their own – but hoch just shows even more how the big companies can bully governments. Hopefully the EU case will lead to similar rules – the market would be too big to ignore

Yeah this most likely where the EU is gonna land. And then it will become an issue of why should EU get that option and not the US.

Apple needs a good kick in the butt. At the end of the day Apples control is ridiculous over iOS and their idevices is way too much. Nobody really owns an iPhone these days, because you can’t install anything you want on them.

Apple has proven without a shadow of a doubt, that they are bully, and will even lie, look at that slogan Apple went out of their way to post "What’s on your iPhone, stays on your iPhone.". I would love to see Apple use that slogan again today. Apple would be taken to court for that lie. Apple even teased their customers with allowing their users to change to a default email, or browser. Even then Apple won’t allow other browsers to use certain features, unlike Apples own Safari. Plus what about giving users the ability to change to a superior voice assistant from crappy Siri? Apples locked down approach to Everything is now coming back to haunt them.

I don’t own iPhone for most of those reasons. I do own an iPad though because android tablets suck….

@sgodsell, why all the stress? If you don’t like a particular manufacturer for their actions/products/whatever, in this case Apple, then just go buy an Android phone. No one compels you to buy an iPhone…

You’ve just described the PWA situation on iOS.

California may not be incentived to stick to Apple sure, but there is no chance that they will cut themselves off if they did. As for small states, yes Apple could stop working/selling/etc in those states and make the residents unhappy true. But when Uber or AirBnb or whoever takes their ball and goes home, we rightfully call them out for it, so why would Apple get a pass for it. It won’t be a good look for them.

Of course it’s all moot, it won’t actually pass because better to kill it now then get the bad press later.

I was thinking the same thing. It’d be different if it were one of the bigger states like California, but North Dakota isn’t going to get very far without multi-state support.

Apple does not have an Apple Store in North Dakota. Not sure how they would enforce the law against Apple if they don’t have a physical presence in the state.

Apple actively does business in North Dakota. They don’t have to be physically present for courts to have jurisdiction.

https://www.lexology.com/library/detail.aspx?g=3b74fcc1-bd4d-4cdb-aa0c-fbc337033a78

Yeah, that’s for the Federal level. I don’t think that applies to individual states in the US.

Change my mind

Well that’s sufficiently patronizing.

"In sum, under U.S. law. if it is reasonable to do so, a court in one state will exercise jurisdiction over a party in another state or country whose conduct has substantial effects in the state and whose conduct constitutes sufficient contacts with the state to satisfy due process."

You didn’t read. So here’s an alternative. lol

https://cyber.harvard.edu/property99/domain/Betsy.html

"Personal jurisdiction based upon contacts. A court of this state may exercise personal jurisdiction over a person who acts directly or by an agent as to any claim for relief arising from the person’s having such contact with this state that the exercise of personal jurisdiction over the person does not offend against traditional notions of justice or fair play or the due process of law, under one or more of the following circumstances:
(A) transacting any business in this state;"

- North Dakota long arm statute.

http://www.lrcvaw.org/laws/ndlongarm.pdf

You are of course right. I just also don’t see why Apple wouldn’t just officially stop business in ND. North Dakotans would just buy iPhones in another state and there wouldn’t be much to do about it would there?

I honestly have no idea; but I suspect they would find a way to comply. The law deals with digital distribution and in app purchases. I can’t think of a way they could extricate themselves from just one state.

Apple having to open up alternative app stores and side loading is just a matter of inevitability at this point. The pressure is starting to cave in further and further and the longer they resist, the more incriminating they look. They had a good ~13 year run of iPhones only running software that they’ve condoned. Congratulations.

It is cool that at least some level of government of the US is trying to take action to influence a change. I really with the federal government would lead the charge in more situations like these but unfortunately, US citizens only get things like "attentive mail and browsers" on iOS because of the pressure the European Union puts on Apple. Not to mention, iPhones get two years of manufacturer warranty out of the box in Europe, because its the law. Here, you either gotta pony up for AppleCare or pay with an AMEX for that level of service.

I wouldn’t conflate this issue with warranty. One way or another, an extra year of warranty does cost, and it’s debatable whether it’s better to force that cost onto the customer, give them the option, or perhaps come up with a different regulatory framework for product support entirely under the banner of consumer rights. (The latter being the least likely option, obviously.)

the point is planned obsolescence.

Capitalism is what brought us planned obsolescence, not any one particular brand or product category.

And no that is not the point of this debate. This is about money, power, control, and other entities wanting a piece of what the major phone players have carved out for themselves.

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