While the payment sector is under the authorities’ spotlight with two on-going public consultations on payments and fintech launched by the European Commission (EC – see our alert here) and a separate consultation on payments in France (see our alert here), the EC announced yesterday that it formally opened two competition law investigations against Apple in relation to its Apple Pay service (press release here) and the Apple App Store (press release here). We address both in turn.

Investigation against Apple Pay

As a reminder, Apple Pay is Apple's proprietary mobile payment solution on its products (iPhones, iPads, Apple Watches and Macs) used to enable payments online as well as in physical stores.

The investigation covers the following three alleged anticompetitive conducts:

  1. Apple's limitation of access to the Near Field Communication (NFC) functionality on iPhones for payments in stores: the EC is looking into the issue of the technical “lock” placed by Apple around the NFC antenna of its iPhones, as a result of which only cards stored in the Apple wallet can be used to make contactless payments – and, therefore, a card stored in another third-party wallet on an iPhone cannot be used to make NFC payments, making Apple Pay the only “tap and go” payment solution working on iOS devices. If you would like to read more about this topic, please read our previous articles here (on the EC competition law case) and here (on the German legislation giving PSPs a right to access the NFC antenna).

  2. Apple's terms & conditions and other measures for integrating Apple Pay in merchant apps and websites: the press release does not provide any insights as to what the EC is specifically targeting, other than stating that the EC is looking at measures that may distort competition and reduce choice and innovation. It is our understanding that the EC may be looking into the fact that when a consumer shops on a website or in a merchant shopping app that supports Apple Pay, automatically the Apple device (e.g. iPhone, iPad) will prompt the consumer to pay via his Apple Pay wallet, as opposed to an alternative payment method, thereby favouring its own proprietary payment method at the expenses of alternative payment methods. If this is indeed what is happening, this may have a negative impact on consumer choice, but also potentially on merchants' payments related costs since they may offer cheaper alternatives to consumers (e.g. payment initiation services or PIS pursuant to the second payment services directive (PSD2) and UK Open Banking).

  3. Refusal of access to Apple Pay for specific products of rivals: it is still not entirely clear which anti-competitive practices are targeted by the EC , but this could be a reference to Apple denying some merchants access to Apple Pay when those merchants offer services that compete with Apple's own services, e.g. denying Spotify access to Apple Pay since its services compete with Apple Music, or denying Netflix access to Apple Pay since its services compete with Apple TV+, or denying Google Drive access to Apple Pay because it competes with iCloud Drive.

Commenting on the opening of the investigation, EC Executive Vice-President and Competition Commissioner, Margrethe Vestager, pointed out that “It is important that Apple's measures do not deny consumers the benefits of new payment technologies, including better choice, quality, innovation and competitive prices”.

Investigation against the App Store

This investigation was triggered by a complaint from Spotify, followed by a complaint from an e-book/audiobook distributor.

Commissioner Vestager stated that "… Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a “gatekeeper” role when it comes to the distribution of apps and content to users of Apple's popular devices. We need to ensure that Apple's rules do not distort competition in markets where Apple is competing with other app developers …”.

The EC indicated that it will investigate in particular:

  1. The mandatory use of Apple's own proprietary in-app purchase system “IAP” for the distribution of paid digital content, where Apple charges app developers a 30% commission on all subscription fees through IAP. Spotify claimed that this fee had the effect of increasing consumer prices for the Spotify streaming service, thereby favouring Apple's Music service which is not subject to the payment of that commission.

  2. Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to consume content such as music, e-books and audiobooks purchased elsewhere (e.g. on the website of the app developer) in the app, its rules prevent developers from informing users about such purchasing possibilities, which are said to be usually cheaper.

Should you have any questions about the above, please do not hesitate to contact one of the members of the Bird & Bird global payments team, who will continue to closely follow this case.

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