Google Paid Apple Billions for Access to iPhone Users. Now the Partnership's Under Scrutiny in a U.S. Antitrust Lawsuit. The U.S. Department of Justice is suing Google and alleging that the company unlawfully maintained its search engine dominance through exclusionary deals with partners like Apple.
By Madeline Garfinkle •
Key Takeaways
- Google has been paying billions to Apple since 2005 to be the default search engine on Safari, resulting in a lucrative partnership that has benefited both tech giants.
- The trial not only focuses on Google and Apple, but also sheds light on the power of default settings in the tech industry and their potential impact on business partners.
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Since 2005, Google has paid Apple billions to be the default search engine on Safari, bringing the two tech giants together in a partnership that has made them both billions.
Now, the partnership is under scrutiny in the U.S. Department of Justice's antitrust case against Google (U.S. et al v. Google), which alleges that the tech giant unlawfully maintained its search-engine dominance through exclusionary deals with partners like Apple, Bloomberg reported.
Established nearly two decades ago, the agreement designated Google as Apple's default search engine, with Apple receiving up to 50% of the advertising revenue generated by Google searches conducted on Apple's Safari browser. In 2016, Apple and Google expanded their agreement to include other Apple features like Siri and Spotlight, further solidifying their cooperation.
Throughout the partnership, Google has benefited from Apple's mobile achievements, resulting in a commanding 90% share of the overall search market. Apple reaped substantial annual earnings from this collaboration, estimated at around $18 billion in 2022, as reported by Sanford C. Bernstein & Co. analysts, per Bloomberg.
Google's perspective on the relationship is one of "co-opetition," combining cooperation and competition, Kent Walker, Google parent company Alphabet's chief legal officer, told the outlet.
However, critics argue that such deals effectively stifle competition.
"You are not supposed to be able to cooperate with your competitors," Rebecca Allensworth, associate dean of research for Vanderbilt Law School, told Bloomberg.
The legality and consequences of the arrangement will be under close examination in the trial, which is set to begin on Tuesday and last 10 weeks.
In 2012, a Google executive revealed to FTC investigators that the company's search volume could plummet by as much as 50% if Apple were to replace Google Search with Bing, Politico reported.
Apple isn't the only Google partner under examination during the trial. In 2011 Verizon, Sprint, AT&T and T-Mobile all entered partnerships with Google wherein the carriers would receive a share of advertising revenue ranging from 15% to 40% generated on the devices they sold to their customers. The strategic move aimed to safeguard Google's Android search distribution from potential competitors like Bing or Yahoo.
In a 2011 email cited in court filings, a Google executive explained its philosophy, stating, "We pay revenue share in exchange for exclusivity," Bloomberg reported.
Why is the U.S. Suing Google?
The DOJ has accused Google of unlawfully leveraging partnerships with phone manufacturers and internet browser firms to exclude rival search engines. Through agreements like that with Apple, the government claims that Google's substantial payments to its partners have hindered other search engines and created a cycle of monopolization, stifled competition and limited consumer choice. As of June 2023, Google has 90.68% of the search engine market share, according to data analysis firm SimilarWeb.
Google's monopoly, the DOJ argues, has significantly impacted the search engine landscape, particularly as it pertains to unfairly harming competitors.
Microsoft's Bing, for instance, currently holds just a 6.4 percent share of the U.S. market, and Yahoo, which utilizes Bing, accounts for an additional 2.4 percent, according to StatCounter. DuckDuckGo, a privacy-focused Google alternative, has only managed to capture a fraction of the market, and it attributes this challenge to Google's default search agreements.
"Even though DuckDuckGo provides something extremely valuable that people want and Google won't provide — real privacy — Google makes it unduly difficult to use DuckDuckGo by default. We're glad this issue is finally going to have its day in court," Kamyl Bazbaz, the spokesperson for DuckDuckGo, told Vox.
Google argues these agreements were "legitimate" and designed to provide a superior user experience. The trial will determine if Google's actions harmed competition and if its market power outweighed any consumer benefits.
If Google loses, the government will seek an injunction to stop anti-competitive practices, potentially impacting Google's business.
Furthermore, the case raises the question of if such monopolies wield excessive control over users' online experiences.
