26 September 2023

EU takes hard look at Apple Pay

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David Meyer* says the European Union has slapped Apple with an antitrust case over Apple Pay contactless payments.

Users of Apple’s iPhones are able to pay for things by tapping their handsets against payment devices—but only using the manufacturer’s own Apple Pay app.

Other mobile wallets don’t get to access the handsets’ tap-to-pay functionality.

That situation is not okay, according to the European Commission, which on Monday slapped Apple with an antitrust charge sheet known as a “statement of objections.”

“We have indications that Apple restricted third-party access to key technology necessary to develop rival mobile wallet solutions on Apple’s devices,” said Margrethe Vestager, the European Commission vice president in charge of both antitrust and digital policy.

“In our statement of objections, we preliminarily found that Apple may have restricted competition, to the benefit of its own solution Apple Pay.

“If confirmed, such a conduct would be illegal under our competition rules.”

The technology in question is called near-field communication, or NFC—it’s the most commonly used means of enabling contactless payments, and iPhones have included NFC since 2015.

“The potential for innovation in this space is enormous,” said Vestager.

“But this innovation has been prevented by Apple refusing others to access NFC on its devices.

“As a result, various features of mobile wallets, such as financial complementary services, are simply not available.

“Because Apple is not challenged, it has little incentives to innovate itself.”

And because Apple won’t allow other mobile wallets access to NFC on iPhones, Vestager said, some developers of those rival apps “did not go ahead with their plans as they were not able to reach iPhone users.”

The EU is an Android-first part of the world, but Apple still accounts for over a quarter of mobile sales there.

Apple has in recent years claimed that it cannot let other financial services institutions use the NFC functionality in iPhones because doing so would “fundamentally diminish the high level of security Apple aims to have on our devices.”

The European Commission, which is the EU’s executive body, doesn’t buy that.

“Our investigation to date did not reveal any evidence that would point to such a higher security risk,” said Vestager.

“On the contrary, evidence on our file indicates that Apple’s conduct cannot be justified by security concerns.”

The company now gets to respond to the objections before the Commission makes a final decision on the matter, which could involve a fine.

“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,” an Apple spokesperson said in an emailed statement.

“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.”

Vestager also said the case would inform how the EU’s Digital Markets Act—a blockbuster piece of antitrust legislation that was introduced earlier this year—will be applied in practice.

“It will set a precedent with regard to the analysis of the security concerns, and a recipe for effective and proportionate access to NFC for mobile payments,” she said.

Apple and Google both decried the introduction of the DMA, which as Vestager noted Monday will force them to “ensure effective interoperability with hardware and software features they use themselves in their ecosystems.”

The Commission started investigating Apple’s NFC limitations in 2020, along with its policies for taking a 30 per cent cut from App Store app sales.

That latter issue earned Apple a separate statement of objections a year ago.

*David Meyer, the editor of CEO Daily and a senior writer on Fortune’s European team, is a Berlin-based journalist with a decade and a half’s experience writing about technology, business, policy, and politics.

This article first appeared at finance.yahoo.com.

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