Judge Allows CU Class Action Suit Against Apple to Move Forward

A California federal judge decided last week that a credit union class action antitrust lawsuit will move forward, which alleges tech giant Apple has unlawfully monopolized tap-and-pay mobile wallets for the iPhone, iPad and Apple Watch.

U.S. District Court Judge Jeffrey S. White in Oakland, Calif., denied Apple’s motion to dismiss the lawsuit on three out of four legal claims made by the technology company. He ordered the lawsuit to be moved to a case management conference to schedule various legal proceedings, including a trial date.

The “court finds that plaintiffs have plausibly alleged monopolization and attempted monopolization under the Sherman Act,” Judge White wrote in part in a 12-page ruling rendered on Sept. 27.

The lawsuit was filed in July 2022 by the $145 million Affinity Credit Union in Des Moines, Iowa. By October, the credit union’s amended lawsuit was joined by the $11.2 billion GreenState Credit Union in North Liberty, Iowa and the $3.3 billion Consumers Co-op Credit Union in Gurnee, Ill.

The credit unions, which issue payment cards and participate in Apple Pay, alleged they are paying supracompetitive issuer-transaction fees on purchases made with Apple Pay because the tech company prohibits mobile wallets other than Apple Pay from utilizing the NFC chip on iOS devices.

In their lawsuit, the credit unions also alleged that Apple harms competition by limiting access to the NFC chip in iOS mobile devices to Apple Pay and apps without payment functionality. Although iOS device consumers never agree that they will exclusively use Apple Pay as their tap-and-pay iOS mobile wallet, iOS device consumers are nevertheless coerced to use Apple Pay by exclusion of tap-and-pay iOS mobile wallet competitors, the credit unions argued.

In one of its legal claims that the lawsuit should be dismissed, Apple contended that the credit unions did not plausibly allege supracompetitive prices and that their allegations about stifling innovation are contradicted by other allegations in the amended lawsuit.

“Plaintiffs have plausibly alleged that Apple Pay charges arbitrary and inflated fees to issuers, and that competition in the tap-and-pay iOS mobile wallet market would spur innovation and lead to lower prices,” Judge White wrote. He denied Apple’s motion to dismiss the lawsuit, in part, on its claim that the credit unions’ lawsuit failed to plead anticompetitive harm.

Although Judge White also denied Apple’s motion to dismiss the lawsuit based on two other legal arguments, he granted the tech company’s motion to dismiss based on a “tying claim,” that may violate anti-trust law.

To make a tying claim, a plaintiff must allege that the defendant tied together the sale of two distinct products or services, possessed enough economic power in the tying product market to coerce its customers into purchasing the tied product, and that the tying arrangement affects a “not insubstantial volume of commerce in the tied product market,” according to the judge’s ruling.

“Apple argues that there is no tie because iOS device consumers are not required to use Apple Pay and because Apple Pay is free to consumers. The Court agrees,” Judge White wrote. “Purchase of Apple Pay cannot be a condition of purchase of an iOS mobile device because consumers do not actually purchase Apple Pay or agree to forego purchase of other tap-and-pay iOS mobile wallets.”

The lawsuit is seeking a court injunction to stop Apple’s alleged anticompetitive practices and unspecified monetary relief.

READ MORE: Affinity Credit Union, et. al., v. Apple Inc. Motion to Dismiss Ruling.