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In a significant legal battle that could reshape the digital payments landscape, Apple finds itself at the center of an antitrust lawsuit. A federal judge, Jeffrey White of the California Northern District, has refused to dismiss a proposed class-action suit brought forth by three credit unions. These financial institutions allege that Apple Pay not only imposes exorbitant fees but also maintains a stranglehold on the market, hindering the entry of other digital wallets.
At the heart of the matter is the contention that Apple has established a monopoly within the realm of iOS mobile payments. The credit unions argue that Apple’s imposition of high processing fees, coupled with its reluctance to grant access to its NFC-scanning hardware to competing digital wallets, violates the Sherman Antitrust Act.
Judge White concurred with the credit union’s argument that QR code payment applications, such as Venmo, lack the convenience and functionality offered by Apple Pay. This, combined with the perceived high cost of switching to Android, underscores iOS tap-to-pay as an independent market.
In this scenario, Apple stands as the sole dominant player, and the absence of competition is primarily attributed to the exclusivity surrounding the NFC reader, a detail that solidifies Apple’s monopoly in the eyes of the law.
Another pivotal aspect of the lawsuit revolves around the alleged unlawful tying of Apple Pay to Apple’s ecosystem of devices, including iPhones, iPads, and Apple Watches. While Apple contends that Apple Pay is a free and optional service, lawyers representing the credit unions assert that it’s inherently linked to Apple devices. Judge White found merit in both arguments but ultimately acknowledged that the claim of Apple’s monopoly is plausible.
One of the most contentious issues in this lawsuit is Apple’s fee structure for payment processing. The judge agreed with the plaintiffs’ assertion that Apple imposes arbitrary and inflated fees on transactions. Furthermore, the absence of competition within the iOS digital payments sector, due to Apple’s strict control over NFC access for third-party apps, is deemed anti-competitive by Judge White.
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Apple’s legal woes extend beyond US borders, as the European Union (EU) has also raised concerns about Apple Pay’s anticompetitive practices. In a preliminary ruling in 2022, the EU criticized Apple for its exclusionary use of the iPhone’s NFC reader.
The battle between Apple and the credit unions is far from over. They are set to reconvene in court on December 1st at 11 AM PT, where further arguments and evidence will be presented.