Today, the Commission has sent a Statement of Objections to Apple. We are concerned that Apple may have illegally distorted competition in the market for mobile wallets on Apple devices.
Apple Pay case
In June 2020, the Commission opened an investigation to assess whether Apple’s conduct in connection with Apple Pay violates EU competition rules.
On a preliminary basis, we have found that Apple abused its dominant position. Apple restricted access to key inputs that are necessary to develop and run mobile payment apps, so-called ‘mobile wallets’. Mobile wallets allow for payments with a mobile device, in shops and online. Mobile wallets can integrate complementary services, such as ‘buy now pay later’, transaction alerts, easily accessible financial overviews, as well as boarding passes, tickets and loyalty cards.
In Europe, most payments in brick-and-mortar shops made with a mobile phone rely on a wireless technology called ‘Near Field Communication’ – NFC. This functionality enables communication between a customer’s mobile phone and the shop’s payments terminal. In essence, it allows you to ‘tap and go’. NFC technology was developed by third parties, is standardised and available in almost all payment terminals in Europe. There are other technologies, such as those based on QR code, that can be used for mobile payments. But NFC technology is the most widespread in the EU, and allows for the safest and most seamless experience.
Apple has built a closed ecosystem around its devices and its operating system, iOS. And Apple controls the gates to this ecosystem, setting the rules of the game for anyone who wants to reach consumers using Apple devices. But other app developers depend on the access to this ecosystem to develop innovative mobile wallets.
The potential for innovation in this space is enormous. But this innovation has been prevented by Apple refusing others to access NFC on its devices. As a result, various features of mobile wallets, such as financial complementary services, are simply not available. Because Apple is not challenged, it has little incentives to innovate itself.
And this is important. Because this market is growing fast. Today, Apple Pay, is by far the largest NFC based mobile wallet on the market.
We have analysed the market for smart mobile devices, as well as for the NFC input and for mobile wallets on iPhones. We have come to the preliminary conclusion that Apple holds a significant position on the device market and a dominant position in NFC input and wallets on iOS.
In Europe, NFC functionality is vital for developing a viable payment app on mobile phones. Neither the NFC standard nor the terminal infrastructure are property of Apple. Our concerns relate to Apple’s decision to block access to the NFC technology for payment purposes and use it solely for its own mobile wallet, Apple Pay. As a result, users of Apple devices can only pay with the ‘tap and go’ function using Apple Pay and not with other wallets. This is because competing wallet developpers need access to the NFC on Apple devices to reach Apple users.
Developing a mobile payment application is costly. Investment may only be worth it if developers can reach both Apple and Android customers. Evidence on our file indicates that some developers did not go ahead with their plans as they were not able to to reach iPhone users. This behaviour stifled innovation and prevented competition in the mobile wallet market. As a result, European consumers have little choice of mobile payment solutions when paying in shops.
Apple claims that for security reasons it cannot provide access to NFC for payments. According to Apple, security risks would increase if access were to be granted to third parties. We take security very seriously. Our investigation to date did not reveal any evidence that would point to such a higher security risk. On the contrary, evidence on our file indicates that Apple’s conduct cannot be justified by security concerns.
When it enters into the force, the Digital Markets Act will have a direct effect on digital payments. It will require companies designated as gatekeepers to ensure effective interoperability with hardware and software features they use themselves in their ecosystems. This includes access to NFC for mobile payments. The Regulation also contains safeguards related to the integrity of the device and security.
Today’s case addresses a conduct by Apple that has been ongoing since Apple Pay was first rolled out in 2015. This conduct may have distorted competition on the mobile wallets market in Europe. It prevented emergence of new and innovative competition that could have challenged Apple.
The Apple Pay investigation will inform the future application of the Digital Markets Act. It will set a precedent with regard to the analysis of the security concerns, and a recipe for effective and proportionate access to NFC for mobile payments.
The preliminary conclusion we reached today relates to mobile payments in shops. By excluding others from the game, Apple has unfairly shielded its Apple Pay wallet from competition. If proven, this behaviour would amount to abuse of dominant position, which is illegal under our rules.
Our action in this case contributes to the Commission’s wider objective of integrating the European payments market. It is important that consumers can fully benefit from secure, seamless and fast payments in their daily dealings.
Apple will now have the opportunity to respond to our concerns.