Distortion of competition in the EU: Apple faces billions in fines

US tech companies regularly get into trouble with the EU Commission in the EU. The focus is on data protection law in particular, but also on competition law. Now Apple is facing a huge fine. The reason for this is the Apple Pay payment service. From the Commission’s point of view, it causes immense distortion of competition. Calls are being made to open up the technology based on the NFC chip. However, while the Commission fears for competition, the tech company argues with the safety of its users.

Apple Pay anti-competitive for EU Commission

And once again, the EU Commission is threatening serious action against a big player from Silicon Valley. This time, however, it might not affect Google. The search engine giant is currently defending itself against a billion-dollar fine from the Commission and apparently wants to go to the European Court of Justice (ECJ). Meta is also not in focus this time. The parent behind Facebook and Instagram once again collected a million-dollar fine in November 2022 for a breach of the General Data Protection Regulation (GDPR). This time, Apple, another well-known tech company from California, is affected. The reason for this is the wireless payment service Apple Pay, which is possible with iPhones. Back in spring 2022, the EU Commission accused the group of a competition violation because of its payment service.

Now the political body seems to be following up its words with action. In its latest accusations, the Commission also criticizes the design of the App Store. This limits the possibilities of developers too much, because they can not implement alternative payment methods. In the case of Apple Pay, it is primarily the NFC interface that is incompatible with applicable law for the European competition authorities. In particular, it is the exclusivity that poses a problem. The NFC chip for contactless payment can only be used with Apple Pay and no other payment services. This would exclude in particular credit institutions that want to enable their customers to make contactless payments via smartphone.

Tech group counters data protection

On the basis of these accusations, the EU Commission has already been working at full speed since last year. The aim here is to prove the dominant market position of the tech group’s own payment service. In addition, the company from California would like to be asked to open Apple Pay to other competitors as well. After all, this is now a standard technology. But of course, Apple also has arguments on its side. As can be seen from a report from the news agency Reuters, the tech company has now been able to bring these forward to the competition authorities.

The focus here is on the now almost specious argument that Apple wants to create a high level of security for its customers through the exclusivity of the interface. There may be some truth in that. But what is a not too small, but fine side effect for Apple is the gigantic revenue it generates with Apple Pay. If the interface were opened up, the gigantic commissions would possibly shrink quickly. While the end customer himself will of course not notice anything about this, it is a real drag for competitors. In particular, young companies that want to develop modern payment services cannot get around the restrictions of Apple Pay.

Billion-dollar fine inevitable?

Apple’s narrative of ensuring the greatest possible security for its customers seems to have fallen on deaf ears at the EU Commission for a long time. The tech company should slowly realize that. Otherwise, it could face serious and, above all, expensive consequences. If Apple does not pay for its NFC interface for Apple Pay, the consequence could be a penalty payment in the billions. There is talk of 10 percent of global sales. Consequently, the tech company led by CEO Tim Cook would have to reckon with a fine in the double-digit billions.