Above a desk somewhere in Apple’s headquarters, someone probably stuck the slogan “One more week, another lawsuit” and this week doesn’t look any different, as the EU is targeting Apple Pay, or more specifically how Apple restricts the use of the NFC chip inside on the iPhone.
What is the claim?
In the second indictment in Europe this year, EU antitrust regulators say Apple is restricting competitors by denying access to NFC (Near-Field Communications) technology, which it uses in its mobile wallet.
An objection statement was sent to Apple detailing how it abused its dominant position in the iOS mobile wallet markets in violation of Article 102 TFEU.
Apple Pay has access to NFC input APIs that the company does not provide to third party payment companies. However, other platforms allow third parties to have access to NFC technology to make such payments.
IN EU statement says it “does not dispute the online restrictions or alleged denials of access to Apple Pay for specific products of competitors that the Commission said had concerns when it launched an in-depth investigation into Apple’s practices.”
The case is different from the proposals within EU Digital Markets Actwhich will also affect Apple’s business. Apple faces control and regulation in most of its major markets, including the United Kingdom, the United States, Korea, Europe, Japan and others.
What the EU says
“In our statement of objections, we found in advance that Apple may have restricted competition in favor of its own Apple Pay solution. If confirmed, such behavior would be illegal under our competition rules, “said Executive Vice President Margrethe Vestager in a statement.
Regulators say Apple has significant market power in the mobile market and dominates mobile wallets. The Commission claims that the company is abusing this power by maintaining access to NFC technology on its Apple Pay devices, to the detriment of competitors and consumers.
Apple will now have time to investigate and respond to the allegations as part of an ongoing investigation.
The statement of objections should not be confused with a final verdict – although Vestager has already rejected security counter-arguments and regulators seem deaf to the need for consumer privacy.
What Apple says
In a statement provided to me, Apple defended itself, saying: “We designed Apple Pay to provide an easy and secure way for consumers to digitally present their existing payment cards and for banks and other financial institutions to offer contactless payments to their customers.
“Apple Pay is just one of many options available to European consumers to make payments, and ensures equal access to NFC, while setting industry-leading privacy and security standards. We will continue to work with the Commission to ensure that European consumers have access to the payment option of their choice in a safe and secure environment. “
It is worth noting that Apple recently opened the NFC chip for Apple developers for use with the Apple Tap to Pay feature, which turns the iPhone into card readers. This still prevents competitors from using the NFC chip to make payments from the iPhone. Apple too recently published a report this showed how successful third-party applications on its platforms can be.
What’s the story?
Apple really started laying the groundwork for iPhone payment technology years before Apple Pay was introduced in 2014. In 2010, it acquired VIVOtech, a contactless / close communications technology company, and soon appointed industry expert Benjamin Vigie as a product manager of mobile commerce.
Vigier was probably a key mercenary to enable Apple’s plans; he also oversees the development of mobile payment systems for Starbucks and Paypal. This hiring was not accidental. Apple had already filed patents for the use of NFC technology by then, and speculation had already begun about Apple’s plans to hold airline tickets on the iPhone.
When Apple launched the service, it was so long behind everyone else, but Apple Pay soon overshadowed that of similar services from Samsung, HTC and others. It turned out that people making mobile payments want brand trust, security and biometric identity to seal these transactions.
Since then, Apple Pay has probably become the most widely used NFC-based payment system in the world; It can be argued that the iPhone maker has done more than most to overcome the initial resistance of consumers to mobile payment systems.
Why is this happening?
Apple is a victim of its own success. When the company introduced the iPod and launched its iTunes ecosystem, it was a small company fighting for survival against Microsoft and others.
The same basic business plan used by Apple with iTunes was later transposed around the iPhone and App Store. Today, the company has become the most valuable technology company in the world, which means that it is subject to a different set of rules.
Whereas before she was a small player fighting for a position, today she has become a big company and has to expect control. He also needs to develop a new approach to this side of his business, while increasing revenue elsewhere.
It seems inevitable that the space for mobile payments will become cluttered.
Most mobile payment systems have probably failed amid suspicion across the sector appeared in 2010. Apple has built a far deeper currency of trust in its customer base and seems to have greater ambitions in the financial services space. These ambitions inevitably pit the company against occupiers in space, so it’s no surprise to see regulators get involved.
What is at stake?
Money. If the EU finds Apple guilty, it could be fined up to 10% of its global turnover, although it is unlikely to be punished to that extent. Apple Pay is used by more than 2,500 banks in Europe, along with more than 250 applicant banks and fintech services.
In the background, we also continue to speculate about Apple’s plans to introduce new payment services and expand the availability of Apple Cards outside the United States. Related to this, we hear rumors that the company may intend to release Apple’s plan as a service.
What can happen?
Apple seems ready to fight tooth and nail to defend its strategy to make some features specific to the platform. Full control of its ecosystem has always been part of his approach, so it is philosophically in line with this strategy.
However, the nuances of technological regulation cast heavy shadows on the company at this time, and as with any conflict resolution, it will ultimately be achieved through a combination of negotiation and regulation.
This may take years, but the arguments made elsewhere about its ecosystem are probably applicable here as well.
I think the final question will be how much Apple can charge third-party companies for access to profitable parts of its system without being seen as anti-competitive. And to what extent will regulatory activity dilute the consumer experience?
In the course of events, I imagine that Apple will try to say that those who complain about its business practices in mobile payments are trying to take advantage of its work, given other attempts to create systems popular as her own they have already failed.
This argument is unlikely to win over regulators for its position, but it could help the company justify its right to claim part of any future transactions made through its third-party service platforms. I doubt the latter will get a free ride.
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