Credit Card Issuers File Antitrust Suit Against Apple for Exclusionary Conduct in Mobile Tap-and-Pay Market

Apple Operating an Illegal Monopoloy in Tap-and-Pay Market, Suit Says

The convenience of the tap-and-pay mobile wallet model is a feature consumers increasingly enjoy for online and in-store purchases. But has Apple Inc. – the clear leader in this market – taken its dominance too far by blocking competitors from offering this popular service on their devices? Credit card issuer Affinity Credit Union says “yes,” citing a number of alleged anticompetitive behaviors in a complaint filed in the Northern District of California on July 18 (Affinity Credit Union v. Apple Inc., No. 3:22-cv-04174, N.D. Calif., San Jose Div.).

apple payFueling this trillion-dollar industry are the more than 70% of Americans who use mobile wallet payments with some frequency. Unlike other phones sold by Samsung and Google, Apple product owners are required to use Apple Pay when using their mobile wallet. Apple Pay is a feature across Apple’s many products, used within its app store and for e-commerce payments.

Mobile wallet competitors are barred from participating on Apple’s iPhones, tablets and watches, however, and are charged payment-card issuer fees, something no other mobile wallet does. Apple does not allow these fees, which made the company $1 billion in 2019, to be passed onto consumers. These revenues are projected to quadruple in the coming years as demand for tap-and-pay convenience continues to grow. Currently, the issuer fees are .015% on credit cards and .05% on debit cards.

Affinity says in its complaint that “if Apple faced competition, it could not sustain these substantial fees.” Google, for example, doesn’t charge card issuers when cardholders use the Android wallet. The fact that Apple can sustain its charges despite other free forms of payment “demonstrates that a hypothetical monopolist can (and has been able to) profitably impose a small but significant non-transitory increase in price (a SSNIP),” Affinity maintains.

The complaint alleges a violation of the Sherman Act in two ways:

1. By unlawfully coupling two of its products—a mobile device and a mobile wallet—Apple negates consumer choice by requiring use of Apple Pay and by forcing issuers to pay a “manifestly supracompetitive fee” on each transaction.

2. Asserting that iOS tap-and-pay mobile wallets is a relevant antitrust market, Apple’s bar of any competitors constitutes an unlawful monopoly of that market. This exclusionary conduct results in high fees imposed on the issuer and denies consumers the benefit of innovation.

European Commission

This is not the only legal challenge Apple faces over its pay practices. The complaint notes a preliminary view statement issued by the European Commission dated May 2, 2022, saying Apple’s restrictions, “likely violate European competition law and have an exclusionary effect on the competitors and lead to less innovation and less choice for consumers for mobile wallets on iPhones.”

Affinity and the proposed class of issuers seek monetary relief, injunctive relief, and all other forms of relevant relief available to stop the practice and provide redress for the harm it has caused.

The case has been assigned to Senior District Judge Jeffrey S. White.

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