Google’s Billion-Dollar Apple Search Deal Deemed Illegal
The U.S. regulatory body’s antitrust case against Google has recently seen significant developments. A U.S. federal judge has ruled that Google’s monopolistic dominance in the search and advertising markets constitutes a violation of U.S. antitrust laws (via Bloomberg).
In the ruling, the judge emphasized that various exclusive agreements Google reached with Apple and the Mozilla Foundation are illegal. Google pays Apple $20 billion annually to be the default search engine on the Safari browser, and it pays the Mozilla Foundation approximately 80% of ad revenue to be the default search engine on Mozilla Firefox.
For Google, losing the support of the Firefox browser is not a major issue given its low market share, but losing Apple’s support would pose a significant problem.
The agreement with Apple ensures that Google Search remains the default search engine on iOS, iPadOS, and macOS, contributing significantly to Google’s ad revenue. This explains Google’s willingness to pay the exorbitant sum of $20 billion; the deal is crucial for both Google and Apple.
Notably, Google has argued that its agreement with Apple is not exclusive, pointing out that Apple collaborates with other search engines and that users can change the default search engine in settings. However, the judge dismissed this argument, noting that Apple has little incentive to develop its search engine given the substantial guaranteed income from Google, despite having the capability to do so.
“Google is a monopolist, and it has acted as one to maintain its monopoly. It has violated Section 2 of the Sherman Act,” reads the ruling.
Regarding the issue of manipulating the advertising market, the judge mentioned that Google itself has admitted that it can do virtually anything with Google Search and its ad business without worrying about users switching to other search engines or advertisers choosing other platforms.
Internal research at Google indicates that the company can systematically worsen its search engine without affecting user numbers or usage because users have no better alternatives.
Therefore, the judge believes that the ability to raise prices without losing customers is a clear indicator of monopoly power, and the ability to degrade product quality without losing users is also a hallmark of monopolistic control.
Undoubtedly, Google will appeal this decision. Antitrust cases of this magnitude typically take years, if not longer, to conclude. However, the current situation is unfavorable for Google.
