For a very long time, Apple and Google have had an agreement that the search engine in the Apple ecosystem is Google. This merger is very lucrative for Apple since it brings in about 20 billion dollars per year, an amount that leaves its mark on Apple’s financial results. Until today, the agreement had never been the subject of observation by a court, Unfortunately, this has just happened and the judgment is unfavorable to both companies.
The end of the $20 billion deal between Apple and Google?
A federal judge ruled overnight that Google’s deal with Apple and other companies to be the default search engine violates U.S. antitrust laws. Judge Amit Mehta concluded that the deals seriously harm competition in the online search industry, giving Google an unfair advantage and entrenching its monopoly.
For Judge Amit Mehta, it is certain that Google’s agreements with Apple reduce competition, this is a blatant finding that cannot be denied according to the judge. He mentioned that Google’s dominant position is not simply the result of the quality of its search engine, but rather of strategic agreements that limit competitors’ access to the market. Bing, Yahoo!, DuckDuckGo, Qwant, and Ecosia are struggling to increase their market share mainly because of these restrictive agreements.
The Justice Department seems to be right
The Justice Department filed an antitrust lawsuit against Google several years ago, accusing the company of unfairly dominating the online search and advertising industry. Judge Mehta’s decision confirms that Google exercises a monopoly and engages in practices designed to maintain it, in violation of Section 2 of the Sherman Act. The Sherman Act prohibits monopolistic behavior and attempts to monopolize the market.
While Apple wasn’t directly named in the antitrust lawsuit, its deal with Google was at the heart of the proceedings. According to testimony from several Apple executives, including Eddy Cue and John Giannandrea, Google pays Apple nearly $20 billion each year to remain the default search engine on iPhones, iPads, and Macs. That’s a staggering sum that gives Apple an incentive to push Google’s search engine across its ecosystem, to the detriment of competitors that have less visibility.
During the trial, Eddy Cue recalled that iPhone, iPad and Mac users have the possibility to choose their own default search engine in the settings of their device. True, Google is highlighted from the first start-up of the device, but a user who prefers another search engine can change it in 2 seconds, without difficulty.
If the Apple-Google deal were to be canceled by 2025, the repercussions for Apple could be significant. Revenue from the services segment, which has grown steadily in recent years, could collapse. This segment represents a significant portion of Apple’s financial results and its stability could be called into question without this lucrative deal with Google.