Wednesday, July 27, 2022
Plus, unlike other mobile wallet providers, Apple charges card issuers per-transaction fees. Issuers pay 15 basis points on credit card payments and five cents on debit card payments, and they're not allowed to pass on those costs to cardholders.
In 2019, alone, Apple collected $1 billion in Apple Pay transaction fees, according to the lawsuit filed by Affinity Credit Union in U.S. District Court fort the Northern District of California. The lawsuit claims the yearly tab will swell to $4 billion in 2023. Apple also bundles its tap-and-pay and ecommerce services, "which compounds the injury card issuers suffer," the lawsuit states.
Unlike Apple iPhones and tablets, Android devices can support multiple mobile wallets and there are no issuer fees whatsoever. The lawsuit seeks to represent a class of card issuers that enable Apple Pay, which totaled 5,480 in 2020, according to attorneys for Affinity.
News of the Affinity lawsuit follows word that the European Commission opened a formal antitrust investigation of Apple Pay. "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," Margrethe Vestager, the EC's executive vice president said in a statement. "I have therefore decided to take a close look at Apple's practices regarding Apple Pay and their impact on competition."
Here in the United States, Affinity is asserting that Apple Pay violates the federal Sherman Antitrust Act in two ways. First, by "tying" two products together—its mobile phones and wallets, and foreclosing rival solutions. Second, by foreclosing competitors, Apple "unlawfully monopolizes" the market for tap-and-pay mobile wallets on iOS.
"When you compare the functionality of Apple Pay to mobile wallets available on Android devices—Google Pay, Samsung Pay—you're essentially holding up a mirror; they are essentially identical," said Steve Berman, managing partner in the San Francisco law firm Hagens Berman, which filed the lawsuit on behalf of Affinity.
"And yet," Berman added, "the same service on Android that card issuers pay absolutely nothing for costs them a collective $1 billion annually through Apple Pay. The reason is simple. There is competition on Android devices, with multiple wallets offering contactless payments, whereas Apple has barred all rivals, making Apple Pay the only option."
This is the third time Hagens Berman has taken Apple to court for alleged antitrust practices. In 2015, the firm secured a $560 million settlement against Apple and several publishing companies regarding price-fixing in the ebook market. In June 2022, Oakland, Calif., U.S. District Judge Yvonne Gonzalez Rogers approved a $100 million out-of-court settlement the firm secured from Apple in a lawsuit filed in 2019 on behalf of small app developers who accused Apple of using its app store monopoly to impose "profit-killing" commissions.
The Affinity lawsuit seeks reimbursements to card issuers who have been charged Apple Pay's fees and injunctive relief to put an end to the fees going forward. "On the surface, Apple Pay's fees pushed onto card issuers may seem small, but truly the devil is in the details of Apple's policies, and these fees add up, big time," Berman said. 
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