Apple Pay Unlawfully Restricted Access To NFC, EC Says

May 4, 2022
The European Commission has preliminarily found that Apple Pay violated competition law by restricting access to key technology necessary to run mobile wallets.

The European Commission has preliminarily found that Apple Pay violated competition law by restricting access to key technology necessary to run mobile wallets.

As part of its antitrust investigation into Apple Pay, the commission has issued a statement of objections setting out its preliminary findings that the technology giant abused its dominant position by limiting access by third-party developers of mobile wallets to the standard near-field communication (NFC) technology.

The NFC "tap and go" technology embedded on Apple mobile devices enables contactless communication between a mobile phone and payment terminals in stores.

According to the commission, Apple restricted third-party access to NFC, a key technology to develop rival mobile wallet solutions on Apple's devices.

By reserving access to NFC technology to Apple Pay alone, the commission alleges that Apple abused its dominant position in the market for mobile wallets on its iOS operating system.

This has led to an exclusionary effect on competitors, less innovation and less choice for consumers for mobile wallets on iPhones, according to the watchdog.

Currently, Apple Pay is the only mobile wallet solution that can process payments using NFC technology on iOS and is “by far the largest” NFC-based mobile wallet on the market, according to the European Commission.

“Mobile payments play a rapidly growing role in our digital economy. It is important for the integration of European Payments markets that consumers benefit from a competitive and innovative payments landscape,” said former competition commissioner Margrethe Vestager.

“The potential for innovation in this space is enormous. But this innovation has been prevented by Apple refusing others to access NFC on its devices,” Vestager added.

“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 incentive to innovate itself.”

Vestager has been a crusader of European competition rules against US tech giants. During her tenure leading the European Commission’s Directorate-General (DG) for Competition, the department imposed record billion fines on Google, Facebook, Intel and Qualcomm and ordered Apple to recover €13bn in illegal state aid received from Ireland. Vestager is now executive vice-president for "A Europe Fit for the Digital Age and Competition" within the commission.

Should the European Commission decide against Apple, the bigtech could face a fine of up to 10 percent of its overall annual turnover, which stood at $365bn in 2021.

In addition, the agency could direct the company to open up access to its NFC technology for competitors, providing a host of new opportunities to market participants. These could include buy, now pay later (BNPL) services, transaction alerts or easily accessible financial overviews.

Vestager stressed that this investigation will inform the future application of the Digital Markets Act (DMA), the EU’s regulatory initiative to rein in large online platforms.

The DMA will require companies designated as gatekeepers to ensure effective interoperability with hardware and software features they use themselves in their ecosystems, including access to NFC for mobile payments.

Responding to the announcement, an Apple spokesperson said in a statement: “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.”

“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,” they added.

Other investigations

Other practices by the tech giant are also subject to EU scrutiny. In a separate investigation, the EC is looking into Apple’s terms and conditions for integrating Apple Pay in merchant apps and websites on iPhones and iPads and alleged refusals of access to Apple Pay. While that investigation is related to access refusals for specific products of rivals, the currently SO concerns access to NFC input by third-party developers.

At the same time, Apple’s NFC practices have been a concern in other parts of the world too, but so far none of these efforts has led to an antitrust finding or regulatory reform.

In 2019, a US House report identified that Apple is able to preference its own services by reserving access to certain device functionalities, such as NFC, for itself.

The Netherlands antitrust authority closed an investigation into the tech giant last July, conceding that Apple’s NFC infrastructure is anti-competitive, but that current regulation is unsuitable for dealing with the concerns.

Similarly, the Australian Competition and Consumer Commission is investigating Apple Pay’s restrictions on banks, while the Australian parliamentary joint committee on corporations and financial services was also looking at concerns against restricting NFC access on Apple devices.

Its report, issued last October, however, concluded that these NFC restrictions do not require regulatory action as such imbalances are seen in other areas of Australia's payment system too.

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