05 May 2022

The Economist: Watchdogs take a swipe at Apple Pay

Why complaints about Apple’s walled garden are multiplying. THERE IS NOT yet an app to keep track of the growing number of antitrust complaints against Apple. But perhaps there should be.

 On May 2nd the European Commission, the EU’s executive arm, added another to the pile. Following an investigation begun in 2020, it sent the smartphone-maker a “statement of objections”, saying that, in the commission’s view, Apple is abusing its power in the market for smartphone payments.

At issue is Apple Pay, a contactless-payment service introduced in 2014. Apple Pay uses a specialised radio called a Near-Field Communication (NFC) chip to allow an iPhone to work like a contactless credit card. Users who have loaded their banking details onto their phones can wave them at contactless-payment terminals—or even other iPhones—to pay for things. Apple collects a fee from the user’s bank for each transaction.

The service has quickly become popular: in 2020 Bernstein, a financial firm, estimated Apple Pay accounted for about 5% of global card transactions, and forecast that it might reach 10% by 2025. The problem, in the commission’s view, is that iOS, the operating system used by iPhones, allows only Apple’s own mobile-wallet software to make use of the NFC chip. That freezes out rivals who might want to build competing payment apps of their own. Android, a rival smartphone operating system maintained by Google, does allow third-party apps access to a phone’s NFC chip, meaning that Android users can choose contactless-capable smart wallets from firms such as Google, Samsung, PayPal and others. (Complaints from PayPal in particular are thought to be at least one reason for the commission’s investigation.)

The commission’s findings are only preliminary. But if a full-blown investigation comes to the same conclusion, Apple would be in breach of European competition laws, and exposed—at least in theory—to hefty fines of up to 10% of its worldwide turnover. The firm will have further chances to argue its corner, both in writing and in person, before the commission issues a final decision, a process that could take many months....

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