Google is essentially paying Apple to stay out of the search engine business, class action claims
Apple has an agreement with Google that it won’t develop its own internet search engine as long as Google pays it to remain the default option in Safari, according to a new class action lawsuit.
Filed in California court earlier this week against Apple, Google and their respective CEOs, the lawsuit alleges the two companies entered into a non-competition agreement in the internet search industry that violates US antitrust laws.
More specifically, the complaint accuses Apple CEO Tim Cook and Google CEO Sundar Pichai of participating in “regular secret meetings” where Google agrees to share its profits with Apple if it receives preferential treatment on devices like iPhone and iPad.
The class action lawsuit also alleges that Google is making billions of dollars in annual payments to Apple based on an agreement that Apple will not launch its own competing search engine, and that the non-competition agreement includes plans to actively suppress small competitors and acquire potential competitors.
The complaint alleges that advertising rates are subsequently higher than rates would be in a competitive system. He is therefore seeking an injunction prohibiting the non-competition agreement between Google and Apple, a termination of the profit-sharing and preferential treatment agreement, and an end to the multi-billion dollar payments.
Finally, the complaint calls for “the break-up of Google into separate and independent companies and the break-up of Apple into separate and independent companies in accordance with the precedent of the break-up of the Standard Oil company into Exxon, Mobile, Conoco, Amoco, Sohio, Chevron, and others.”
It’s no secret that Apple and Google have a massive financial deal that secures Google’s position as the default search engine on Apple devices. Neither company has ever confirmed exactly how much Google pays to be the default search engine on Apple devices in the US, UK and other countries, but the rumor mill is in the billions.
In 2020, The New York Times reported that Apple receives around $8 billion to $12 billion a year in return for making Google the default search on its devices. According to an analyst, Google’s payment to Apple in 2021 to maintain this status quo could have reached as much as $15 billion.
It’s believed to be the largest payment Google makes to anyone and could account for up to a fifth of Apple’s annual profits. But it has also come under intense scrutiny in the past, particularly from the US Department of Justice, which complaints that the deal is representative of illegal tactics used to protect Google’s monopoly and stifle competition.
The UK Competition and Markets Authority also called the deal a “significant barrier to entry and expansion” for rivals in the search engine market and, in 2020, asked authorities law enforcement to have a range of options to deal with the agreement between Apple and Apple. Google to provide a more level playing field for other search engines.
Bringing the antitrust case to a San Francisco court this week, attorney Joseph M Alioto said: “These powerful corporations abused their size by illegally shutting down and monopolizing major markets which, in an otherwise corporate system free, would have created jobs, lowered prices, increased production, added new competitors, encouraged innovation and increased the quality of services in the digital age.”
Apple and Google would likely argue that if payments are in effect for Google to remain the default search option, users can select other search engines in Safari, including Microsoft’s Bing, Apollo Fund’s Yahoo, and Search Engines independent research centers DuckDuckGo and Ecosia.
Apple would also likely point out that it is already in the search engine business and maintains an active web crawler, called Applebot. The crawler works primarily in the background to enhance Siri and Spotlight search results, though earlier reports have interpreted the increased Applebot activity as Apple “stepping up efforts” to develop its own search technology if its agreement with Google became incompatible with antitrust laws.