App stores drive the innovation economy

And lawmakers should proceed with caution, writes CTA's Gary Shapiro.

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The Australian competition authority found Apple and Google have "significant market power in the distribution of mobile apps" in the country.
Image: Apple

Gary Shapiro is president and CEO of the Consumer Technology Association.

It's amazing how technology continually improves and changes our lives. Constant innovation, and the fierce competition that sparks it, make us safer, smarter, more productive and better connected than ever.

Consider a mobile phone, which isn't just a phone anymore. It's a computer, a TV, a gaming console, an atlas, an alarm clock and so much more. Today's smartphones are more powerful than the computers that took the Apollo spacecraft to the moon. The applications on our phones can get us where we need to go, connect us with family and friends around the world, get dinner on the table and help our children learn.

But innovation comes not only from big companies, but from thousands of smaller companies, including many that profit from a diverse app ecosystem. Competitors large and small play a role, as one innovation or application spurs the next.

Our nation's tech sector is more than Big Tech, the crown jewel of American companies, which help drive our economy, propel our retirement savings and lead the world in innovation. Many global tech brands can be recognized by their logos alone, but the heart of the U.S. tech sector includes the startups and small businesses that don't have familiar names.

Sadly, the loudest voices are often not the ones that need to be heard the most. A select few companies have captured the attention of both courts and regulators, purporting to represent the voices of many.

For example, Epic Games filed an antitrust lawsuit against Apple, alleging that Apple's App Store policies are anticompetitive. The CEO of Epic Games, Tim Sweeney, is a billionaire. Fortnite, Epic's most well-known product, is one of the most successful video games of all time. As of 2019, Epic Games had more than 1,000 employees. While Sweeney is a developer, he is not your average developer.

Epic Games is also stoking the fires burning in several states, where the company is pushing bills that would change the way app stores interact with apps. Epic, together with the advocacy organization it funds, called the Coalition for App Fairness, wants state legislators to pass forced app distribution bills, which would require platforms to open the door to other payment processing systems and unvetted software applications.

Opening these systems may sound like a good thing, but it would take the biggest toll on small developers and decrease consumer options. Putting aside the huge privacy and security risks these bills would invite, state rules for global platforms would create new problems. Only the huge companies have the lawyers, lobbyists and funds to deal with this level of regulatory compliance — a burden startups simply cannot bear. Furthermore, forcing companies to let anyone download any random app to their phones raises big cybersecurity issues. The platforms provide a layer of safety, as they screen for fraud, cyberstalking, privacy invasion and provide safeguards consumers want and certainly don't want policymakers to strip away.

Last month's app store antitrust hearing in Congress provided a good example of large developers claiming to speak on behalf of the smaller companies. The Senate Judiciary Antitrust Subcommittee heard testimony from a few developers who had plenty to say about how Apple and Google's behavior has stifled their success. Who were these beaten-down developers? Large, undeniably successful companies, with the resources and market power necessary to be heard by legislators.

Today, more than 20 mobile app stores are on the market, facilitating a $1.7 trillion ecosystem led almost entirely by U.S. companies. This is no accident. American innovators and consumers are enjoying the fruits of the immensely successful app economy.

As policymakers consider the future of app stores, they should proceed cautiously, carefully considering the possible consequences sweeping legislation could impose on the internet ecosystem. The global technology race is closely contested, and the United States is winning — for now. But the government picking winners and losers in the market is not the way to grow our nation's vibrant tech economy and cement our leadership.

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