The Australian Competition and Consumer Commission (ACCC) is planning to deny the Commonwealth Bank of Australia, Westpac, National Australia Bank and Bendigo and Adelaide Bank (collectively, the banks) petition to collectively bargain with and boycott Apple on Apple Pay.
In justifying the decision, ACCC chairman Rod Sims said that the likely benefits of allowing the banks to collectively bargain does not outweigh the potential negative effects of the bargain and proposed boycott.
On 26 July 2016, the banks sought authorisation on behalf of themselves and other credit and debit card issuers to engage in limited collective negotiation and limited collective boycott conduct in regards to Apple. The banks have since clarified that they only wish to collectively negotiate with Apple in relation to specified issues regarding Near-Field Communication (NFC) access on iPhones, reasonable access to the App Store for their digital wallets, and the ability to pass through Apple Pay fees.
On 19 August 2016, the ACCC decided not to grant interim authorisation to the applicants. Currently, only consumers with eligible payment cards issued by ANZ and American Express are able to use Apple Pay.
It has been reported that banks are seeking strong growth in digital payments, and earlier this year (2016) ANZ broke ranks with its rivals to become the first major bank to offer Apple Pay to its customers. ANZ says the move has delivered it strong growth in deposits but it says the contract with Apple prevents it from revealing the number of customers using the service. Payments business Cuscal has also reached an agreement with Apple Pay, which means the service is offered by various smaller lenders.
Another deciding factor in the ACCC’s decision was that digital wallets/mobile payments are still in their infancy in Australia and consumers are already using their contactless cards to do “tap and go” payments.
The use of tap and go payments has risen greatly in recent years, accounting for up to 75 per cent of all Visa transactions. This has caused many consumers to question, exactly what the advantages are of digital wallets over contactless cards. The absence of an obvious advantage over other payment methods like contactless cards has slowed the adoption of mobile payments in Australia. Any reduction in competition could stall this even longer. The ACCC Chairman was quoted as saying:
“Apple Wallet and other non-bank digital wallets could represent a disruptive technology that may increase competition between the banks by making it easier for consumers to switch between card providers and limiting any ‘lock in’ effect bank digital wallets may cause.”
Commenting on the decision to deny the banks authorisation for the action, the ACCC Chairman Rod Sims said:
“This is currently a finely balanced decision. The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments … While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited … However, banks can already offer competing digital wallets on iPhones without direct access to NFC, through their own apps using Apple Pay payment technology, or using NFC tags. Banks can also offer digital wallets on the Android platform...It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations.”
A spokesman for the banks (payments expert Lance Blockley), said the lenders would make further arguments to the ACCC:
"Whilst we are disappointed with this draft result, our application is not just relevant to Australia – the same issues around consumer choice and the freedom to offer genuine competition against Apple Pay arise globally."
Apple said the company looked forward to working with Australian banks to provide Apple Pay to customers, with a spokesman saying:
"We are focused on offering the easiest, most secure and private payment experience possible, and millions of Apple Pay users from 3,500 banks in 12 countries enjoy that today."
The banks can either continue to act collectively and seek to persuade the ACCC that the Draft Decision is not the correct one, or they can independently approach Apple to see if they can negotiate a better or at least an equivalent deal to that already struck by ANZ. With the ACCC’s decision currently at draft stage, there will be further public consultations. The ACCC is expecting to release its final decision in March 2017.
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
ACCC rejects the banks colluding to bargain on Apple Pay - theconversation.com.au
ACCC rejects NAB, CBA, Westpac, Bendigo collective boycott of Apple Pay in draft ruling - smh.com.au
ACCC proposes to deny authorisation for banks to collectively bargain with and boycott Apple on Apple Pay - ACCC Media Release MR 222/16
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