The UK Competition and Markets Authority is probing the deal between Google (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL) regarding the default search engine on Apple’s mobile Safari browser. The regulators indicate that this creates a huge entry barrier and expansion of rival search engines.
Apple pays $1.5 billion for default search engine position
Google paid Apple around $1.5 billion so that its search engine can be the default search engine on various devices in the UK. Interestingly every year, Google pays for the default search engine positions in the UK, only making its search engine the only go-to engine in the safari browser or any other platform.
According to the regulators, such a deal prevents competitors such as Microsoft Corp’s (NASDAQ:MSFT) Bing, Verizon Communications Inc.’s (NYSE:VZ) Yahoo and DuckDuckGo. These other search engines have to pay Apple for them to be search engine alternatives on Apple devices. A statement from the regulator stated that considering the effect of preinstallations and defaults on Apple’s devices and its market share, the deal with Google created an unfair advantage. The regulator suggests that Apple’s ability to monetize these kinds of deals should be limited or should offer users options to choose search engines on setup.
iPhone is a huge revenue generator for Google’s mobile ad business
Over the years, Apple’s mobile Safari web browser has depended on the Google search engine. This made the iPhone a huge revenue generator for Google’s mobile advertising business and offering an edge over rivals. Court documents revealed in 2014 that Google paid $1 billion to secure the default search engine position on the Safari browser in the US. Analysts indicate that over the years, the amount has increased, and this benefits Apple with approximately $9 billion earned annually from such licensing arrangements.
In recent times regulators in the US and EU have increasingly become critical regarding the anti-competitive nature of these US tech giants. The EU has been aggressive in enforcing strict rules as well as imposing fines.