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The European Commission said that Apple apparently "abused its dominant position" in developing its Apple Pay system. The US company could face billions in fines.
The EU's top executive body said on Monday that it has found that Apple is infringing EU Competition rules with its Apple Pay system.
The EU Commission finding follows a months-long preliminary investigation.
The Commission oversees competition in the EU's single market and has the power to issue fines to companies it deems have damaged consumers' interests.
Apple Pay is a digital wallet that allows users to make contactless payments.
"On a preliminary basis, we have found that Apple abused its dominant position," the European Commission said in a press statement. The statement said that Apple restricted access to "key inputs" that are necessary for other third parties to develop mobile wallets.
"Apple has built a closed ecosystem around its devices and its operating system, iOS," the statement said. "Apple controls the gates to this ecosystem, setting the rules of the game for anyone who wants to reach consumers using Apple devices."
"We are concerned that Apple may have illegally distorted competition in the market for mobile wallets on Apple devices. Now Apple can answer our concerns," European Competitor Commissioner Margrethe Vestager said in a tweet.
Apple had previously argued that restrictions it placed on Apple Pay were due to security concerns. Vestager said at a news conference that the investigation "did not real any evidence that would point to such a higher security risk" and that Apple's conduct "cannot be justified" in this manner.
The Commission said that the anti-competitive practices dated back to 2015 when Apple Pay was launched.
European Competitor Commissioner Margrethe Vestager said that apple may have 'illegally distorted competition in the market for mobile wallets'
Apple could face a fine of up to 10% of its global turnover, which would amount to $36.6 billion (€34.7 billion) based on its revenue last year. However, the EU rarely hands out maximum penalties.
Apple Pay is used by more than 25,000 banks in Europe.
The US-based company can ask for a closed-door hearing to defend its case. It may also send a written response before the Commission issues a decision.
There is no legal deadline for the end of the investigation.
In September of last year, Apple was ordered by a US federal court to accommodate app developers and loosen control over in-app payments.
sdi/dj (Reuters, AP, dpa)