with Aaron Schaffer

State legislatures could define the future of app stores. 

States across the country from Hawaii to Georgia are weighing bills that would have a sweeping impact on Apple and Google’s ability to collect a cut of financial transactions in smartphone apps. 

Companies including Spotify, Match Group and Fortnite maker Epic have waged a long-running battle against the phone makers, arguing that the commissions they take on in-app purchases are anti-competitive. Their lobbying group, called the Coalition for App Fairness, scored a critical victory on Wednesday when the Arizona House of Representatives passed a measure that would allow app makers to use their own payment processing software, effectively circumventing the systems the smartphone makers have in place. Apple and Google have previously booted apps, including Fortnite, off their stores for attempting to get around their payment tools. 

Now the legislation moves to the Arizona state Senate, where Republicans who sponsored the bill have a narrow majority. 

If the bill becomes law, it could spur other states  and eventually even Washington to act.

States are starting to play a critical role in regulating the technology industry, as gridlock in Congress increasingly creates a void in tech regulation. They’re increasingly setting the rules on privacy and if Apple's adversaries get their way, soon app stores too. 

“This should be a federal issue, but the problem is they're not taking it up," said Arizona State Rep. Regina Cobb (R), the primary sponsor of the bill. “If they would take it up, and they would work on it, and they would move quickly – which I don't know if the federal government can move quickly – we wouldn't be sitting here in this situation today.”  

The app stores were a major focus of the recent House investigation into the competitive behavior of tech companies, and it’s likely that House lawmakers will introduce legislation in the coming months that could affect how they’re currently structured.  

Sen. Elizabeth Warren (Mass.), who has been one of the most vocal critics of tech companies’ power in the Democratic Party, said the Arizona bill was “a good start” to address the industry’s practices. 

Apple and Google did secure a key victory earlier this year in North Dakota, where the state legislature voted against a bill similar to Arizona's targeting the app store. Cobb said she closely watched the battle in North Dakota as she prepared to bring her own legislation to the floor, and she hopes that other states will take lessons from the recent victory in Arizona. 

Cobb said the idea for the legislation initially came to her through Ryan O'Daniel, a lobbyist who represents Match Group and the Coalition for App Fairness. She said she and O'Daniel have worked together on legislation for years, and she also has hired him to work on her campaign over the past year. 

Meghan DiMuzio, the executive director of the Coalition for App Fairness, said the group is closely monitoring the legislative activity in other states as well. “We’ve been keeping a close eye on developments in the states and will weigh how best CAF can help prevent monopolies from further disadvantaging developers and consumers,” she said. 

It’s a rare issue that has bipartisan momentum. 

The legislation in Arizona was backed by a Republican, while in other states, such as Illinois and New York, Democrats are bringing the app store bills forward. 

That underscores the broad range of critics of Big Tech’s power who are increasingly targeting the app stores' power. Conservatives are increasingly interested in checking large Silicon Valley companies' power in the aftermath of the attacks on the Capitol, when tech companies took rare steps to limit the reach of former president Trump and apps such as Parler due to concerns that they were contributing to physical violence. Apple and Google both kicked Parler off their app stores for violating their terms following the attacks. 

“With a swipe of the finger, they can wipe them off,” Cobb said. “That is a problem. If somebody has that much control over your business, your personal business, that is a problem.” 

Apple and Google have aggressively defended their stores’ practices. 

Apple deployed lobbyists and executives to Arizona to fight the bill’s passage, and pro-industry lobbying groups have been fighting against similar measures in other states. The company has aggressively defended the fees it takes through its App Store.  

“Apple provides developers an enormous amount of valueboth the store to distribute their apps around the world and the studio to create them,” Apple chief compliance officer Kyle Andeer said before the Arizona House. “That is what the commission reflects.”

Apple takes a 30 percent cut of most purchases made on the App Store, and the commission drops to 15 percent a year for subscriptions that remain active for more than a year. Under public scrutiny, it recently lowered its fees to 15 percent for developers generating less than $1 million in App Store revenue. 

Google has not directly addressed the Arizona bill specifically, but it has previously defended its own fees on similar grounds. 

The state action comes as Europe zeros in on Apple’s App Store. 

U.K. authorities announced yesterday that they launched an investigation into Apple’s App Store, over concerns that it’s hurting consumers and stifling competition. It’s also the focus of three other antitrust probes by the European Union’s Executive Commission.

Our top tabs

YouTube’s CEO said Trump's channel will remain banned until the company decides there's less risk of it causing physical violence. 

Susan Wojcicki said the company would weigh signals such as government agency statements, law enforcement presence and other violent rhetoric on the platform in making that determination, Reuters’s Elizabeth Culliford and Paresh Dave report. The statement could portend a long road ahead for Trump to get back onto the platform, which was the last of the major tech sites to suspend Trump in the wake of the Jan. 6 riot at the Capitol.

“The channel remains suspended due to the risk of incitement to violence,” Wojcicki said, noting that Capitol Police warnings about threats to the Capitol this week show that an “elevated violence risk still remains.” 

Some coronavirus fever scanners are ineffective, researchers warn.

Seven widely used scanners use algorithms that researchers say undermine their medical value, my colleague Drew Harwell writes. The scanners are being widely rolled out in schools, offices, restaurants and other public venues, and the findings raise concerns that infected people could be let through checkpoints and spread the virus. 

The researchers from surveillance research group IPVM say that scanners could detect someone with a temperature of 100.4 degrees as having a healthy temperature of just 98 degrees.

“The utility of these devices as fever screeners is now highly questionable and arguably a risk to public health because they actively report fevers as normal,” said Conor Healy, the study’s lead researcher.

Several companies whose technology was tested declined to comment or did not respond. A representative of Meridian, which makes a temperature-screening kiosk that was tested, disputed the findings, saying that it “calibrates itself with [its] surroundings” and does not improperly adjust temperature readings.

Amazon added more New York warehouses amid the pandemic.

The company bought nine warehouses in the city as online shopping surged this past year, the New York Times’s Matthew Haag and Winnie Hu report. It underscores how the company is continuing to increase in size, even as its political and labor problems pile up. 

The company has left its competitors in the dust, as none have warehouses in the city. It is expanding in the city despite an unsuccessful bid to build its headquarters in Queens because of local political pushback. (Amazon CEO Jeff Bezos owns The Washington Post.)

Yet Amazon’s presence in New York is drawing regulatory scrutiny, with the state’s attorney general suing the company for failing to protect workers during the coronavirus pandemic. An Amazon spokeswoman disputed the allegations, saying that it cares “deeply about the health and safety” of its workers.

Rant and rave

BuzzFeed reporter Ryan Mac took a dig at the latest column from David Brooks of the New York Times. He and Craig Silverman have been reporting on Brooks's financial ties to tech companies, which weren't disclosed to Times readers. 

Business Insider correspondent Patrick Coffee:

Vice Features senior staff writer Anna Merlan:

Hill happenings

Lawmakers want the FTC to go after period-tracking apps that share personal information.

Senate Foreign Relations Committee chairman Robert Menendez (D-N.J.) and Reps. Bonnie Watson Coleman (D-N.J.) and Mikie Sherrill (D-N.J.) told acting Federal Trade Commission chairwoman Rebecca Kelly Slaughter in a letter that the FTC should take enforcement action on menstruation-tracking apps that have had data breaches or have improperly shared personal data. The letter comes after reports that fertility and menstruation-tracking apps shared data without getting consent from users.

The Senate is working on a bill to boost the chip industry.

The bill, which is being drafted by Senate Majority Leader Charles E. Schumer (D-N.Y.), could include $30 billion in funding to boost U.S.-based chip makers, Reuters’s Alexandra Alper reports. Lawmakers would like to bring the proposal for a vote next month. It comes as the chip industry got support from President Biden, who signed an executive order aiming to fuel the country’s semiconductor industry last month.

Inside the industry

Trending

A year into the pandemic, the pros and cons of increased screen time are stark.

Some children say that technology is a savior that allows them to remain social, while others say it’s taking a toll on their mental health, Heather Kelly reports. Parents and their children have had a roller-coaster relationship with technology throughout the pandemic, especially as schools adapted to virtual learning.

“Covid has been a cascading catastrophe for education, and in particular for disadvantaged kids, but where would we be without the possibility of learning online or even entertainment?” said Ann Masten, a developmental psychologist at the University of Minnesota. Masten said that technology use isn’t inherently good or bad. But she is worried that the pandemic will deepen disparities.

Mentions

  • Former Uber executive Justin Kintz has registered as an in-house lobbyist for stationary bike company Peloton effective Feb. 22. Two outside lobbying firms, Forbes Tate and Tai Ginsberg & Associates, also registered to lobby for the company, effective Feb. 17.

Daybook

  • The Senate Judiciary Committee holds a hearing on President Biden’s nominations of Lisa Monaco and Vanita Gupta to top Department of Justice positions on March 9 at 9 a.m.
  • The Aspen Institute hosts an event on international Internet blackouts on March 9 at noon.
  • The Brookings Institution hosts an event on the government’s role in reducing bias in algorithms on March 12 at 9 a.m.

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