Jennifer Huddleston
Cato Institute intern Denison Hatch contributed to this article.
Last Congress saw a debate over the Open App Market Act (OAMA), which would have created numerous additional regulations, supposedly to increase competition, on how app stores operate. Now, a similar proposal has been introduced in this Congress, the App Store Fairness Act (ASFA). However, app stores still don’t require some sort of regulatory intervention, and such regulations could actually make things worse for consumers and small app developers.
Understanding App Stores’ Benefits for Distributors and Consumers
App stores are not just on smartphones. App stores are also available on a variety of devices, including virtual reality headsets, video game systems, and smart TVs. As a result, many consumers are likely already using multiple app stores on a regular basis. This method of distribution has been beneficial for both app consumers and developers.
App stores are not the only choice developers have for their products, but for smaller developers they offer several benefits. App stores have brought the overall cost of distribution down from the days of needing to have software placed in a retail store like Circuit City. App stores also allow faster access to a broader and more global market than the days of having to negotiate retail space. Additionally, app stores can be particularly useful for smaller developers by helping them gain trust among consumers who may trust the app store parent company and user reviews, even if they are not yet familiar with the app developer.
Similarly, app stores have not only provided consumers with trust and discovery, but they can also offer unique customization and control options. For example, many app stores offer parents a range of controls that allow their children some freedom on the device while still addressing their concerns about safety, content, and costs. This includes things like requiring permission to buy or download apps, blocking access to specific apps, or limiting in-app purchases.
Policy changes that mandate app stores allow third-party services for payment processing or even limit a platform’s ability to determine what apps are allowed could make app stores less consumer-friendly. For example, due to European regulations requiring more open app stores, Apple was forced to approve a porn app that otherwise would not have been allowed in the app store under its policies.
Just like stores in the real world can set policies about what products they want to distribute and various other costs and contractual obligations, app stores are doing the same in a different environment. The majority of apps pay little to no fees. Those who are paying fees are likely to have a range of options available to distribute their products if they do not like the current setup and have likely already built a significant customer base.
Have Things Changed from OAMA to ASFA?
The debate over potential regulations that would mandate app stores to follow certain business models or otherwise place requirements on how these services function has been ongoing. Yet, policymakers continue to pursue the same type of problematic proposals. Still, there are a few distinctions between the current legislative considerations and previous attempts.
With respect to their approaches toward prohibiting anticompetitive conduct and ensuring open development, there are some substantive differences between ASFA and OAMA. Regarding prohibitions on differential treatment, OAMA’s anti-retaliation provisions focus on pricing terms and conditions of sale across platforms, whereas ASFA’s scope is broader, explicitly covering retaliation for offering different “pricing terms or conditions of sale” as well as “other terms of sale” through alternative channels. Additionally, ASFA provides explicit compliance alternatives related to intellectual property that are not present in OAMA. However, OAMA included a specific anti-self-preferencing rule in search results that is not explicitly present in ASFA.
For consumers, ASFA’s approach could yield more competitive pricing options, while OAMA’s would more directly limit platforms from prioritizing their own products in search results.
The bills also diverge significantly in their exemption structures and enforcement mechanisms. OAMA provides explicit security and privacy defenses with strict legal requirements and certification processes to prevent abuse, protections that ASFA lacks, meaning that platforms that refuse to allow risky or even foreign adversary-backed services could still find themselves subject to fines. In terms of enforcement, OAMA employs a broader range of antitrust statutes, while ASFA imposes an additional civil penalty of up to $1,000,000 per violation.
This distinction is significant because ASFA’s penalty structure could create stronger deterrence against individual violations, whereas OAMA’s reliance on existing antitrust frameworks would apply established enforcement mechanisms and precedents.
Finally, there are some positive substantive distinctions around enforcement and preemption. OAMA would have granted developers a private right of action to bring suits, whereas ASFA does not (though OAMA includes an exclusion preventing foreign state-owned enterprises from pursuing private litigation). Additionally, the acts differ in terms of scope and federal-state relations, with OAMA establishing a lower user threshold for defining “covered companies” and ASFA including a preemption clause to override conflicting state laws (a provision absent from OAMA). Accordingly, OAMA’s private right of action would empower developers to litigate independently, whereas ASFA’s preemption clause would ensure regulatory uniformity across states.
Conclusion
App stores continue to be a huge driver of innovation and opportunity for both developers and consumers. They continue to offer lower costs and a wider range of solutions for both segments as well. Unfortunately, if policymakers were to successfully pursue the type of regulations in the name of competition seen in proposals like ASFA, not only would it diminish the benefits of the app stores, but it could also make using them risky business from a privacy and security perspective.