Financial institutions challenge Apple’s payment fees as lawsuit expands nationwide.
Apple is facing a class action lawsuit from financial institutions over pay fee add-ons charged when customers use Apple Pay, expanding a legal fight that began more than four years ago. The case centers on whether Apple used its control over payments on its devices to charge card issuers fees that were higher than they would have been in a competitive market. The lawsuit was filed in 2022 by three credit unions: Affinity Credit Union of Des Moines, Iowa; GreenState Credit Union of North Liberty, Iowa; and Consumers Cooperative Credit Union of Gurnee, Illinois. The credit unions claimed that Apple required financial institutions to pay fees when their cards were used through Apple Pay on Apple devices.
A federal judge in California has now allowed the case to proceed as a class action. U.S. District Judge Jeffrey White of the Northern District of California certified the class on Wednesday. The ruling means the lawsuit can represent other U.S. financial institutions that issued payment cards enabled for Apple Pay and paid the fees described in the case. The court also rejected Apple’s request to prevent an economist hired by the plaintiffs from providing testimony about competition in the digital wallet market. That decision allows the economist’s work to remain part of the pay fee case as it moves forward.
The financial institutions argue that Apple’s fees are unfair because Apple controls access to tap-to-pay functions on its devices. According to the lawsuit, Apple charges card issuers 0.15% of a credit card transaction made through Apple Pay. For debit card transactions, the company charges a flat fee of one-half of a cent, regardless of the payment amount. The plaintiffs have argued that the fees are higher than what card issuers would face with competing digital wallet services. The lawsuit points to Google Pay and Samsung Pay, saying those services do not charge card issuers comparable fees for payments made through Android devices.
The pay fee case also raises questions about how much control technology companies should have over payment services that operate on their devices. Apple has argued that Apple Pay still faces competition because consumers can choose other payment methods, including physical cards and other ways to make purchases. In a response filed in 2023, Apple argued that the design of Apple Pay does not prevent competition in the wider payment market. The company said consumers have many other payment options available when making purchases.
Apple has not publicly responded to a request for comment on the latest court ruling, according to the report. The attorneys representing the credit unions said they were pleased with the decision and said the class includes U.S. entities that issued payment cards that could be used with Apple Pay and paid Apple the fees at issue. The class certification does not decide whether Apple broke antitrust laws or whether the financial institutions will receive money. Instead, it allows the claims of similarly situated card issuers to be handled together in the lawsuit.
The case could now move into additional legal proceedings as both sides present evidence about Apple’s payment system, the fees charged to card issuers and the level of competition among digital wallet services. The outcome could affect Apple as well as financial institutions that pay fees connected to digital payment systems.
