Google verdict could put Apple at risk of Rs 1,67,830 crore: Here’s everything you need to know
Apple’s lucrative deal with Google could be under threat after a US judge ruled that the Alphabet-owned search giant is engaging in illegal monopolistic behavior.
Wall Street analysts said on Tuesday that a potential remedy for Google to avoid antitrust action could include ending the deal, which would make Google’s search engine the default on Apple devices.
According to Morgan Stanley analysts, Google pays Apple $20 billion (Rs 16,78,30 crore) annually, or about 36% of the money it earns from search ads through its Safari browser, for this privilege.
Analysts estimate that if the deal does not go through, the iPhone maker could suffer a 4-6% drop in profits.
The deal is valid until at least September 2026, with Apple having the right to unilaterally extend it for another two years, according to media reports in May citing a document filed by the Justice Department in the antitrust case.
Read more: Google Illegal Search Monopoly, Spending Billions to Block Competition: US Judge
“The most likely outcome now is that a judge rules that Google can no longer pay for default placement, or that companies like Apple must proactively prompt users to choose their search engine instead of setting the default and allowing consumers to change the setting if they want,” Evercore ISI analysts said.
Apple shares traded flat on Tuesday, underperforming the broader market’s rebound after Monday’s global sell-off. Alphabet was little changed, after falling 4.5% in the previous session.
“The message here is that if you have a dominant market position in a product, you better avoid using exclusivity agreements and make sure that any agreements you do make allow buyers to have the freedom to choose alternatives,” said Herbert Hovenkamp, a law professor at the University of Pennsylvania.
To be sure, the “fix” phase could be lengthy, followed by possible appeals to the U.S. Court of Appeals, the District of Columbia Circuit, and the U.S. Supreme Court. The legal wrangling could stretch into 2026.
AI Transformation
However, if this partnership is canceled, Apple will have a number of options including offering customers alternatives like Microsoft Bing or potentially a new search product powered by OpenAI.
Analysts agree that the ruling will accelerate Apple’s move toward AI-powered search services. The company recently announced that it would be bringing OpenAI’s ChatGPT chatbot to its devices.
In a move away from exclusive deals that help Apple avoid regulatory scrutiny, the company said it is also in talks with Google to add its Gemini chatbot and plans to add other AI models.
Read more: iPhone maker’s big shift to AI could soften the blow from Google’s antitrust ruling, here’s why
Apple is also improving Siri with AI technology, helping Siri better control tasks that were difficult in the past, such as writing emails and interacting with messages.
While those efforts aren’t expected to yield much profit in the coming years, they could help leverage new technology.
“Apple may see this as a temporary setback, especially since it makes a lot of money from its search deal with Google, but it also presents an opportunity for them to move into AI solutions for search,” said Gadjo Sevilla, an analyst at Emarketer.
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