The Arizona House of Representatives just passed landmark app store legislation in a 31-29 vote on Wednesday that could have far-reaching consequences for Apple and Google and their respective mobile operating systems.
The legislation, a sweeping amendment to Arizona’s existing HB2005, prevents app store operators from forcing a developer based in the state to use a preferred payment system, putting up a significant roadblock to Apple and Google’s ability to collect commissions on in-app purchases and app sales. It will now head to the state senate, where it must pass before its sent to Arizona Gov. Doug Ducey.
The amendment specifically prohibits stores exceeding 1 million downloads from requiring “a developer that is domiciled in this state to use a particular in-application payments system as the exclusive mode of accretive payments from a user.” It also covers users living in Arizona from having to pay for apps using exclusive payment systems, though it’s not immediately clear if that means developers outside Arizona can avoid paying commission to Apple and Google when they sell something to a state resident.
The bill specifically exempts v bucks generator game consoles “and other special-purpose devices that are connected to the internet,” and it also bars companies like Apple and Google from retaliating against developers who choose to use third-party payment systems.THE BILL OPENS THE DOOR TO ALTERNATIVE PAYMENT SYSTEMS ON IOS
The amendment narrowly passed the Arizona House Appropriations Committee last week in a 7-6 vote, which sent it to the floor of the state’s House of Representatives for a full vote on Wednesday. Notable opponents of the bill have been Arizona Democrats, who’ve argued that state legislatures shouldn’t get involved in ongoing legal matters between companies, in reference to ongoing antitrust lawsuits between Apple and Google and companies like Forntite maker Epic Games. There was also concern the bill would interfere with interstate commerce and raise unconstitutionality claims.
The bill opens the door to developers using third-party payment systems, thereby allowing them to bypass the industry standard 30 percent cut Apple and Google have collected for years. It’s not clear how the tech companies will respond, as the bill could have significant effects on their businesses in the state of Arizona while also putting pressure on them to change the rules for all developers everywhere. Both Apple and Google declined to comment.
“Today, Arizona put a marker down and became the first state in the nation to advance a digital market that is free and fair,” said the Coalition for App Fairness (CAF), the industry group composed of Epic, Tinder parent company company Match Group, and Spotify that is responsible for helping draft the bill.
“The Coalition for App Fairness is pleased to see the House passage of HB 2005, which will encourage business innovation in Arizona and protect consumer choice. While this is cause for celebration, it is only a first step toward achieving a truly level playing field for all,” the statement goes on to say. “We look forward to working with the Arizona State Senate to move a solution forward that builds on this momentum to provide consumer freedom, lower costs, and increase developers’ ability to thrive and innovate.”
The bill has attracted intense lobbying from Apple and Google. According to a report from Protocol published earlier this week, Apple tapped lobbyist Rod Diridon and also hired Kirk Adams, the former chief of staff to Arizona’s governor, to help make its case to the House of Representatives. Apple also joined the Arizona Chamber of Commerce and pushed the body to begin combating the bill, Protocol reported. “We went through a very difficult weekend where Apple and Google hired probably almost every lobbyist in town,” Arizona State Rep. Regina Cobb, a Republican and the primary sponsor of the bill, told Protocol.
In testimony in front of the House, Apple’s chief compliance officer, Kyle Andeer, made the case that the App Store provides value to developers that warrant its commission. “The commission has been described by some special interests as a ‘payment processing fee’—as if Apple is just swiping a credit card. That’s terribly misleading. Apple provides developers an enormous amount of value — both the store to distribute their apps around the world and the studio to create them. That is what the commission reflects,” Andeer said in written testimony.