Apple Ordered To Face Apple Pay Antitrust Lawsuit

A judge in the United States handed Apple a legal setback on Wednesday, after he ruled the iPhone maker has to face a private antitrust lawsuit.

It was in July 2022 when a proposed class action lawsuit was filed in a San Francisco federal courtroom, alleging Apple was thwarting competition for its Apple Pay mobile wallet.

The lawsuit from Iowa-based Affinity Credit Union, alleged that Apple “coerces” consumers who use its smartphones, smart watches and tablets into using its own wallet for contactless payments, unlike makers of Android-based devices that let consumers choose wallets such as Google Pay and Samsung Pay.

Apple Pay

The plaintiff alleged Apple’s anticompetitive conduct forces the more than 4,000 banks and credit unions that use Apple Pay to pay at least $1 billion of excess fees annually for the privilege.

It also alleged that Apple’s conduct minimises the incentive for it to make Apple Pay work better and make it more resistant to security breaches.

Now Reuters has reported that the proposed class action is now led by Illinois’ Consumers Co-op Credit Union, and Iowa’s Affinity Credit Union and GreenState Credit Union.

Reuters reported that Apple was ordered on Wednesday to face the private antitrust lawsuit, after US District Judge Jeffrey White said the plaintiffs could try to prove that Apple had violated the federal Sherman antitrust law by enforcing a 100 percent monopoly over the domestic market for tap-and-pay wallets for iPhones, iPads and Apple Watches.

The Oakland, California-based judge also reportedly dismissed a “tying” claim, which accused Apple of requiring purchasers of iOS devices to buy Apple Pay or forego purchases of competing wallets.

Apple did not immediately respond to requests for comment, Reuters reported.

Plaintiff response

“We are happy with this ruling,” Steve Berman, a lawyer for the plaintiffs, was quoted as writing in an email. “There are billions at stake so getting by the motion (to dismiss) largely intact was huge for the class.”

The plaintiffs allege Apple “coerces” people who use its smartphones, tablets and smart watches into using its own wallet for tap-and-pay transactions, unlike makers of Android-based devices that let people choose wallets such as Google Pay and Samsung Pay.

According to the complaint, 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.

Judge White reportedly said the plaintiffs plausibly alleged that Apple allow alternatives to Apple Pay, and that more competition would spur innovation and reduce prices.

In seeking a dismissal, Apple had apparently said it charged “nominal” fees to even smaller card issuers, and that the plaintiffs ignored the “competitive reality” that consumers could still pay with cash, credit and debit cards, and other means.

Other complaints

This is not the only trouble Apple is facing on this particular issue.

The European Commission had begun an in-depth probe into the Apple Pay payment technology back in June 2020.

Then in May 2022 the European Commission informed Apple of its preliminary finding that the iPhone giant unfairly restricted contactless NFC tech in iPhones to benefit of the Apple Pay payment system.

The EC probe could lead to heavy fines for the tech giant and force it to open up its mobile payment system to competitors, such as banks.

The EU investigation is ongoing.

In September 2021 the head of the Commonwealth Bank of Australia had also accused Apple of anticompetitive behaviour over its control of payments on its phones.

Matt Comyn, chief executive at the Sydney-based Commonwealth Bank of Australia called on Australian lawmakers to boost scrutiny of technology giants, pointing to payments through digital wallets developed by Apple and Alphabet’s Google, and the fees charged by Apple in particular.

Apple had introduced Apple Pay to the world back in 2014, and it essentially digitises and replaces a credit or debit card chip and PIN transaction at a contactless-capable point-of-sale terminal.