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Apple could lose $15 billion if DOJ forces Google to stop paying to be iPhone’s default search engine

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Apple risks losing up to $15 billion a year if the Justice Department forces Google to stop paying the company to be the default search engine on all iPhones — as regulators question the legality of the long-standing arrangement.

Whenever iPhone users open a web browser to enter a search query, Google is always used by default. While anyone can change this setting, hardly anyone does, resulting in a massive amount of traffic (and ad revenue) to Google from over a billion iPhone users worldwide.

Bernstein analysts estimate Google’s payment to Apple would increase to $15 billion in 2021 and to $18-20 billion this year, reports 9to5Mac.

Apple threatens to lose up to $15 billion a year if Justice Department forces Google to stop paying the company as the default search engine on all iPhones

The contracts are the foundation of the DOJ's antitrust law against the California-based company, which began in the final days of the Trump administration and won't go to trial until sometime in 2023.

The contracts are the foundation of the DOJ’s antitrust law against the California-based company, which began in the final days of the Trump administration and won’t go to trial until sometime in 2023.

Last year, Apple’s total gross profit was over $152 billion – so if you lost the Google payments, it would be at least a 10% difference.

Dating back to the early 2000s, this agreement between the two tech giants is under threat — with regulators accusing Google of anti-competitive practices to maintain its dominance in the search industry.

“Google is investing billions in defaults, knowing people won’t change them,” Justice Department attorney Kenneth Dintzer said during a hearing Thursday in the antitrust case. ‘They buy default exclusivity because defaults matter a lot.’

The contracts are the basis of the DOJ’s antitrust case against the California-based company, which began in the final days of the Trump administration. States are also pursuing a parallel antitrust lawsuit against Google.

“Google is investing billions in defaults knowing that people won’t change them,” Justice Department attorney Kenneth Dintzer said during a hearing Thursday in the antitrust case. ‘They buy default exclusivity because defaults matter a lot’

According to BloombergGoogle’s attorney John Schmidtlein said regulators are misunderstanding the market and should focus less on search rivals like Microsoft’s Bing and more platforms like TikTok, Amazon, Meta and Grubhub — where countless users are doing their searches these days.

“You don’t have to go to Google to shop on Amazon. You don’t have to go to Google to buy airline tickets on Expedia,” he said. “Just because Google doesn’t face the same competition for every search query doesn’t mean the company isn’t experiencing stiff competition.”

Bernstein analysts estimate that Google's payment to Apple, led by CEO Tim Cook (above), would rise to $15 billion in 2021 and to $18-$20 billion this year, 9to5Mac reports.

Bernstein analysts estimate that Google’s payment to Apple, led by CEO Tim Cook (above), would rise to $15 billion in 2021 and to $18-$20 billion this year, 9to5Mac reports.

Still, all the user data that Google obtains from Apple’s huge following certainly helps to increase the profitability of the search engine. It already has the most popular browser, Chrome, with a 69% market share, and the second most popular smartphone operating system, Android.

Dintzer said Google’s contracts with Apple, along with smartphone makers such as Samsung and Motorola, plus Verizon, T-Mobile and AT&T, make it the default search engine and ensure it comes preinstalled on phones, making it the “gateway” to the Internet for most people.

“Default exclusivity allows Google to systematically reject rivals’ data,” he said per Bloomberg.

Lawmakers and consumer advocates have long accused Google of abusing its dominance in online search and advertising. The pending case says Google is using billions of dollars raised from advertisers to pay phone manufacturers to ensure Google is the default search engine in browsers.

That arrangement kills competition and innovation from Google’s smaller budding rivals and harms consumers by reducing the quality of search and limiting privacy protections and alternative search options, the government claims.

At the time the lawsuit was filed in October 2020, Google pledged to defend itself, saying, “Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to — not because they’re forced to or because they can’t find alternatives.”

The Justice Department’s case against Google won’t go to trial until sometime in 2023, and even if it loses, Google will appeal.

Last year, Apple's total gross profit was over $152 billion - so if you lost the Google payments, it would save at least 10%

Last year, Apple’s total gross profit was over $152 billion – so if you lost the Google payments, it would save at least 10%

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