Have you ever wondered why the world’s most valuable company never made any serious attempt to capture a sizeable share of the search engine market, especially in an era when the number of daily search queries is peaking at a record high? Yes, we are talking about Apple and its mysterious strategy for not tapping the search engine market currently dominated by Google.
If there is any truth in the lawsuit filed recently, it explains how Apple has hands in gloves with Google!
Apple Google Deal In 2020
Apple has a deal with Google that says it will not develop its own web search engine for as long as Google continues to pay top dollars to keep it as the default search engine within Safari, a new class action claims.
Earlier in the week, the lawsuit was filed against Apple, Google, and their respective CEOs in the California court. The lawsuit asserts that the two companies are bound by an agreement to not compete in the online search business which is in direct violation of US antitrust law.
In particular, the complaint specifically accuses Tim Cook, CEO – Apple Inc, and Alphabet-owned Google CEO Sundar Pichai of participating in “regular secret meetings“. Both the companies are accused of indulging in the arrangement where Google will split earnings with Apple in exchange for special treatment on its devices, such as iPhones and iPads.
The lawsuit further asserts that Google is obligated to pay Apple annually multi-billion dollars payment in exchange for an agreement that Apple will refrain from developing its own search engine. But the actual plan goes beyond restricting Apple alone. Google’s non-compete clause also hints at actively stifling smaller competitors, as well as the acquisition of competitors, both potential and existing.
The complaint claims that the rates for advertising are on the higher side intentionally and in a competitive scenario it would go down easily. However, the agreement between Google and Apple helps both companies to enjoy monopoly and control advertising rates.
The complaint, therefore, seeks an injunction to stop any non-compete agreements between Google and Apple. It also requests the court to terminate the profit-sharing arrangement and preferential treatment, as well as the end of the multi-billion dollar payments deal.
Finally, the complaint is calling for “the dissolution of Google into separate and distinct companies, and the dissolution of Apple into separate and distinct businesses in line to the precedent set by the dissolution of the Standard Oil company into Exxon, Mobile, Conoco, Amoco, Sohio, Chevron and many others.”
It’s no secret that Apple and Google have a significant monetary agreement that guarantees Google’s status in the position of being the default choice for the search for Apple devices. Neither Google nor Apple has ever revealed how much Google pays to become its default browser on Apple iPhones across the United States, the United Kingdom as well as other countries. However, it’s believed to be in the billions.
How much does Google pay Apple for being default search engine?
In 2018, a research firm Goldman Sachs reported that Google paid $9 billion to Apple to secure its position as Apple’s default search engine. In 2020 The New York Times stated that Apple received between $8 and $12 billion annually in exchange to make Google Chrome the primary search engine on its iOS devices. It is now estimated that Google’s payment to Apple could be to the tune of $20 billion in 2022.
It is believed to be the single largest amount Google ever makes to any company. Interestingly, the amount received from Google accounts for as much as a fifth of Apple’s annual earnings. It has also attracted criticism previously, particularly by authorities like the US Justice Department, which declares that the arrangement could be a sign of illegal practices employed to safeguard Google’s monopoly and limit competition.
The UK Competition and Markets Authority has also described the arrangement as a “significant obstacle to growth and entry” for competitors in the market for search engines. In the year 2020, it asked for the enforcement authorities to be given a variety of alternatives to redefine the agreement with Apple and Google to ensure a level playing field for all players in the search engine space.
“These large corporations abused their size by illegally closing and monopolizing markets that in a more open and free-market system could have created jobs, reduced prices and production, added new competitors, stimulated innovation and improved service quality offered in the age of digital,” says Attorney Joseph M Alioto, who brought the antitrust case before the San Francisco court this week.
Apple and Google are likely to defend themselves with an argument that while the payments are made to Apple for Google to be the default search engine, users are always provided an option to choose other search engines within Safari such as Microsoft’s Bing and Verizon’s Yahoo and the various independent search engine DuckDuckGo as well as Ecosia.
Apple will also likely claim that it is already involved in the business of search engines and has an active web crawler called Applebot. It is in the background and works to enhance Siri and Spotlight results for searches. However, previous reports have suggested that the claims of increasing activity of Applebot in this regard to justify that the Cupertino giant is “stepping up the efforts” to create its own search engine contrasts its arrangement with Google, and ends up being unconfirmed with antitrust laws.