Wired
According to the New York Times, as one of the US government’s largest antitrust cases, the US Department of Justice is investigating a lucrative deal between Apple and Google. On Tuesday, the Justice Department initiated an antitrust lawsuit against Google, claiming that the Mountain View-based company used anti-competitive and exclusive practices in the search and advertising markets to maintain an illegal monopoly.
In 2017, Apple updated an agreement to keep Google’s search engine as the default option on Apple devices. Apple is estimated to receive 8-12 billion U.S. dollars each year, making Google the default search engine for iPhone and Siri. This is considered to be the largest payment made by Google to anyone, accounting for 14% to 21% of Apple’s annual profits.
The prosecutor said that the deal was a proxy for illegal means of protecting Google’s monopoly and stifling competition. At present, nearly half of Google’s search traffic comes from Apple devices. The prospect of losing the agreement is described as “terrible” and is a “code red” scenario within the company. Thanks to Google’s advertising system, Google’s search traffic is indispensable in its business model.
Apple has also come under fire because it acquiesced to the agreement and squeezed more funds through regular renegotiations, thereby promoting anti-competitive behavior. Although the two companies are rivals in Silicon Valley, the agreement is said to be part of an “impossible alliance of competitors.”
Legal intervention poses a threat to Apple’s revenue, but for Google, it is a greater danger, because Google seems to have no way to replace the traffic it will lose. The New York Times speculated that such a breakup may prompt Apple to acquire or build its own search engine, which in turn would pose a greater threat to Google.
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