In context: Apple switched over from Bing to Google for search functionality across macOS and iOS in 2017 and made significant revenue gains. As a result, the UK's antitrust authority is now scrutinizing the deal as it believes it poses a threat to competition between search engines on mobile devices.
The UK Competition and Markets Authority has published a report on the state of online platforms and digital advertising. One finding that stands out is Apple's and Google's longstanding search engine deal. Officials say it is a "significant barrier to entry and expansion" for alternative search engines.
The CMA noted that Google pays Apple a "substantial majority" of the £1.2 billion (around $1.5 billion) it spends every year in the UK to have its search engine set as the default on a variety of mobile devices. Regulators are worried that this behavior is unfair towards Microsoft's Bing, Verizon Media's Yahoo, as well as independent search engines like DuckDuckGo or Ecosia that strive to make money without tracking your internet activity or selling your data to third parties.
To put things in perspective, Google paid Apple a total of around $10 billion in 2018 for the privilege of having its search engine as the default in Safari as well as for Siri and Spotlight search results. The CMA believes the arrangement needs to be changed so that users are given a choice screen for search providers, which would restrict "Apple's ability to monetize default positions."
For its part, Apple told regulators in the UK that search engines do not pay it for the right to be set as the primary default search engine on its devices. However, the agreement with Google states that Apple will be paid an agreed-upon share of search advertising revenue in return for setting Google as the default search provider across macOS and iOS.
The Cupertino giant lamented the high cost of implementing a choice screen. It explained that it selected Google as the default search engine in response to the overwhelming preference for it among Apple customers.
After being levied a series of heavy fines in Europe, Google had to implement a choice screen for search engines on Android. Apple might have to do the same to appease regulators. That said, the CMA thinks Apple should be provided with a range of options to address its arrangement with Google.
The antitrust body also called for a "new pro-competition regulatory regime" that would keep the market power of online giants like Google and Facebook in check. This would involve creating a strict code of conduct, opening up click and query data to rivals, increasing interoperability between online services, and the "separation of platforms where necessary to ensure healthy competition."