Even if the Australian Competition and Consumer Commission (ACCC) authorises collective negotiations between a group of banks and Apple over the use of the Apple Pay platform, the iPhone maker says that it “will not and cannot” agree to the conditions likely to be sought by the banks.
Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank and Westpac last month applied to the ACCC for authorisation to collectively negotiate with mobile wallet providers, with the application naming Apple’s service as well as Google Pay and Samsung Pay.
The banks argue that Apple, Google and Samsung are potentially in a position to negotiate terms for use of their mobile wallets that are “likely to result in reduced competition and innovation, and increased risk in the security and transparency of mobile payments.”
Currently in Australia only American Express and ANZ offer Apple Pay support for their customers, but worldwide more than 3000 issuers support the platform, according to Apple.
Apple says that based on the banks’ application to the ACCC, the applicants will not agree to support Apple Pay unless it allows them to charge consumers for the use of the platform, it provides access to the iPhones Near Field Communications (NFC) antenna, and it agrees to security guidelines drafted by the applicants that will only apply to third party mobile wallets (not the banks’ own offerings).
These terms will “undermine the availability, security and privacy our customers expect when using Apple devices to make payments,” Apple argues in a submission to the ACCC. The submission follows on from an interim submission that “strongly urged” the ACCC to reject the banks’ application.
Apple says that it has attempted to negotiate agreements with each of the applicant banks bar one (which was not willing to sign a confidentiality agreement). The inability of the banks to reach agreement with Apple “demonstrates that each individual applicant bank possesses a significant amount of bargaining power against Apple,” the iPhone maker argues.
“As each of the banks has individually resisted serious engagement with Apple for the past two years, collectively negotiating will further entrench the applicant banks' position by ensuring that all of them can only advance in lockstep with the slowest, least willing member,” the submission argues.
“The applicant banks would know that they can continue to hold out without the threat that one of their competitors will introduce Apple Pay for their customers, which could result in the loss of some customers who will switch banks in order to access Apple Pay.”
Apple in its submission takes particular umbrage to banks seeking access to the iPhone’s NFC capabilities.
“This is not open to negotiation with any bank,” the company argues. “Apple designs its products to provide very secure experiences, especially where payments are concerned. Apple has been able to provide the required level of security with tight integration of hardware, software, and services such as Apple Pay. Apple does not provide banks access to the NFC radio because doing so would undermine the security our customers expect when using Apple devices to make payments.”
As justification, the submission cites examples of security vulnerabilities in Android.
Apple adds that just because it will not support use of NFC by third parties, there are alternative technologies that can be used for contactless payments, for example QR codes.
“Apple’s desire to protect the integrity of its own proprietary hardware installed within its own devices is not anticompetitive,” the submission argues. “It is not ‘exclusive dealing’ conduct to which Australian competition law applies.
“What the applicant banks are seeking is the right to impose a collective boycott for the purpose of putting pressure onto Apple to grant them access to proprietary hardware and software. Apple has invested significant financial and other resources developing a simple and convenient mobile wallet service with the highest security and privacy protections available. This is also the basis on which Apple seeks to differentiate its mobile wallet from those offered by other mobile wallet providers.”
The full submission is available online.