EU and US regulators increase pressure on GAFA
American political changes always have worldwide effects. The Biden administration is initiating actions to bring more taxation and regulation in the US economy, especially compared to the Trump era. At the same time, probably not unrelatedly, European authorities are increasingly airing their worries at the growing place taken by the GAFA in the payment industry.
In France, the « Autorité de la Concurrence » (the official competition regulator) has published an opinion in which it expresses its concerns about the arrival in the payments sector of new players, FinTechs and BigTechs, which have developed innovative payment methods for consumers, and new diversified services, by seizing all the opportunities created by new regulations. The opinion especially targets Apple Pay, Google Pay and Amazon Pay for having access to large data sets, and being positioned as the front-end of payments.
The enforcement of the PSD2, the Second European Payment Services Directive, aims at reinforcing the competitive situation in Europe, especially thanks to the introduction of new services and the Open Payment concept which separates different roles in payment transactions: the banks holding consumers’ accounts may be separate from the PSPs (Payment Services Providers) giving consumers access to their financial data and able to initiate transactions.
Apple Pay, Google Pay and Amazon Pay are now proposing payment services, positioning themselves as payment initiators, in the meaning of the PSD2. This point is under scrutiny by the French Autorité de la Concurrence, as they consider the GAFA benefit from the consumer relationship position without having to incur the charges of executing the payment transactions themselves. In addition, managing the front end of payments allows the GAFA to increase the amount of data they already collect about each individual, thus even more reinforcing their dominant position.
As the GAFA integrate all aspects of our daily lives, they are seen as bringing an unfair competition into the payment market. Moreover, as financial institutions are heavily regulated by governments worldwide, they complain about the lack of regulations that apply to these new entrants.
The European Commission has already launched several actions against the GAFA, always to try to control and supervise their dominant position. For instance, in June 2020, European Commissioner Margrethe Vestager, Executive Vice-President for A Europe Fit for the Digital Age and Competition, opened an antitrust investigation to assess whether Apple's conduct in connection with Apple Pay violates EU competition rules, essentially through the limitation the hardware developer imposes on NFC access preventing third parties to implement their own apps using iPhones NFC capabilities. in April 2021, Margrethe Vestager has issued charges against Apple stating that its AppStore rules break EU law as the EU Commission believes Apple has a “dominant position in the market for the distribution of music streaming apps through its AppStore.”
After the GAFA, the BATX (Baidu, Alibaba, Tencent, Xiaomi) are coming. As of now, they do not propose global payment systems, but they are building their expertise in their home market to be ready to expand worldwide. European DSA and DMA (Digital Services Act and Digital Markets Act) aim at establishing a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally. The battle will be hard to fight, but the stake is essential.
Issues for the GAFAM are not only developing in Europe. In their home market, the Biden administration has appointed Tim Wu as special assistant to the president for technology and competition policy and Lina Khan as a Commissioner of the Federal Trade Commission. Tim Wu, who is best known for advocacy against powerful telecom companies and for coining the term “net neutrality,” is said to be ready to strengthen antitrust laws, according to the New York Times. Lina Khan, in her previous positions, already accused the technology industry of monopolistic conduct and pushed for aggressive remedies like the structural separation of businesses, according to Bloomberg.
The GAFA’s position in a few years may be very different from now. Time, and political action, will tell…