As anticipated, the US Department of Justice (DoJ) has filed an antitrust lawsuit against Google’s parent Alphabet, accusing it of a secret and anti-competitive deal with Apple and other smartphone vendors.
The lawsuit says Apple’s CEO, Tim Cook, met Google chief Sundar Pichai in 2018 to negotiate a deal which would see the two giants “work as if we are one company”, as a senior Apple employee later put it. This deal saw Google pay for its search engine to be the default on iPhones and other Apple products, replacing Microsoft. In 2019, nearly half Google’s search traffic came from Apple’s products. The DoJ says Apple gets between $8bn and $12bn annually from the agreement.
Google afterwards said, in an internal document, that losing the deal with Apple would constitute a ‘Code Red’ situation. Similar arrangements are alleged with other handset vendors including Samsung. The DoJ alleges that this has resulted in almost 90% of searches and 95% of mobile searches in the USA being done through Google.
The lawsuit is expected to be the first in a series of major actions against the US Internet giants. The DoJ claims in its filing that Google “became the darling of Silicon Valley as a scrappy start-up … but that Google is long gone.” Instead, the company has become “a monopoly gatekeeper for the Internet,” which uses anti-competitive tactics to maintain monopolies in search-related services.
This causes harm to “users, advertisers, and small businesses” by leading to higher advertising prices, less innovation, and greater privacy violations, said US attorney general William Barr in a statement.
Google’s SVP Kent Walker, writing in a blog post, said the DoJ’s action was “a deeply flawed lawsuit”. He compared the deal with Apple to how “a cereal brand might pay a supermarket to stock its products at the end of a row or on a shelf at eye level”.