Not the best news cycle for Apple over the past 24 hours. More lawsuits and a possible hiring freeze don’t make for the most favourable headlines.
Possible $1 Billion class action lawsuit over Apple Pay
Hagens Berman and Sterling & Slater, two highly respected law firms, have filed a claim against Apple. The claim alleges that by locking out third parties from ‘Tap-to-Pay’ functionality, Apple is in breach of multiple clauses of the Sherman Act. The legislation in question is designed to prevent anti-competitive behaviour.
The claim takes particular issue with the commission that Apple takes from the card issuers. It argues that Apple illegally profits to the tune of $1 billion annually while denying access to the NFC hardware to competitors.
“When you compare the functionality of Apple Pay to mobile wallets available on Android devices – Google Pay, Samsung Pay – you’re essentially holding up a mirror; they are essentially identical,” said Steve Berman, Hagens Berman co-founder and managing partner. “And yet, the same service on Android that card issuers pay absolutely nothing for costs them a collective $1 billion annually through Apple Pay.”HBSS Law
The claim is less concerned with the fee itself. But rather the fact that should competition be allowed to access the NFC hardware, it would make it difficult for Apple to maintain those kinds of transaction fees. Or in other words, a lack of competition is artificially inflating the fees.
The AppleTLDR Take
It’s hard to argue that the proposed legislation does not include some valid points. Points that at the very least, are worth testing in a court of law. On the flip side of the argument, however, Apple has long argued that its rationale for preventing access to the NFC hardware, comes down to security and privacy.
When a user enables Apple Pay, the card number is not stored in a plain text format. Instead, it is turned into a secure token and stored inside a piece of specialised hardware known as the secure element. Apple claims that enabling access to third-party developers to the secure element for payments, a critical part of the Apple Pay experience, would run the risk of exposing consumers to fraud and data misuse.
Apple to slow hiring and cut budgets for certain teams
According to Bloomberg Analyst Mark Gurman, Apple may be looking to economise in 2023. His report suggests that the decision is limited in scope and won’t affect all divisions in the company.
The rationale behind the slowdown in spending is thought to be linked to economic uncertainty in the year ahead. The ongoing headwinds of the pandemic, the war in Ukraine, energy shortages and high inflation are all contributors to the decision.
If correct, the plans could see Apple slash budgets for R&D across certain teams. While others will face a hiring freeze as opposed to a cut to budgets.
This shouldn’t be a sign of concern for Apple’s future. Quite the contrary, this represents a prudent management approach given the economic uncertainty. Apple reported its best ever Q2 results back in March for context.