Apple reaping massive illegal profits from Apple Pay fees on card issuers, lawsuit claims

Posted:
in General Discussion edited July 18
Apple has been hit with a class action lawsuit alleging that its Apple Pay policies illicitly allowed it to extract more than $1 billion in fees from card issuers.

Apple Pay
Apple Pay


The complaint, lodged in the U.S. District Court for the Northern District of California on Monday, accuses the Cupertino tech giant of illegally profiting from pay card issuers and denying rivals access to the systems needed for a competing mobile wallet on iOS.

Hagens Berman, the law firm that successfully obtained a $450 million settlement from Apple over ebook price fixing, is representing the class, which is comprised of U.S. credit unions and financial institutions that have cards enabled for use in Apple Pay

"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," the law firm representing the class said in a press release.

The lawsuit details the alleged "supracompetitive fee structure," as well as "tactics to weave Apple Pay into its existing structure of market dominance in the mobile device industry."

According to the lawsuit, Google Pay and Samsung Pay don't charge card issuers on transactions. Apple's fees amount to nearly $1 billion a year -- a number expected to grow to $4 billion by 2023.

"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," Steve Berman, Hagens Berman co-founder and managing partner said. "These fees add up, big time."

Apple charges U.S. card issuers 15 basis points on credit card transactions and $0.05 on debit card transactions. The lawsuit also takes issue with the fact that Apple Pay is the only mobile wallet on iOS. It calls that part of Apple's "exclusionary practices."

As such, the complaint says that Apple is in violation of antitrust regulations, including the Sherman Act, which targets monopolies.

The lawsuit seeks to reimburse card issuers charged by Apple and place an injunction to end Apple's fees and alleged exclusionary policies, among other prayers for relief.

Read on AppleInsider
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Comments

  • Reply 1 of 26
    crowleycrowley Posts: 10,376member
    Don’t support Apple Pay then. There’s no rule that just because Android does it for free everyone else has to.

    Among the last group of people I’ll ever have any sympathy are credit card companies.
    bageljoeydougboaribaconstangItsDeCiaAnilu_777chadbagdave marshchiaJaiOh81viclauyyc
  • Reply 2 of 26
    JFC Apple is not a monopoly on this or any other issue. They are just looking for another “easy” pay day. If you don’t like the way iOS does things there are plenty of other options for you.
    dougboariAnilu_777dave marshchiaJaiOh81viclauyycAlex1N9secondkox2marklarkradarthekat
  • Reply 3 of 26
    red oakred oak Posts: 950member
    Filed in Northern California.   Good chance Visa is one of the “financial institutions” 

    What utter bullshit.   Typical, money-grabbing slime lawyer 
    dougboariAnilu_777dave marshJaiOh81viclauyycAlex1N9secondkox2FileMakerFellermarklarkradarthekat
  • Reply 4 of 26
    tobiwontobiwon Posts: 1member
    One of the reasons Google does it for free is that they collect non-anonymous data on you and your purchasing patterns and sell it to make money. I don’t believe that Apple does this since Apple wallet transactions are anonymized.
    Anilu_777dave marshchiaJaiOh81viclauyycAlex1N9secondkox2FileMakerFellerbageljoeymarklark
  • Reply 5 of 26
    jimh2jimh2 Posts: 435member
    Visa is part of the problem. They nickel and dime every transaction with their fees. The statement from our card processor shows the 20+ fees they charge per transaction. It adds up to between 1.5% to well over 3% with AMEX being the ultimate fleeced. Before we dropped their card they hit us for close to 4% on one of their rewards cards. 

    The part customers do not understand is that they are paying on average 3% extra for every single thing they purchase with or without a card. All this is to get their free rewards. Customers pay for these with their own money via the markup to offset the fees. 
    baconstangAnilu_777dewmeJaiOh81Alex1NFileMakerFellerthe1maximuswatto_cobra
  • Reply 6 of 26
    davidwdavidw Posts: 1,653member
    There is no Apple "monopoly". Under the Sherman Act, iOS can not be consider a "relevant market" on which a monopoly is determined. The "relevant market" can not be (or very rarely can be) narrowed down to a single brand.  The "relevant market" in this case would be "mobile devices" or at the least ... "mobile OS". And Apple Pay is not a monopoly  in either of those markets. Apple would have a monopoly with Apple Pay only if the iPhone had a monopoly in the mobile device market or iOS is a monopoly in the mobile OS market.   

    https://www.lexology.com/library/detail.aspx?g=84446bf5-7cd3-4d98-8c43-e1000c2a7823

    Microsoft have a monopoly with Windows OS because MS Windows is on 80% of the World's desktop computers. Not because Microsoft have 100% of the Windows OS market.

    Just because one can only buy a Whopper at a BK, that doesn't mean BK, under the Sherman Act, have a monopoly with the Whopper. The "relevant market" would include all fast food burgers and not just the Whopper.  And BK is under no obligation to allow McDonalds to sell Big Macs in their BK diners, to compete with their Whoppers.     
    viclauyycAlex1NFileMakerFellermontrosemacsmarklarkam8449radarthekatdoorman.the1maximusStrangeDays
  • Reply 7 of 26
    “the fact that Apple Pay is the only mobile wallet on iOS” Hmm, maybe consider rephrasing? Other mobile wallets that can be used at retail point of sale terminals (sometimes only at a specific retailer) include, to name only a few, Chase Pay, Walmart Pay, Kroger Pay, PayPal… Depending on how narrow the definition, all of these are “mobile wallets”
    dewmewaveparticleAlex1NFileMakerFellermarklarkradarthekatthe1maximusdoorman.watto_cobra
  • Reply 8 of 26
    geekmeegeekmee Posts: 587member
    I thought that is the purpose of capitalism?
    marklarkthe1maximuswatto_cobra
  • Reply 9 of 26
    geekmee said:
    I thought that is the purpose of capitalism?
    It is.
    marklarkthe1maximuswatto_cobra
  • Reply 10 of 26
    viclauyycviclauyyc Posts: 834member
    So this law firm think companies should not makes money on its own products? I am shock, capitalism is doomed. 
    Alex1N9secondkox2marklarkthe1maximuswatto_cobra
  • Reply 11 of 26
    "Ooh! Ooh! We should hire those guys that got Apple stitched up in the eBooks case!"
    marklarkthe1maximuswatto_cobra
  • Reply 12 of 26
    viclauyyc said:
    So this law firm think companies should not makes money on its own products? I am shock, capitalism is doomed. 
    Good. Capitalism has killed billions of people and is a cancer. 
  • Reply 13 of 26
    jcs2305jcs2305 Posts: 1,305member
    red oak said:
    Filed in Northern California.   Good chance Visa is one of the “financial institutions” 

    What utter bullshit.   Typical, money-grabbing slime lawyer 
    "Hagens Berman, the law firm that successfully obtained a $450 million settlement from Apple over ebook price fixing, is representing the class, which is comprised of U.S. credit unions and financial institutions that have cards enabled for use in Apple Pay."

    They already dinged Apple for 450M.. why not try again? B)

    Honestly these CC companies have a lot of balls crying when they kill small businesses with their transaction fees. I see more and more small businesses that are cash only, or in the case of gas stations you pay a few more cents a gallon if you choose to pay with a credit or debit card rather than cash.

    Credit card companies charge between approximately 1.3% and 3.5% of each credit card transaction in processing fees. The exact amount depends on the payment network (e.g., Visa, Mastercard, Discover, or American Express), the type of credit card, and the merchant category code (MCC) of the business.




    h2pthe1maximuswatto_cobraFileMakerFeller
  • Reply 14 of 26
    sdw2001sdw2001 Posts: 17,895member
    When issuers stop charging merchants 3-4% on every transaction, we can talk.  Until then, VISA/MC/AMEX/DISCOVER can all cry me a river. 
    the1maximusStrangeDayswatto_cobraFileMakerFeller
  • Reply 15 of 26
    entropysentropys Posts: 3,610member

    Once upon a time there was a little red hen who scratched about the barnyard until she uncovered some grains of wheat. She called her neighbors and said 'If we plant this wheat, we shall have bread to eat. Who will help me plant it?'

    "Not I, " said the cow.

    "Not I," said the duck.

    "Not I," said the pig.

    "Not I," said the goose.

    "Then I will," said the little red hen. And she did. The wheat grew tall and ripened into golden grain. "Who will help me reap my wheat?" asked the little red hen.

    "Not I," said the duck.

    "Out of my classification," said the pig.

    "I'd lose my seniority," said the cow.

    "I'd lose my unemployment compensation," said the goose.

    "Then I will," said the little red hen, and she did. At last the time came to bake the bread. "Who will help me bake bread?" asked the little red hen.

     "That would be overtime for me," said the cow.

     "I'd lose my welfare benefits," said the duck.

    “I'm a dropout and never learned how," said the pig.

     "If I'm to be the only helper, that's discrimination," said the goose.

     "Then I will," said the little red hen.

     She baked five loaves and held them up for the neighbors to see.

    They all wanted some and, in fact, demanded a share. But the little red hen said, "No, I can eat the five loaves myself."

     “Excess profits," cried the cow.

     “Capitalist leech," screamed the duck.

     "I demand equal rights," yelled the goose.

     And the pig just grunted.

     And they painted "unfair" picket signs and marched round and around the little red hen shouting obscenities.

     

    When the government agent came, he said to the little red hen, "You must not be greedy."

     “But I earned the bread," said the little red hen.

     "Exactly," said the agent. "That's the wonderful free enterprise system. Anyone in the barnyard can earn as much as he wants. But under our modern government regulations productive workers must divide their products with the idle."

     And they lived happily ever after, including the little red hen, who smiled and clucked, "I am grateful, I am grateful." But her neighbors wondered why she never again baked any more bread.

    the1maximusmaximarawatto_cobraFileMakerFeller
  • Reply 16 of 26
    radarthekatradarthekat Posts: 3,526moderator
    Be careful what you wish for.  Once the credit card companies succeed in forcing open Apple’s wallet [sic] what’s to stop Apple from competing on their turf?  I’d sign up quick for an Apple credit card that applies <1% fees to merchants.  
    the1maximusdoorman.entropysjcs2305watto_cobraFileMakerFeller
  • Reply 17 of 26
    I am sure Visa can afford the minimal charges.  I’m in the UK paying 29.9% on my Visa card with a base rate of a 1.25%.  I have never managed to get the rate reduced, there is always another six months to wait.  I have been nowhere near my credit limit for several years and have always paid more than the minimum. The account has been clear for some months.  I also have a very high credit score.  Visa doesn’t reduce my rate because historically I have not been able to clear it, so I was just captive.  Banks charge business more for debits and credits on business accounts which is why personal current accounts are free.  I only use Apple products because they are so secure.
    radarthekatwatto_cobra
  • Reply 18 of 26
    The fees are clearly not illegal.  If the companies sign up for the Apple Pay service, they do so knowingly. If there is another free service, well, fine. Apple is again generating business for the banks and pays for the infrastructure.  Yet another try-on for third parties to make money from Apple with no justification.
    radarthekatwatto_cobra
  • Reply 19 of 26
    hexclockhexclock Posts: 1,073member
    viclauyyc said:
    So this law firm think companies should not makes money on its own products? I am shock, capitalism is doomed. 
    Good. Capitalism has killed billions of people and is a cancer. 
    The Empire killed billions of people Darth, get your facts straight. 
    radarthekatwatto_cobraFileMakerFeller
  • Reply 20 of 26
    maximaramaximara Posts: 407member
    davidw said:
    There is no Apple "monopoly". Under the Sherman Act, iOS can not be consider a "relevant market" on which a monopoly is determined. The "relevant market" can not be (or very rarely can be) narrowed down to a single brand.  The "relevant market" in this case would be "mobile devices" or at the least ... "mobile OS". And Apple Pay is not a monopoly  in either of those markets. Apple would have a monopoly with Apple Pay only if the iPhone had a monopoly in the mobile device market or iOS is a monopoly in the mobile OS market.   

    https://www.lexology.com/library/detail.aspx?g=84446bf5-7cd3-4d98-8c43-e1000c2a7823

    Microsoft have a monopoly with Windows OS because MS Windows is on 80% of the World's desktop computers. Not because Microsoft have 100% of the Windows OS market.

    Just because one can only buy a Whopper at a BK, that doesn't mean BK, under the Sherman Act, have a monopoly with the Whopper. The "relevant market" would include all fast food burgers and not just the Whopper.  And BK is under no obligation to allow McDonalds to sell Big Macs in their BK diners, to compete with their Whoppers.    
    The thing is the California court already ruled Apple wasn't a monopoly as documented in Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21.  Heck Epic claimed Apple was a “lawful monopoly in the iOS app distribution market.” and Epic couldn't even prove such a market existed.

    "The threshold of market share for finding a prima facie case of monopoly power is
    generally no less than 65% market share. See Image Tech. Servs. II, 125 F.3d at 1206 (“Courts
    generally require a 65% market share to establish a prima facie case of market power.”); Hunt-
    Wesson, 627 F.2d at 924–25 (“market shares on the order of 60 percent to 70 percent have
    supported findings of monopoly power”).592 A more conservative threshold would require a
    market share of 70% or higher for monopoly power. See Kolon Indus. Inc. v. E.I. DuPont de
    Nemours & Co., 748 F.3d 160, 174 (4th Cir. 2014) (“Although there is no fixed percentage
    market share that conclusively resolves whether monopoly power exists, the Supreme Court has
    never found a party with less than 75% market share to have monopoly power. And we have
    observed that when monopolization has been found the defendant controlled seventy to one
    hundred percent of the relevant market.” (citations omitted)); Syufy Enters. v. Am. Multicinema,
    Inc., 793 F.2d 990, 995 (9th Cir. 1986) (“[A]s far as we know, neither the Supreme Court nor
    any other court has ever decided whether a market share as low as 60-69% is sufficient, standing
    alone, to sustain such a finding.”).

    "Apple does not have market power in the smartphone market. Rather Apple only has 15 percent of global market share in 2020."

    "Thus, the Court finds the relevant geographic market to be global."
    watto_cobraFileMakerFeller
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