Effect of Google Antitrust Decision: A Single Term Priced at $20 Billion Each Year for Apple
For over a year now, discussions have been ongoing about whether Google’s compensation to Apple for being the default search engine in Safari would be prohibited.
While it had appeared likely this would be the outcome, what emerged was a compromised judgment. It became evident that the distinction between Apple generating $20 billion annually and $0 rested on one particular term …
### It had appeared probable that both firms would suffer losses
The judgment a little over a year ago was unequivocal: Google’s agreement with Apple to serve as the default search engine indeed contravened antitrust legislation. The court determined that Google maintained a near-monopoly in the search engine sector and that its $20B+ yearly payment to Apple constituted illegal actions to uphold that market supremacy in breach of the Sherman Act.
Although Apple was found not culpable of any wrongdoing and was denied the right to intervene in the case, it certainly appeared that the company was destined to forfeit that annual payment, which would result in a significant blow to its services revenue.
We had to wait until this week to learn what solutions the court would propose, and while the widespread expectation was that the payment would be prohibited, that was not precisely the outcome.
### The judgment relied on a singular term
Investor and former Google Ventures partner MG Siegler proved to be accurate in his prediction. Rather than outright prohibiting the payment, the court indicated that Google was not permitted to compensate Apple for the sole right to be the search engine on the company’s gadgets.
That one term – sole – implies that Google is permitted to keep paying Apple to be the default search engine in Safari on iPhones, iPads, and Macs.
### AI played a secondary role
An additional element in the court’s judgment was the increasing trend of individuals using generative AI as an alternative to a search engine. As misguided as this may seem, the judge stated that it effectively diminished the significance of search engines within the broader search ecosystem.
So, as my colleague Marcus Mendez noted yesterday, the arrangement between Apple and Google remains largely unchanged by the ruling.
One query does linger: will Google be willing to pay the same amount to be a default search engine in Safari if it cannot be the sole one? I suspect that in practice, Apple will not actively seek to establish other agreements, so Google will likely pay either exactly the same or a very comparable amount.
Regardless, the sum has been increasing each year, so any modest dip in the payment would swiftly be compensated by annual hikes. I’m sure the executives of both companies were popping open some incredibly pricey champagne.
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