Tech

Apple Settles EU Probe, Opens NFC to Rivals, Dodges $40B Fine

Apple avoids $40 billion fine by allowing competitors access to NFC technology for mobile payments.

By Athena Xu

7/11, 05:35 EDT
Apple Inc.
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Key Takeaway

  • Apple will allow competitors access to its NFC technology for mobile payments, avoiding a potential $40 billion EU fine.
  • The move follows an antitrust probe accusing Apple of blocking rivals' access to favor its own payment system, Apple Pay.
  • Apple's concessions include free NFC access for developers and fair procedures for third-party wallet apps, enhancing competition in mobile payments.

Apple Concessions to EU

Apple has agreed to measures that will allow its competitors access to its contactless payments technology, a move that helps the company avoid a significant fine from the European Union. The US tech giant will enable developers to use its near-field communication (NFC) technology for Apple Pay and Apple Wallet, providing a secure and private way to pay and present passes. This decision comes after a long-running antitrust probe by Brussels, which accused Apple of blocking rivals' access to its technology to favor its own payment system.

Margrethe Vestager, the executive in charge of enforcing EU competition rules, stated, "Today’s decision makes Apple’s commitments binding. It opens up competition in this crucial sector, by preventing Apple from excluding other mobile wallets from the iPhone’s ecosystem." This move is expected to allow Apple's competitors to "effectively compete" with Apple Pay for mobile payments on iPhones, offering consumers a "wider range of safe and innovative mobile wallets to choose from."

Avoiding Hefty Fines

By complying with the EU's demands, Apple will avoid a potential fine of up to $40 billion. The European Commission had accused Apple in 2022, after a two-year investigation, of breaking competition law by blocking rivals' access to its NFC technology. Sanctions for anti-competitive practices could have included a fine of up to 10% of Apple's total worldwide annual turnover, which in 2023 amounted to $383 billion. However, fines of this magnitude are rarely imposed and often get reduced in court after appeal.

Apple's recent concessions include giving developers free access to its NFC technology on iOS devices without the need to use Apple Wallet or Apple Pay. This move was part of a broader effort to settle the case, as reported by the Financial Times last month. The company has also faced other antitrust accusations from European regulators, including a record €1.8 billion fine over anti-competitive practices related to music streaming services, which Apple has appealed.

Commitments and Market Testing

To address the Commission's competition concerns, Apple initially offered several commitments. These included allowing third-party wallet providers access to the NFC input on iOS devices free of charge and enabling access to NFC in Host Card Emulation (HCE) mode. HCE allows for secure storage of payment credentials and completion of transactions using NFC without relying on an in-device secure element. Apple also committed to applying fair, objective, transparent, and non-discriminatory procedures and eligibility criteria for granting NFC access to third-party mobile wallet app developers.

Between January and February 2024, the Commission market tested Apple's commitments and consulted interested third parties to verify if they would remove competition concerns. Based on the feedback, Apple amended its initial proposal, extending the possibility to initiate payments with HCE payment apps at other industry-certified terminals and explicitly acknowledging that HCE developers are not prevented from combining the HCE payment function with other NFC functionalities.

Street Views

  • Margrethe Vestager, EU Competition Commissioner (Neutral on Apple):

    "Today’s decision makes Apple’s commitments binding. It opens up competition in this crucial sector, by preventing Apple from excluding other mobile wallets from the iPhone’s ecosystem."
    "The tech group’s rivals will be able to effectively compete with Apple Pay for mobile payments with the iPhone in shops, giving consumers a wider range of safe and innovative mobile wallets to choose from."