PLAYING HIDE THE SAUSAGE

Apple, Google Agreed to ‘Defend’ Search Deal From Regulators

Emily Birnbaum, Mark Gurman, Leah Nylen and Sabrina Willmer
Tue, September 26, 2023 

(Bloomberg) -- Apple Inc.’s lucrative agreement to use Alphabet Inc.’s Google as the default search engine for the iPhone includes a provision that the two tech giants will “support and defend” the deal against government scrutiny, a top Apple executive said at an antitrust trial.

Their longtime contract was renegotiated in 2016 to include the provision, Apple’s Senior Vice President of Services Eddy Cue disclosed Tuesday in a Washington federal court, where the US government is pressing its claim that Google operates a monopoly in the search business.

Cue, the architect of the most recent version of the agreement, said the provision for a joint defense was added at Google’s request. He said it was handled by company lawyers so he couldn’t speak directly to why it was included. Around that time, the European Union was investigating Google’s dominance in online search.

During his testimony, the executive defended Apple’s arrangement with its tech rival, saying it was the best choice for customers to have Google as the default search engine.

“There certainly wasn’t a valid alternative we would have gone to at the time,” Cue said. “I don’t know what we would have done” if the deal had collapsed, he said.

Google first became the default option in the Safari browser in 2002. That deal has been revised several times. Cue said the contract was extended in 2021, after the Justice Department filed its initial case against Google’s search dominance the year before.

Google pays Apple billions of dollars for this prominent position on products like the iPhone, making the agreement of particular interest to the government. The question before the judge in the antitrust trial is whether the search giant pushed its way onto Apple devices at the expense of competitors.

In his testimony, Cue stressed that Apple sees no need to develop its own search tool because Google clearly is the best option. That differs from the company’s approach in other areas: It competes with Google in mapping software and voice assistants, as well as operating systems for phones and computers.

The Justice Department displayed an email from 2016 in which Cue told Apple Chief Executive Officer Tim Cook that Google CEO Sundar Pichai was not agreeing to Apple’s proposed revenue share. When the Justice Department’s attorney asked Cue whether Apple would have walked away from the negotiation, Cue said he didn’t seriously consider it, but Apple might have created its own search engine.

Read More: What’s at Stake in Google Trial on Antitrust Charges: QuickTake

Part of Cue’s testimony Tuesday was closed to the public because it involved internal company information that Apple and Google want to keep secret.

Cue was expected to testify behind closed doors about Apple’s search arrangements with other companies, which provide the non-default options built into the Safari internet browser, according to a person familiar with the planned testimony. That includes Microsoft Corp.’s Bing, Yahoo, DuckDuckGo and Ecosia. Similar to its agreement with Google, Apple gets a slice of the advertising revenue generated when users select those search engines as their main option in Safari.

Last week, Apple machine learning chief John Giannandrea testified as well. The executive, who led search at Google before joining Apple in 2018, pointed to a new feature in iOS 17 and iPadOS 17 — the latest software that runs iPhones and iPads — that lets users assign a different default search engine for private browsing.

That means Apple users can switch between Google and another option more easily, according to Cue. “We like our products to come out of the box and work where it feels like magic,” he said. However, Apple doesn’t track how many customers actually make the change to a non-Google search engine, because of privacy concerns, Cue said.

The case is US v. Google, 20-cv-3010, US District Court, District of Columbia.

(Updates with testimony from Apple executive.)

Apple exec defends the decision to make Google its default search engine on iPhones and Macs

PAUL WISEMAN
Tue, September 26, 2023

The iPhone 15 phones are shown during an announcement of new products on the Apple campus in Cupertino, Calif., Tuesday, Sept. 12, 2023. On Tuesday, Sept. 26, a top Apple executive defended the tech giant’s decision to make Google the default search engine on Apple iPhones and Macs, saying there was no “valid alternative.’’ (AP Photo/Jeff Chiu, File)

WASHINGTON (AP) — A top Apple executive defended the tech giant’s decision to make Google the default search engine on Apple iPhones and Macs, saying there was no “valid alternative.’’

Testifying in the biggest antitrust trial in a quarter century, Eddy Cue, Apple’s senior vice president of services, said Tuesday that there wasn’t “anybody as good’’ as Google at helping phone and computer users search the internet.

The U.S. Department of Justice has accused Google – a company whose very name is synonymous with scouring the web — of smothering competition by paying Apple, Verizon and other tech companies to make its search engine the first users see when they open their devices.

Google counters that it dominates the market because its search engine is better than the competition, a position Cue supported in his testimony. Google also argues that users can, in any event, switch to other search engines with a couple of clicks.

The antitrust case, the biggest since the Justice Department went after Microsoft and its dominance of internet browsers 25 years ago, was filed in 2020 during the Trump administration. The trial began Sept. 12 in U.S. District Court in Washington D.C.

Mikhail Parakhin, Microsoft’s head of advertising and web services, testified Tuesday that Google’s dominance feeds on itself. The more searches Google processes, the more data it collects that can be used to improve future searches.

“The more data you have, the better the results are,’’ he said, echoing one of the government’s arguments.

Dominating the market helps in other ways, Parakhin said. For example, restaurants are more likely to make sure their location and hours are accurate in results on the leading search engine, while they are far less likely to bother correcting information on smaller search engines.

Experience shows, he said, that search engines need 20% market share to survive. Otherwise, “their quality degrades rapidly, and they disappear.’’’

Parakhin also recounted his experience battling Google in his previous job as chief technology officer at the Russian search engine Yandex. After Russian regulators required Android phones to let users choose their search engine – instead of letting Google hold the default position – Yandex’s market share rose from 30% to 55%, he said.

Earlier in the proceedings, the government called a behavioral economist, who testified that Google's default status discourages users from switching search engines, partly because they are reluctant to change ingrained habits. Last week, the founder of the search engine DuckDuckGo, which has about 2.5% of the search market, testified that his company struggled to compete because of Google's revenue-sharing agreements with Apple and other companies.

U.S. District Judge Amit Mehta likely won’t issue a ruling until early next year. If he decides Google broke the law, another trial will determine how to rein in its market power. The Mountain View, California-based company could be stopped from paying Apple and other companies to make Google the default search engine