Google Pays Apple Billion Of Dollars To Keep Cupertino Out Of Search Business: Lawsuit Alleges

Alphabet, Inc. GOOGL GOOG edged out its bigger tech peer Apple, Inc. AAPL to take the honors as the biggest gainer among the FAANGs in 2021. A lawsuit filed in late December alleges that there is an unholy nexus between the two companies.

What Happened: A class action lawsuit has been filed against Apple and Google as well as the CEOs of both companies for alleged antitrust violations, according to a statement put out by the Alioto law firm.

In the complaint, the plaintiffs charge that Google and Apple have made an agreement that Apple would not compete in the internet search business against Google. The terms of the non-compete agreement call for Google to share its search profits with Apple in return for getting preferential treatment in all Apple devices.

The complaint also alleges that executives of the companies regularly meet in secret and that Google is making annual multi-billion-dollar payments to Apple to stay out of the search business.

The claims do not appear without merit. Bernstein analyst Toni Sacconaghi, Jr. said in an Aug. 2021 note that Google is on track to pay $15 billion to Apple to continue using Google as the default search engine on iOS, up from $10 billion paid in 2020.

The companies are also charged with suppressing competition by foreclosing competitors from the search market and acquiring actual and potential competitors.

Related Link: Why Regulatory Risk Is A Silver Lining For Apple And Google

Why It's Important: The class-action lawsuit comes at a time when governments across the globe have taken up cudgels against anticompetitive practices of tech behemoths.

While seeking an injunction prohibiting all these antitrust practices, the complaint also calls for the breakup of Google and Apple into separate and independent companies in accordance with the precedent of the breakup of oil companies.

A Google spokesperson told Benzinga the claims are completely false. "We don't have any agreement with Apple preventing them from competing in search, and nothing in our search distribution agreement with Apple stops them from developing their own search services or from having promotional agreements with our competitors. Apple features Google Search on Safari because, in their words, it's "the best." We look forward to debunking these meritless claims in court," the spokesperson added.

Benzinga's emails to Apple seeking clarification on the lawsuit went unanswered.

Related Link: Apple Becomes First Company To Top $3 Trillion Market Cap; Analyst Says Rally Has Further Legs

Photo: Courtesy of berrytokyo on Flickr