The payments from Alphabet Inc’s Google to Apple Inc as the default search engine in Apple’s Safari web browser are a “major barrier to access and expansion” for Google’s rivals in the search engine market, the UK market regulator said in a report released Wednesday.
Apple received the “substantial majority” of the £ 1.2 billion ($ 1.5 billion) Google paid to become the default search engine on various devices in the UK in 2019, according to the report. The British Competition and Markets Authority said in its final report on online platforms and digital advertising that the agreements between Apple and Google “constitute a significant barrier to access and expansion” for Google’s rivals in the search engine market. Those rivals include Bing from Microsoft Corp, Yahoo from Verizon Communications Inc and the independent search engine DuckDuckGo, all of which also make payments to Apple in exchange for search engine options on their devices, the report said.
“Given the impact of pre-installs and defaults on mobile devices and Apple’s significant market share, we believe that Apple’s existing agreements with Google are a significant barrier to entry and expansion for rivals that affect search engine competition on mobile phones.” , the regulators wrote in the report. Apple and Google did not immediately return requests for comments.
Earlier this year, Bernstein analyst Toni Sacconaghi estimated that Apple generates approximately $ 9 billion annually from licensing deals worldwide, revenues with a gross margin of over 90% and approximately 80% of the total from Google. Apple reports revenues in its service segment, which investors are looking for growth as consumers slow down the pace of iPhone upgrades. In the report, UK regulators said enforcement agencies should be given a range of options to address the agreement between Apple and Google, including requiring ‘choice screens’ where users decide which search engine should be the default when setting up the device or limiting Apple’s ability to monetize default positions.
Apple told regulators that restrictions on monetization would be “very costly,” the report said. (1 pound = $ 1.25 dollar)