Google CEO Defends Paying Apple For Default Search

The CEO of Alphabet had defended the billions of dollars that Google pays Apple to ensure it makes Google the default search engine on iOS devices.

CEO Sundar Pichai began the week by testifying in the biggest US antitrust case in a quarter century. The last major tech monopoly case was that of Microsoft in 1998, which ended in a settlement that forced the company to change some business practices.

The landmark trial has been a long time coming, ever since the DoJ had filed a civil antitrust suit against Google for monopolising search and search advertising back in 2020.

Search allegations

Google is also facing another antitrust lawsuit, after the DoJ, along with a number of Attorneys Generals from US states filed a civil antitrust suit against Google for monopolising multiple digital advertising technology products in violation of Sections 1 and 2 of the Sherman Act in January 2022.

In this search lawsuit however, the DoJ alleges that Google pays off tech companies to lock out rival search engines to smother competition and innovation.

According to court documents the government entered into the record last week, the payments (to Apple and others) came to more than $26 billion in 2021, a year in which operating expenses for Google’s parent company, Alphabet, were nearly $68 billion.

Google argues that it dominates the market because its search engine is better than the competition.

Earlier this month Microsoft’s CEO Satya Nadella testified that “everybody talks about the open web, but there is really the Google web.”

Nadella described the obstacles Bing faced to gain more market share from Google.

The most famous exclusive deal is the multibillion-dollar agreement between Google and Apple to make Google search the default on Apple products.

Nadella revealed that Microsoft was prepared to take on billions of dollars in short-term losses for Bing to pay Apple enough to make its search engine the default on Apple products.

Not only would Microsoft have to replace the revenue Apple currently receives from Google for default placement (estimated to be as much as $19 billion this year), Nadella said Redmond would also need to cover the risk Apple would take on by switching the default.

Pichai defence

But Sundar Pichai has defended the huge amounts of money it pays to Apple and others to ensure that its search engine is the default search engine on their products.

According to the Associated Press, Pichai testified Monday that Google’s payments to phone manufacturers and wireless phone companies were partly meant to nudge them into making costly security upgrades and other improvements to their devices, not just to ensure Google was the first search engine users encounter when they open their smartphones or computers.

Google benefits from the deals because it makes money when users click on advertisements that pop up in its searches and shares the revenue with Apple and other companies that make Google their default search engine, under a revenue sharing agreement (RSA).

The DoJ is seeking to show that Google feared Apple might establish its own search engine and worried about losing talent to Apple. In a 2019 email shown in court, Pichai asked to be informed directly whenever a member of Google’s search engine team defected to Apple.

According to AP, much of the testimony in the case has been held behind closed doors, and a significant amount of evidence has been redacted from documents at the request of Google and Apple, whose attorneys say they need to protect trade secrets.

However the DoJ did also address its allegation over Google’s policy of not automatically retaining internal chat messages, despite being subject to a litigation hold

In February, the DoJ had alleged that Google “systematically destroyed” instant message chats through its history-off option that allowed them to be deleted every 24 hours unless a user manually changed the setting.

Pichai acknowledged he was aware of the history-off default for chat that persisted until February and that he had taken action to change that.

The DoJ pointed to a message exchange where Pichai asked for history to be turned off in a group chat in 2021. Pichai testified that he did so to discuss a personnel matter, along the lines of who would be a good speaker at an event. It was not something even “remotely” close to something covered by the litigation hold, he reportedly said.

“I take great care to comply with all litigation holds,” Pichai testified.

The case continues.