By Kevin Haas
Rock River Current
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ROCKFORD — Illinois lawmakers including state Sen. Steve Stadelman are taking on Apple and Google with a proposal that aims to rein in the hefty cut the companies take for smartphone app purchases.
Senate Bill 3417, also known as the Freedom to Subscribe Directly Act, would allow consumers to buy directly from smartphone apps. Right now, customers buy from the smartphone company — Google or Apple — and not the app developer. Those tech giants can take as much as a 30% cut of the payment.
“Most (developers) have no alternatives than to pay what is demanded, when it’s demanded. That’s not a free and fair marketplace. It’s destructive to the competition that is supposed to deliver us more and better for less,” David Heinemeier Hansson, chief technology officer of the web-based software company Basecamp, said Wednesday on a call with reporters. “Google and Apple move in lockstep on terms and rates because they know they don’t have to fear competition. That’s a market failure legislators have to address head on.”
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Stadelman, D-Loves Park, said his interest in the legislation is to support local news operations, which must increasingly rely on building their online business to remain viable. He said news organizations could use smartphone apps to enroll paid subscribers without losing out on 15-30% of the revenue.
“That’s a significant amount of money that could be used to help staff newsrooms,” Stadelman said. “Local news operations have already lost a lot of advertising revenue to tech companies. I think this is one way to make that playing field a bit more fair.”
Developers have complained in court and to Congress that Apple and Google monopolize control of app stores. The companies have said the fees it charges are justified for the security it provides to customers. Companies such as Epic Games, the maker of Fortnite, and Spotify have also taken issue with the commissions the tech companies take from in-app purchases.
A bipartisan bill introduced in Congress in late summer takes aim at the companies’ requirement for customers to purchase from app stores, similar to the proposal in Illinois. But lawmakers here are ready to make Illinois the first battleground.
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“The state of Illinois regulates railroads, pharmacists, utilities, and now we need to regulate tech,” said state Sen. Sara Feigenholtz, a Democrat from Chicago. “We have to protect Illinois innovators and with Senate Bill 3417, the Freedom to Subscribe Directly Act, we will do exactly that.”
She said the proposal will help Illinois companies keep more of their revenue, and it will benefit the state through added corporate income tax revenue. That’s because Google and Apple don’t pay state corporate income tax to Illinois from app store revenue, she said, but Illinois-based companies do pay that tax.
“As we try to modernize our revenue base, we as a state must tap into lost revenues and we have to keep Big Tech in check,” she said.
Feigenholtz filed the bill, which will be co-sponsored by Stadelman, on Tuesday. It was referred to the state Senate’s Assignments Committee.
This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas.