ACT | The App Association has historically advocated for our members on privacy and competition legislation at the federal level, but over the last year, a growing number of states have thrown their hat in the privacy and competition ring, with various statehouses introducing their own bills. These bills could have serious implications on tech-driven industries and the global mobile app economy at large, but also for the small businesses we represent. This growing state participation in what some are calling “techlash” came in many bill forms, from regulating social media moderation practices to privacy legislation and prohibiting the enforcement of app store policies. As a result, we spent the last year monitoring these nationwide developments and advocating with and for our small business members at the state level.
We hit the ground running by engaging with hundreds of state officials, conducting meetings, and providing commentary in more than 10 states from Massachusetts to Washington, and the best part – there is so much more to come! But before we jump ahead to 2023, we’re breaking down what happened at the state level and what it means for future legislative sessions.
Privacy Legislation
2022 has been deemed the “year of privacy” when it comes to the states, with more than 34 statehouses introducing a total of 200 consumer privacy bills. These bills cover everything from biometric information to education privacy and financial services-specific activities. Despite the various states taking part in privacy legislation, all eyes were on Utah and Connecticut as they became the fourth and fifth states to have a state-specific comprehensive privacy bill—joining California (CCPA), Virginia (VDCPA), and Colorado (CPA). With five states on the books and subtle nuances between most of the bills, a patchwork is slowly spanning from coast to coast. Despite this year being the “year of privacy” in the states, a number of competition and platform-related bills circulated in state legislatures as well. Even more concerning than a privacy patchwork is the states’ efforts to regulate global app stores.
Competition Legislation
This year, more than 13 states were expected to reintroduce legislation regulating app stores, but the bill only appeared in 11 legislatures. Of the 11, nine states held hearings, where we were actively engaged and shared our members’ perspectives. Although some of the bills differed slightly in the scope of the prohibitions, the central provision of each of them would prohibit the major app stores from removing or limiting access by any app to the operating system or smart device, effectively rendering enforcement of app store guidelines impossible.
In Arizona, the app store bill advanced through the committees and was on its way to the House floor for a vote but was ultimately held for the remainder of the session and died. In Louisiana, we faced a similar battle with the app store bill advancing through committees and to the House floor for a full vote. That bill died on the House floor by a one-vote margin (45-aye to 46-no). While the bills in these two states posed the biggest threats to the mobile app economy, it’s worth noting that all 11 states that introduced app store legislation were unsuccessful: some for the second consecutive session. The lack of success for these bills begs an important question – what is wrong with this bill and what prevents the passage of a bill like this? The short answer is state policymakers ultimately recognize the serious unintended consequences of these measures.
These app store bills shared similar language found in the two big antitrust bills pending in Congress, the Open App Markets Act (S. 2710), which poses the same potential harms to the ecosystem by heightening the barrier for entry into a global marketplace for smaller developers and companies.
The concern spanning state legislatures was that understanding the nuances, and the short and long-term impacts of a bill aiming to revamp a global market—the global app economy—was something that states should not be jumping into because more pressing needs plague their communities. Other legislators acknowledged the bill’s attempt to geofence a global online marketplace around state borders and refused to jump on board, fearing a violation of interstate commerce via the dormant commerce clause (making this a federal issue and not one for the states.). Others recognize that prohibiting the removal of even the worst kinds of software from consumer devices opens up new cybersecurity threats and appreciate that requiring the stores to carry malware and fraudulent apps only raises the barriers to entry for small, relatively unknown app companies. These are only a handful of perspectives shared by state legislators who read the bills, listened to testimony, and met with industry leaders both for and against the bill.
What to Expect
So, what’s in store for the future of both privacy and app store bills? Well, in the words of a beloved professor, “It depends.” The future of these state bills is heavily dependent on what happens at the federal level. On the privacy front, if no federal privacy bill—for example, the bipartisan American Data Privacy and Protection Act (ADPPA, H.R. 8152)—is passed, we can expect to see even more states introducing state-specific privacy bills. Comprehensive privacy and children’s privacy will likely be the two big ones across the country next session. If Congress passes a federal privacy bill, we will see a push for more states to ensure the federal bill will not preempt (take precedent over) any state privacy law that is in effect or slated to take effect. Additionally, if a federal privacy bill is enacted, we can expect states to focus on localized privacy regulations relating to health and location tracking.
With regards to app store bills and competition, if the federal bills (S.2992 and S.2710) fail, then states will be highly likely to introduce or reintroduce app store bills. If they do, they might update the old language to mirror the amended version of S. 2710, the app store bill, but that seems unlikely. Some states might even take up versions of S. 2992, the broader antitrust bill that targets all of the big online platforms, not just the app stores. If the federal bills are passed, we can expect an onslaught of states to shift their focus to broader antitrust reform legislation, aimed at redefining the threshold characteristics of monopoly and monopsony—which would apply to the giants of the 21stcentury both tech-based and brick-and-mortar—examples of which have been introduced and debated in Minnesota and New York.
There are a lot of “what ifs” around the 2023 state legislative session, but one thing is for certain: the App Association will be ready to advocate wherever the wind blows.
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Caleb Williamson is the state public policy associate at ACT | The App Association. In this role, he monitors and tracks relevant legislation impacting member companies, builds and maintains relationships with state and locally elected officials, and provides commentary and testimony on state bills that would impact digital innovation and the mobile app economy more broadly.