Will Arizona Republicans choose regulation over markets?
Arizona’s Free Enterprise Club gave a hearty endorsement to a list of state legislative candidates in the 2020 election cycle. “It is critical Arizona has leaders and policy makers who are able to articulate and stand up for free market principles and pro-growth policies,” the group explained. “This slate of candidates has proven they can and will.”
That’s music to this free-marketer’s ears, but perhaps the club should be less optimistic about what these candidates will do. It endorsed Arizona State Rep. Regina Cobb, a Republican who represents the state’s largely rural western edge, but her latest effort—which has, oddly, been backed by the club—is something that one might expect from an anti-free-enterprise progressive.
Cobb is the primary sponsor of House Bill 2662, which would dictate the terms of private business contracts. Specifically, the legislation bans digital companies—Google and Apple—from using their own application stores as the exclusive means to offer their products. It’s a plainly anti-market and anti-growth measure, the equivalent of forcing Lowe’s to take Home Depot payments at its stores.
But Arizona Republicans have largely supported it, possibly out of their general pique at big tech companies. Conservatives have been angry at censorship of right-leaning viewpoints by social media firms, which has led them to back a wide range of antitrust proposals that would normally raise their market hackles. It’s unwise, however, to legislate based on anger rather than principle.
“While D.C. sits on its hands, we are taking action now to challenge Big Tech’s monopoly and make Arizona a better place for every app user and app developer,” Reps. Cobb and Leo Biasiucci wrote last year in Arizona Capitol Times, in support of a similar bill. They said it would “lower prices for consumers and free small businesses from Big Tech’s ‘app tax.’”
But describing a private contractual fee as a “tax”—and pretending that meddlesome business regulation promotes entrepreneurism—doesn’t change the true nature of the legislation. Their newest bill is similar to efforts in other legislatures to pressure the federal government into reworking these two large companies’ payment arrangements.
A previous (HB 2005) effort even drew praise from Sen. Elizabeth Warren (D-Mass.) who is one of the U.S. Senate’s least market-friendly members. “Apple & Google’s app platforms are a necessity for many small businesses & startups to exist—but they rig the rules to bulldoze competition and consolidate their power. … Bills like this are a good start.”
It would be ironic if Arizona Republicans jumpstart a process that gives government even more power to dictate the contractual terms of private businesses. Such efforts rarely end well. And Warren’s hyperbole is nonsensical when one considers that the app stores have created incredible opportunities for small companies and startups.
As R Street has explained, app stores “created a new means of distribution that allowed even the smallest developers to reach a global market while providing consumers with a convenient and trusted source for new apps.” That’s something I’ve compared, in my bill testimony, to providing even the tiniest mom-and-pop business with shelf space in Wal-Mart or Costco.
The main supporters of the Arizona bill are not these small businesses. Ninety percent of the millions of apps available on Google Play or App Store are available as free downloads, so their developers pay no commission. This is the work of relatively large firms that want to pay less for access to Google’s and Apple’s markets. The biggest developers pay as much as 30 percent commissions on their sales.
“Companies including Spotify, Match Group and Fortnite maker Epic have waged a long-running battle against the phone makers, arguing that the commissions they take on in-app purchases are anti-competitive,” The Washington Post reported. In free-market circles, we call this “rent-seeking”—defined as manipulating government policy to increase profits.
Supporters of HB 2662 certainly are members of a special club—but don’t confuse it with one that necessarily supports free enterprise.
Image credit: SeanPavonePhoto