A U.S. federal judge ruled Monday that Google paying Apple billions to be the default search engine on iPhone and other devices is a violation of antitrust law. He said it makes Google a monopolist.
This is the result of a court case brought by the Department of Justice against Google. Apple isn’t directly involved, though its annual income may have just dropped by $15 billion or $20 billion. Or more.
Judge: ‘Google is a monopolist’
Do an online search with the Safari web browser and the results will come from Google by default. Users can change to anther search engine, but they must do so manually. Otherwise, it’s Google.
Google pays Apple an enormous amount for this prime placement. The exact amount isn’t known outside the two companies, but it’s been estimated to be at least $15 billion a year. Other companies receive payments from Google, too. The total coming out of Google amounted to $26 billion in 2021. And Judge Amit Mehta ruled Monday that these payments violate U.S. antitrust law.
“Google’s distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete,” the judge wrote in his nearly 300-page ruling (.pdf).
When someone does a search with Safari on an iPhone, the results include ads. Google gets 76% of its revenue from advertising, and its search engine is critical to the business.
Attorney General Merrick Garland painted the decision as a decisive blow against the power of Big Tech.
“This victory against Google is an historic win for the American people,” Garland said. “No company — no matter how large or influential — is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”
However, pro-business lobbying group Consumer Choice Center criticized the Justice Department’s targeting of Google and other tech companies.
“The United States is drifting toward the anti-tech posture of the European Union, a part of the world that makes almost nothing and penalizes successful American companies for their popularity,” Yael Ossowski, the center’s deputy director, told the Associated Press.
What happens next?
The wheels of justice grind slowly. Just because Mehta ruled that “Google is a monopolist, and it has acted as one to maintain its monopoly,” doesn’t mean that Apple must stop making Google the default search engine on iPhone, Mac and iPad tomorrow.
First off, the judge did not yet decide what remedies to take. He could simply order Google to stop paying Apple and others to be their default search engines. Alternatively, he could order Google broken up into component pieces, forcing its search engine and advertising business into separate companies. Or something else. He’ll order whatever he thinks is most likely to break Google’s monopoly and create real competition in internet search.
“Google’s loss in its search antitrust trial could be a huge deal — depending on the remedy,” Emarketer senior analyst Evelyn Mitchell-Wolf told the Associated Press. “A forced divestiture of the search business would sever Alphabet from its largest source of revenue. But even losing its capacity to strike exclusive default agreements could be detrimental for Google. Its ubiquity is its biggest strength, especially as competition heats up among AI-powered search alternatives.”
Whatever decision Mehta makes, you can expect Google to appeal. That’s a process likely to stretch out for years. But there are definite short-term consequences. The value of Google dropped 4.61% on Monday, and Apple’s share price fell 4.82%, amid what MarketWatch deemed a “global equities markdown.”