An Australian banking consortium may lose its fight to collectively bargain with Apple and boycott Apple Pay, with the Australian Competition and Consumer Commission (ACCC) issuing a draft determination proposing to deny authorisation on Tuesday.
The Commonwealth Bank of Australia (CBA), Westpac Banking Corporation, the National Australia Bank (NAB), and Bendigo and Adelaide Bank have been seeking regulatory approval to collectively negotiate with third-party mobile providers such as Apple on conditions relating to competition, best practice standards, and efficiency.
The banks want access to the near-field communication (NFC) controller in iPhones, as Apple currently does not allow any entity direct access. The group has been arguing that 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 -- which is what Apple wants to avoid.
Additionally, the banks want the removal of the restrictions Apple imposes on banks that prevent them from passing on fees that Apple charges the banks for use of its digital wallet.
Core to the banks' argument is that the public will benefit if Apple is forced to hand over its NFC hardware, highlighting it would increase competition and consumer choice in digital wallets in Australia, increase innovation and investment in digital wallets and other mobile applications using NFC technology, provide greater consumer confidence leading to increased adoption of mobile payment technology in Australia, and provide cost-based benefits for consumers.
"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 in a statement.
"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."
The banks responded to the ACCC's draft decision by saying they "remain committed to pursuing a successful outcome" by addressing the issues raised by the regulator.
"If the draft determination of the Australian competition regulator stands, effectively there will be no competition against Apple for mobile payments on the iPhone," the banks' spokesperson Lance Blockley added.
"The application has never been about preventing Apple Pay from coming to Australia or reducing competition between wallets. It has always been about providing consumer choice and innovation."
The four banks initially requested interim authorisation within 28 days of their initial request on July 27 for the ACCC to allow them to commence collective negotiations while the regulator considered the application for final authorisation.
The ACCC refused to grant the banks interim authorisation to collectively negotiate on the basis it needed more time to come to a decision.
Given the infancy of digital wallets and mobile payments, Sims said on Tuesday he is concerned with how competition may develop with possible future innovations and that the proposed conduct could reduce or distort competition in a number of markets.
In its first submission, Apple accused the banks of wanting to control the market, saying that collective negotiation with the banks "would harm consumers, lead to less competition and less innovation, and create a troubling precedent".
"The present application is only the latest tactic employed by these competing banks to blunt Apple's entry into the Australian market," it said.
Apple also accused the banks of having a "limited understanding" of Apple Pay.
In August, Apple claimed that collectively negotiating with Australian banks would "undermine the availability, security, and privacy" its customers expect when using Apple devices to make payments.
"If granted, the authorisation would harm consumers, lessen competition, and reduce innovation in the banking sector, of which the payments system is a core part. It would also create a troubling precedent. Apple expects that banks and third-party mobile wallet providers will continue innovating and developing new and better solutions," Apple wrote in its submission.
The banks then argued in its joint submission to the ACCC that Apple's arguments against collective negotiation are "unconvincing" and "superficial".
The regulator also said in its draft proposal to deny authorisation on Tuesday it believes collective bargaining rights 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.
"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," Sims said.
The ACCC also said it considers the conduct could also distort competition between mobile operating systems.
Updated at 2.40pm AEDT, November 29: Added statement from banks.