An Iowa-chartered credit union alleges in a proposed class action lawsuit that Apple has illegally monopolized the mobile wallet market by preventing consumers from using products capable of offering competing tap-and-pay solutions.
The plaintiff, Affinity Credit Union, says in the 43-page antitrust complaint that although Android devices afford users a selection of tap-and-pay mobile wallets, such as Google Pay and Samsung Pay, Apple users’ only option on iOS devices is Apple Pay.
According to the suit, Apple did not secure this “preeminence” by building a better product, but instead by locking iOS users into using Apple Pay exclusively for all mobile wallet transactions and barring would-be competitors from accessing the near field communication (NFC) technology—which allows a smart device to send a wireless signal to a payment terminal in close proximity—needed to compete in the market.
Per the case, Apple charges payment card issuers fees that no other mobile wallet providers impose, and these fees, the lawsuit says, generated a reported $1 billion for the tech giant in 2019. The plaintiff alleges these “issuer fees” are “manifestly supracompetitive” and the result of anticompetitive conduct.
“If Apple faced competition, it could not sustain these substantial fees,” the suit says. “Alternative mobile wallets, including Google Pay, would be downloaded onto iOS devices, and card issuers would agree to make their cards available on those substitute mobile wallets at zero cost and would not agree to make their cards available on Apply Pay unless and until Apple reduced its price to the competitive level.”
The filing goes on to allege that Apple has “further cemented its market power” by blocking all U.S.-based card issuers from passing on Apple Pay fees to consumers. Essentially, to participate in Apple Pay, the suit says, a card issuer must agree not to impose a surcharge on a cardholder’s Apple Pay transactions, a rule that the plaintiff argues prevents issuers from using differential pricing to drive consumers to lower-cost, alternative methods of payment.
Further still, although Apple Pay can be used to make e-commerce payments online and within apps, card issuers, critically, cannot disable the e-commerce function or negotiate a different fee on those transactions, according to the complaint. This is due to the fact that Apple bundles Apple Pay’s e-commerce functionality with the tap-and-pay service and requires users who “accept the latter to also accept the former.”
“As with tap and pay, when a user completes an Apple Pay transaction in e-commerce, members of the class must pay the same supracompetitive fees to Apple,” the plaintiff relays. “Thus, even though Apple’s exclusionary conduct—i.e., the restriction on the use of NFC technology—operates on point-of-sale transactions, Apple, by bundling its tap and pay and e-commerce services, can extract the same monopoly rents on transactions in e-commerce. This compounds the injury card issuers suffer.”
Summarizing, the lawsuit alleges Apple has run afoul of the federal Sherman Act by unlawfully tying together its iOS mobile devices and mobile wallet and by foreclosing all competitors from the mobile wallet market. The case notes that Apple was the subject of a statement of objections in May 2022 from the European Commission, who stated that it took issue with the company’s decision to prevent mobile wallet developers from accessing the necessary hardware and software on its devices to the benefit of Apple Pay.
As a result of Apple’s conduct, the complaint alleges, card issuers pay and have paid fees they otherwise would not have in a competitive market. Moreover, if there were multiple tap-and-pay mobile wallets allowed on iOS devices, competitors would need to innovate to differentiate their offerings, such as by improving transaction security, the suit contends.
The lawsuit looks to represent all U.S. entities that issued any payment card enabled for Apple Pay and paid Apple a fee for any Apple Pay transaction on that payment card.
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