The European Commission has secured commitments from Apple regarding its operations of Apple Pay, effectively resolving a lengthy investigation into potential competitive concerns. Margrethe Vestager, the European Union’s Executive Vice President for Competition Policy, addressed the media at a press conference on Thursday.
Apple must implement adjustments by July 25 to allow rivals to develop near-field communication-enabled mobile payments, enabling seamless “tap-and-go” transactions for customers. With the latest iOS updates, users can now seamlessly access a range of key features by merely doubling-clicking on their Home button, allowing them to effortlessly launch their preferred apps alongside enhanced biometric security through Face ID, Touch ID, or robust passcode authentication mechanisms.
Apple might allow customers to designate a third-party Passbook app as the default, rather than its own native Passbook.
The EU’s competition division launched a thorough investigation into Apple Pay, as well as Apple’s mobile costs and mobile wallet services, in ????, following numerous consumer complaints. The initial plan focused on examining Apple Pay in its entirety. The focus subsequently shifted to leverage Apple’s capabilities for seamless contactless transactions.
Two years after commencing its inquiry, the European Union announced preliminary findings indicating that Apple exploited its dominant market position to stifle competitors from introducing near-field communication (NFC)-enabled contactless payment solutions for the iPhone, effectively preventing rivals from developing alternative mobile wallets that could compete fairly with Apple Pay.
The European Union expressed concern over Apple’s restrictions on rivals’ ability to develop wallet apps that could wirelessly communicate with NFC payment terminals, mirroring the functionality of Apple Pay. The company suspected that Apple’s restrictions on enabling its contactless payment technology were unfairly limiting their ability to capture market share. The EU demanded that Apple grant unrestricted access to its NFC technology, enabling competitors to create alternative digital wallet solutions.
Apple has been invited by the European Union to respond to its May 2022 Statement of Objections. When these modifications were provided, they were intended to facilitate the settlement of the case. Apple proposes allowing third-party developers to create cellular wallets and cost providers to access NFC functionality on iOS devices at no additional cost, through a suite of APIs that don’t require the use of Apple’s own payment or wallet technology?
The proposed technology would nonetheless prevent competitors from accessing a specific chip on Apple devices, known as the secure element, which is used to reinforce the security of transactions made using Apple Pay. However, Apple stated it will provide “equal access” to NFC components through a mechanism called “Host Card Emulation (HCE) mode”. This innovative technology enables third-party wallets to store customers’ payment credentials and process full transactions securely via NFC, without gaining access to sensitive security features.
Apple committed to delivering additional capabilities, including the promise of presenting third-party apps with enhanced features and performance, such as defaulting popular free-to-play games and access to authentication options like Face ID, its biometric authentication technology. The company also committed to utilising FRAND principles when determining whether to permit access to its NFC infrastructure.
Stronger commitments
European Competition Commissioner Margrethe Vestager announced on Thursday that she had accepted Apple’s proposal, following calls for some key improvements.
“Excluding competitors from the market may have had a detrimental impact on innovation.” The lack of emphasis on selection and innovation poses a significant threat. It poses a significant risk to customers and contravenes EU competition regulations. Earlier this year, Apple had issued a set of commitments to address these concerns, according to her.
“In the past month, we’ve thoroughly reviewed a comprehensive collection of data and sought expert opinions to gauge the effectiveness of potential solutions in addressing our pressing concerns.” The issue sparked widespread interest. Numerous financial institutions, application developers, and payment organizations provided their recommendations to us. We thoroughly reviewed the feedback and demanded that Apple strengthen their commitments. When Apple subsequently offered enhanced treatments, we were already there to ensure those treatments were legally enforceable against Apple.
The particulars of Apple’s enhancements to its January provision, as outlined in the Fees report, include a commitment to:
- Eliminating the necessity for builders to hold a licence as a Fee Service Supplier (PSP) or establish a binding agreement with a PSP to access the Near Field Communication (NFC) portal.
- To align the HCE-based payment system with Apple Pay’s evolving needs.
- While streamlining dispute resolution processes and condensing timeframe expectations.
In response to the European Union’s investigation into Apple Pay, the bloc has issued revised rules aimed at enhancing competition in digital markets by imposing upfront obligations on prominent platforms, including Apple’s iOS, to prevent tech giants from blocking rivals’ access to crucial infrastructure. EU lawmakers urge the Digital Markets Act (DMA) to expedite efforts in rebalancing digital dominance and revitalizing competition in monopolized markets.
After introducing the regulation, the European Union began consulting with business stakeholders regarding Apple’s Apple Pay service, taking into account the modifications it had proposed and aligning them with the necessary requirements of the Digital Markets Act.
The European Commission has formally approved Apple’s commitments on Apple Pay, exceeding requirements set forth in the Digital Markets Act. “For instance, they champion monitoring and dispute resolution mechanisms,” she stressed, highlighting that this underscores the harmonious relationship between antitrust enforcement and the Digital Markets Act.
While Apple has a strong presence in the tech industry and the iPhone is a dominant force in the smartphone market, it cannot solely rely on these assets to keep competitors out of the mobile wallet space. Competition among pocket builders and customers alike will benefit from these enhancements, fostering innovation and choice while prudently preserving resources.
The commitments will remain legally binding for a period of 10 years, effective immediately. Failure to comply with these regulations will result in severe consequences.
Apple confirmed that its technology is being made available to European financial institutions, offering developers the option to enable near-field communication (NFC) contactless payments and transactions for a range of use cases – including automotive keys, closed-loop transit, company badges, home keys, hotel keys, loyalty rewards, and event tickets – from within their iOS apps using Host Card Emulation-based APIs. Apple Pay and Apple Cash will continue to be available throughout the European Economic Area (EEA) for consumers and developers, providing a straightforward, secure, and personalized way to make payments, while allowing current transactions to transition smoothly from Apple Cash.
