Class-Action Antitrust Lawsuit filed against Apple over Competition Blocking

On iOS devices, Apple has ensured that only its mobile wallet, Apple Pay, can make contactless payments at the point of sale.

A class-action lawsuit was filed Monday against Apple accusing the company of profiting illegally from payment card issuers, according to attorneys at the law firm Hagens Berman in Seattle, California.

The lawsuit accuses Apple of profiting illegally from payment card issuers via its Apple Pay policies, and alleges that the company extracted up to $1 billion annually in fees that were “in violation of federal antitrust law,”.

The lawsuit seeks to represent a class of U.S. credit unions and financial institutions that issue payment cards enabled for use in Apple Pay.

The class action was filed in the U.S. District Court for the Northern District of California and accuses Apple of denying rivals access to the technology needed to develop a competing mobile wallet.

On iOS devices, Apple has ensured that only its mobile wallet, Apple Pay, can make contactless payments at the point of sale.

Having secured a monopoly for Apple Pay in this fashion, Apple charges card issuers who use Apple Pay supracompetitive fees for a service that is available on Android devices for free, according to the lawsuit.

“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, Hagens Berman co-founder and managing partner.

“And yet, the same service on Android that card issuers pay absolutely nothing for costs them a collective $1 billion annually through Apple Pay.”

This is the third time the firm has sued Apple for antitrust matters. In 2015, Hagens Berman secured a combined $560 million settlement against Apple and publishing companies regarding price-fixing of e-books after Apple appealed the case to the U.S. Supreme Court, and in 2022, the firm achieved a $100 million settlement on behalf of iOS developers who were harmed by Apple’s stifling App Store policies.

“As a firm with a long history of antitrust successes, we’re no stranger to Apple’s monopolistic behaviour,” Berman said.

“We’re hoping for a hat-trick and we believe the economic evidence our team has amassed against Apple in this case is frankly undeniable. We look forward to fighting for this case.”

The Lawsuit

The lawsuit details Apple Pay’s supracompetitive fee structure compared to other mobile wallet providers across the market, as well as Apple’s tactics to weave Apple Pay into its existing structure of market dominance in the mobile device industry.

Across Android devices and supported mobile wallets on that operating system, issuers pay nothing to use the decades-old technology that allows for tap-and-pay functionality via Android platforms.

Meanwhile, across all iOS devices, Apple Pay is the only tap-and-pay mobile wallet allowed, thanks to Apple’s exclusionary practices. Via Apple Pay, Apple charges U.S. card issuers 15 basis points on credit and .5 cents on debit for all transactions.

“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.

To illustrate the significance, the suit states,

“That Apple has profitably sustained its significant issuer fees, despite other free forms of payment, demonstrates that a hypothetical monopolist can (and has been able to) profitably impose a small but significant non-transitory increase in price (a SSNIP).”

Attorneys say that to make matters worse for payment card issuers, Apple also forces these same fees on e-commerce transactions, keeping issuers from disabling Apple Pay’s e-commerce function from its tap-and-pay feature.

Apple also prohibits issuers from passing these fees onto consumers which, absent Apple’s policies, they could do to incentivize use of more cost-effective forms of payment.

The antitrust violations come two-fold, according to the lawsuit:

  1. Apple has unlawfully linked two of its products – mobile devices and its proprietary mobile wallet – compelling iOS users to exclusively use Apple Pay and foreclosing rival tap-and-pay options.
  2. Apple unlawfully monopolizes the market for tap-and-pay mobile wallets on iOS. While issuers pay $0 when their cardholders use Android wallets and pay $0 when their cardholders use contactless cards, Apple rakes in billions of dollars from fees from tap-and-pay payments on its platform.

The lawsuit seeks to reimburse payment card issuers who have been charged Apple Pay’s fees and seeks injunctive relief to put an end to Apple’s policies.

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