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Biden seeks app store competition

Report: Consumers, developers hurt by current market by FATIMA HUSSEIN The Associated Press | February 2, 2023 at 1:50 a.m.
Customers shop in an Apple store in Pittsburgh on Monday. (AP/Gene J. Puskar)

WASHINGTON -- The Biden administration is taking aim at Apple and Google for operating mobile app stores that it says stifle competition.

The finding was contained in a Commerce Department report released Wednesday as President Joe Biden convened his competition council for an update on efforts to promote competition and lower prices.

"You've heard me say capitalism without competition isn't capitalism," Biden said Wednesday before convening the meeting. "It is just simply exploitation."

The report from the Commerce Department's National Telecommunications and Information Administration says the current app store model -- dominated by Apple and Google -- is "harmful to consumers and developers" by inflating prices and reducing innovation. The companies have a stranglehold on the market that squelches competition, the report adds.

"The policies that Apple and Google have in place in their own mobile app stores have created unnecessary barriers and costs for app developers, ranging from fees for access to functional restrictions that favor some apps over others" the report said.

In a January op-ed in The Wall Street Journal, Biden called on Democrats and Republicans to rein in large tech firms without mentioning by name Cupertino, Calif.-based Apple Inc. and Mountain View, Calif.-based Google LLC, owned by Alphabet Inc.

"When tech platforms get big enough, many find ways to promote their own products while excluding or disadvantaging competitors -- or charge competitors a fortune to sell on their platform," Biden said. "My vision for our economy is one in which everyone -- small and midsized businesses, mom-and-pop shops, entrepreneurs -- can compete on a level playing field with the biggest companies."

A representative from Apple told The Associated Press that "we respectfully disagree with a number of conclusions reached in the report, which ignore the investments we make in innovation, privacy and security -- all of which contribute to why users love iPhone and create a level playing field for small developers to compete on a safe and trusted platform."

A Google spokesperson said the firm also disagrees with the finding, namely "how this report characterizes Android, which enables more choice and competition than any other mobile operating system."

A legal battle over app store dominance is already playing out in the courts.

Apple has defended the area surrounding its iPhone app store, known as a walled garden, as an indispensable feature prized by consumers who want the best protection available for their personal information. The company has said it faces significant competition from various alternatives to video games on its iPhones. And Google has long defended itself against claims of holding a monopoly.

The Commerce report said "new legislation and additional antitrust enforcement actions are likely necessary" to boost competition in the app ecosystem.

Alan Davidson, who leads the National Telecommunications and Information Administration, told reporters Wednesday the report "identifies where legislation would be needed to address some of these issues."

Biden said his administration will work with state and local officials to identify ways to crack down on junk fees in their jurisdictions. He also called on Congress to pass the Junk Fee Protection Act, which targets hidden fees in the entertainment, travel and hospitality industries.

Meanwhile, the White House said the Consumer Financial Protection Bureau will move forward with a proposed rule to limit credit card late fees, which the bureau estimates would save consumers roughly $9 billion annually in late fees.

Rohit Chopra, the bureau's director, said the rule is projected to reduce typical late fees from about $30 to $8 for missed payments and could go into effect in 2024.

"Historically, credit card companies charged relatively small penalty amounts for missed payments, but once they discovered that these fees could be a source of easy profits, late fees shot up with a surge occurring in the 2000s," Chopra said. "And in recent years, these late fees have surged to as much as $41 for a missed payment. These fees add up, with consumers being hit with $12 billion a year in late fees in addition to the billions of dollars in interest they're paying."

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