Exclusive Google has been paying Apple a portion of search revenue generated by people using Google Chrome on iOS, according to a source familiar with the matter.

This is one of the aspects of the relationship between the two tech goliaths that currently concerns the UK’s Competition and Markets Authority (CMA).

Though everyone knows Google pays Apple, Samsung, and other manufacturers billions of dollars to make its web search engine the default on devices, it has not been reported until now that the CMA has been looking into Chrome on iOS and its role in a search revenue sharing deal Google has with Apple.

We twice asked Apple and Google to confirm or deny what we’ve learned, and neither corporation would talk. We also approached the CMA, and a spokesperson for the monopoly regulator said: « The CMA cannot comment on or disclose any confidential information. »

What’s the problem with sharing search revenue?

The British competition watchdog is worried that Google’s payments to Apple discourage the iPhone maker from competing with Google. Substantial payments for doing nothing incentivize more of the same, it’s argued.

This perhaps explains why Apple, though hugely profitable, has not launched a rival search engine or invested in the development of its Safari browser to the point that it could become a credible challenger to Chrome.

Incidentally, that now appears to be changing as a result of regulatory pressure. Beyond increasing the size of its Safari WebKit team over the past two years and signaling that it may relax some of its rules this year, Apple on Thursday issued a WebKit update for the first beta of Safari 16.4 that delivers many of the features developers complained have been missing from Apple’s browser.

But back to Chrome. In its final, public market study report [PDF] of the mobile ecosystem, the CMA coyly describes various allegedly competition-quelling revenue sharing arrangements between Apple and Google.

The agency’s 356-page report, published June 10 last year omits a crucial detail on page 174, section 5.117:

In the report, the [x] is represented by a scissors icon, signaling that text has been redacted.

The CMA identified Safari because it has long been known that Google pays rival browser makers Apple and Mozilla to ensure that Google Search is the default search engine upon installation of their respective web browsers.

But the agency chose to omit the identity of the second product for which Apple is being paid. We’re told the excised word is « Chrome. »

The following passage, section 5.118, is similarly shy about identifying Chrome:

The redaction arguably might represent other possible products, such as Siri – Google displaced Bing as the source of web search results produced by Siri in 2017, the result of a 2016 deal that also linked Google Search to Apple’s Spotlight device-based search service.

But for the CMA to reveal one Apple product (Safari) while concealing another (Siri), would be odd. And section 5.117 specifically deals with revenue for browser traffic on iOS. Chrome is the only browser that fits in this context.

What’s more, Chrome fits in section 5.119 better than any other iOS apps or services that incorporate Google Search. The passage specifically cites competition between browsers:

Having Google pay Apple « a significant share of revenue from Google Search traffic » passing through its own Chrome browser on iOS is difficult to explain. Apple does not provide any obvious value to people seeking to use Google Search within Google Chrome.

One attempt to explain the arrangement can be found in an antitrust lawsuit filed on December 27, 2021, and subsequently amended [PDF] on March 29, 2022. The complaint, filed by the Alioto Law Firm in San Francisco, claims Apple has been paid for the profits it would have made if it had competed with Google, without the cost and challenge of doing so.

« Because more than half of Google’s search business was conducted through Apple devices, Apple was a major potential threat to Google, and that threat was designated by Google as ‘Code Red,' » the complaint contends. « Google paid billions of dollars to Apple and agreed to share its profits with Apple to eliminate the threat and fear of Apple as a competitor. »

Google paid billions of dollars to Apple and agreed to share its profits with Apple to eliminate the threat and fear of Apple as a competitor

These alleged revenue sharing arrangements – which are known in detail only to a limited number of people and have yet to be fully disclosed – have been noted by the UK CMA as well as the US Justice Department, which along with eleven US States, filed an antitrust complaint against Google on October 20, 2020.

Reached by phone, attorney Joseph M. Alioto, who filed the private antitrust lawsuit, told The Register it would not surprise him to learn that Google has been paying Apple for search revenue derived from Chrome. He said Google’s deal with Apple, which began at $1 billion per year, reached as high as $15 billion annually in 2021.

« The division of the market is per se illegal under the antitrust laws, » said Alioto.

Apple and Google are currently trying to have the case dismissed citing lack of evidence of a horizontal agreement between the two companies, and other supposed deficiencies.

Incentives

In an email, Donald Polden, Dean Emeritus and professor of law at California’s Santa Clara University, agreed with the CMA’s assertion that the revenue sharing arrangements « dampen incentives for competition between browsers on iOS. »

« Apple would have very little incentive to take on Google in either search market and it would thus maintain the duopoly in search on both platforms, » Polden explained.

« A couple of years ago, some of my antitrust students were quizzing me about why Apple didn’t build out its Safari mobile search platform to take on Google search and this is a pretty good explanation – it is just too beneficial to maintain each others’ dominance. »

Polden said the UK CMA’s findings may inform antitrust actions in America against the two companies, though he said those cases may be focused on other aspects of anticompetitive conduct in the search and advertising markets, and there’s a limited amount of anticompetitive conduct the government can try to address.

The US Justice Department, already suing Google over competition concerns, is said to be preparing a possible antitrust case against Apple. ®

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