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U.S. senators question Apple and Google on app store dominance

[April 22, 2021] By Diane Bartz, Stephen Nellis and Paresh Dave

WASHINGTON (Reuters) -A panel of U.S. senators questioned officials from Apple Inc and Alphabet Inc's Google on Wednesday about the dominance of their mobile app stores and whether the companies abuse their power at the expense of smaller competitors.

Amy Klobuchar, the top Senate Democrat on antitrust issues, said Apple and Google can use their power to "exclude or suppress apps that compete with their own products" and "charge excessive fees that affect competition."

App makers like music streaming service Spotify Technology SA and dating services giant Match Group, which owns the Tinder app, have long complained that mandatory revenue sharing for sales of digital goods and strict inclusion rules set by Apple's App Store for iPhones and iPads, along with Google's Play store for Android devices, amount to anticompetitive behavior.

Representatives for Apple and Google told senators the companies' tight control over their stores and the associated revenue-sharing requirements are needed to enforce and pay for security measures to protect consumers from harmful apps and practices.

But when asked by Senator Josh Hawley, Apple's Chief Compliance Officer Kyle Andeer would not commit to spending all of the mandatory fees on security.

Explanations from Andeer and Google's Wilson White, senior director for government affairs, about why the companies' fees do not apply to Uber Technologies Inc and apps that sell physical goods also failed to satisfy senators.

"I feel like unfrozen caveman lawyer," Senator Mike Lee said. "I'm not grasping it."

Senator Richard Blumenthal expressed concern about a call Match said it received late on Tuesday from its business counterpart at Google.

Match's Chief Legal Officer Jared Sine said Google wanted to know why Sine's planned testimony, which had just been released, deviated from previous comments the dating company had made.

"It looks like a threat, it talks like a threat, it's a threat," Blumenthal said of the call, vowing to investigate Google's action further.

Google's White said the call reflected an effort to ask an honest question and the company would never threaten partners.

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Apple unveils AirTag, in this still image from the keynote video of a special event at Apple Park in Cupertino, California, April 20, 2021. Apple Inc./via REUTERS.

In his testimony, Match's Sine argued that Google and Apple both exact an onerous 30% of any digital transaction, raising prices for consumers.

Match pays nearly $500 million in fees to the app stores annually, the company's single largest expense, Sine said.

Spotify and Match said Apple's app review process was opaque. Sine said Apple blocked a safety update to the Tinder app meant to warn LGBTQ+ users if they were traveling to a country where it might be dangerous to expose their identity because Apple said the update violated the "spirit" of a new rule.

But Apple would not explain how to fix the issue, Sine said. He said that Apple approved the update two months later only after senior leaders at Match's parent company at the time, IAC/Interactivecorp, raised the issue with Apple's senior leaders.

The hearing came a day after Apple said it would begin selling AirTags - which can be attached to items like car keys to help users find them when they are lost - in direct competition with Tile, which has sold a similar tracking device for more than a decade.

Apple said its AirTags were an outgrowth of its "FindMy" app, which is used for locating lost Apple devices and to share user locations and was introduced in 2010, before Tile's founding. Apple last month opened its operating system up to alternative item trackers and said that Chipolo, a startup competing with Tile and AirTags, is using the system.

Tile General Counsel Kirsten Daru testified Apple's FindMy program is installed by default on Apple phones and cannot be deleted.

"Apple has once again exploited its market power and dominance to condition our customers’ access to data on effectively breaking our user experience and directing our users to FindMy," she said.

(Reporting by Diane Bartz, Stephen Nellis and Paresh Dave; Editing by Steve Orlofsky and Marguerita Choy)

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