This news caused me to make a spit-take on my morning coffee.
Several of the country’s big banks are seeking to join forces and negotiate as a bloc with technology giant Apple, which could lead to a collective boycott of Apple Pay, in a bid to offer “digital wallets” on the iPhone.
Commonwealth Bank, National Australia Bank, Westpac and Bendigo Bank have this week applied to the Australian Competition and Consumer Commission, asking permission to negotiate as one with Apple.
Their application also seeks permission to undertake a “limited form of collective boycott,” in which the banks will agree not to negotiate with Apple individually while the collective talks are occurring.
Let’s unpack this. Apple has an NFC solution on its iPhone (just as Google does) but in order for Australian consumers to use it, they need permission of their banks. The banks claim that because Apple controls the phones of some of its customers, they need to negotiate as a block on access to the NFC component on the iPhone. Of course, not all banks. ANZ has already signed up to Apple Pay.
But here is what I don’t get. First, what does negotiating for access to the NFC component mean? Do the banks think that Apple will open it up to them when they haven’t opened it up to anyone else in the world? The reason Apple keep that close knit is because of security. It is unlikely there is anything else going on.
Second, the idea apparently is for the banks to agree not to sign up to Apple Pay until this is done. Then they will negotiate terms of access individually. In other words, a collective boycott.
The Australian law has provisions to allow this sort of thing if there are public benefits. But in this case, the public benefits only arise (potentially) if it is in the public interest for Apple to open up access to NFC. However, that decision would lie elsewhere with a much more detailed process. Also, because Apple is not a dominant handset maker — it has much less than 50% market share in Australia and elsewhere — opening up access through the usual route won’t happen. Put simply, Google have already developed this and so access to NFC is possible.
Instead, the idea here is to allow for something blantantly anti-competitive. One of the forces the drives banks to adopt new technologies that are provided by others is competitive pressure between them — that is, their customers want it. That is why AmEx and ANZ are already on board with Apple Pay. What the remaining banks want to do is ensure any one of them doesn’t break ranks and adopt Apple Pay and activate a competitive response.
In summary, the banks are using the wrong part of the law to deal with a public interest question precisely because Apple is not dominant in the Australian market. And they are doing it to protect what is likely a poor set of investments on their part and because they are unwilling to throw their weight behind Google alone. In other words, it is classic undermining of competition to benefit the interests of competitors and not the interests of consumers. Hopefully the ACCC will deal with it quickly because it is pretty clear that while the regulators deliberate, the same effect as a collective boycott is actually occuring.