Apple is abusing its dominant position by restricting access to key hardware on iPhones, according to a new class-action lawsuit. The lawsuit was filed on behalf of financial institutions and credit unions that issue payment cards for Apple Pay.
Every modern iPhone has an NFC chip. Near Field Communication or NFC is the critical driving factor behind the meteoric rise of cardless and contactless payments made through the Apple Wallet.
Apple Pay and Apple Wallet are only available on an iPhone, and they work by securely communicating with a POS (Point of Sale) machine via the NFC chip. The lawsuit alleges that Apple refuses to grant access to the NFC chip to any third-party payment processing company. It also claimed Apple Pay policies allowed the company to extract more than $1 billion in fees from card issuers.
Simply put, any and all financial services that wish to work well on an iPhone, must go through Apple's channels. The lawsuit alleges that by denying access to critical technology, Apple is preventing the development of competing mobile wallet apps for Apple Pay on iOS devices. According to the complaint in the US District Court for the Northern District of California, this is a violation of federal antitrust law.
Having secured a monopoly for Apple Pay in this fashion, Apple charges card issuers who use Apple Pay supra-competitive fees for a service that is available on Android devices for free ... [Apple] exercises its market power in the device markets by requiring that consumers of its mobile devices also acquire its mobile wallet -- Apple Pay -- and prevents consumers from using competing mobile wallets capable of offering competing tap and pay solutions.
By denying rivals access to the NFC system and associated communication systems, Apple could be illegally profiting from payment card issuers. If Apple grants access, developers could, in theory, develop a competing mobile wallet on iOS. This could allow FinTech companies to possibly bypass Apple Wallet, and in extension, perhaps even the infamous “Apple Tax”.
The lawsuit adds that Google does not restrict access to Android NFC technology. This allows a thriving competition of wallet apps.
It is interesting to note that Hagens Berman, the law firm that successfully obtained a $450 million settlement from Apple over alleged e-book price fixing, is representing the class-action lawsuit.