Google’s antitrust ruling could pose $20 billion risk to Apple: report

San Francisco:

Apple’s lucrative deal with Google could be under threat after a US judge ruled that the Alphabet-owned search giant operated an illegal monopoly.

A potential solution for Google to avoid antitrust lawsuits could involve terminating the deal that makes its search engine a default on Apple devices, Wall Street analysts said Tuesday.

Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising through its Safari browser, for the privilege, according to analysts at Morgan Stanley.

If the deal falls apart, the iPhone maker could suffer a 4% to 6% reduction in profit, analysts estimate.

The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Justice Department in the antitrust case.

“The most likely outcome now is that the judge rules that Google should no longer pay for default placement or that companies like Apple should proactively ask users to select their search engine, rather than setting a default and letting consumers make changes to the settings if desired.” Evercore ISI analysts said.

Apple shares traded flat on Tuesday, underperforming the recovery in the broader market following Monday’s global sell-off. The alphabet changed little, after falling 4.5% in the previous session.

“The message here is that if you have a dominant market position with a product, it is best to avoid using exclusive agreements and ensure that any agreement you make gives the buyer the freedom of choice to replace it,” said Herbert Hovenkamp , professor of law at the University of Pennsylvania.

Admittedly, the “reparation” phase could be lengthy, followed by potential appeals to the U.S. Court of Appeals, the District of Columbia Circuit, and the U.S. Supreme Court. The legal dispute could last until 2026.

TILT IA

Still, if the deal falls apart, Apple will have several options, including offering customers alternatives like Microsoft Bing, or potentially a new search product developed by OpenAI.

Analysts agree that the decision will accelerate Apple’s shift toward AI-based search services. It recently announced that it would bring OpenAI’s ChatGPT chatbot to its devices.

Moving away from exclusive deals that would help Apple avoid regulatory scrutiny, the company said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well.

Apple is also revamping Siri with AI technology, giving it more control to handle tasks that were cumbersome in the past, like writing emails and interacting with messages.

While these efforts are expected to generate little money in the coming years, they could help capitalize on the new technology.

“Apple may see this as a temporary setback, especially as it stands to gain so much from the Google search deal, but it is also an opportunity for them to move into AI solutions for search,” said Gadjo Sevilla, an analyst at Emarketer.

(Except the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)