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Illinois Democrats push bill to cut into app fees paid to tech giants

As Illinois tries to lead the Midwest in progressive climate policy and electric vehicle production, lawmakers are now turning their attention back to regulating tech companies.

Senate Bill 3417, called the Freedom to Subscribe Directly Act, was announced in a press conference Wednesday. The bill aims to eliminate fees levied by software distributors like Apple and Google. Apple and Google reportedly take a 15-30% cut of sales on their App Store and Google Play Store platforms.

Software company Basecamp’s founder David Heinemeier Hansson spoke at Wednesday’s press conference about the harm that these fees can cause on Illinois businesses. Basecamp has been based in Chicago for over 20 years.

When Basecamp introduced their email service Hey.com in summer 2020, he said they were informed Apple would take 30% of revenue made through the App Store. If they refused, Hey.com would be removed from the App Store. Basecamp fought back and won, avoiding these fees. Hansson said he believes that all software companies should have the same right without having to start a fight with these mega corporations.

Hansson believes that if Basecamp can fight against these fees, so can the legislature.

“There are literally millions of developers for these platforms around the world and surely lots of them in Illinois as well. And many of them suffer in silence and fail to grow their business efficiently as they hand over these exorbitant cuts of revenue, or are denied the right to even exist when these companies reject their applications from the app stores on bogus pretenses,” said Hansson.

This bill is sponsored by state Sen. Sara Feigenholtz, D-Chicago. She said distributors are extracting hundreds of millions from Illinois companies.

Feigenholtz filed a similar bill in 2021 and faced a lot of backlash from large companies. (Apple recently introduced an App Store Small Business Program, featuring a reduced commission rate of 15% on paid apps and in-app purchases.)

Feigenholtz noted, however, that she and her fellow lawmakers also had trouble garnering public support from affected businesses.

“There were a lot of small developers who were in our calls, on our Zooms, talking about their experience, but they basically backed out of making a public statement about it in fear that they would be cut off from their platforms,” Feigenholtz said.

Also speaking Wednesday in favor of the bill were state Sens. Robert Peters, D-Chicago, and Steve Stadelman, D-Rockford, and state Rep. Edgar Gonzalez Jr., D-Summit. Gonzalez is the chief sponsor of House Bill 4599, a companion bill in the Illinois House.

Stadelman, a former journalist, said the bill could be a boon for local newspapers. Many smaller Illinois media outlets are moving to digital versions and stories distributed via app, but these fees create a barrier.

Danielle Coffey of the News Media Alliance restated the necessity of this fee exemption for Illinois newspapers, especially in a time of rampant misinformation and fake news.

“What we provide is local news, valuable coverage of what's going on in communities … and that's threatened by the dominant platforms. So while our audiences are exponentially growing, because of the information that we're providing to these communities, the dominant platforms reap all the revenue and the reward,” said Coffey.

While no Republican lawmakers joined Wednesday’s event, Gonzalez said he is expecting bipartisan support.

“States that have considered this on the state level include Arizona, Georgia, Florida, North Dakota — you know, just hearing them, that these are red states — so because of that you know that a lot of Republicans are behind this,” said Gonzalez.

SB 3417 is currently awaiting committee assignment.

Copyright 2022 WCBU. To see more, visit WCBU.

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