EU Accuses Apple of Abusing Mobile-Payment Market Power

If found guilty of abusing its dominance in connection with the payment service, Apple could be subject to a fine of as much as 30% of the revenue generated from its mobile wallets and related services, the commission said, without specifying whether that would be limited to the European market. Analysts said that Apple Pay accounts for a small proportion of the company’s total revenue.

“Apple has built a closed ecosystem around its devices and its operating system,” said EU Executive Vice President

Margrethe Vestager,

the bloc’s competition commissioner. “Apple controls the gates to this ecosystem, setting the rules of the game for anyone who wants to reach consumers using Apple devices.”

Apple will have an opportunity to respond to the commission’s objections and can request an oral hearing before any final judgment is issued.

The tech giant said that its payment system is one of many options available to European consumers and that it has ensured equal access to the underlying technology, near-field communication, “while setting industry-leading standards for privacy and security.”

The company said, “We will continue to engage with the Commission to ensure European consumers have access to the payment option of their choice in a safe and secure environment.”

By issuing a statement of objections, which is also known as a charge sheet, the European Commission informs a company in writing of the objections raised against it. It doesn’t prejudge the outcome of a probe.

The commission’s decision comes several weeks after lawmakers in the EU reached an agreement on the Digital Markets Act, sweeping new legislation that aims to put new constraints on potentially anticompetitive behavior by the world’s largest tech companies. The new rules will apply to “gatekeepers” that the EU defines as companies that have high earnings and market capitalizations and a large number of users in the bloc.

Once the legislation comes into effect, these companies could face fines of up to 10% of their global annual revenue for breaking the new rules. Repeated infringements could raise the limit to 20% or lead to a ban on some acquisitions.

One of the provisions in the Digital Markets Act appears to have been inspired by the Apple Pay investigation, said

Thomas Vinje,

an antitrust lawyer with Clifford Chance who has represented music-streaming company

Spotify Technology SA

in a separate complaint against Apple. As proposed, the law would require gatekeeper companies to ensure equal access to their operating systems and other features, such as the technology behind contactless payments.

In a press conference Monday, Ms. Vestager declined to elaborate on whether the Apple Pay investigation might be finished before the new legislation takes effect. “It will take a bit of time before the [Digital Markets Act] is into force, and of course we would want to push on this case as fast as possible,” she said.

The EU investigation into Apple’s payment system began in 2020 with two probes into whether the company broke competition rules through its Apple Pay service and its App Store.

Apple already faces other European Commission probes into its business practices. Last year, the EU charged the company with antitrust violations for allegedly abusing its control over the distribution of music-streaming apps through a requirement that they use Apple’s in-app payments system to sell their digital content. The EU also said the iPhone maker limited how app developers can inform users about their options for subscribing outside the app. That investigation is continuing.

And in 2016, the commission ordered Apple to pay 13 billion euros, then equivalent to about $14.5 billion, in taxes. Apple won a court appeal of the order, which the commission then appealed. The case is pending.

Apple has also come under scrutiny in other jurisdictions over its in-app payment requirements. Last year, a U.S. federal judge ordered the company to ease its restrictions on how developers seek to be paid within their apps.

Draft rules from the EU’s Digital Markets Act include a provision that would allow software makers access to the iPhone without having to go through the company’s App Store.

Gene Munster,

managing partner with tech investment company Loup, said he estimates that Apple Pay only accounts for about 1% of the company’s overall revenue, which suggests that any fine from the European Commission in relation to that segment of the business would be calculated from a relatively small base. Apple Pay revenue in Europe probably accounts for roughly 0.25% of the company’s total global revenue, Mr. Munster said.

A spokeswoman for the European Commission said Monday that, in principle, Apple’s revenues from mobile wallets and related services could become the basis for the calculation of a fine, which could be up to 30% of revenue in that segment depending on the seriousness of the infraction. She didn’t immediately specify whether the base amount would be limited to the European market.

Either way, the amount would probably be insignificant for Apple, Mr. Munster said. “What does add up is the continuation of layering of regulation from the U.S. and Europe, predominantly, that have the potential to dilute some of the strength of some of [Apple’s] franchises like the App Store.”

—Tim Higgins contributed to this article.

Write to Kim Mackrael at [email protected] and Laurence Norman at [email protected]

If found guilty of abusing its dominance in connection with the payment service, Apple could be subject to a fine of as much as 30% of the revenue generated from its mobile wallets and related services, the commission said, without specifying whether that would be limited to the European market. Analysts said that Apple Pay accounts for a small proportion of the company’s total revenue.

“Apple has built a closed ecosystem around its devices and its operating system,” said EU Executive Vice President

Margrethe Vestager,

the bloc’s competition commissioner. “Apple controls the gates to this ecosystem, setting the rules of the game for anyone who wants to reach consumers using Apple devices.”

Apple will have an opportunity to respond to the commission’s objections and can request an oral hearing before any final judgment is issued.

The tech giant said that its payment system is one of many options available to European consumers and that it has ensured equal access to the underlying technology, near-field communication, “while setting industry-leading standards for privacy and security.”

The company said, “We will continue to engage with the Commission to ensure European consumers have access to the payment option of their choice in a safe and secure environment.”

By issuing a statement of objections, which is also known as a charge sheet, the European Commission informs a company in writing of the objections raised against it. It doesn’t prejudge the outcome of a probe.

The commission’s decision comes several weeks after lawmakers in the EU reached an agreement on the Digital Markets Act, sweeping new legislation that aims to put new constraints on potentially anticompetitive behavior by the world’s largest tech companies. The new rules will apply to “gatekeepers” that the EU defines as companies that have high earnings and market capitalizations and a large number of users in the bloc.

Once the legislation comes into effect, these companies could face fines of up to 10% of their global annual revenue for breaking the new rules. Repeated infringements could raise the limit to 20% or lead to a ban on some acquisitions.

One of the provisions in the Digital Markets Act appears to have been inspired by the Apple Pay investigation, said

Thomas Vinje,

an antitrust lawyer with Clifford Chance who has represented music-streaming company

Spotify Technology SA

in a separate complaint against Apple. As proposed, the law would require gatekeeper companies to ensure equal access to their operating systems and other features, such as the technology behind contactless payments.

In a press conference Monday, Ms. Vestager declined to elaborate on whether the Apple Pay investigation might be finished before the new legislation takes effect. “It will take a bit of time before the [Digital Markets Act] is into force, and of course we would want to push on this case as fast as possible,” she said.

The EU investigation into Apple’s payment system began in 2020 with two probes into whether the company broke competition rules through its Apple Pay service and its App Store.

Apple already faces other European Commission probes into its business practices. Last year, the EU charged the company with antitrust violations for allegedly abusing its control over the distribution of music-streaming apps through a requirement that they use Apple’s in-app payments system to sell their digital content. The EU also said the iPhone maker limited how app developers can inform users about their options for subscribing outside the app. That investigation is continuing.

And in 2016, the commission ordered Apple to pay 13 billion euros, then equivalent to about $14.5 billion, in taxes. Apple won a court appeal of the order, which the commission then appealed. The case is pending.

Apple has also come under scrutiny in other jurisdictions over its in-app payment requirements. Last year, a U.S. federal judge ordered the company to ease its restrictions on how developers seek to be paid within their apps.

Draft rules from the EU’s Digital Markets Act include a provision that would allow software makers access to the iPhone without having to go through the company’s App Store.

Gene Munster,

managing partner with tech investment company Loup, said he estimates that Apple Pay only accounts for about 1% of the company’s overall revenue, which suggests that any fine from the European Commission in relation to that segment of the business would be calculated from a relatively small base. Apple Pay revenue in Europe probably accounts for roughly 0.25% of the company’s total global revenue, Mr. Munster said.

A spokeswoman for the European Commission said Monday that, in principle, Apple’s revenues from mobile wallets and related services could become the basis for the calculation of a fine, which could be up to 30% of revenue in that segment depending on the seriousness of the infraction. She didn’t immediately specify whether the base amount would be limited to the European market.

Either way, the amount would probably be insignificant for Apple, Mr. Munster said. “What does add up is the continuation of layering of regulation from the U.S. and Europe, predominantly, that have the potential to dilute some of the strength of some of [Apple’s] franchises like the App Store.”

—Tim Higgins contributed to this article.

Write to Kim Mackrael at [email protected] and Laurence Norman at [email protected]