Apple Accused of Antitrust Violations
Lawsuit alleges that, with Apple Pay, the company uses its market power in the mobile device industry to fend off competition from rival payment apps.
Apple Inc. was hit with an antitrust lawsuit over Apple Pay—accused of, first, using its market power in the mobile device industry to fend off competition from rival payment apps and, second, charging card issuers fees to boost its bottom line.
The proposed class-action complaint by Affinity Credit Union marks the latest antitrust battle for the iPhone maker, after it’s faced increasing regulatory scrutiny in recent years over its App Store policies. European regulators, after a nearly two-year investigation, also found on a preliminary basis that Apple abused its dominant position with Apple Pay in the market for tap-to-pay apps or mobile wallets.
IPhone users must use Apple Pay if they want to buy something by tapping the phone against a terminal in a store. Other iPhone payment services, such as PayPal and Square—as well as financial institutions like Chase, Citi, and American Express—can’t launch tap-to-pay iPhone apps with their own features and interface.
By excluding competition, Apple can charge “payment-card issuers fees that no other mobile wallet ventures to impose,” Affinity Credit Union, the Des Moines, Iowa–based payment card credit union that issues payment cards, said in the lawsuit filed Monday in federal court in San Jose, California.
Apple charges issuers 0.15 percent on credit card transactions and 0.05 percent on debit cards. Google Pay and Samsung Pay, operating on the Android system, don’t charge card issuers any fees. The Apple Pay fees “generated a reported $1 billion for Apple in 2019, and this revenue stream—earned from card issuers—is predicted to quadruple by 2023,” Affinity Credit Union said in the lawsuit.
“If Apple faced competition, it could not sustain these substantial fees,” Affinity Credit Union said. The credit union claims Apple is violating the Sherman Act—designed to protect competition—by tying its mobile devices and mobile wallet together and by exclusing all competitors.
Apple didn’t immediately respond to a request for comment.
But in discussing the European Union’s (EU’s) probe of Apple’s mobile payment policies in May, the region’s digital chief, Margrethe Vestager, said Apple claimed it can’t provide access to NFC for security reasons.
“Our investigation to date did not reveal any evidence that would point to such a higher security risk,” Vestager said, according to prepared remarks posted on the EU’s website. “On the contrary, evidence on our file indicates that Apple’s conduct cannot be justified by security concerns.”
Affinity Credit Union is represented in the California lawsuit by Hagens Berman, a frequent class-action lawsuit opponent of Apple. The law firm helped plaintiffs reach a $400 million settlement in 2016 over eBooks price fixing, a $100 million deal in 2021 for small App Store developers, and a $95 million settlement this year over product warranties.
The suit is Affinity Credit Union v. Apple Inc.,3:22-cv-04174, in the Northern District of California (San Jose).
—With assistance from Mark Gurman & Leah Nylen.
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