While the Department of Justice has accused Google of a range of anti-competitive behaviors, the judge in the case has said that the Apple search payment is “the heart” of the matter.
The implication is clear. If that deal is illegal, then Google will lose the case, and the company may have to be broken up. Conversely, if the court finds that the payment was legal, then Google likely wins, as the other charges are comparatively minor …
Apple search payment
When you do a search in the combined URL/search bar on any Apple device, the default search engine will be used. Unless you have manually changed it, that search engine is Google.
The traffic from searches on iPhones, iPads, and Macs is worth a huge sum of money to Google, as that’s what allows it to display relevant ads alongside search results. To keep that traffic and money flowing, Google pays Apple an undisclosed sum each year for maintaining its default search engine status.
The most recent payment has been estimated at around $20B – which would make up around 15% of Apple’s total profits.
The two questions at the heart of the case
Arstechnica notes the judge saying that the Apple search payment is the very heart of the case.
The facts are not in dispute. While Google has so far managed to persuade the court to keep the actual amounts secret, both parties accept that Google makes a large annual payment to Apple for remaining the default search engine on Apple devices – and that it has done so every year for 21 years.
What is in dispute is Google’s motivation for doing this. Google contends that this is a perfectly ordinary commercial transaction designed to drive traffic to its site. The DoJ argues that Google’s goal is to limit competition from other search engines.
The two questions are these:
- Did Google intend to make it impossible for other search engines to compete on equal terms, by effectively guaranteeing that most Apple users would only ever use Google?
- Did Google want to dissuade Apple from launching its own search engine, by paying the company so much money that it would be against the iPhone maker’s financial interests to do so? In short, was Google bribing Apple not to compete with it?
If the answer to one or both of these questions is yes, then Google broke the law.
What happens to Apple if Google loses?
Apple is not on trial here: Even if it was illegal for Google to offer the payments, it was not illegal for Apple to accept them.
The company would lose a huge chunk of income, which was effectively almost pure profit, but it would have a range of options – including retaining the Google deal outside the US (at least, until it comes under fire from antitrust regulators in other countries).
The most likely outcome is that Apple users would be proactively asked to choose their default search engine at the setup stage, with the iPhone maker taking a commission from all of the search engines presented to users. Its total take might be somewhat smaller, but probably not massively so.
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