Apple is in the news this week for fines of unprecedented proportions. Both cases have to do with abuse of power, but are otherwise separate from each other. The first case relates to the payment chip, the second to a payment system for dating apps.
We start with the European Commission†It concludes in a preliminary conclusion that Apple is abusing its power in the market for mobile payments. Such payments are made via an NFC chip in a smartphone. When you activate the chip and set up a payment method, you can now pay contactless at most of the ATMs.
On Android, you can set up your own bank as a payment method, or else a service such as Google Pay or PayPal. However, on iOS you can only use Apple Pay. Apple thus limits competition on its platform, the preliminary conclusion reads. This also limits “innovation and consumer choice”.
This is just the beginning of the procedure. Apple now has a chance to respond to the claims. The European Commission makes it clear that such a preliminary conclusion is not leading in the investigation into the company and that the outcome is therefore not certain. In any case, it is indisputable that Apple restricts access to the chip.
If this ends badly for Apple, the company faces a fine of several billions; far more than Microsoft or Google ever got. The European Commission is able to impose a fine of up to ten percent of the annual turnover. Apple had a turnover of 36 billion dollars (more than 34 billion euros).
Complaints from PayPal
This ball got rolling by, among other things complaints from competing companies, such as PayPal. That payment service wants to offer the same options as on Android, but is currently unable to do so. It is now true that Apple made the NFC chip available to other developers, but it is still not possible to make payments.
However, it is possible to receive a payment via an iPhone with such a chip on board. That’s a change Apple recently made. That is not the change that competing parties hoped for, so the complaints remain. This Apple investigation formally began in June 2020, but the first complaints appeared as early as 2019.
The hassle with dating apps
Meanwhile, there’s another matter at stake for Apple: the dating app business. Apple does not allow iOS apps to use third-party payment systems. However, an exception has been made for dating apps. But that is not enough for market watchdog ACM. That is why the organization previously imposed a hefty fine of fifty million euros.
Apple has the opportunity to think along about the implementation of the payment system, but let things go a bit. The company has now supplied submit a proposal to the Authority for Consumers and Markets, but he now says that he will reject it. Although the ideas are now improving, it is true that they are not sufficient for European and Dutch legislation.
In the new proposal, Apple proposes that app makers can use a third-party payment system or the Apple system; not both. The makers also have to issue a warning that they are using a payment option that is not owned by the company. In addition, developers are still required to give 27 percent of sales to Apple.
ACM is now preparing a new penalty payment. It is unclear at the time of writing how high that amount will be. The battle between Apple and the market watchdog has dragged on for months. In December, it was decided that Apple should make changes to the App Store, but the company has been thwarting ever since.
The highest fine?
In practice, it is rare that the EU decides to charge companies ten percent of annual turnover as a fine. But if it does, then 3.4 billion euros is probably the highest fine that Apple has to pay. That fine is not close to the amount that Apple had to pay in France earlier in 2020.
Just over two years ago, the French variant of the ACM decided that Apple had to pay an amount of 1.1 billion euros. Even then, it involved anti-competitive practices, which “sterilized” the market. Apple determines the price for its products and who can sell those products, except for the iPhone.
At the time, the French ACM (the Autorité de la Concurrence) thought that the company was in fact operating a cartel. The big question now is whether the European Commission will go beyond this.
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