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Biden administration's new report on app stores calls 'on Apple and Google to do better'

Opening up another front in the increasing tensions between Big Tech and Washington, the Biden administration released a new report Wednesday that outlined what they say are a host of anticompetitive practices inside the nation’s biggest mobile app stores.

The report from the Department of Commerce’s National Telecommunications and Information Administration (NTIA) concluded that "the current mobile app ecosystem, and especially the current app store model, is harmful to consumers and to app developers," said Alan Davidson, Assistant Secretary of Commerce.

"We are also calling on Apple and Google to do better," Davidson said.

The report outlines specific changes that the officials would like to see from the companies, but added that new legislation and enforcement actions would also be needed to fully achieve their recommended changes. While Davidson's agency doesn’t have regulatory power itself, the report was developed in consultation with officials at the Federal Trade Commission and the Department of Justice Antitrust Division, both of which could potentially move on these issues, Davidson said.

"One potential solution to many of the structural issues present in the current app ecosystem is increased antitrust enforcement, both domestically and internationally," the report says.

App Store icon displayed on a phone screen is seen in this illustration photo taken in Krakow, Poland on January 29, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
The app store icon displayed on a phone screen is seen in this illustration photo. (Jakub Porzycki/NurPhoto via Getty Images)

Also Wednesday, the Biden Administration announced a series of actions around “junk fees” by rolling out proposed new rules from the the Consumer Financial Protection Bureau targeting credit card companies. The administration is also urging congressional action around issues with fees in online ticket sales, airlines that charge families to sit together, and more.

The coordinated announcements from Washington on Wednesday came as part of President Biden’s Competition Council, an interagency group charged with increasing competition in the American economy. They have a meeting scheduled in the East Room of the White House at 1:15 pm ET on Wednesday to discuss the announcements further.

In response to the report, Apple (AAPL) said the company welcomes a robust app economy.

"We appreciate the report acknowledges the importance of user privacy, data security, and user convenience," a spokesperson told Yahoo Finance. "Nevertheless, we respectfully disagree with a number of conclusions reached in the report, which ignore the investments we make in innovation, privacy, and security — all of which contribute to why users love iPhone and create a level playing field for small developers to compete on a safe and trusted platform.”

A spokeswoman from Google (GOOG), Julie Tarallo McAlister, added: “We disagree with how this report characterizes Android, which enables more choice and competition than any other mobile operating system."

A call for new legislation from Congress

Wednesday’s 50-page report entitled “Competition in the Mobile App Ecosystem” calls for several changes that could impact how consumers interact with their phones in the years ahead.

A primary focus in the report is around the applications that come pre-installed on new phones. Biden officials pointed to web browsers and mapping software as areas where they say consumer choices are constrained. The report also calls for App Store operators to stop favoring their own apps and proposes a ban on the requirement that developers use an app store in-house payment system.

US President Joe Biden speaks during the third meeting of the White House Competition Council in the State Dining Room of the White House in Washington, DC, on September 26, 2022. (Photo by Mandel NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)
President Joe Biden speaks during a meeting of the White House Competition Council at the White House in September. (MANDEL NGAN/AFP via Getty Images)

Furthermore, the report charges that the current App Store model is too hard for consumers when it comes to getting outside apps and charges that both Apple and Google create hurdles for developers through things like restriction on how apps can function.

As part of the process of compiling the report, both Apple and Google filed comments to the NTIA pushing back on many aspects of the final report. In its filing, Apple called their offering an "economic engine for app developers" that supports 20 million workers by connecting them with millions of customers around the world.

Google's filing argues the Android App store offers a more open experience than its counterparts and “transparency and control underpin our approach to privacy.”

The report says that the current system harms consumers and leads to inflated prices and reduced innovation. In a recent op-ed in the Wall Street Journal, President Biden wrote about the overall need to “bring more competition back to the tech sector.”

But administration officials acknowledged that much of what they are proposing won't become a reality without action from Congress.

In 2021, lawmakers introduced a bill that covers similar ground called the Open App Markets Act. Those lawmakers charge that both Apple and Google use gatekeeper control to stifle competition and proposed a series of new rules to limit things like self-preferencing. The bill was eventually shelved as time ran out on the effort in 2022 amid lobbying from tech CEOs against that bill and another measure.

On Tuesday, Davidson declined to endorse any specific bill for 2023, but noted “many of our recommendations would be answered and addressed by legislation such as the the Open App Markets Act as it was introduced last year.”

The bipartisan effort has yet to be reintroduced during the current congressional session.

Overall, White House Deputy Director for the National Economic Council Bharat Ramamurti stressed that the White House plans to lobby Congress to act, but it also has significant authorities to act unilaterally, more details of which could be announced in the months ahead.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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