Illinois bill looks to counter California tech monopoly

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QUINCY (WGEM) – Illinois senators have introduced a bill aimed at preventing tech giants like Apple and Google from making profits from Illinois app developers.

Currently, whenever an in-app purchase is made through Apple or Google payment service, they take 30% of the revenue. App providers are not allowed to use other payment services without the risk of being kicked out of the platform.

Some companies, such as Uber or McDonalds, are allowed to exceed the 30% mark to order from their websites. Services such as dating apps, premium music subscriptions, and games are subject to discounting. As well as subscriptions to digital news when this is done through the application.

The Direct Subscription Freedom Act prohibits Apple and Google from requiring developers to use their app stores to sell their products and services.

Illinois-based software company Basecamp is one supporter of this proposal. CTO and co-founder David Heinemeier-Hansson said that Apple threatened his company not to allow the new email service to run on the Apple App Store if Basecamp did not use its payment service.

“Apple has asked to sell our new service through their payment processor, so they can get a 30% discount, or we’ll be kicked out of the App Store.” Heinmer Hanson said.

“Basecamp may be among the few companies that are willing to speak up but we are far from the only ones dealing with these oppressive regimes,” he continued.

Similar bills have been proposed in nine state legislatures across the country: Florida, Georgia, Hawaii, Massachusetts, New York, North Carolina, and North Dakota. A similar bill was introduced in the US Senate as well, with bipartisan support.

For Illinois, there are three main concerns in this policy.

Increase corporate tax revenue

When the 30% is lowered by Apple and Google, the corporate tax revenue goes to their primary states of California.

Senator Sarah Feigenholtz (D-Chicago) wants tax revenue to return to Illinois.

“As we try to update our revenue base, we as a country must take advantage of the lost revenue,” Wijgenholtz said. “We need to keep big tech in check.”

In 2021, Apple and Google announced $110 billion in revenue for their app stores. By estimating that Illinois provides 1% of app sales nationwide, Feigenholtz said, Illinois lost $1 billion in tax revenue.

Senator Robert Peters (D-Chicago) describes Google and Apple as a “middleman,” and charges a fee to allow app developers to connect with consumers. The current system, he says, pulls money from residents into the accounts of large corporations “in the Cayman Islands.”

Technology Industry Development in Illinois

Peters sees the bill as an opportunity for economic development in Illinois that is not based on tax cuts. Instead, he argues, it protects Illinois’ growing business.

“This is a good first step to protect businesses and consumers in Illinois from monopolistic control that prevents small developers from communicating with people directly,” Peters said.

Instead of cutting the 30% to Apple or Google, the legislation will allow app developers to use other third-party payment services, such as Paypal or Stripe, or work on developing their own.

Several tech companies support the legislation, according to a press release. Some of them are not based in Illinois. The Match Group, responsible for dating site Match.com, backs the bill but is based in Texas.

The only tech company in Illinois mentioned to support the bill so far is Basecamp, which offers its own email provider as well as business management software for working remotely.

Support local news

As more newspapers and news organizations move towards a digital audience, their subscription fee is subject to a 30% cut by Apple and Google.

Senator Steve Stadelman (D-Rockford) argued that money taken from them could be vital to support local newsrooms.

“This is a large amount of money that could be used to help staff newsrooms,” Stadelman said. “Local news operations have already lost a lot of advertising money to tech companies, and I think that’s one way to make this playing field more fair.”

Local news organizations, especially newspapers, have faced difficulties in recent years as the rise of digital technology has reduced the number of people picking up newspapers. Thousands of newspapers were closed across the country, and many newspapers conducted newsroom cuts.

As a former reporter, Stadelman said the closure of local newsrooms “raises concerns about the democratic process.”

“If there is no one covering local city councils or school boards, how will people get the information they need to make informed decisions,” he said.

Copyright 2022 WGEM. All rights reserved.

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