Arizona’s GOP Goes Crazy
Every party has lawmakers who stir division and act like clowns, but even the Arizona GOP’s most sensible members have been acting a bit bizarre lately. Nothing can compete with Rogers’ rantings, of course, but Republican lawmakers have been doing their best lately to embarrass the party by taking some decidedly big-government positions.
They recently passed a clearly unconstitutional bill to limit the public from recording police officers. And last month, the House Commerce Committee’s GOP members voted to insert the government into a contract dispute, picking winners and losers and telegraphing this message to companies: If we don’t like you we will destroy your business model. Relocating California businesses ought to consider that before putting Arizona on their short list.
Such a stance would have been unfathomable until recently, as would have been the interventionist posturing from GOP committee members Justin Wilmeth of Phoenix, Jeff Weninger of Gilbert, and Neal Carter of Phoenix. They reminded me a little of Democratic Sen. Elizabeth Warren — the trust-busting Massachusetts progressive who has championed this type of legislation and even did a tech event that week with Arizona progressives.
The measure, House Bill 2200, targets Silicon Valley-based technology firms. Lefties have always wanted to use government to control businesses and now conservatives go along with them perhaps because of their pique over online censorship. House Bill 2200 would do nothing to address that frustration, but it shows that Republicans are as willing as progressives to use the government to “do something!”
Warren sees the bill as a step toward a government breakup of tech businesses, even though its provisions are far narrower. The legislation would ban app developers from using their own online digital stores as the only means to accept payment. It’s a transparent attack on Apple and, to a lesser degree, Google — the two main platforms where consumers purchase smart-phone apps. Other app stores exist, but lawmakers exempted them from the regulations in a crony-capitalist move.
Lawmakers want to force the AppStore and Google Play to let outside app companies collect their own payments and thereby avoid the fees they now pay Apple and Google. It’s as if a tool manufacturer demanded to set up its own cash register in a Lowe’s or Home Depot to avoid paying for the shelf space and then lobbied the government for help after the retailers told them to go to Aisle 17, find some sand, and pound it. (READ MORE: Washington Is Trying to Muck Up the Tech Market’s Consumer Protections)
Supporters tout the measure as a consumer-driven reform. It’s not. Other multibillion-dollar companies — mostly game makers such as Epic and the parent company for dating sites Tinder, Match.com — don’t like the terms of the contracts they accepted with Apple and Google. They want access to app stores, but don’t want to pay the fee. As a side effect, the new rules would reduce competition and drive up costs for the remaining apps sold in the stores.
These corporate rent seekers are claiming that Apple and Google are monopolies — a nonsensical argument given that other app stores exist (Samsung, for instance) and no one is blocking firms from entering that market. Federal courts have looked at Apple’s system (Epic Games v. Apple) and found nothing monopolistic about it. “Success is not illegal,” the judge noted — but it could soon be illegal in Arizona. The courts, not legislatures, should handle contract matters.
HB 2200’s supporters argue that the contracts are lopsided given the market power of Apple and Google. How does this differ from the unilateral contracts we sign when we stay at the Hilton or rent a car from Enterprise? If you don’t like the terms that the companies offer, you can do business elsewhere rather than lobby the government for a favor.
In full disclosure, I testified before the House Commerce and Judiciary committees on behalf of my employer, the R Street Institute. The bill had lost the previous week in Judiciary, then lawmakers reinserted the language (a striker amendment) into a different bill and brought it back from the dead at the urging of its GOP Senate sponsor Regina Cobb.
“Like most government meddling in the marketplace, this legislation will have unintended — but not unforeseen — consequences,” I argued. “The bill has the potential to upend the marketplace for applications that consumers download onto their smart phones and other electronic devices.” Furthermore, “App stores reflect the wonders of the digital marketplace” by giving “even the smallest developer unparalleled market access — the equivalent of giving a mom-and-pop business shelf space in Wal-Mart or Costco.”
Those stores vet the apps in advance, assuring that they don’t wreak havoc on anyone’s devices, and they offer a trustworthy payment system that reduces concerns about fraud and financial privacy. This comes at a price. The stores charge large developers as much as 30 percent of sales and 15 percent for smaller developers — although companies that offer free apps pay no commission. They represent over 90 percent of the apps available in both stores.
“We understand why app developers would prefer to pay a lower rate, just as we understand why companies that sell their products in large retail stores would prefer that the retailers receive a smaller cut,” I wrote. “The issue is not about the proper size of the commission, however, but about the right of store owners to negotiate their own business terms with their clients — and the proper role of government in regulating businesses.”
Unfortunately, Arizona Republicans increasingly believe in a nearly unlimited role for the government when it comes to interfering with private businesses. Not many of them act like Wendy Rogers, but their position still puts them out on the fringes.
Image credit: andreykr