WSJ: Apple search deal is at center of U.S. antitrust case against Google

From Rob Copeland and Tim Higgins’ “Google’s Exclusive Search Deals With Apple at Heart of U.S. Lawsuit” ($) in Wednesday’s Wall Street Journal:

Google’s partnership with Apple is at the heart of the U.S. Department of Justice antitrust lawsuit claiming that the Alphabet Inc. unit misused its power in an anticompetitive manner, potentially threatening a major revenue stream for both tech giants.

It has long been known that Google relies on search traffic from Apple’s popular line of phones. Google’s flagship search engine is the preset default on Apple’s Safari phone browser, meaning that when consumers enter a term on their phone, they are automatically fed Google search results—and related advertising.

What’s new is just how central it is to both companies, and to the antitrust case. While the government stopped short Tuesday of asking for specific remedies, the prominence of the Apple arrangement in the lawsuit leaves little doubt that the Justice Department will seek to intercede.

The government says that Apple CEO Tim Cook and Google’s CEO Sundar Pichai—neither of whom are named in the lawsuit—met in 2018 to discuss how the companies could work together to drive search-revenue growth.

Afterward, according to the lawsuit, a senior Apple executive followed up with a Google counterpart with some encouraging words: “Our vision is that we work as if we are one company.”

The companies declined to comment on the alleged meeting. The apparent friendliness is a change—Apple’s late co-founder Steve Jobs and former Google Chief Executive Eric Schmidt famously fell out over Google’s launch of competing mobile software.

Though Google and Apple have been tight-lipped on how much their deal is worth, the lawsuit projects that it accounts for between 15% and 20% of Apple’s annual profits.

My take: Easier for Apple to find a new search engine than for Google find a new lock on its search monopoly.

For the full text of the lawsuit, click here.

22 Comments

  1. Gregg Thurman said:
    A great example of how slowly investigatory government operates. The Google/Apple arrangement was there for all to see, and has been going on for years.

    OTOH, a single complaint from Amazon resulted in a rather quick investigation that led to Apple being named a co-conspirator, and convicted, of collaboration with book publishers to fix book pricing. I still don’t understand the logic in that case.

    8
    October 21, 2020
  2. David Emery said:
    I suspect it’s on the edge of monopoly law for a monopolist to pay to extend its monopoly. That would be the argument in Google & Apple.

    That’s different than the contracts that punish a Telco if they remove Google as their preferred search engine.

    Ben Thompson just put up something on this: https://stratechery.com/2020/united-states-v-google/ I’m going to go read that now.

    0
    October 21, 2020
  3. Jerry Doyle said:
    “…. Though Google & Apple have been tight-lipped on how much their deal is worth, the lawsuit projects that it accounts for between 15% and 20% of Apple’s annual profits.”

    Apple’s gross profit for 12 months ending June 30, 2020 was $104.580B. 15-20% means 15.687 to 20.916B, if gross profit is used. Still, all one has to do is go to “Settings,” tap “Safari,” tap “Search Engine,” & choose either Yahoo, Bing or DuckDuckGo. That is a quick user friendly 4 step process easily performed by anyone desiring to use another search engine. I do not quite understand this monopoly. If there are restaurants up the highway for travelers to stop & eat & I own 1 of those restaurants so I decide to purchase advertisements on all the billboards along the highway in approach of my restaurant I assume, then, that I & the billboard advertising firm are monopolists. Yet, when road travelers enter the city limits there are these other restaurants around. Its just a matter of turning the steering wheel & heading to 1 of them. The choice is there for travelers to choose differently.

    I discern the case the feds are attempting to make that I bought advertising space on all the road signs leading into town, but I have a difficult time understanding how Google and Apple has a “lock” on the user anymore than how I would have a lock on the road traveler entering town and forced to drive to my restaurant when other restaurants are present.

    1
    October 21, 2020
  4. Jerry Doyle said:
    What troubles me here is my belief that most folk choose Google as their search engine, even knowing other search engines do exists and knowing the steps needed to switch to one of the other search engines.

    I ask folk why they use Google as their search engine when they know fully Google is collecting personal data relative to their searches. The answers I get back from folk is their belief that Google is the better search engine for getting to the information they seek. And this answer has high merit.

    In other words, while users have the means to change their search engine of preference, most users decide against doing so because they believe Google is the better choice for them even if they are giving up some of their personal data to Google in return.

    1
    October 21, 2020
    • Hugh Lovell said:
      As a retired Apple Retail employee, I can tell you from personal experience the reasons most people don’t change the search engine in Safari. They can’t be bothered, they find the process “too confusing” or when told about privacy issues they say that they don’t care or it doesn’t make any difference. The vast majority of people using iOS devices (and Macs no doubt) never change default settings.

      1
      October 21, 2020
  5. David Emery said:
    By the way, how many of you changed your search engine on your iDevices? (I did, to DuckDuckGo.)

    6
    October 21, 2020
    • Dave Ryder said:
      David, I use DDG 99% of the time.

      0
      October 21, 2020
    • Jerry Doyle said:
      @David Emery: My search engine is set mostly to DuckDuckGo. Occasionally I switch to Google where I find its search engine provides more findings and comprehensive searches. I even switch to Yahoo periodically to see what it provides me on a specific topic of interest. So, I use all the search engines, but primarily DuckDuckGo for its privacy.

      I must say, though, while switching is an easy four step process for iOS users, I understand that it is more cumbersome for Android users.

      0
      October 21, 2020
    • Gregg Thurman said:
      Duck Duck Go then Bing

      Haven’t changed again because the results are essentially the same.

      1
      October 21, 2020
    • Manfred Schwencke said:
      DDG – as default search engine …

      0
      October 21, 2020
    • Hugh Lovell said:
      I’ve been a DDG user for several years.

      0
      October 21, 2020
    • Arthur Cheng said:
      me too, also to Duck Duck go

      0
      October 21, 2020
  6. Jerry Doyle said:
    Isn’t it interesting that Google is being touted as a monopoly Search Engine when the majority above do not use it, but use DuckDuckGo. That speaks for something.

    3
    October 21, 2020
    • John Konopka said:
      The cognoscenti, not the hot polloi. 🙂

      “ My take: Easier for Apple to find a new search engine than for Google find a new lock on its search monopoly.”

      It is easy for Apple to find another search engine but not so easy to monetize it to the extent that Google does.

      1
      October 21, 2020
  7. David Emery said:
    Wasn’t part of the settlement on EU’s case against Microsoft a provision to randomize the default browser? I vaguely remember something like that from years ago…

    0
    October 21, 2020
  8. John Konopka said:
    It would be ironic if part of the settlement is that Google no longer pays Apple to be the default search engine but people still use it by choice. Google would get the clicks without paying Apple for them.

    0
    October 22, 2020
    • Bart Yee said:
      It might be more fun to see Apple take an App Store stance with google and charge a 15-30% commission on all iOS traffic and advertising dollars Google gets from iOS. But then that would have to apply to all other search engines and they probably couldn’t afford that.

      0
      October 22, 2020
  9. Bart Yee said:
    Well, Apple could randomize the 4 current US choices (Google, Yahoo, Bing, Duck Duck Go) or make it so Google is never in the top spot but always in the bottom spot. If all users’ search engines were reset on the next iOS version or sub-.x-update, and each version was allowed a short description/ pitch as to why it’s a good choice put to the user before they choose, maybe that would satisfy the government.

    The other option is to say OK, each search engine company that wants to be a choice for iOS (this would include Yandex from Russia, and Baidu, Sogou, and 360 Search from China) would all be asked to pay a commission of $2-3B annually to be on that list. Not nearly as high as the potential $11B that Google may be paying now, so a bargain for Google or Bing and maybe a bit harder for others? But that would allow Apple to recoup some of its investment.

    I don’t know how hard that would be for DDG, but Yahoo and Bing could easily afford it, unless they don’t pay anything now, in which case they would cry highway robbery.

    0
    October 22, 2020
  10. Bart Yee said:
    Or as some have mentioned, Apple could also introduce its own search engine for iOS. Like Maps, it might not be great at first but allow it to evolve and it may become fairly effective.

    Wouldn’t it be a hoot if an genuine Apple search engine and/or browser for Android was available? Problem is, there’s lots of FAKE “Safari by ‘Apple’” apps out there already, most all are scamware or malware injectors on side loading sites so no, not worth it for Apple to even go there lest Apple’s reputation gets sullied by the misdeeds of others.

    Better to just introduce solid, feature and price competitive products to pull Android users and new users to the Apple ecosystem.

    0
    October 22, 2020
  11. Bart Yee said:
    The article below explains how and why Google makes money via Android. True clean bare Android can be used but has NO access to Google Apps or Play Store app Store. That doesn’t work for most Android OEMs who have no (monetary) interest in developing their own (or enticing others to build) apps to work for their hardware. So vast majority choose to use “Full Android” and must comply with following:

    Conditions that phone manufacturers need to comply with to get a free license to install Android with Play:

    1) The manufacturer needs to include all other apps like YouTube, Gmail, Maps Photo, and mainly Search and Chrome.
    2) They need to make Google Search default
    3) Manufacturers have to push Google apps to a prominent place on the home screen
    4) and also, a manufacturer that wants to use Android phones with Google Play cannot use other modified versions of bare Android on different devices.

    And more. Otherwise Google would have to pay OEMs to have Google in the software they are using.

    Author gives an interesting analysis and may be worthy of checking other articles out:

    https://www.kamilfranek.com/how-google-makes-money-from-android/

    0
    October 22, 2020
  12. Bart Yee said:
    So here’s my thesis, DOJ going after Google and Apple because it serves two purposes, address Google paying to be search engine for iOS and Apple for accepting it as an example of “collusion” or anticompetitive behavior.

    Where DOJ doesn’t seem to go is the fact that Google has, like Apple, 50% of the smartphone market. Neither is a monopoly in regards to each other, but Google Search has a near stranglehold in US and abroad save China & Russia of 90%. More interesting is the “requirements” of OEM Android makers to use Full Android forces Google Search on their users, must occupy prominence, and they get little to nothing in return other than “free” operating software.

    Here’s where US may go – force Android to be split off and separated from Google, Google Search and Alphabet, and let it be it’s own company. Force makers to pay for OS usage up front as a real cost of doing business. Take Google search default away and allow Android users to choose any one of a number of search engines. After all, that is 85% of the entire worlds smartphone users and 50% of all US users.

    1
    October 22, 2020

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