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Google Paid Apple to Stay Out of the Search, Lawsuit Claims

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Image for article titled Google Paid Apple to Stay Out of the Search Business, Lawsuit Claims

Photo: Tobias Schwarz (Getty Images)

At this point, it’s a bit of an open secret that Google likely pays Apple billions of dollars each year to remain the default search engine that crops up on people’s iPhones and Mac computers. Now, a new class-action suit is alleging that the tech titans’ dealings go even farther than that. An antitrust case against the two companies that was filed in California earlier this week accuses Apple of unfairly giving Google’s search engine a top slot on its devices and accuses the company of agreeing to forgo any plans to develop a search engine of its own to avoid competing with its deep-pocketed business buddy.

The suit—which names Apple, Google, and CEOs Tim Cook and Sundar Pichai as defendants—doesn’t name the exact dollar amount allegedly paid off to Apple in exchange for the company not entering the search business. But based on bystander recordings taken of the “clandestine meetings” where this agreement took place, the suit alleges that Google had paid Apple upwards of $50 billion not to compete in search.

“These meetings were undertaken to promote the shared vision that Apple and Google would act in effect as one company that was merged without merging,” the suit goes on. “Apple and Google invented the word ‘co-opetitive’ to describe their unlawful combination and conspiracy.”

That’s not all. The suit also alleges that Google agreed to share an undisclosed chunk of profits from search ads (which nets the company tens of billions every year) with Apple, as part of a non-compete agreement signed between the two companies. “According to the suit, this non-compete also mandates that Apple “actively suppress” Google’s smaller search engine competitors (like Bing or DuckDuckGo) by making Google the default search engine for Apple’s Safari browser, for Siri, and for Spotlight, Apple’s system-wide search feature. When that suppression wasn’t enough, the suit alleges, the two companies would engage in the tried and true practice of acquiring companies before they became too much of a headache. The suit claims Apple has acquired more than 120—and Google more than 247—competitors and potential competitors over the past 22 years.

“Google has long recognized that its competitors will not be able to compete without adequate scale,” The suit goes on.

“The agreement between Apple and Google suppresses the ability of Google’s competitors to achieve any scale of significance to be able to compete against Google. That economic prohibition would be eliminated if the agreement between Apple and Google were dissolved.”

So, naturally, the suit asks for all these “clandestine” agreements made over the past two decades to be declared void. It asks that the courts require Apple to pay back Google any ill-gotten gains earned as part of the former’s agreement not to roll out its own search engine. The suit also seeks an injunction to dissolve the duo’s non-compete agreements, profit-sharing agreements, and any other agreements resulting in “preferential treatment” of Google’s products on Apple’s hardware.

But those breakups alone aren’t sufficient, according to the suit. The plaintiffs go on to ask that the Court “eradicate the structure and size that were abused to commit these violations,” specifically by divvying Apple and Google up into smaller standalone companies. The precedent that the suit draws from is the 1911 Standard Oil case, which saw the then-behemoth Standard company divided into 34 separate entities under the Sherman Antitrust Act—and those entities later came to be known as Exxon, Chevron, and so on.

This certainly isn’t the first time that a plaintiff has summoned the Sherman act as part of an argument for breaking up one of the Silicon Valley players, but that doesn’t mean the comparisons between Big Tech and Big Oil are warranted. Analysts have pointed out in the past that while Standard Oil’s case offered a clear case where one company’s monopoly directly led to consumer harm via spiked gas prices, it’s tough to point to similar impacts onto the consumer market that uses Apple or Google products.

The most direct harm, as the current suit points out, is to advertisers—“Google charges higher prices to advertisers than would otherwise be the case in the absence of the Google-Apple agreement,” the suit alleges.

It’s a point that echos other anticompetitive claims being made by lawmakers and advertisers alike against the search giant over the past year, specifically alleging covert ad price-fixing schemes that were cooked up alongside fellow tech giant Facebook. But in those cases (and with the new case alleging similar schemes arranged with Apple) the harms named—higher ad prices in particular—are a blow to advertisers and online, instead of the users who surf Google’s search engine. If this new suit wants to have any legs, it’ll need to figure out some sort of harm against those users, and fast.

We’ve reached out to both Apple and Google about the suit and will update this piece when we hear back.

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