Wednesday, September 28, 2022

In Senate testimony, U.S. antitrust chief Jonathan Kanter urged adoption of Open App Markets Act as end of legislative term is approaching fast

Yesterday, President Biden tweeted the following, which is spot-on:

The following is not news in a strict sense, considering that a week has passed since Antitrust Assistant Attorney General Jonathan Kanter testified before the Senate Judiciary Committee. But one passage of his testimony clearly deserves more attention and is very much related to President Biden's tweet:

"I would also note the importance of the Open App Markets Act, which seeks to ensure that independent app developers are able to compete on fair and equal terms and to prohibit the worst types of anticompetitive conduct by the gatekeeper firms that own and operate the largest app stores and mobile platforms. While the growth of the mobile app ecosystem over the past fifteen years has brought enormous benefits to American consumers, the continued viability of this ecosystem is threatened by the increasing power held by a handful of dominant digital gatekeepers, who are able to use their control over app stores and mobile operating systems to pick winners and losers, extract above-market fees, and favor their own apps in ways that harm competition and sap incentives to innovate. The Act identifies and prohibits some of the most egregious anticompetitive practices which are currently prevalent in the mobile app ecosystem." (emphases added)

The end of the Congressional term is approaching fast. Some other antitrust topics may be more controversial (such as the American Innovation and Choice Online Act (AICO)). But the Open App Markets Act (OAMA) should finally be adopted.

It's a valid question to ask why Mr. Kanter urges the enactment of a new law while the Antitrust Division of the Department of Justice--the very division he's heading--is simultaneous advocating the application of existing antitrust law (particularly the Sherman Act) to mobile app stores. At the Epic Games v. Apple appellate hearing in San Francisco on October 21, a DOJ attorney (whose name has meanwhile become known: Nickolai Gilford Levin) will deliver oral argument and while the DOJ formally supports neither party, every single one of its arguments strengthens Epic's case. A similar question came up at a Senate committee hearing shortly before the Epic v. Apple trial, but was directed to the member companies of the Coalition for App Fairness as opposed to the DOJ.

I wholeheartedly believe that Epic's proposed market definition (a single-brand market with a smartphone operating systems foremarket and an app distribution aftermarket) is the correct one. And that would also pour fuel on the fire of a U.S. consumer class action against Apple. But as I explained in the post I just linked to, there is a risk of the appeals court having qualms over a single-brand market definition (though the Kodak standard is not just met here, but the case is even stronger than Kodak was). Even if the Ninth Circuit agrees with Epic, I consider a remand for further proceedings more likely than a definitive decision on liability--and in any event, Apple will try to appeal an adverse decision to the Supreme Court.

All of that takes time and comes with considerable uncertainty while Apple's abusive conduct affects the economy at large as well as various segments of the technology industry--even NFT startups.

The European Union's Digital Markets Act (DMA) has been passed into law, but implementation takes time and will invite legal challenges that Apple and Google appear to have prepared already. Also, Apple and Google could (and most likely will) choose to comply with the DMA only in the EU, in which case the situation in the United States won't improve.

The OAMA isn't a panacea either, but it would be a major breakthrough, and there is at least a chance that if both the United States and the European Union promulgate similar rules, Apple and Google will think hard about whether it's worth fighting policy makers and regulators in such places as South Korea, which also raises fragmentation concerns.