Australian Regulator Denies Big Banks Collective Bargaining On Apple Pay

(RTTNews) - The Australian Competition and Consumer Commission said it has issued a draft determination proposing to deny authorisation to the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank to collectively bargain with and boycott Apple (AAPL) on Apple Pay.

The banks sought authorisation to bargain with Apple on two key issues: access to the Near-Field Communication (NFC) controller in iPhones. Such access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple's digital wallet without using Apple Pay; removing restrictions Apple imposes on banks preventing them from passing on fees that Apple charges the banks for the use of its digital wallet.

"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," ACCC Chairman Rod Sims said.

The banks argued that being able to engage in the proposed conduct will increase the likelihood of being able to offer competing wallets on the iOS platform and pass through Apple fees.

"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," Mr Sims said.

The applicant banks have yet to reach agreement with Apple over deals to enable their cardholders to use Apple Pay. Apple does not allow the banks, or any entity, direct access to the NFC to allow them to offer their own integrated digital wallet to iPhone users.

"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," Mr Sims said.

"Digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations."

The ACCC is concerned that the proposed conduct could reduce or distort competition in a number of markets.

The conduct would reduce the competitive tension between the banks individually negotiating with Apple, which could reduce competition between the banks in the supply of mobile payment services for iPhones.

The ACCC is seeking submissions on its draft determination before making a final decision.