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European digital legislation ensures effective hardware and software’s interoperability and opens up competition in this sector, e.g. by preventing Apple from excluding other mobile wallets from the iPhone’s system. Now competitors are able to compete with Apple Pay for mobile payments in shops and Apple cannot keep other mobile wallets out of the market. This EU decision will benefit consumers by opening up innovation and keeping payments secure.
Background
Apple has created a closed digital system around its devices and their operating systems; they also integrate other services, e.g. loyalty cards, contactless tickets for events, boarding pass and/or digital identity credentials, etc. Within this digital system, there are multiple markets for services: among those services there are mobile payment apps, the so-called “mobile wallets”. Mobile wallets allow for payments with a mobile device, in shops and online; mobile wallets have grown considerably in Europe: the use of mobile wallets in shops has tripled over the last four years.
The EU law (art. 102, TFEU) prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition. The implementation of this provision is defined in Regulation No 1/2003*), which can also be applied by the national competition authorities.
Apple Pay is Apple’s own mobile wallet used to allow iPhone users to pay with their devices in stores and online. Apple’s iPhones run exclusively on Apple’s operating system ‘iOS’ and manage to control the system, including access for mobile wallet developers.
Following the opening of a formal antitrust investigation into Apple’s behavior in June 2020, the Commission sent Apple a Statement of Objections in May 2022. In January 2024, the Commission market tested Apple’s first set of commitments. The Commission also adopted a decision closing its investigation into online restrictions and alleged refusals of access to Apple Pay for specific products of rivals that the Commission also opened in June 2020. This decision also closes all proceedings in relation to the UK, which no longer forms part of the EEA.
Source: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3706
*) Note. Several aspects in the Regulation 1/2003 can be used to understand the Commission’s move: i.e. art. 9 (1) enables companies investigated by the Commission to offer commitments in order to meet the Commission’s concerns and empowers the Commission to adopt a decision to make such commitments binding on the companies. For example, art. 27 (4) requires that before adopting such decision the Commission shall provide interested third parties with an opportunity to comment on the offered commitments. If the market test indicates that the commitments are a satisfactory way of addressing the Commission’s competition concerns, the Commission may adopt a decision making the commitments legally binding on the company concerned. Such a decision does not mean that there is an infringement of EU antitrust rules, but it is legally binding that companies comply with the offered commitments.
Reference to: https://ec.europa.eu/commission/presscorner/detail/da/ip_24_3706
The Apple case
In 2022, the Commission raised concerns over Apple’s conduct in relation to the so-called mobile wallet solution. The Commission’s preliminary finding was that Apple abused its dominant position by restricting access to the technology needed to make payments by iPhones. In Europe, the most widely available technology for mobile payments in stores and supermarkets is the so-called “near field communication”, or NFC. This technology enables wireless communication between a mobile phone and a store’s payments terminal; i.e. it allows customers to “tap and go” using just the mobile phone.
The NFC technology was not developed by Apple; it is a standardised technology and it is available for free. Compared to other technologies, like payments using QR codes, it allows for the safest and most seamless mobile payment experience; presently, it is the most widespread payment solution in the EU. Hence, in order to develop viable mobile payment apps, the access to NFC technology is therefore essential.
According to the Commission’s investigation, three preliminary conclusions have appeared: first, Apple holds a significant position in the market for smart mobile devices; second, Apple is dominant in the market for NFC functionalities and for mobile wallets for iPhones; and third, Apple refused to give access to the NFC technology on the iPhone to rival wallet developers. Instead, Apple reserved the use of the NFC technology on the iPhone to its own mobile wallet solution.
Without access to the iPhone’s NFC functionalities, competitors cannot reach Apple users. So, iPhone users can only pay with the ‘tap and go’ function with Apple Pay and they cannot pay with other wallets; this Apple’s attitude prevented developers from bringing new and competing mobile wallets to iPhone users. Besides, by excluding others, Apple unfairly shielded its own mobile wallet from competition.
The Commission’s preliminary finding was therefore that Apple abused its dominant position by refusing to supply the NFC technology to competing mobile wallet developers. By excluding competitors from the market, it may have had a negative impact on innovation with the harmful reduction in choice and innovation to consumers; besides, it is illegal under EU competition rules. However, to address these Commission’s concerns, Apple offered a set of commitments earlier in 2024.
Source and citations from: https://ec.europa.eu/commission/presscorner/detail/da/speech_24_3746
Conclusion
Present Commission’s decision is in line with the digital business practices that are covered by the EU Digital Market Act, DMA concerning both in-store payments with iPhone using NFC technology and bringing more opportunities required by the DMA, e.g. they include monitoring and dispute resolution mechanisms. Thus, the Commission is looking forward to see the implementation in practice; it also shows that antitrust enforcement goes hand in hand with the DMA.
From now on, Apple can no longer use its control over the iPhone system to keep other mobile wallets out of the market. Competing wallet developers, as well as consumers, will benefit from these changes, opening up innovation and choice, while keeping payments secure.
The commitments will remain in force for ten years and apply throughout the EEA; their implementation will be monitored by Apple who will report to the Commission for the same time period. Apple’s commitments are without prejudice to Apple’s current or future obligations under other regulations, in particular relating to other use cases and functionalities within the scope of the DMA (Regulation 2022/1925) and the implementation of the Digital Euro.
Citation
= “It is safe and convenient to pay with your phone. Apple has committed to allow rivals to access the so-called “tap and go” technology of iPhones; present decision makes Apple’ commitments binding. It opens up competition in this crucial sector, by preventing Apple from excluding other mobile wallets from the iPhone’s ecosystem. From now on, competitors will be able to effectively compete with Apple Pay for mobile payments with the iPhone in shops. So consumers will have a wider range of safe and innovative mobile wallets to choose from”.
Margrethe Vestager, Executive Vice-President in charge of competition policy.
Source: Commission press release at https://ec.europa.eu/commission/presscorner/detail/da/ip_24_3706