UK regulators are reviewing a longstanding agreement between Apple and Google over the default search engine for the iPhone maker’s Safari mobile browser, reports Reuters.
According to a updated report compiled by the UK government’s Competition and Markets Authority, Google pays Apple a “substantial majority” of the £1.2 billion (about $1.5 billion) it pays annually in the UK just for so-called default positions, in other words when Google pays a company to make its search engine the reference in a browser or another platform.
The report says the deal creates a “significant barrier to entry and expansion” for Google’s competitors. The report also suggests limiting Apple’s ability to monetize these offers or giving users a choice of search engine during setup.
For years, Mobile Safari has relied on Google Search, making the iPhone a substantial revenue generator for Google’s mobile advertising business and giving Google a competitive edge over the competition. In 2014, court documents revealed a $1 billion payment made by Google to secure the default location on mobile Safari in the US. Analysts estimate that this amount has has only increased over the years since. Apple benefits greatly, with around $9 billion a year coming from these placement deals, although the company has never disclosed concrete numbers.
Regulators now fear that this massive deal in the UK, which was 50% higher last year than what Google paid for a placement in the US more than six years ago for a much more populated region, can stifle competition. Google’s competitors – though few, such as Microsoft’s Bing and DuckDuckGo, actually remain – may not be able to pay such a large sum for premium placement on the default iPhone browser. Here is the excerpt from the report, found on page 13, regarding the agreement:
In search, Google has negotiated agreements with Apple and many of the largest mobile phone manufacturers under which it pays a share of search advertising revenue to these partners in exchange for Google Search occupying the leading positions. default search on the device. The magnitude of these payments is striking and demonstrates the value that Google places on these default positions. In 2019, Google paid around £1.2 billion in exchange for default positions in the UK alone, the vast majority of which went to Apple for being the default on the Safari browser. Search engines competing with Google that we’ve spoken to have highlighted these default payments as one of the most significant factors hindering competition in the search market. Consumers primarily access the Internet through mobile devices, which account for more than two-thirds of general searches, a share that has grown significantly in recent years and is expected to continue growing in the future.
EU and US regulators are increasingly looking to Big Tech, fearing that the size and power of Silicon Valley companies will make them anti-competitive, though the EU has been far more aggressive as regards the effective application of these rules and the imposition of fines. The EU has slapped Google with numerous multibillion-dollar fines over the past decade, and regulators are now scrutinizing Apple over its handling of the App Store and the fees it charges developers.