Big Tech’s unlikely next battlefield: North Dakota

Last month, a lobbyist approached Kyle Davison, a state senator in North Dakota, with an unusual proposal: a law to stop Apple and Google from forcing state companies to deliver a share of their app sales.

Sir. Davison, a Republican, was focused on bills related to a $ 200,000 literacy program and birth records for the homeless. But he was fascinated by the lobbyist’s arguments that the tech giants hurt small businesses, and he believed such a law could attract tech companies to North Dakota. So he introduced it.

“She told me this could be big. But for me, that means the local newspaper comes with a camera, ”said Davison, 60. “I would not be truthful if I said I expected the reaction.”

At the Capitol in Bismarck, a 21-story Art Deco tower that is the state’s tallest building, a hearing on the bill last week heard Washington lawyers, newspapers in North Dakota and executives in Silicon Valley. Siding with Apple and Google were Americans for Prosperity, the conservative group funded by the Koch family. On the other side was the Fargo Chamber of Commerce. A person called in from Alaska.

Supporters of the bill said it would help smaller businesses and only hurt Apple and Google’s revenue. Apple’s head of privacy, Erik Neuenschwander, testified that the bill “threatens to destroy the iPhone as you know it.”

North Dakota is part of a new front in the battle for Big Tech and its power. Frustrated by the lack of action by courts, regulators and Congress, technology rivals and critics turn their attention to state legislators and push bills that seek to tax the largest technology companies, strengthen their power and limit their control over the Internet.

New York is considering a bill it would make it easier for the state to pursue cartel cases against the big technology companies. Legislators in Florida this month proposed measures, supported by the governor, it would limit how social media companies could police content on their sites. And Friday, Maryland adopted a law that taxes online ads sold by companies like Facebook, Google and Amazon. Connecticut and Indiana are looking at similar bills.

State struggles pose a difficult problem for technology companies whose legions of lawyers and lobbyists are trained to put out threats in Washington and the courts. The 50 state legislators are diverse and unpredictable, with both Republicans and Democrats joining Big Tech.

The North Dakota bill focuses on the practices of Apple and Google takes an average of up to 30 percent from many app sales on smartphones, a policy that brought companies a total of $ 33 billion last year, according to estimates from Sensor Tower, an app data company.

Some smaller companies have claimed that Apple and Google force app manufacturers to pay only an artificially high fee because of their sheer dominance. The two companies’ software supports almost all smartphones in the world.

The bill bans Apple and Google from requiring apps to use their payment systems, which allow them to collect their commissions.

It would also require Apple and Google to allow users of their smartphones to download apps outside of their flagship app stores, even if Mr. Davison said he was trying to remove that provision to ease some of his colleagues’ concerns. Google already allows such downloads, but Apple does not.

North Dakota’s 47 senators are set to vote on the measure this week after the debate begins Monday. The timeline is accelerated because the legislature meets for only 80 days every two years. If a majority votes yes, the bill goes on to Parliament.

If the bill fails, Apple and Google’s battle is far from over. Lawmakers in Georgia and Arizona are considering nearly identical legislation on app stores, and Andy Vargas, a Massachusetts state attorney, said he planned to introduce a similar bill this week. Lobbyists said they were also pushing for app-sized bills in Wisconsin and Minnesota.

An Apple spokeswoman said most iPhone apps were free and paid no commission. She added that most of the North Dakota companies that shared revenue with Apple earned less than $ 1 million a year from their apps, meaning they pay Apple 15 percent of some sales instead of 30 percent. Apple lowered the rate for smaller companies last year under the control of its App Store policies.

Google did not respond to a request for comment.

Sir. Davison said he had been drafted by Lacee Bjork Anderson, a lobbyist for Odney Public Affairs in Bismarck. Mrs Anderson said in an interview that she was employed by Epic Games, the maker of the popular game Fortnite and plaintiff in lawsuits against Apple and Google over their app policies. She said she was also paid by Coalition for App Justice, a group of companies including Epic, Spotify and Match Group that have protested against app commissions and are pushing for app-sized bills.

“Look, we are a very conservative state,” said Mrs. Anderson, a Republican. “But we are also a state where Teddy Roosevelt came from, and there are no major confidence busts.” (Roosevelt, the former president, was born in New York but later owned a ranch in North Dakota.)

Still, she admitted that the bill may not have had enough votes to pass, which she attributed to confusion among some senators and aggressive lobbying from Apple.

“They create Zoom calls with every senator,” she said. “It doesn’t necessarily play well up here – if California leaders or lobbyists try to tell people what to do.”

State Senator Jerry Klein, the Republican who heads the committee that handled the bill, agreed that Apple’s presence was felt in State House. He said he was strongly opposed to the legislation because Apple and its lobbyists warned that the bill could put North Dakotans at risk of cyberattacks and make North Dakota subject to expensive lawsuits. He was also worried that interference in an agreement between two private companies would be bad for business.

Mr. Klein, 69, a retired grocery owner from Little Fessenden, said some of his colleagues were also wary of passing a bill focused on “digital application distribution platforms” and “payment systems in applications” as they struggled to understand effects.

“All the people here know is that they have their phone connected, it has power, they can take pictures and show photos of their grandchildren,” he said. “This is going to hurt some of us.”

Still, some app manufacturers make a lot of use of the legislation. David Heinemeier Hansson, a Danish tech entrepreneur who has fought to avoid Apple fees with his email app, hey, said the bill could be a significant blow to Apple’s policies, even if it would only apply to North Dakota companies.

He said if the bill was passed, he was ready to set up offices in North Dakota. And he predicted that if one moved there to avoid paying Apple 30 percent of sales, many other companies would join him.

“You don’t have to be that big of a software company until 30 percent of your revenue is your biggest line item,” he said. He added that he had never been to North Dakota, where the temperature dropped to minus 18 degrees Fahrenheit the other day, “but I hear it’s nice.”

Sir. Heinemeier Hansson said he did not bet North Dakota passed the law, but he said the fact that the bill received attention and received a vote would encourage other states to consider similar measures.

“That’s why Apple came up with the big scary image that this would end up being the iPhone as we know it,” he said. “Of course, it would not end with the iPhone, as we know it, for this to happen in North Dakota. They are afraid that no matter what condition first opens the river gates, the river gates will be open. ”

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