🍏 The secret Apple-Google pact at the heart of the U.S. antitrust case

Apple and Google are competitors. They each make smartphones, not to mention laptops and other products. But the two companies have worked together in a way that is one of the most foundational parts of the United States’ action against Google.

  • About 13 years ago, Google and Apple aligned: They made an agreement that Google would be the default search engine on the iPhone. In 2017, the deal was renewed (with Sundar Pichai and Tim Cook spotted sharing wine together at a trendy restaurant), and Apple makes somewhere in the ballpark of $8 billion a year for keeping Google as the default. The sum accounts for about 15% of Apple’s annual profits.

  • The steep cost is well worth it for Google: The Justice Department alleges that nearly half of Google’s search traffic comes from Apple devices. A former Google executive told the NYT that losing the Apple deal would be terrifying for the company.

  • Apple and Google call this “co-opetition”: And the U.S. DOJ calls it an antitrust violation. Their investigation revealed a note sent between a high-ranking Apple employee to a counterpart at Google saying “our vision is that we work as if we are one company.”

Apple and Google had tried to keep the relationship under wraps

Apple didn’t publicly discuss the revenue it makes from Google until an earnings call from earlier this year.

The Verdict

Although the DOJ action against Google will likely take years to resolve, a result could come sooner regarding the Apple-Google pact. The DOJ is seeking an injunction to prevent Google from making any such new deals. And Apple could be pressured to dissolve the relationship and perhaps work on its own competing search engine.