US Edition
Sundar Pichai was nervous. In the days before the iPhone was released in 2007, Google and Apple executives were locked in discussions about a deal to make the search engine the default on the iPhone’s Safari browser.
Pichai, then the head of Google Chrome, raised concerns in an email to executives including Sergey Brin, Google’s co-founder.
“I don’t think it is a good user experience nor the optics is great [sic] for us to be the only provider in the browser,” he said, suggesting that rival search engine Yahoo should also be available as an alternative.
Nonetheless, the Apple agreement went ahead. Google became the default search engine on the iPhone.
Sixteen years later, Pichai is now chief executive and Google has been the default search engine on billions of iPhones, making what is already the world’s biggest search company even more successful.
Users can choose alternatives in the settings menu, but few do.
The deal has been hugely lucrative for both sides, with Google paying roughly $18bn (£14.5bn) to Apple each year to maintain its place.
Now, the agreement is at the centre of the US Government’s most significant lawsuit against big tech for a quarter of a century.
The Department of Justice (DoJ) claims Google has struck illegal deals to freeze out rivals and maintain its place as the dominant search engine, to the detriment of competition and innovation.
It is seeking to have the deals declared illegal, which could lead to them being prohibited in future. Lawyers for the DoJ wrapped up arguments in the two-month trial on Thursday.
The iPhone deal is not the only primacy arrangement agreed by Google but it is by far the biggest.
“Apple owns one of the most important portals to the internet. And Google saw that,” says Gene Burrus, a competition lawyer who spent 15 years at Microsoft, much of it attempting to get regulators to pay more attention to Google.
Although Google has faced fines and orders in the EU, a case on home territory represents the biggest challenge to its search dominance to date.
It is the US government’s biggest tech case since it took on Microsoft in 1998 and is central to the Biden administration’s efforts to rein in Silicon Valley.
If the Government gets its way, Google’s exclusivity deals are at risk – and cracks in the business could start to show.
The Apple agreement and other smaller agreements with companies like Samsung cost Google $26bn in 2021 – more than one in every six dollars its search engine makes in revenue. It is a sign of just how significant executives view these deals.
Declaring them illegal could open up the search giant to competition it has not faced in two decades.
Megan Gray, the former general counsel at rival search engine DuckDuckGo, who has been following the trial closely, says that Google has spent much of the proceedings seeking to present itself as it was 20 years ago – a youthful innovator, rather than the behemoth it is today.
“I think Google still thinks of itself as this scrappy genius,” she says. “And that’s just not relevant anymore. Nobody cares how cute you were as a toddler, we’re looking at a bloodsucking company well into, in internet time, its middle age.”
Gray says that while a young hungry start-up might be justified in fighting for its place in the world, it is harder to justify one of the world’s biggest companies squeezing out competitors.
“Google fights for every crumb of market share. The paranoia is immense,” she says.
Google executives and lawyers have argued that the company merely has the best search engine and that it is not its fault that consumers do not switch to alternatives.
However, a key point of the US case has been that Google’s dominance has prohibited rivals from building anything to challenge it.
Over the years, Apple started to build search-like features into the iPhone, such as suggesting websites users might want to visit.
The company even considered buying Microsoft’s Bing, according to evidence presented during the trial. Google bristled and reworked its deal with Apple to stop the iPhone-maker launching features that would “bleed off traffic”.
Microsoft’s Satya Nadella, who called Apple a king-maker in internet search during his testimony, said that if Bing was able to strike the sort of deal Google had, it would soon catch up thanks to the wealth of data from iPhone users that would come its way.
Observers say the US government’s lawsuit has gone better than expected.
“My overall impression is that the [Justice] Department is unlikely to come away from this empty handed,” says Bill Kovacic, a professor at George Washington University Law School and a former commissioner at the US Federal Trade Commission.
Amit Mehta, the judge in the case, will decide next year on whether Google broke the law. If he decides it did, it will take another round of legal arguments to determine the penalty.
Analysts at Barclays said this week that if Google loses, it could be replaced on the iPhone by Bing, or Apple may even launch its own search engine.
For all the company’s supposed power, Google’s core product looks surprisingly vulnerable.