There could still be a net benefit while also increasing choice and competition. By allowing 3p app stores.
each app store competitor could create their own privacy policies, quality requirements, or maybe manual curation. whatever differentiation.
Apple would still surely capture a large % of average consumers whose privacy would be protected. But those who care could seek out and customize their experience and chose a different privacy policy.
It's not seeking out and customizing my experience if the only choice is "have my privacy violated, or don't use the service. That's the experience that already exists on platforms with less strict privacy protections.
If this dystopia of Government control over my phone comes to pass, I personally predict that we'll see companies like Google, Meta and Adobe run company stores as the exclusive way to load their apps.
As others have pointed out, this only works as well as it does for Apple because there isn’t a reasonable way to side load apps. As soon as there is, Facebook will just jingle their large carrot on their own distribution system that lets them do whatever they want.
The only thing other than price is the opportunity to attract less scrupulous developers in a race to the bottom with respect to policy enforcement.