Testimony before the Arizona House Judiciary Committee Regarding App Security

Arizona State Legislature
House Judiciary Committee
February 9, 2022
Patrick Hedger, Executive Director, Taxpayers Protection Alliance

RE: Opposition to HB 2662

Dear Chairman Blackman, Vice-Chair Nguyen, and distinguished Members of the House Judiciary Committee,

My name is Patrick Hedger and I am the Executive Director of the Taxpayers Protection Alliance, a national nonprofit, nonpartisan taxpayer and consumer advocacy organization.

HB 2662 severely limits the ability of Apple, Google, and other operators of software stores to honor their contracts and safety and security commitments to their customers, the average Americans who own a smart devices.

There is an inherent market failure present in any technology market: information asymmetry. A simple example of information asymmetry is when your car mechanic tells you a part you’ve never heard of needs to be replaced. It’s always difficult to tell if you’re being ripped off, usually until it’s too late.

Brick and mortar retail stores helped alleviate this market failure in all kinds of consumer products by giving consumers an additional point of trust and recourse in the transaction. If you buy a defective Samsung television from Walmart, you can seek recourse from both Walmart and Samsung.

HB 2662 dramatically weakens this natural, free-market solution to the inherent market failure of information asymmetry in the app economy. Currently, when consumers purchase digital products through apps on major app stores, they do not have to second guess if their purchase is protected. Major app stores, like Apple’s, operate like a department store, curating the products and serving as a trusted point of purchase for third-party app digital goods and standing behind the sale.

By overseeing in-app payments, consumers enjoy incredible protections. Centralized tracking and management of app subscriptions allows consumers to see and cancel all of their subscriptions in one place. Ask-to-buy protects families against children making accidental or unapproved purchases within apps by alerting the account holder. Most importantly of all, by overseeing in-app payments, store operators are able to protect their customers from credit card fraud. If a stolen credit card is used and flagged in one app, standardized in-app payment systems are able to stop purchases anywhere within the managed app store ecosystem.

HB 2662 upends the ability for Apple, Google, and other store operators from standing with their customers and protecting their purchases. The legislation transforms app stores from secure digital department stores to online flea markets.

The harms are not theoretical. In 2020, Apple’s App Store alone stopped $1.5 billion in potentially fraudulent transactions, protected the owners of more than 3 million credit cards, and banned over 1 million accounts from ever transacting in the App Store again.

On behalf of taxpayers and consumers in Arizona and across the country, we urge the committee to not advance legislation that would introduce the market failure of information asymmetry where it currently does not exist and violate the commitments that app store providers have made to protecting their customers.

Thank you for your time,

Patrick Hedger
Executive Director
Taxpayers Protection Alliance