Minnesota bill targets Apple and Google's smartphone app fees

The battle over Big Tech has made its way to Minnesota, where unlikely alliances are forming in the divided Legislature over a bill that has sparked intense opposition from Apple and Google.

The proposal — quietly introduced last week — would force the two tech giants to keep the products of Minnesota developers in their app stores even if those developers sell them directly or through other channels.

Supporters say it would level the playing field for developers and help them avoid sizable commissions collected by Apple and Google in their app stores. It's part of a larger push making its way to state legislatures, including Arizona and Georgia, to chip away at the power just a few companies have over much of the digital landscape.

"A lot of people are concerned about the increased influence and power that Big Tech has, and I think there's a lot of interest in trying to make sure that we have a fair and open digital economy," said Rep. Zack Stephenson, DFL-Coon Rapids, who is sponsoring the bill in the House.

Stephenson and other House Democrats see this as an extension of the antitrust and net neutrality debate, while the lead in the GOP-controlled Senate said he wants to send a message to Silicon Valley after Donald Trump's ban and removal from Twitter and other social media platforms.

"That to me is a huge problem," said Sen. Mark Koran, R-North Branch. "They basically deleted a president. Those who are taking that victory lap, that is going to be a short-lived celebration, because that cancel culture is coming for them too."

Tech companies swooped in within hours of the bill being introduced in the House and Senate to wage an intense lobbying effort to stop the proposal in its tracks. They recently blocked a similar bill from passage in North Dakota, where Apple's chief privacy engineer testified that the legislation "threatens to destroy the iPhone as you know it."

"They are loading up," said Stephenson, who has also sponsored legislation in the past to prohibit internet companies from favoring some websites over others in access speed. "I understand that they have been reaching out to some of my colleagues. I heard whispers of that occurring throughout the Capitol. I think we got someone's attention."

Apple's and Google's respective apps stores dominate the mobile ecosystem, but Apple currently prohibits developers from using their own payment systems to charge customers in the app store. Apple and Google take a 30% commission on the price of paid apps and in-app purchases, though Apple recently reduced those fees by half for developers that net less than $1 million per year in their app store.

Under the proposed bill, Apple and Google could not retaliate against a developer for using an alternative system to charge customers.

These alternative payment methods are part of an ongoing legal battle between Epic Games and the tech giants. Epic tried to bypass Apple's and Google's fees and charge customers directly for the game Fortnite. After the game was removed from the Apple and Google app stores, Epic sued both companies, alleging antitrust violations.

Epic joined forces with more than a dozen other companies, including music streaming service Spotify, to establish the Coalition for App Fairness, which was behind the push for the legislation in North Dakota.

Scrutiny is intensifying nationally on Big Tech companies like Apple, Google and Microsoft. Minnesota U.S. Sen. Amy Klobuchar has introduced sweeping antitrust legislation to boost enforcement budgets at the Justice Department's Antitrust Division and Federal Trade Commission and prohibit certain types of mergers that will decrease competition.

Apple did not return a request for comment for this story, while Google declined to comment on Minnesota's legislation. But both groups are privately lobbying individual legislators to oppose the measure.

They have strong allies in conservative groups such as the Koch-funded Americans For Prosperity, which testified against the legislation in North Dakota. There, the state Senate ultimately rejected the bill on a 36-11 vote after high-powered opposition flooded in.

Jason Flohrs, Minnesota state director of Americans for Prosperity, said there are concerns about the privacy and security of allowing other payment processing vendors into the app store, and the group is fundamentally opposed to any legislation in which the government is trying to put a "mandate on private businesses."

"If the government starts telling tech companies how to run their products, they can't keep them as secure," he said, adding that the more government gets involved in business decisions, the "less we see the innovation that has driven that industry and driven the apps and the tools that customers want."

In North Dakota, legislators brought up concerns about possible legal challenges the state could face if they pass different rules for state companies. In Minnesota, Stephenson said he's been in touch with Attorney General Keith Ellison, who supports the bill and would be charged with defending it in court if it's enacted.

Koran acknowledges he's heard plenty from opponents since he signed his name on the bill, but he's hoping the legislation can start a conversation about tech "monopolies" and the power they hold.

"They essentially are a duopoly," he said. "They say there are 20 other apps stores out there. Well, that's great, but how many other operating systems are there on our phones?"

Briana Bierschbach • 651-925-5042

Twitter: @bbierschbach