Mobile app stores: No. 1 tech battlefield of this decade

By Florian Mueller

Florian Mueller

Patent disputes in the mobile device industry are still a thriving business. The ongoing spat between Samsung Electronics and Ericsson on three continents is the first 5G fight of that scale. But there is an even bigger conflict in the mobile sector at the moment, and it will likely dominate the debate for much of this decade: the war against abusive practices by Apple's and Google's mobile app stores.

There is a lot to gain for Korean smartphone makers Samsung and LG Electronics, major game studios like Nexon, NCSOFT and Netmarble, and for Korean consumers, more than 50 percent of whom play games on their smartphones.

When lawyers brought a class-action lawsuit on behalf of a certain Mr. Pepper and other American consumers against Apple in 2011, accusing Apple of abusively charging a 30 percent commission on revenues generated via the App Store, few took them seriously. Two years ago, the U.S. Supreme Court finally allowed the case to go forward, and the trial will take place later this year.

Meanwhile, the European Commission has launched an investigation into antitrust allegations against Apple by music streaming company Spotify. Epic Games brought the highest-profile app store complaints last summer after Apple and Google kicked its "Fortnite" flagship game out of their stores because it offered consumers an alternative payment method. At about the same time, a group of South Korean Internet companies submitted a complaint to the Korea Communications Commission.

Just this week, the lower chamber of the Arizona state legislature shocked Apple and Google by adopting a proposal to level the playing field between platform operators and app developers. It might be passed into law now, and similar initiatives are underway from Hawaii to New York ― and in the European Union, which is working on a Digital Markets Act to protect smaller companies from the heavy-handedness of digital platforms.

The benefits to consumers from bringing down the 30 percent commission and more choice are clear, as Apple and Google often disallow apps or features for no good reason. It is equally easy to understand that game makers and other app publishers benefit from greater freedom to do business with the users of their software. Apple and Google are gatekeepers who insert themselves into those business relationships and take control. On March 4, the competition authority of the United Kingdom launched a brand new investigation into Apple's App Store practices.

Samsung and LG stand to benefit from these developments on an even larger scale than app developers and users. First, top-tier Android smartphones compete with the iPhone. According to CNBC, Apple's App Store generated more than $64 billion in 2020, up from $50 billion the previous year. The App Store is at the heart of Apple's growth strategy.

Second, the relationship between Android original equipment manufacturers (OEMs) and Google is complicated. In its Google Android antitrust ruling, which is being appealed, the European Commission highlighted how Google maximizes its leverage over OEMs, and its Google Play app store is a key element. Theoretically, Android is a free, open-source operating system. But Samsung and LG need to work out license agreements with Google. By now, their own trademarks ― literally household brands ― are strong enough they could do well without the little green robot logo. However, many Android users are locked into Google's proprietary apps and, especially, the Google Play Store with well over 2.5 million apps.

China is the only major market in which Google Play is prohibited. Dozens of local app stores provide Chinese users with apps approved by their government. Outside of China, Huawei is presently forced to rely on its own App Gallery because the Trump administration decided to bar Google from licensing its apps, including the app store itself, to Huawei.

Considering that every single one of its Android devices comes with Google Play, which is the primary go-to place for users looking for Android apps, Samsung's Galaxy Store is doing well with approximately 400 million monthly users. But it could do much better if legislation, regulation and litigation loosened Google's grip on Android. That, in fact, would give Samsung much more leverage in its own licensing negotiations with Google.

After "Fortnite" was kicked out by Google, the Galaxy Store presumably became its most important mobile distribution channel. In the U.S., it is even the only one, according to Samsung's website.

Apple and Google defend their tyrannical app store regimes with security, privacy and intellectual property considerations. Frankly, all of that is pretext. In fact, users buying goods via shopping apps like Amazon also enter their credit card data in those apps. There is no reason they could not do so in games. The app review guidelines that developers must comply with to offer their apps on the App Store or on Google Play stifle innovation by disallowing features, promotional methods and topics. For example, only apps from governmental or government-approved sources may be COVID-themed. Apple and Google are far more restrictive than necessary, and they apply their own rules not only inconsistently, but even arbitrarily.

This is not merely about bringing down an excessive app store commission. It is about essential freedoms. The alternative is a world in which Apple and Google are dictators, controlling access to billions of users while treating developers and (in Google's case) even OEMs as serfs: the modern-day variant of medieval European feudalism or similar systems in 18th- and 19th-century Russia.

Florian Mueller is an award-winning intellectual property activist.