As online payment methods have become more popular, so have virtual credit and debit cards, many of which can be connected to mobile phones and used with just a tap. One of the most popular forms of this virtual wallet is Apple Pay, the main form of payment used by IPhone and IPad owners.
To create this function, Apple uses Near-Field Communication (NFC) technology, which allows payment credentials to be saved securely in the wallet, and then connects the credentials with card readers through the physical act of touching or hovering over them. This technology has not been made available to third-party virtual wallet developers looking to expand their services to Apple users. Therefore, this exclusive NFC technology has become the basis of an antitrust investigation in the EU as well as a class action lawsuit in the United States. Competing virtual wallet companies claim that Apple’s refusal to share NFC technology made it difficult for rivals to develop alternative payment options for Apple devices that could compete with Apple Pay.
However, the several year battle, governed by the EU over Apple’s coveted tap-to-pay technology, came to a head in early 2024 when Apple offered to settle the EU antitrust suit. Apple proposed a set of commitments to improve competition, such as allowing third-party phone wallet companies to access their NFC technology, as well as informing Apple users of the option to choose a third-party phone payment service, instead of automatically opting in to Apple Pay. However, these commitments do not involve full disclosure to third-party companies. Apple will not provide access to the special chip used in the virtual wallet called the “secure element” that affords Apple Pay users heightened security when completing their transactions.
Despite the lack of complete disclosure, this new development could possibly allow Apple to appease the EU and dodge a massive fine, which could be up to 10% of their global annual turnover, while also setting an interesting precedent regarding Apple’s ability to make their services the only viable option for Apple users.
Despite the lack of complete disclosure, this new development could appease the EU and allow Apple to dodge a massive fine, which could be up to 10% of their global annual turnover. Additionally, it could also set an interesting precedent regarding Apple’s ability to make their services the only viable option for Apple users.
Third-party companies claim that “Apple’s conduct forces more than 4,000 banks and credit unions that use Apple Pay to pay at least $1 billion of excess fees, and harms consumers by minimizing the incentive to make Apple Pay safer and easier to use.” But they also believe that the commitments offered by Apple will remedy these issues. The EU commission will seek feedback from these competitors and from customers before deciding whether to accept the Apple’s proposed settlement.
Furthermore, Apple is currently facing an identical suit in California, where private card issuers brought a class action suit against the tech giant, accusing them of thwarting competition for Apple Pay. The court held early this year that “Plaintiffs could try to prove that Apple violated the federal Sherman antitrust law by enforcing a 100% monopoly over the domestic market for tap-and-pay wallets for iPhones, iPads and Apple Watches.” With the new settlement in the EU, it could be expected that Apple may also settle with American based virtual wallet companies, by providing the necessary technology to promote competition.
As this same tap-to-pay issue plays out in the United States, it will be interesting to see if this standard will also expand to similar American-based suits faced by Apple. For example, the Spotify suit regarding anti-steering obligations that prevented Spotify from advertising their music service to Apple users, as well as the saga regarding Apple’s iOS App Store, in which Apple was charged with unfair competition in regards to the fees they implement on app developers using the App Store. Ultimately, the precedent set in regards to Apple’s tap-to-pay technology could create an opening for other tech companies to gain access to the market where Apple has long had a strong grip.
Olivia Nieri is a second-year law student at the University of North Carolina School of Law, from Durham, North Carolina. Before attending law school, Olivia attended the University of North Carolina at Chapel Hill and received her degree in psychology. In her free time, Olivia enjoys reading novels and trying new restaurants.