California Northern District Judge Jeffrey White has partially denied Apple's plea to dismiss a federal class action lawsuit centered around its digital payment system, Apple Pay. Three credit unions filed a lawsuit alleging that Apple violated the Sherman Anti-Trust Act by charging exorbitant processing fees and preventing rival digital wallets from using its NFC-scanning technology.
The credit unions argued that Apple's iOS tap-to-pay system constitutes a distinct market due to its simplicity and functionality, distinguishing it from QR code payment apps like Venmo. They further contended that converting to Android, which lacks an equivalent system, would be cost-prohibitive. Judge White sided with the credit unions, asserting that Apple effectively holds a monopoly in this specialized market, primarily due to its control over the NFC reader element.
Crucially, the lawyers representing the credit unions contended that Apple Pay is "unlawfully tied" to Apple's devices such as iPhones, tablets, and watches. While Judge White acknowledged this argument, he also recognized Apple's assertion that the use of Apple Pay is voluntary and does not compel consumers to adopt it.
Nevertheless, Judge White found merit in the plaintiffs' monopolistic claim, expressing concern over Apple's practice of imposing what he termed "arbitrary and inflated fees" for payment processing. He also highlighted the lack of competition in the iOS digital payments industry as detrimental to consumers.
A key point of contention in this case revolves around the absence of NFC functionality for third-party apps, a decision that Judge White deemed anticompetitive. This echoes the sentiment that the European Union expressed in a preliminary 2022 judgment that branded Apple Pay as anticompetitive and cited the exclusion of third-party access to Apple's iPhone NFC reader.
The outcome of this lawsuit carries far-reaching implications for the digital payment landscape, potentially paving the way for increased competition and innovation in the sector. The credit unions and Apple are slated to appear in court once again on December 1st at 11 a.m. PT, where further arguments and evidence will be presented.
Since it has the potential to change the dynamics of the digital payment industry and establish new precedents in antitrust litigation involving significant tech conglomerates, industry experts, legal scholars, and consumers alike will undoubtedly be closely watching this case as it develops.
