The mobile payments sector is on regulatory tenterhooks following the increase in the use of mobile wallets and the entry of new competitors, including tech companies, in the sector. The European Commission ("EC") just announced two new studies in the mobile payments sector. The sector is also subject to scrutiny at EU Member State level, while the US and Chinese antitrust regulators are closely monitoring developments.
The EC is seeking to investigate the mobile payments sector by launching two tenders by the end of October for the provision of expert reports on the sector. The first tender1 aims to "gather informed knowledge, in the form of a report, about the state and evolution of contactless and mobile payments online and in stores in all [European Economic Area ("EEA")] countries”. The tender call notes that the contractor is required to prove knowledge and experience in competition and payment markets.
The second tender2 focuses on gathering "detailed information on how merchants and payment gateways integrate certain interfaces (APIs) for the use of payment solutions for payments on apps and websites". Expert IT knowledge as well as IT capabilities to analyse APIs and run API simulations for the implementation of payment solutions are required.
As a side effect of the COVID-19 pandemic, contactless payments and the use of mobile wallets have significantly increased in recent months. In this context, EC officials are thus reflecting on the appropriate regulatory and enforcement policy mix towards the mobile payments sector. As one senior official recently put it, the "increase in the use of mobile wallets [and] the entry of Big Tech" requires "additional reflection" with a view to more regulation and enforcement.3
The EU Commissioner for Competition had already made it clear that "the [EC] monitors compliance with competition rules by operators active in the payments systems sector, including mobile payments systems".4 An investigation into Apple Pay was officially launched on 16 June 2020, examining whether Apple is denying consumers the benefit of new technology by restricting its mobile devices’ near-field communication ("NFC") functionality ("tap and go") to its own proprietary payment service. The EC is also investigating whether developers may need access to hardware and software such as fingerprint and facial scanners, app stores, or telephone SIM cards.
The EC’s interest in payments is not new. Mastercard and Visa’s inter-EEA and inter-regional5 multilateral interchange fees ("MIFs") have been under the scrutiny of the EC for years, with decisions in 2007,6 2010,7 and 2019.8 In April 2015, the EU adopted the Interchange Fee Regulation ("IFR"),9 which capped interchange fees for cards issued and used in the EU at a maximum of 0.20% for debit cards and 0.30% for credit cards. On 7 December 2020, the EC will hold an IFR conference (Hearing) where views from a broad range of stakeholders will be heard. The Hearing is designed to provide input to the EC’s ongoing reflection process about the impact of the IFR in a fast-changing retail payments sector. The programme for the Hearing and the link to the registration page can be found here.
Mobile payment markets are also subject to scrutiny at national level. In the UK, the Payment Systems Regulator ("PSR") conducted in 2016 and 2017 a call for information exercise in order to have a comprehensive understanding of the contactless mobile payments sector. The report published in 2018 concludes that the PSR will "continue to keep the sector under observation, retaining the option to investigate and to act" as it is important to maintain "efficient competition and innovation in the markets concerned".10 Similarly, the Dutch Authority for Consumers and Markets initiated a market study into the activities of major tech firms on the Dutch payments market in October 2019. In Germany, the Payment Services Supervisory Act provides, as of January 2020, the right for payment service providers to access technical infrastructure that contributes to mobile and internet-based payment services. The provision is also known as the "Lex Apple Pay" given that it implicitly aims to give payment service providers the right of direct access to the NFC interfaces of Apple’s mobile devices.
In the US, the Department of Justice (“DOJ”) is focusing on anti-competitive effects of conduct that restricts merchants’ ability to influence consumers’ payment choices and impede competition.11 Accordingly, in 2010, the DOJ sued American Express (“Amex”), Visa and Mastercard to eliminate the restrictions that the three credit card networks imposed on merchants. While the DOJ reached a settlement with Visa and Mastercard, the Amex case went to trial, with the US Supreme Court issuing a decision12 in 2018 that concluded, however, that Amex’s anti-steering rules did not violate antitrust law. Along the same lines, the Federal Trade Commission (“FTC”) is monitoring US payment systems for unfair or deceptive practices affecting core consumer protection principles,13 while it recognizes that innovation in financial technologies provides benefits to consumers and businesses.
In China, the State Council’s antitrust committee has reportedly been mulling whether to launch an investigation into Alipay and WeChat Pay, following the People’s Bank of China’s claim that the digital payments giants have used their dominant positions to impede competition.
The mobile payments sector, and financial services in general, have been clearly placed under scrutiny, especially since COVID-19’s important impact on the sector. The Digital finance package14 adopted in September of this year further reflects the EC’s aim to regulate the financial services sector and revise EU legislation. Be that as it may, various corners of the financial sector have already been scrutinized by the EC and European national authorities in recent years, with investigations into credit cards, benchmarks (such as LIBOR), syndication loans, and asset management. Given the antitrust regulators’ other main focus, digital industries, and the fact that fintech and mobile payments are at the intersection of the financial and digital industries, we expect ever-increasing scrutiny for these sectors globally.
1 Contract reference COMP/2020/014, Expert fact finding on mobile payments, available at link.
2 Contract reference COMP/2020/015, Expert IT analysis - payment APIs, available at link.
3 Concurrences Law & Economics Webinar, Financial services and antitrust: A live update with DG COMP and UK FCA, 13 October 2020.
4 European Parliament, Question reference: P-004223/2018, Answer given by Ms Vestager on behalf of the European Commission, 1 October 2018, available at link.
5 This investigation concerned interchange fees applied to payments made in the EEA with cards issued outside the EEA.
6 European Commission decision, COMP/34.579, MasterCard, 19 December 2007.
7 European Commission decision, COMP/39.398, Visa MIF, 8 December 2010.
8 European Commission decisions, AT.39398, Visa MIF, 29 April 2019 and AT.40049, Mastercard II, 29 April 2019.
9 Regulation (EU) 2015/751 of the European Parliament and of the Council on interchange fees for card-based payment transactions, 29 April 2015.
10 UK Payment Systems Regulator Report, Contactless mobile payments, July 2018.
11 OECD, Digital Disruption in Financial Markets – Note by the United States, DAF/COMP/WD(2019)55, 5 June 2019, pg. 6 [OECD].
12 Supreme Court of the United States, No. 16–1454, Ohio v. American Express Co., 25 June 2018.
13 OECD, supra note 11, pg. 7.
14 For more information, see European Commission’s communication on the Digital finance package available at link.
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