Apple has spent decades building its walled garden. It may be starting to crack

Apple has spent decades building its walled garden. It may be starting to crack
Apple has spent decades building its walled garden. It may be starting to crack

As Europe prepares to go after Apple Pay ahead of landmark new law and U.S. lawmakers prepare similar approaches, Apple maintains that its ironclad approach to its mobile ecosystem is in consumers’ best interests

Apple Inc. has spent decades tending to and building a “walled garden” around its technology, allowing the most valuable company in the U.S. to maintain control over what software can land on its iPhones and Macs and what that software can do.

Recent moves by regulators and legislators in Europe and the U.S. threaten to put the first major cracks in that wall, however, with a focus on mobile payments and the App Store, both part of the fastest-growing segment of Apple’s business. A new European Union law, fresh objections to the underlying technology of Apple Pay’s structure and proposed laws in the U.S. will likely change the way Apple AAPL, +0.47% — and Alphabet Inc.’s GOOGL, -0.65% GOOG, -0.93% Google — operate their mobile businesses.

A new fissure showed Monday, when the European Commission issued a statement of objections to Apple Pay practices, and charged Apple with abusing its payment dominance by restricting access to the technology underpinning contactless payments on its mobile devices. Regulators believe that technology, called Near Field Communication, or NFC, exerts a monopoly that only Apple can offer. Contactless payments are popular across Europe, but Apple Pay remains the only contactless option for mobile payments on iPhone and iPad.

“We have indications that Apple restricted third-party access to key technology necessary to develop rival mobile wallet solutions on Apple’s devices,” European Commission Executive Vice President Margrethe Vestager said in a statement, adding the EC has formally charged the iPhone maker and could levy a hefty fine. “In our Statement of Objections, we preliminarily found that Apple may have restricted competition, to the benefit of its own solution Apple Pay. If confirmed, such a conduct would be illegal under our competition rules.”

The move against Apple is a precursor to sweeping new legislation in Europe called the Digital Markets Act, or DMA, that is months away from going into effect, as well as two bills wending their way through the U.S. Senate that parallel parts of DMA. Mitch Stoltz, senior staff attorney at digital-rights group Electronic Frontier Foundation, has called DMA “the first strong, comprehensive set of regulations that’s specific to market power in internet platforms.”

For more: Landmark EU law could take billions from Apple, and already forced a major change at Google

The charges against Apple Pay and forthcoming legislation could create a crack in Apple’s walled garden approach, Marco Bellin, chief executive of virtual-private network company Datacappy, told MarketWatch.

“Apple wants to protect and control users’ data, not just your privacy,” he said.

For years, Apple has vigorously contended that disruption of its proprietary mobile-payments system and NFC specifically would shatter any resemblance of security for consumers, exposing them to a potential torrent of malware and a data-privacy calamity.

In a statement to MarketWatch on Monday, Apple said it has “designed Apple Pay to provide an easy and secure way for users to digitally present their existing payment cards and for banks and other financial institutions to offer contactless payments for their customers. Apple Pay is only one of many options available to European consumers for making payments, and has ensured equal access to NFC while setting industry-leading standards for privacy and security.”

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