The biggest sweetheart deal in America
The Justice Department's antitrust lawsuit against Google filed last Tuesday could upend the company's unlikely partnership with its adversary Apple, one of the most lucrative business agreements in history, the New York Times reports.
By the numbers: Google pays Apple an estimated $8 billion–$12 billion annually for its search engine to be the default on Apple’s iPhone and other devices, according to the Times. It's likely Google's single largest annual outlay and accounts for 14%–21% of Apple’s yearly profit.
The bottom line: The end of the 15-year-old deal between two of the most valuable companies in tech "could mean the loss of easy money to Apple. But it would be a more significant threat to Google," the Times writes.
- Google has no obvious alternative to replace the traffic it gets from iPhones, per the Times. Without the deal, Apple could be compelled to acquire or develop its own search engine.
- Google has also feared that in the absence of a partnership, Apple will make it more difficult to access Google search on iPhones.
The backdrop: The DOJ argues in the suit, which is the government’s biggest antitrust case in two decades, that Google has "foreclosed competition for internet search" by securing its search engine as the default in web browsers and on mobile devices, including ones that run Google's own Android operating system.
- Google has said its prominence in the search market is the result of the quality of its product, and the company has denied that it engages in anti-competitive tactics.
- The company said it sees healthy competition in its major revenue-generating businesses, like advertising and mobile.
Go deeper: U.S. vs. Google — the siege begins