Apple's profitable arrangement with Google may be at risk following a US judge's decision that Google, owned by Alphabet, is maintaining an unlawful monopoly. Wall Street analysts suggested on Tuesday that a possible solution for Google to evade antitrust measures could be to end the agreement, which designates Google as the default search engine on Apple devices. Google reportedly pays Apple $20 billion yearly, equivalent to roughly 36% of its search advertising revenue generated via the Safari browser, according to analysts at Morgan Stanley. If the agreement is terminated, Apple could face a 4-6% reduction in its profits, the analysts estimated. The agreement is set to continue until at least September 2026, with Apple having the option to extend it by an additional two years, as reported by media in May citing a document from the Department of Justice in the antitrust case.
Evercore ISI analysts commented, "The most probable scenario now is that the judge orders Google to cease paying for default placement or mandates companies like Apple to actively prompt users to choose their search engine, rather than automatically setting a default and allowing users to alter this in settings if they desire." Apple's stock remained stable on Tuesday, lagging behind the broader market's rebound following Monday's global market downturn. Alphabet's shares showed minimal change, having dropped 4.5% in the prior session.
Herbert Hovenkamp, a law professor at the University of Pennsylvania, noted, "The takeaway here is that if you hold a dominant market position with a product, it's advisable to avoid exclusive agreements and ensure any agreements allow the buyer the freedom to choose alternatives." — Reuters
