Apple has offered a series of commitments to competition regulators in the European Union aimed at resolving concerns centered around NFC payments and mobile wallet technology in iOS, its mobile operating system. The EU suspects that Apple unfairly favors its own mobile payment technology, Apple Pay, and blocks the ability of competitors to develop competing contactless payment offerings on its mobile platform.
The iPhone maker is proposing to allow third-party mobile wallet and payment service providers to gain the necessary access to NFC functionality on iOS devices, for free, through a set of APIs — without having to use its own Apple Pay or Apple Wallet technologies.
Per The committee, third parties still don’t have access to a component of Apple’s mobile hardware, a special chip called a secure element, which it uses to enhance the security of transactions made using Apple Pay. However, it has offered to allow “equivalent access” to NFC elements — in what it refers to as a “Host Card Emulation (“HCE”) Function,” which the EU says will “securely store payment credentials and complete transactions using NFC, without relying on a secure element on the device.”
Apple says it will apply the proposed commitments to all third-party mobile wallet app developers in the European Economic Area and to all iOS users with an Apple ID registered in the region. “Apple will not prevent the use of these applications for payments in stores outside the EEA,” the Commission adds.
Further commitments offered include Apple’s commitment to provide third parties with additional features and functionality — including “pre-selection of preferred payment apps, access to authentication features such as FaceID, and a suppression mechanism.”
It has also committed to applying “fair, objective, transparent and unbiased” eligibility criteria to provide NFC access to third parties — who will need to enter into an ADP license agreement to gain access. In addition, Apple has agreed to establish a dispute resolution mechanism under which any decisions it makes to deny access to NFC input will be reviewed by independent experts.
The saga of the Apple Pay competition goes back several years at this point. The EU launched a formal investigation of concerns in June 2020, with the first charges to follow in May 2022. The Commission’s preliminary findings remain that Apple abused a dominant position in the iOS mobile wallet market to prevent competitors from offering NFC -Enabled contactless payments on its platform and developed other mobile wallets that could compete fairly with Apple Pay.
Apple will hope that the commitments it is proposing are enough to satisfy regulators’ concerns and settle the matter. But that remains to be seen.
The Commission has opened a consultation seeking comments on Apple’s offer — and leaves a month to publish the full text of Apple’s proposed commitments on Official Journal of the EU for the submissions to be made. He will then make a decision to accept them or not. If it decides they are insufficient to resolve the concerns, Apple may face pressure to offer more concessions to move away from competitive scrutiny.
If the commitments are accepted by the EU, they will apply for ten years, with an independent monitoring administrator appointed to monitor the application. Any future failure to meet the agreed commitments could see Apple fined up to 10% of its global turnover without the Commission having to prove it is in breach of EU antitrust rules.
The Apple Pay case predates the anticipatory competition law the bloc has since enacted and which Apple is subject to. having been appointed, in September, as a so-called ‘gatekeeper’ under the Digital Markets Act (DMA). The regulation includes provisions intended to protect the freedom of business users to choose alternatives to gatekeeper services — so it appears aligned with the Commission’s enforcement push on Apple Pay, even though that case fell under pre-existing EU competition rules.
The DMA, which gatekeepers are expected to comply with by March 7, imposes a number of ex ante obligations on gatekeepers, including a requirement not to unfairly align their market power by forcing business users to use their own services. And even though Apple’s payment technology, Apple Pay, isn’t listed as a “core platform service” in the iOS App Store. And the EU’s hope for the DMA is that it will significantly speed up the process of tackling abuses of dominant positions in digital markets.
