European Commission takes aim at Apple Pay in antitrust probe

The European Commission sent Apple on Monday (2 May) the preliminary findings of a competition investigation into its mobile payment system, Apple Pay, suggesting that the US tech giant had “unfairly shielded” its system from competitors and therefore stifled innovation.

The EU executive initiated the antitrust proceedings of its own initiative in June 2020, as part of a wider objective of integrating the European payment market. The investigation concerns Apple Pay, the mobile payment system that allows users to make in-store payments directly through electronic devices.

For the Commission, Apple has created ‘close ecosystems’ with the operating systems of the iPhone and iPads, gaining absolute control over the user’s experience. That is also its mobile wallet solution since it was first rolled out in 2014.

The investigation is based on the concern that Apple deliberately restricted access to the technology that has become the industry standard for contactless payments with mobile devices, the Near-Filed Communication (NFC), known by consumers as ‘tap and go’.

“Apple has unfairly shielded its Apple Pay wallets from the competition. If proven, this behaviour would amount to an abuse of a dominant position, which is illegal under our rules,” the Commission’s competition chief, Margrethe Vestager, told a press conference.

According to the Commission’s assessment, NFC technology is the most secure, seamless and fastest solution on the market. Preventing other developers from employing NFC effectively resulted in undercutting competitors because alternative solutions are not as good nor as widely used.

An Apple spokesperson told EURACTIV that “Apple Pay is only one of many options available to European consumers for making payments, and has ensured equal access to NFC while setting industry-leading standards for privacy and security”.

The EU executive sent to Apple its statement of objections, an initial step to inform the concerned company about the suspected violations of EU antitrust rules. Apple will now be able to reply in writing.

“We will continue to engage with the Commission to ensure European consumers have access to the payment option of their choice in a safe and secure environment,” the Apple spokesperson added.

Vestager declined to comment on the level of the fine that Apple might face. An eventual fine would be calculated based on what Apple Pay has been charging users for its services.

She stressed that developing mobile payment technology is an expensive endeavour that requires a customer base larger than just Android, where there is competition between these systems.

Android is estimated to count for around 70% of the world market share for mobile operating systems, with Apple’s iOS making up for the rest. However, the iPhone’s percentage of users tends to increase with the income, meaning they are predominantly present in the most profitable markets.

Therefore, the Commission has found that as a result of Apple’s closed system several developers have abstained from creating their own payment technology, thereby decreasing technological innovation and consumers’ choice.

Apple has justified the exclusion of competitors from the NFC technology with security concerns, noting that its payment system has virtually zero frauds thanks to a special security chip that interacts with the NFC to protect the users’ data.

For the iPhone-maker, the Android ‘open’ model is more susceptible to attacks that could compromise the customer’s card information.

“We take security very seriously. Our investigation to date did not reveal any evidence that would point to such a higher risk. On the contrary, evidence in our file indicates that Apple’s conduct cannot be justified by security concerns,” Vestager added.

In March, the EU co-legislators reached a political agreement on the Digital Markets Act (DMA), a set of ex-ante rules for technology giants like Apple.

One of the provisions of the new legislation, which is expected to be binding in around two years, would require the designated companies to ensure the interoperability of their hardware and software with third-party services.

For Vestager, the ongoing investigation will support the Commission in applying the DMA rules. The probe might also enable the Commission to better assess Apple’s argument that opening up iOS to alternative app stores, which is another obligation of the DMA that the iPhone-maker opposes on security grounds.


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