A 15-year deal between Google and Apple that nets the latter billions of dollars every year is now threatened by a landmark antitrust lawsuit brought against the search giant by the U.S. Department of Justice (DOJ), according to several media reports, including The Wall Street Journal (WSJ).
Google pays Apple an estimated $8 billion to $12 billion a year to be the default search engine on iOS devices, but that deal is now under the microscope as part of the DOJ’s lawsuit, WSJ reported.
The DOJ pointed to the deal as an example of how Google uses its profits to keep rivals on the sidelines, according to WSJ. It also shows just how much search is worth. Analysts and investors predict it will be a financial blow to Apple if the deal is lost. Google’s payments make up a fifth of Apple’s profit.
“There’s a risk, if you play it out, that there actually could be more financial impact to Apple than there is for Google,” Toni Sacconaghi, an analyst for Bernstein, told WSJ. Apple’s stock could drop 20 percent if the Google deal is entirely scrapped, he said.
A former Google executive told The New York Times that the notion of losing Apple’s traffic is “terrifying” to the search giant.
The DOJ has asked for a court injunction that would stop Google from cutting deals like the one it made with Apple. That deal is responsible for making Google the center of search for 92 percent of the world, the Times reported.
Kent Walker, Google’s chief legal officer, said in a blog post that the company’s relationship with Apple is “no different from the agreements that many other companies have traditionally used to distribute software.”
Competitors had complained for many years that regulators had a hands-off approach to Google. In light of the DOJ lawsuit, complaints are coming to the surface and rivals are publicly speaking out.
The lawsuit could affect other parts of the connected economy, and Google could be forced to break up or undergo a transformation. Google Maps, Waze and Google Pay could all come under scrutiny.
Big Tech is also facing problems on the other side of the pond. EU regulators are creating a “hit list” of about 20 companies that will face tougher competition rules.