' Apple Pay and MCX: Antitrust Minefield or Misfire? | MTTLR

Apple Pay and MCX: Antitrust Minefield or Misfire?

On October 20, Apple implemented an NFC payment method called Apple Pay. In a nutshell, this service allows customers to store credit card, debit card, and brand loyalty card information in their iPhones and complete transactions without using the physical card or giving any third-party access to the card number. Within 72 hours, the service already had more than one million card activations. One of the benefits of using NFC for this service is that many merchants (as many as 220,000 nationwide) already have the hardware in place to enable Apple Pay with no active support required from the merchants. This led to Apple Pay being accepted and used at various merchants who had not anticipated supporting it.

Within one week of Apple Pay’s implementation, however, CVS and Rite-Aid turned off the hardware that enabled Apple Pay and similar services, like Google Wallet. The reason? Those merchants are members of a group called MCX, which has been planning to release a similar payment solution called CurrentC early in 2015. Members could face steep fines for failing to boycott a competing mobile payment method. Aside from customer backlash, this has raised concerns of anti-competitive behavior in the form of a private antitrust investigation against MCX.

Although CVS and Rite-Aid’s actions “raise an antitrust smell“, it remains unlikely that an antitrust suit will bring about change. Proponents of the claims state that what MCX has done is create a ‘horizontal boycott‘ which is illegal. At first glance, this seems to be a slam dunk, but in order to prove a boycott, the potential plaintiffs would need to produce hard evidence of the anti-competitive conduct, such as emails or letters between the participants. Further, even with such evidence, MCX will still have an opportunity to give a ‘pro-competitive reason’ for not allowing members to accept competing payment solutions. One possible reason that a court could accept is that it was necessary to protect the market for MCX’s own system.

If that reasoning is found valid, the actions of MCX would be analyzed under a much more relaxed standard, called the rule of reason. Under this analysis, the court would examine projected market share, define a relevant market, as well as a host of other economic tools of analysis. This process is a long one, imposing high costs for all of the parties involved. However, even under this more relaxed standard, MCX might still be in trouble. They have actively excluded potential competitors from entering a market and reduced the choices available to consumers.

Regardless of the outcome  or existence of any potential suit, the CEO of the MCX consortium has stated that the exclusivity provisions of the MCX agreement will not remain in force forever, in fact, it would be “months, not years” before they were lifted. Were this truly the case, the suit may be over before it even begins.


Andrew Steiger is an editor on the Michigan Telecommunications and Technology Law Review, and a member of the University  Michigan Law School class of 2016.

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