Working the Refs

Inside Apple’s Push to Kill State App Store Bills

State lawmakers have floated numerous bills to break Apple’s grip over the App Store. A TTP investigation reveals the iPhone giant’s extensive pushback.

Apple mounted an aggressive, behind-the-scenes lobbying campaign in Georgia and other states to kill or tamp down legislation that threatened its tight control over the App Store, according to a new investigation by the Tech Transparency Project (TTP) that sheds light on the company’s scramble to counter growing threats to its business model.

TTP examined hundreds of previously undisclosed emails, obtained from state governments through open records laws, that reveal the range of tactics used by Apple to thwart bills that target its App Store practices. These tactics include swarming states with lobbyists, some of them unregistered; warning state officials that the bills would spark expensive litigation; and leveraging the controversial right-wing group ALEC to sway lawmakers in Republican-controlled state legislatures.

Apple deployed some of these strategies in Georgia, where it had notable success in derailing app store legislation, according to the emails, which TTP recently shared with Politico. The communications also illuminate Apple’s tactics in states like Arizona and North Dakota, which tried and failed to advance similar bills. Apple’s intensive push in the states gives a taste of it how may respond to a newly announced federal, bipartisan bill that seeks to bring more competition to the app store market.

Apple has been under growing pressure in the U.S.European Union, and other countries over its App Store rules, which include taking a cut as high as 30% of an app’s sales. As accusations grow that Apple is abusing monopoly power, the company has begun to make concessions, lowering its commission to 15% for app developers with annual sales of up to $1 million; letting developers tell users about payment methods outside the App Store; and allowing some apps to link to external websites for users to make payments.

But as TTP’s research shows, the company has also lobbied furiously to keep states from imposing any regulations that might restrict its gatekeeper role in the App Store, one of Apple’s key profit engines.

Georgia

On February 1, 2021, a group of Republican lawmakers in Georgia introduced a pair of app store bills, SB 63 and HB 229, in their respective chambers. The bills allowed iPhone users to load apps from outside the App Store—and prohibited Apple from forcing app developers to use its payment processing system. (The House bill also had one Democratic co-sponsor.)

Within a week of the bills’ introduction, a trio of lobbyists made Apple’s displeasure clear to the office of Georgia’s Republican attorney general, Christopher Carr, according to emails reviewed by TTP. 

On Feb. 4, Tyler Stephens, of the Washington, D.C.-based Republican lobbying firm Fierce Government Relations, wrote to Carr’s chief of staff: “We (Apple) are obviously opposed to the legislation below, which is being pushed by our competitors.” (Parentheses in the original.) Stephens followed up later that day with four bullet-pointed legal arguments against SB63.

 

On Feb. 10, another lobbyist for Apple, Rufus Montgomery, expanded on those arguments in a follow-up email to Carr’s chief of staff, warning that the app store bills would, among other things, violate the dormant Commerce Clause, the Fifth Amendment, the Contract Clause, Equal Protection Clause, and Georgia’s state constitution. A few weeks later, Montgomery raised the prospect that the legislation would result in “potential legal cost/exposure to the state” and “put the state in a legal bind.”

 

The email didn’t specify the “legal bind” for the state, but the implication was clear: If the app store bill were to pass, the AG’s office would face an expensive onslaught of litigation—a daunting prospect, given Apple’s status as the world’s most valuable company.

According to Politico, which reported on TTP’s findings, Apple lobbyists also told state lawmakers that the company would pull out of two major investments in Georgia if the legislation passed: a $25 million commitment to a historically black college in Atlanta and a “potentially multibillion-dollar partnership with Kia to build autonomous vehicles.” Apple denied to Politico that it made such threats; one source told the publication it came from the company’s outside lobbyists.

The emails show the AG’s staff was surprisingly solicitous of Apple. Carr’s director of external affairs, Jordan Watson, told Montgomery on Feb. 24 that neither of the bills “appear to be moving” and that the lead state senator on SB 63 had expressed “second thoughts” to him. Watson then offered to gather intelligence on the House bill, saying he could call an analyst in the Georgia House Judiciary committee, which had jurisdiction over the measure, to find out more. At one point, Watson reached out to Montgomery about the bills: “How’s it going my man? What are you hearing?”

In the end, Apple’s heavy lobbying appeared to pay off. On Feb. 26, the same Judiciary analyst emailed a revised version of the bill to the AG’s office, saying, “I know you were getting questions on it. Let me know if this new version alleviates concerns or creates new ones.” A comparison of the original bill and revised draft shows that an entire section had been removed that would have prohibited Apple from forcing developers to use its payment processing system. This represented a significant weakening of the bill, gutting one of its central goals. 

Still, Apple’s lobbyists continued to press the company’s case. Matt Konenkamp, one of the lobbyists for Apple, talked with Attorney General Carr in person on March 2. In a follow-up email to Carr, Konenkamp reiterated Apple’s opposition to the bill and attached the same legal analysis warning of potential lawsuits. Konenkamp previously served as a policy advisor to then-South Dakota Gov. Dennis Daugaard.

In the end, both the House and Senate bills failed to advance during the legislative session.

Notably, Konenkamp and Stephens didn’t register their lobbying in Georgia, in apparent violation of state rules. Georgia law requires anyone engaged in lobbying to register with the Georgia Government Transparency and Campaign Finance Commission “before commencing lobbying activities.” Stephens is not listed in the Commission’s lobbyist registry in 2021 or 2020. Konenkamp is registered as an Apple lobbyist in North Dakota, but not in Georgia.

Both Stephens and Konenkamp told Politico they had not spent enough time lobbying Georgia officials to meet the threshold for registration in the state, but time isn’t the issue in Georgia law. The trigger for registration is based on expenditure. Anyone lobbying for anticipated compensation of $250 or more is expected to register beforehand with the state.

This hidden activity contributes to a lack of transparency about Apple’s influence efforts in the state and leaves open the possibility that there were additional unregistered lobbyists who, like Konenkamp, met in person with officials without sending follow-up emails subject to public disclosure laws.

Arizona

News reports have documented how lobbyists for Apple and Google descended on Arizona as that state considered its own app store measures, SB 1642 and HB 2005, which were introduced in early February. The bills prohibited app stores from requiring developers to use their payment processing systems. As TTP’s investigation shows, Apple was particularly aggressive in its battle to halt the bills and worked in concert with right-wing groups to do so.

SB 1642 went nowhere in committee after its introduction in the Senate as a parade of tech industry groups including ACT: The App Association, TechNet, and CTIA, and the Electronic Transaction Association expressed opposition. (Apple is a funder of ACT, and both Apple and Google are members of ETA, TechNet and CTIA.) But HB 2005 proved to be a more difficult target to neutralize, and Apple resorted to other tactics.

On Feb. 15, Stuart Goodman, a lobbyist retained by Apple, sent the chairman of the Arizona House Commerce Committee, which was set to take up the bill, letters from Michael Bowman, president of the right-wing American Legislative Exchange Council (ALEC), and Grover Norquist, head of Americans for Tax Reform. The letters warned the legislation amounted to government overreach that would harm consumers, an argument tailored to Republicans, who hold a majority in the Arizona House.

Apple may have seen these groups as a conservative-friendly vehicle for its messaging on the App Store issue, but making common cause with ALEC in particular comes with a lot of political baggage. The controversial right-wing group is a so-called model-bill factory known for pushing conservative and corporate-friendly bills nationwide, according to the Center for Media and Democracy, which has tracked ALEC-promoted measures to ban “sanctuary cities” for illegal immigrants, advance “stand your ground” gun rights, and promote climate change denialism. Tech companies like Facebook and Google have withdrawn from ALEC over the years as its activities have garnered media attention. Apple is not a reported member, but is evidently willing to link up with the group when its corporate interests are at stake.

Interestingly, Goodman, the Apple lobbyist, pushed an ALEC letter in Georgia that was actually addressed to North Dakota lawmakers. He explained that rather than wait for the group to send an Arizona-specific letter, he was sending the North Dakota version “given the similarities between the two bills.” His access to North Dakota communications highlights the multi-state nature of Apple’s lobbying blitz.

 

Apple's full-court press got traction. During an exchange with David Hansson—co-founder of Basecamp, a fierce critic of Apple over the App Store fee issue—Arizona House Commerce Committee Chairman Jeff Weninger lamented that lobbyists had scared enough members of his panel off the bill that there was no way it would pass. On Feb. 16, he released HB 2005 to the chamber's Appropriations Committee to give it another chance.

 

The chair of the Appropriations Committee, Regina Cobb, was a sponsor of HB 2005. She called a Zoom “stakeholder meeting” with representatives of Apple, Google, the Arizona Chamber of Commerce, and the Coalition for App Fairness, whose members include Apple critics like Basecamp, Epic Games, Match Group, and Spotify. She later scheduled a meeting with Grover Norquist. Cobb had gotten the idea for the legislation from a Match Group lobbyist. When Basecamp’s Hansson praised her for not caving to Apple's "army of lobbyists," she assured him she was “not easily bullied."

HB 2005 narrowly passed the Cobb’s Appropriations Committee on Feb. 22, and less than two weeks later, it squeaked through the full Arizona House by a vote of 31 to 29. But as attention turned to the bill’s fate in the Senate, Apple was already beefing up its lobbying presence in the state. Between January and March, the company tripled its lobbying force in Arizona—going from two individual lobbyists and a single lobby firm to six lobbyists and three firms.

The expanded lobbying team included two of Apple’s own government affairs executives, D. Michael Foulkes and Timothy Powderly, as well as a pair of Republican operatives with extensive connections in the state: Kirk Adams, former chief of staff to Arizona Governor Doug Ducey and speaker of the Arizona House from 2006 to 2011, and Constantin Querard, who served as Arizona campaign chair for Sen. Ted Cruz’s 2016 presidential run. Adams is known for spearheading the legal defense of Arizona’s hardline immigration bill that, among other things, gave police power to detain suspected illegal immigrants.

On March 11, Apple lobbyist Goodman sent another legal analysis to J.D. Mesnard, chair of the Arizona Senate Commerce Committee, which was due to take up the bill. The document—on letterhead from the law firm Paul, Weiss, which Goodman described as Apple’s outside counsel—described HB 2005 as “susceptible to legal challenges,” another not-so-subtle hint of what might await the state if lawmakers passed the bill. Over the next two weeks, groups like R Street Institute, ACT and NetChoice sent letters to individual senators opposing the measure. The Commerce panel tabled the bill by unanimous voice vote on March 24.

TTP’s analysis of the emails show that Apple took a leading role in trying to defeat the Arizona bills. Google may have preferred to do its talking through trade groups; the most assertive communication from Google appears to be an email reminding lawmakers that Google drives a lot of economic activity in the state.

North Dakota and other states

North Dakota was one of the first states to gain national attention for proposing an app store bill, drawing early attention from Apple and Google. The bill’s subsequent defeat on Feb. 16 was widely viewed as a major victory for Apple.

The measure, SB 2333, would have forced Apple to allow competitor app stores on its devices and let app developers use alternative payment processing methods. Many of Apple’s efforts to derail the legislation were public, such as when the company’s chief privacy engineer, Erik Neuenschwander, testified that the bill would “destroy [the] iPhone as you know it.” But because North Dakota law allows legislators to keep their communications hidden from public scrutiny, other aspects of Apple’s lobbying activities are more difficult to assess.

TTP’s investigation, however, did turn up communications that shed light on Apple’s North Dakota strategy. As noted earlier in this report, Stuart Goodman, a lobbyist for Apple who was working to kill Arizona app store legislation, shared a supportive letter from ALEC that originally went to lawmakers in North Dakota. That suggests Apple’s lobby team used the same tactic in North Dakota, cozying up to right-wing groups to appeal to the state’s Republican-controlled legislature.

Public records suggest that Apple has also lobbied against current or potential app store legislation in states like Rhode Island, Florida, and Colorado. Apple, for example, retained a lobbyist in Colorado to, among other things, monitor developments in “app fairness.”

According to one email, Rachel Cone, a lobbyist for Apple, forwarded the ALEC opposition letter from North Dakota to Republican Florida State Rep. Blaise Ingoglia, chairman of the state’s House Commerce Committee, on March 19. Cone had met with Ingoglia the day before to discuss Apple’s opposition to app bill legislation introduced in various states. There were no public reports of an app store bill in Florida at the time, meaning this was likely a preemptive effort to steer Florida away from exploring similar legislation.

Apple, meanwhile, had a significant lobbying presence in Rhode Island during that state’s debate over a pair of bills, S0770 and H6055, that challenged the app store business model. Two Apple executives, D. Michael Foulkes and Fred Zeytoonjian, registered to lobby in opposition to H6055 along with two outside lobbyists for Apple. Three other outside lobbyists were deployed against S0770. Zeytoonjian met with three Rhode Island state senators: Dawn Euer, Stephen Archambault, and Leonidas Raptakis—all members of the state’s Senate Judiciary Committee.

Google, notably, has not reported lobbying on any bills Rhode Island as of June 2021.