The judgment against Google, issued by the United States District Court for the District of Columbia, focuses on Google’s monopolistic practices in the general search services and general search text advertising markets. Google currently controls almost 90% of the global search traffic with the closest competitor, Bing having only a 7,2% market share, with all others having less than 2% share of the search market.
The Department of Justice (DOJ) found Google liable for violating Section 2 of the Sherman Act and the revised remedy, announced by the court, will now see a massive unprecedented disruption in the web-search market.
The remedial action is to take effect by August 2025 and will in all probability cost Google and Apple a few billion dollars in annual revenue and will require Apple to rethink its search strategy going forward.
The History of the Apple / Google Search Deal
An agreement of search services between Apple & Google has been in place since 2002, that currently provides
Google exclusive rights as the default search engine on Apple’s Safari, in return for a lucrative revenue sharing agreement with entrenched exclusivity.
Apple currently delivers over 400 billion user queries a year from Safari to Google Search. This search traffic comprises almost 95% of the general search traffic on iPhones. The DOJ has calculated that this guarantees Google 28% of all search queries within the US market.
The scale of the value of the deal for Google is indicated clearly by Google’s revenue share payment to Apple in 2022, that was an estimated at $20bn, equating to 17.5% of the total operating profit of Apple in that financial year.
Far Reaching Remedial Actions Required of Google:
Prohibition on Exclusionary Contracts:
- Google is prohibited from offering payments or preferential treatment to third parties, including Apple, to maintain its search engine as the default or to discourage the use of competing search engines.
- Google cannot enter into exclusive agreements with publishers or condition access to its Play Store on distribution agreements for its search products.
Divestiture Requirements:
- Google must divest its Chrome browser to a buyer approved by the Plaintiffs and the Court.
- Contingent structural relief includes the potential divestiture of Android if the remedies prove insufficient to restore competition.
Data Sharing:
- Google must provide Qualified Competitors access to its Search Index and User-side Data at marginal cost, ensuring privacy and security safeguards.
- Google must share Ads Data used in targeting, retrieval, and auctioning processes.
Search Syndication:
- Google must offer a syndication license to Qualified Competitors, allowing them to access Google’s search results and Search Text Ads at marginal cost.
- Syndication will decline over a 10-year period to encourage competitors to develop independent search capabilities.
Transparency and Reduction of Switching Costs:
- Google must provide detailed performance data for Search Text Ads to advertisers.
- Google must offer keyword matching options and allow advertisers to export data in real-time.
Choice Screens:
- Google must implement choice screens on existing non-Apple devices, Google devices, and Google browsers to inform users of competitive search engine options.
- The choice screens must be designed to not preference Google and to minimize choice friction.
Monitoring and Enforcement:
- A Technical Committee (TC) will be appointed to monitor Google’s compliance with the judgment.
- Google must designate an internal Compliance Officer to oversee antitrust compliance and handle complaints.
Anti-Retaliation and Anti-Circumvention:
- Google is prohibited from retaliating against entities that compete with its search products or file complaints regarding its compliance.
- Google must not engage in conduct designed to replicate the effect of its previously unlawful behavior or evade the judgment’s obligations.
Duration and Jurisdiction:
- The judgment will take effect 30 days after entry and will expire 10 years from the effective date unless extended or terminated early based on compliance and market conditions.
- The court retains jurisdiction to enforce, modify, or interpret the judgment as necessary to restore competition in the monopolized markets.
Apple’s Options
Apple is now faced with the challenge of finding options to offer its users in terms of search. The easiest approach for Apple is to provide users with a choice option screen when searching the web. They will however need to open this up to several competitors, with current choice of viable search engines limited.
Who are the competitors?
These include the Likes of Duck Duck Go, Microsofts Bing, Yahoo and Baidu, however most of these would struggle to meet the technical requirements for such a massive offering. It may however create the opportunity for mergers and investments, with a massive opportunity for a compettitive entrant into a disrupted market.
Key among such developments is likely to be an AI based product that could drive a whole new business model and challenge not only the search functionality but the closely related advertising model that is also currently dominated by Google.
With Apple working feverishly in improving its AI functionality on its devices, will this present an opportunity for them to seriously enter the search market with an AI driven solution, or will they see this as outside of its core developments?
Time will tell, but what is certain is that the search market is about to be disrupted permanently and that there is likely to be new emerging challengers on the horison soon.
