The decision of the European Commission to approve Apple’s pledge to grant third-party access to its phone-based payment system represents a significant development in addressing the Commission’s apprehensions regarding Apple’s refusal to provide competitors with access to the Near-Field-Communication (NFC) technology, which is used for contactless payments with iPhones in stores.
Apple’s mobile wallet, Apple Pay, has been a transformative innovation, facilitating in-store and online payments for iPhone users. However, the Commission’s investigation revealed that Apple’s dominant position in the market for smart mobile devices, as well as its control over the in-store mobile wallet market on its operating system, iOS, has conferred upon it considerable market power.
Up until now, Apple has been the exclusive entity with access to the NFC hardware and iOS software for in-store payments, preventing third-party mobile wallet developers from utilizing the technology. This led to the Commission’s determination that Apple was leveraging its dominant position to restrict choice and innovation for iPhone users, potentially contravening the Treaty on the Functioning of the European Union (TFEU).
Margrethe Vestager, the Executive Vice-President responsible for competition policy, underscored the significance of competition in the industry, emphasizing that Apple’s commitment to granting rivals access to the ‘tap and go’ technology represents a significant step towards averting exclusion from the iPhone’s ecosystem and opening up the market for secure and pioneering mobile wallets.
Apple’s proposed commitment involves providing third-party wallet providers with complimentary access to the NFC input on iOS devices, utilizing Host Card Emulation (HCE) mode to securely store payment credentials and transactions. Furthermore, Apple will establish impartial procedures for granting NFC access to third-party mobile wallet app developers, ensuring access to relevant functionalities, and applying these commitments to all third-party mobile app developers in the European Economic Area (EEA).
The Commission conducted a market test of Apple’s commitments and engaged with relevant stakeholders to address competition concerns, resulting in several modifications made by Apple during this period, including permitting payments with HCE apps at industry-certified terminals, removing restrictions for HCE developers, and providing additional assurances for the monitoring trustee.
In conclusion, the Commission concluded that Apple’s commitments effectively alleviate concerns regarding the restriction of third-party mobile wallet access for EEA iOS users and, as a result, these commitments will be legally binding, overseen by a trustee, and applicable for ten years throughout the EEA. It is important to note that these commitments do not affect Apple’s other regulatory obligations.
Overall, the approval of Apple’s commitments by the European Commission signifies a pivotal moment in the mobile payments industry, promising equitable competition and choice for consumers in the EEA.