Apple, along with Mastercard and Visa, are included in the class-action lawsuit, which accuses Apple of conspiring to lessen competition and make merchants pay higher fees for credit and debit card transactions. Merchant Mirage Wine & Spirits filed a lawsuit Thursday in federal court in East St. Louis, Illinois, accusing Apple of reaching an agreement with Visa and MasterCard to form an offensive and defensive alliance to avoid competing with the two existing credit card companies.
According to the complaint reported by Reuters, Apple's agreement with Visa and Mastercard is that if consumers use Apple's "mobile wallet service" (i.e. ApplePay) to make purchases on their networks, Visa and Mastercard will pay a portion of ApplePay's transaction fees. The complaint contends that this was a "massive and ongoing cash bribe" worth hundreds of millions of dollars annually.
Since there is no competition between the three companies in the complaint, there is no reason for any of the companies involved to work to improve their services and win more customers, such as by lowering the fees merchants pay for card transactions. As a result, the so-called transactions do nothing to help merchants who rely on the network, and instead make them pay more.
It is thought that without a market allocation agreement, Apple or a third party would enter the market, "putting downward pressure on fees for entrenched network companies".
The lawsuit not only targets the charging arrangements, but also involves Apple's hardware. According to the agreement with Visa and Mastercard, Apple will "protect its market segments from competition by blocking third parties from accessing certain hardware in iPhones."
In the complaint, Apple allegedly agreed not to allow third-party payment apps to "reside in the ApplePay mobile wallet or use NFC hardware installed on devices such as iPhones."
If the agreement didn't exist, Apple would have more incentive to effectively manage its own payments network, with Apple Wallet funded by bank transfers and merchant fees that are still "profitable for Apple" but are also "significantly lower" than Visa and Mastercard's fees.
The complaint adds that this would also prompt Apple to open NFC functionality to third-party applications.
The lawsuit is seeking class-action status and represents "at least tens of thousands" of merchants. The lawsuit also seeks treble damages under U.S. antitrust law.
Apple has not officially commented on the lawsuit.
While the lawsuit may take some time to come to fruition, Apple may still open up NFC access. On December 12, there were reports that Apple was considering opening the NFC function on the iPhone to other payment services to fend off trouble from EU antitrust regulations.