UK regulators take aim at Apple, Google’s billion-dollar search engine deal

They claim the agreement impacts negatively all Google rivals in the search engine market

The payments by Alphabet Inc’s Google to Apple Inc to be the default search engine on Apple’s Safari web browser create “a significant barrier to entry and expansion” for Google’s rivals in the search engine market, the UK Competition and Markets Authority said in a report on Wednesday.

According to the report, Apple received the “substantial majority” of the 1.2bn pounds ($1.5bn) that Google paid to be the default search engine on a variety of devices in the United Kingdom in 2019. But the arrangements between Apple and Google create “a significant barrier to entry and expansion” for Google’s rivals in the search engine market.

Those rivals include Microsoft Corp’s Bing, Verizon Communications Inc-owned Yahoo and independent search engine DuckDuckGo, all of which also make payments to Apple in exchange for being search engine options on its devices, the report said.

“Given the impact of preinstallations and defaults on mobile devices and Apple’s significant market share, it is our view that Apple’s existing arrangements with Google create a significant barrier to entry and expansion for rivals affecting competition between search engines on mobiles,” the regulators wrote in the report.

They added that enforcement authorities should be given a range of options to address the Apple-Google arrangement, including requiring “choice screens” in which users decide which search engine to set as a default during device setup or restricting Apple’s ability to monetize default positions. In response, Apple told the regulators that monetisation restrictions would be “very costly,” according to the report.

Apple and Google did not immediately return requests for comment.

Earlier this year, Bernstein analyst Toni Sacconaghi estimated that Apple generates about $9bn per year globally from licensing arrangements, revenue with gross margins above 90% and with about 80% of the total coming from Google. Apple reports the revenue in its services segment, which investors are looking to for growth as consumers slow the pace of iPhone upgrades.

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