Google is paying Apple $12B to Corner the Market
A class action lawsuit filed this month in California claims Google is paying Apple up to $12 billion per year to stay out of the Internet search business.
The complaint details a secret agreement in which Google shares its profits with Apple in exchange for preferential treatment on iPhones and other Apple devices. Executives from both companies are said to hold secret meetings regarding the arrangement, which also includes the suppression and/or acquisition of potential competitors.
“These powerful companies abused their size by unlawfully foreclosing and monopolizing major markets which in an otherwise free enterprise system would have created jobs, lowered prices, increased production, added new competitors, encouraged innovations, and increased the quality of services in the digital age,” argues Joseph M. Alioto, a lawyer involved in the case.
The lawsuit, filed by California Crane School Inc., sites an email sent in 2018 by a senior Apple executive to a colleague at Google that reads: “Our vision is that we work as if we are one company.”
The idea of Google and Apple functioning as a single company makes concerns regarding antitrust violations even more serious. Perhaps both companies should be forced to split up like Standard Oil did in 1911.
In response to the lawsuit, Google described the accusations leveled against it as “deeply flawed” and said its profit-sharing deal with Apple is ‘no different than a cereal brand paying a grocery store to stock its products at eye level.’
But we’re not talking about Cheerios and Lucky Charms here, folks.
Apple sets Google as the default search engine on devices used by more than 113 million Americans – and that figure is just for iPhones in the United States. According to stats from 2019, roughly half of all search traffic worldwide involves an Apple device. Over 90% of all Internet searches take place through Google or its subsidiary, YouTube.
Apple’s secret partnership with Google is said to represent a whopping one-fifth of the company’s annual revenue. Internal documents cited in the lawsuit confirm Apple executives see the deal as a “significant revenue channel” that if lost would create a “code red” scenario.
“This isn’t classic collusion, where two rivals agree to raise prices and each benefits,” argues former Justice Department antitrust lawyer John Newman. “It looks more like one monopolist agreeing with another company to split the monopoly rent.”
Editor’s Note: The effect of these monopolistic actions is to freeze other search engines out of the market and stifle competition there. Since Google is known to have manipulated its results to affect elections, this is dangerous for America as well.