Op-Ed: Gene Burrus: The junk fee Congress can actually cut

Americans have become careful readers of prices. After years of inflation, we notice the delivery surcharge, the shrinking cereal box, the TV sports package that costs three dollars more than it did last spring. Yet one of the most durable markups in the American economy has escaped this scrutiny almost entirely. It lives inside your phone, and this week, Congress has a chance to do something about it.

Here is how it works. Apple and Google control the operating systems on nearly every smartphone in the country, and digital purchases inside those apps overwhelmingly flow through their payment systems. For the privilege, they collect a commission of up to 30 percent. Buy a subscription, an audiobook, a language course, or cloud storage on your phone, and as much as thirty cents of every dollar goes to the company that owns the storefront, whether or not it built anything you bought.

As with any business, someone has to cover those fees, which is why a subscription often costs more when purchased on your phone than on the web, and why some services refuse to let you sign up inside their apps at all. The fee is real, it is enormous, and it is baked into the price of digital life for hundreds of millions of Americans. It is a privately imposed tax that just never appears on the receipt.

On Wednesday, a House Energy and Commerce subcommittee will hold a hearing on the App Store Freedom Act, a bipartisan bill from Representatives Kat Cammack, Republican of Florida, and Lori Trahan, Democrat of Massachusetts.

The bill is refreshingly plain. It would let you install apps from outside the dominant store, pick your own defaults, and delete the apps that came preloaded on your phone. It would let developers use the payment processor of their choice, point customers to a website for a better price and deals, and all without fear of retaliation. And it would require the platforms to give competing developers access to the same tools they reserve for themselves.

None of this is exotic. It describes how your laptop already works. You can buy software for a Mac or a PC from anywhere, pay however you like, and it works. These norms, originating from the Microsoft antitrust case in the early 2000s, unleashed nearly three decades of unprecedented business growth in Silicon Valley and elsewhere. The bill asks only that the computer in your pocket offers the same choice and flexibility as the computer on your desk.

The loudest objection is security, and it deserves a serious answer. It has received one. Tom Ridge and Janet Napolitano, who ran the Department of Homeland Security under presidents of different parties, joined other security experts in a letter to Congress arguing that competition strengthens safety. What protects your phone, they explain, is engineering: the encryption, sandboxing, and hardware defenses built into the device itself. It is not a review process that fields roughly 100,000 app submissions a week and spends less than five minutes on each. That process has waved through scam apps downloaded roughly half a billion times, collecting some $365 million along the way, with some of that money flowing to Apple and Google.

There is also a candor problem with the security story. Apple already permits companies like Amazon and Uber, who earn billions on the mobile platforms, to run their own payment flows. If alternative payments endangered consumers, those exemptions would be inexplicable. The rules bend for some companies but hold firm for companies that Apple just happens to compete with, which tells you the commission was always the point.

The second objection holds that the commission funds innovation. If it did, the money would show up as investment. Documents in the Epic litigation put the App Store’s operating margin, depending on how you account, to be at least 78 percent, and likely much higher. Apple disputed the math without offering its own. Whatever that margin is funding, it isn’t invention nor improved security, which Apple has little incentive to improve upon.

Congress can do frustratingly little about most prices. Rent, groceries, and gas respond slowly, if at all, to legislation. Here is a price Congress can actually move: a hidden markup on the digital services woven into daily life, sustained by market power rather than by any cost of doing business. Removing it requires no subsidy, no new agency, and not one taxpayer dollar. It simply requires Congress to reintroduce competitive incentives into the mobile marketplaces.

The Energy and Commerce Committee should pass the App Store Freedom Act and send it to the floor. Americans are watching every price now. This is one Washington can finally lower.

Gene Burrus serves as global policy counsel for the Coalition for App Fairness, a nonprofit coalition that advocates for freedom of choice and fair competition across the app ecosystem.