Blumenthal Presses Facebook & Google on Support for Bipartisan Antitrust Legislation to Promote App Store Competition

[WASHINGTON, D.C.] – During today’s Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing titled “Big Data, Big Problems: Implications for Competition and Consumers,” U.S. Senator Richard Blumenthal (D-CT) questioned Facebook and Google witnesses about the companies’ support for the Open App Markets Act. The bipartisan legislation, introduced by Blumenthal and U.S. Senator Marsha Blackburn (R-TN) last month, and cosponsored by U.S. Senator Amy Klobuchar (D-MN), would set fair, clear, and enforceable rules to protect competition and strengthen consumer protections within the app market.

“Two companies, Google and Apple, have gatekeeper control over the dominant app stores that allow them to dictate terms for everyone,” said Blumenthal. “Their duopoly allows them to set the terms, and they do. If app developers don't like the terms there is nowhere for them to go. That is what we call a broken market.”

Blumenthal emphasized that Facebook has also been affected, saying “Big as Facebook is, powerful as it is, it is not immune,” noting that Apple has blocked Facebook’s gaming app from the App Store several times and forced Facebook to remove a notice informing its users about the 30 percent rent fee Apple extracts from digital goods and services.

Blumenthal asked Facebook Vice President of Privacy and Public Policy Steve Satterfield if the company would support the bill, saying: “would Facebook support Congress setting fair, clear, enforceable rules on app stores that would prevent Apple and Google from using their gatekeeper power to extract excessive rents and block competition like what happened to you and your app Facebook gaming?” Satterfield said Facebook is “looking at the bill and we're providing feedback.”

Blumenthal questioned Google Vice President of Government Affairs and Public Policy Markham Erickson on whether the company’s Android operating system is safe despite allowing side loading and better developing access. Blumenthal noted that Apple “claimed that if we allow consumers to make their own decisions, all sorts of really horrible or terrible things are going to happen.” Erickson affirmed that Android phones are secure, stating: “we do believe we provide a very safe and secure ecosystem for app developers to reach a global audience of billions of users in 190 countries and that is not undermined by allowing consumers to be able to download applications outside of the app store  or to side load those applications.” Erickson confirmed Google is “taking a look at your legislation.”

A transcript of Blumenthal’s exchange with Facebook and Google representatives is copied below.

U.S. Senator Richard Blumenthal (D-CT): I want to shift to the issue Senator Blackburn also raised, our bipartisan bill, the Open App Markets Act, which would set robust rules to promote competition and strengthen consumer protection. I am proud that this bill is bipartisan. I want to thank my colleague Senator Klobuchar for her leading role in this area. And she is a cosponsor of the bill. It’s received wide support as was mentioned earlier from consumer groups, antitrust experts, and app developers. Ms. Slaiman I especially appreciate your reference to it and the support that Public Knowledge has provided for the bill. Two companies, Google and Apple, have gatekeeper control over the dominant app stores that allow them to dictate terms for everyone. Their duopoly allows them to set the terms, and they do. If app developers don't like the terms there is nowhere for them to go. That is what we call a broken market. Not even Facebook is immune to Google and Apple's gatekeeper control. Big as Facebook is, powerful as it is, it is not immune. Apple has blocked the Facebook gaming app from the app store at least five times and it has prohibited other cloud gaming services from becoming available on the app store. Apple has also forced Facebook to remove a notice informing consumers about the so-called Apple tax. That is the infamous 30 percent rent fee they extract from digital goods and services.

But the little guy is as much a victim as the big guys like Facebook. And the Open App Markets Act would protect developers' ability to offer competitive prices, tell consumers about lower prices, and give consumers the right to make their own decisions about the apps they install. That is what is called competition and a free market. Or at least freer than it is now. It would mean that Facebook and others don't have to pass the Apple tax on to consumers and small businesses. It would mean that iPhone users could side load Facebook gaming directly on to their phones if Apple continues to block the app. These are basically pro-consumer and pro-competition rules. Mr. Satterfield, would Facebook support Congress setting fair, clear, enforceable rules on app stores that would prevent Apple and Google from using their gatekeeper power to extract excessive rents and block competition like what happened to you and your app Facebook gaming?

Steve Satterfield: Senator, thank you. Our team is looking at the bill and we're providing feedback through the normal channels and continuing to work with you and the other cosponsors in providing that feedback.

Blumenthal: What are the normal channels?

Satterfield: We’re communicating with your staff and others.

Blumenthal: Okay. Well, let me point out in case it isn't obvious and I think it is, that Facebook really should support these kinds of rules if it is in favor of competition and open markets and not just for you but for others. Mr. Erickson, Apple has claimed that if we allow consumers to make their own decisions, all sorts of really horrible or terrible things are going to happen. But unlike Apple, Google has allowed side loading and better developing access on Android from the very start. Given Apple's alarming claims would you characterize everyone's [Android] phone as insecure or vulnerable to cyber security risks because that's what Apple says will happen if we eliminate the Apple tax of 30 percent?

Markham Erickson: Senator, thank you for your question. If I may step back for a minute, we share the values you and Senator Blackburn have that consumers should be able to choose the lawful applications to download those and that there should be competition in this marketplace. We are taking a look at your legislation as well. And we'll be happy to engage with you going forward. The Android ecosystem, no, we do believe we provide a very safe and secure ecosystem for app developers to reach a global audience of billions of users in 190 countries and that is not undermined by allowing consumers to be able to download applications outside of the app store  or to side load those applications.

Blumenthal: So you do believe Android is secure?

Erickson: Senator, yes.

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