Apple's search engine deal with Google at risk following antitrust ruling

US District Judge Amit P. Mehta in Washington ruled on Monday that Alphabet, Google's parent company, violated antitrust law by paying companies like Apple to make Google the default search engine on its Safari browser, limiting consumer choice and unfairly locking out competitors. 

The immediate telecom-related blowback from this ruling may be that the billions smartphone giant Apple gets in payments from Google for preferential treatment on its iPhones and other devices is now at risk. 

Google's strategy of forcing its search applications into prominent positions on mobile devices was a calculated move that gave it more user search data. With that data, the tech giant was able to manipulate its search engine behavior, amass billions in profits, and use that wealth to keep buying preferential access and locking out competitors. This was the essence of the Justice Department's original complaint in October 2020. 

Nearly four years later, the judge in the case sides with the government and the dozens of states that initially accused Google of abusing its market power. "After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly," Mehta wrote in his judgment on Monday. 

Smartphone search dominance

In the 286-page ruling, Judge Mehta pointed out how, thanks to its commercial deals – especially its arrangement with Apple – Google's search usage on desktops and mobile devices skyrocketed even when there were more search engine choices in the market. Google's share of search queries on mobile devices was even higher at 94.9% in 2020, Mehta's judgment said.

"Google pays Apple [a redacted percentage] of its net ad revenue, which amounted to $20 billion in 2022," the ruling said. "This is almost double the payment Google made in 2020, which was at that time 17.5% of Apple’s operating profit." 

Why the emphasis on Apple? Unlike Android, Apple's OS for its phones and desktops is not open source, so the preloaded search preference creates a stronger lock-in for consumers and a major obstacle for competitors, like Microsoft's Bing search engine.

The ruling points out that around 70% of the smartphones AT&T distributes are iPhones, while T-Mobile's smartphone sales are about half iPhones and half Android devices. Verizon Wireless "distributes roughly twice as many Apple devices (70%) as Android devices (30%)," the court ruling states.

Big Tech blowback

The US tech industry is facing several legal challenges to its operations. The Justice Department has cases against Meta, Amazon and Apple, which is being sued for maintaining its smartphone dominance.

Meanwhile, Google has other pending antitrust cases in the US and abroad. In the US, Google has been taken to court over how it operates its advertising tech. In the European Union, Google was fined for using its comparison shopping service to gain an unfair advantage over smaller rivals.

Google's search-related issue is far from settled. Alphabet will likely appeal the ruling, and the court will hold separate proceedings to determine what should be done now that the judge has found Alphabet guilty.