Huge Tech’s Unlikely Subsequent Battleground: North Dakota

Last month, a lobbyist reached out to Kyle Davison, a North Dakota state senator, with an unusual proposal: a law preventing Apple and Google from forcing companies in the state to give up some of their app sales.

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

“She said to me that this could be great. For me, however, that means that the local newspaper comes with a camera, ”said 60-year-old Davison. “I wouldn’t be honest if I said I expected the reaction.”

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

Proponents of the bill said it would help smaller businesses and only hurt Apple and Google’s revenues. Apple’s chief data protection engineer, 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 from courts, regulators, and Congress, tech rivals and critics are turning to state law and pushing for bills to tax the largest tech companies, limit their power, and limit their control over the internet.

New York is considering a bill that would make it easier for the state to initiate antitrust proceedings against the big tech companies. Florida lawmakers this month, with the support of the governor, proposed measures that could restrict how social media companies could monitor content on their websites. And on Friday, Maryland passed a law taxing online ads from companies like Facebook, Google, and Amazon. Connecticut and Indiana are considering similar bills.

The state battles pose a delicate problem for tech companies, whose legions of lawyers and lobbyists are trained to eradicate threats in Washington and the courts. The 50 state legislatures are diverse and unpredictable. Both Republicans and Democrats are against big tech.

The North Dakota bill focuses on the practices of Apple and Google to save up to 30 percent on many app sales on smartphones. That estimate grossed the companies $ 33 billion last year, according to estimates by Sensor Tower, an app data company.

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

The bill would prohibit Apple and Google from requiring apps to use their payment systems so that they can collect their commissions.

Also, Apple and Google would need to allow their smartphone users to download apps from outside their flagship app stores, although Mr Davison said he tried to remove this provision to allay some concerns from his colleagues. Google already allows such downloads, but Apple does not.

The 47 Senators from North Dakota will vote on the measure this week after the debate begins on Monday. The schedule is accelerated as the legislature only meets 80 days every two years. If a majority votes yes, the bill will be forwarded to the house.

If the calculation fails, the battle between Apple and Google doesn’t seem to be over. Georgia and Arizona lawmakers are considering near-identical legislation for app stores, and Andy Vargas, a representative for the US state of Massachusetts, said he plans to introduce a similar bill this week. Lobbyists said they are pushing for bills for app stores in Wisconsin and Minnesota as well.

An Apple spokeswoman said most iPhone apps were free and didn’t pay any commission. She added that most North Dakota companies that shared their revenue with Apple made less than $ 1 million a year from their apps, which means they pay Apple 15 percent of sales instead of 30 percent. Apple cut its rate for smaller businesses last year after reviewing the guidelines for the App Store.

Google did not respond to a request for comment.

Mr Davison said he received the bill from Lacee Bjork Anderson, a lobbyist at Odney Public Affairs in Bismarck. Ms. Anderson said in an interview that she was hired by Epic Games, the maker of the popular game Fortnite and plaintiff in lawsuits against Apple and Google over their app guidelines. She said she was also paid by the Coalition for App Fairness, a group of firms including Epic, Spotify and Match Group that have protested app commissions and are leading the push for app store bills.

“Look, we’re a very conservative state,” said Ms. Anderson, a Republican. “But we’re also a state that Teddy Roosevelt comes from, and there is no bigger trust buster.” (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 enough votes to pass, which she attributed to confusion from some senators and aggressive lobbying by Apple.

“You set up zoom calls with every Senator,” she said. “That doesn’t necessarily play a good role up here – California executives or lobbyists are trying to tell people what to do.”

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

Mr. Klein, 69, a retired grocer from Tiny Fessenden, said some of his colleagues were also cautious about passing a bill focusing on “digital application distribution platforms” and “application payment systems” when they struggled with that to understand effects.

“Everyone here knows they have their phones plugged in, they have power, they can take pictures and show pictures of their grandchildren,” he said. “That goes beyond some of us.”

However, some app makers have a lot to do with legislation. David Heinemeier Hansson, a Danish tech entrepreneur who has been battling to avoid Apple fees with his email app, said the bill could be a major blow to Apple’s policies, even though they only apply to businesses in North Dakota would.

He said if the bill was passed he would be ready to set up offices in North Dakota. And he predicted many other companies would join him if moving there meant avoiding 30 percent of Apple’s sales.

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

Mr Heinemeier Hansson said he was not betting that North Dakota would pass the bill, but said the fact that the bill would get attention and get a vote would encourage other states to consider similar measures.

“That’s why Apple came up with the big scary picture that this would end the iPhone as we know it,” he said. “Of course the iPhone as we know it wouldn’t end if this happened in North Dakota. They fear that any state that opens the locks first will then open the locks. “

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