On Thursday (Jan. 20), the Senate Judiciary Committee will debate two important bipartisan bills that, if approved, would have a significant impact on the way that Apple, Google and other platforms operate and generate revenues.
One of the bills is the American Innovation and Choice Online Act, which aims at preventing Big Tech firms from favoring their own services over others. This bill would make unlawful to unfairly preference a platform’s own products, services or lines of businesses over those of another business user and to limit the ability of another business user’s products, services to compete on the platform. Competitors and businesses have complained regularly that Google and Amazon systematically favored their own products when consumers use the search engine or a marketplace. Google was fined 2.7 billion euros for this practice in Europe and is in the spotlight for allegedly favoring its vertical businesses like Google Maps or Google Flights. If approved, this bill would put an end to this type of practice, or at least make it very hard for these companies to engage in it.
The bill seeks to impose additional restrictions on these platforms. For instance, some types of tying and bundling will be banned — this is when a consumer/company is forced to buy a product or service to have access to another product or service. A platform won’t be able either to use non-public data obtained from or generated on the covered platform by the activities of a business user. This provision may be particularly damaging for Amazon, as the company has been accused of using data collected from its business partners to identify the most sought-after products and then create its own white label products and promote them in the platform with the consequent negative impact on its business partners.
Not every platform will be covered by this bill, the quantitative limits ensure that only the Big Tech companies are likely to fall under its remit. For a company to fall under these provisions, it must have at least 50 million U.S.-based monthly active users and a market capitalization greater than $550 billion.
App Store Competition
The other bill that will be debated in the Senate is the Open App Markets Act, which seeks to introduce more competition in app stores. This bill would affect primarily Google and Apple. If approved, the bill will ban the tech companies from requiring developers to use in-app payment systems as a condition of being distributed on an app store. This would allow developers to distribute their apps in the app stores using a more favorable payment systems, since Google and Apple charge developers 15% or 30% for any purchase made in the app store. In addition to this requirement, the law will prevent Google and Apple from demanding developers to offer the best prices in their app stores. This would allow developers to offer users better prices for downloading their apps in other app stores or websites.
Apple has been very vocal about the impact of this bill on its privacy settings and the safety of the App Store. According to a letter viewed by Bloomberg, Apple sent a letter to the Senate Judiciary Committee Chair Dick Durbin, Antitrust Subcommittee Chair Amy Klobuchar, the panel’s ranking Republican Chuck Grassley, and the subcommittee’s ranking Republican Mike Lee, criticizing the legislation. In Apple’s view, this bill would allow users to sideload apps, download an app from a third-party source, which could compromise the integrity and safety of the App Store.
Apple has strongly defended its right to protect its App Store and its In-App payment system by not allowing third parties to interfere. However, the company has suffered recent setbacks in South Korea and the Netherlands where regulators have ordered Apple to allow developers to use alternative payment methods to the in-app payment system in Apple’s App Store.
On Thursday, the Senate will debate two of the most important bills introduced to clamp down on Big Tech firms. If approved, they will affect an important part of the companies’ businesses. While these bills will not affect their core business, they may reduce their dominance in some markets, and impose limits to extend their market power to related markets.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More