Apple Senior Vice President for Services Eddy Cue arrives on the Prettyman U.S. Court House on September 26, 2023 in Washington, DC.
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Eddy Cue, Apple’s senior vice chairman of providers, testified on Tuesday that the corporate selected to make Google the default search engine on iPhones as a result of it made essentially the most sense for shoppers and “there wasn’t a valid alternative.”
Cue, Apple’s lead negotiator of its multibillion-dollar contract with Google, appeared in federal court docket in Washington, D.C., to debate the long-standing settlement between the 2 firms. Though extra granular particulars of the settlement are more likely to come up additional in testimony that is closed to the general public, Cue’s opening statements make clear on facets of the deal hardly ever mentioned within the open.
“When we’re picking search engines, we pick the best one and we let the customer easily change them,” Cue mentioned. He later added that relating to options that Apple presents, they’ve some that “customers have never heard of,” which might make them afraid of creating the improper selection.
Bernstein has estimated that Google might pay Apple as a lot as $19 billion this 12 months underneath the settlement, although the precise phrases haven’t been revealed.
When Cue renegotiated the Information Services Agreement (ISA) with Google CEO Sundar Pichai in 2016, considered one of his objectives was to get Google to extend the income share share it pays to Apple, Cue mentioned in his testimony. Under the phrases, Google pays an undisclosed minimize of the online income it makes from promoting on searches run on Apple gadgets.
Google CEO Sundar Pichai (L) and Apple CEO Tim Cook (R) pay attention as U.S. President Joe Biden speaks throughout a roundtable with American and Indian enterprise leaders within the East Room of the White House on June 23, 2023 in Washington, DC.
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Cue mentioned he “thought it was the right thing and the fair thing for us,” to extend the income sharing share. Apple had constructed the know-how and “deserved” a better income share, he testified.
Meagan Bellshaw, the Justice Department lawyer, introduced up a 2016 electronic mail correspondence with Apple CEO Tim Cook, Cue’s boss. Bellshaw directed Cue to reference a “Rosetta Stone” that matched letters to corresponding income sharing percentages, in order that the precise numbers wouldn’t be revealed in open court docket.
In the primary change that was shared, Cook requested Cue how the assembly went, which Cue mentioned he understood to imply his assembly with Pichai concerning the search contract. Cue responded that it was “good except for the rev share.” Pichai “did not come back with a specific number, but said there is no way he could make C percentage work,” referring to the quantity Apple sought within the negotiation.
In the e-mail to Cook, Cue mentioned he wanted to satisfy with Pichai “alone next week and agree to the economic terms or we shouldn’t move forward,” referring to the income sharing quantity.”
But Cue said on the stand Tuesday that he was confident a deal would get worked out with Google and that he hadn’t seriously contemplated what Apple would do if it didn’t.
“Certainly there wasn’t a legitimate different we’d have gone to,” Cue testified. “It’s not one thing that we ever actually really thought of.”
Ultimately, Cue said he felt it was in the best interests of both companies to finalize a deal.
Cue said the two sides agreed to a revenue sharing percentage that was different from the number each presented initially. The terms of the deal were renewed in 2021 to extend the contract.
The DOJ asked whether there was a provision in the agreement for Apple to support and defend the deal in connection to government actions. Cue confirmed there was but that he didn’t know a lot about it. At the time, Cue said, Google had requested the addition while it was under investigation in Europe, and Apple’s counsel had said it was fine to include.
‘It frustrates customers’
The DOJ also asked Cue to detail how Apple decides where and how it will give consumers a choice about the setup of their iPhones. One alternative that Google competitors have floated to its default status on devices is to give consumers a chance to review their search engine options in a way that presents them equally.
Cue’s testimony spoke to some of the challenges that approach could face.
He said that when consumers get a new device, they want it to work quickly.
“The extra selections or the extra choices that you just get, it frustrates prospects,” he said. So when a customer gets a new iPhone, for example, they’ll only be asked about choosing key details they want to deal with right away, like font size.
Cue said that offering users a choice for their appearance settings out of the box is different from selecting a search engine.
In certain countries, like China and Russia, Apple has carved out the default status for Google because it determined that there was a better option for consumers in those regions. But in other places around the world, the company still sees Google as offering the best experience, Cue said.
In his testimony, Cue also reiterated criticism that Apple has when it comes to Google’s privacy practices. Cue said he agrees protecting privacy is important to Apple, including on search, and said the company has taken steps to limit Google’s tracking ability on its devices. For example, it prevents Google from forcing users to log in to use the search engine.
The DOJ presented a slide deck Cue sent to Cook in January 2013 titled, “Competing on Privacy.”
A slide labeled “Privacy Timeline” included a headline about Google’s $22.5 million settlement with the Federal Trade Commission in 2012 over claims it misled users about its tracking on Apple’s Safari browser. Cue acknowledged he was aware of that settlement when negotiating the ISA, but added, “we have at all times thought we have had higher privateness than Google.”
Another slide referenced a quote from former Google CEO Eric Schmidt, who said the company’s policy boils down to getting “proper as much as the creepy line” but not crossing it.
A later slide called Google’s Android mobile operating system “an enormous monitoring gadget.”
“As I acknowledged earlier, we predict the iPhone is a way more non-public gadget,” Cue testified.
Google declined to comment on the testimony.
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