Apple’s Eddy Cue defends default look for deal with Google as finest solution for customers

Eddy Cue, Apple’s senior vice president of solutions, testified on Tuesday that the firm selected to make Google the default lookup engine on iPhones simply because it built the most feeling for individuals and “there wasn’t a valid alternate.”

Cue, Apple’s lead negotiator of its multibillion-dollar deal with Google, appeared in federal court docket in Washington, D.C., to examine the prolonged-standing arrangement concerning the two providers. Though far more granular facts of the agreement are possible to occur up further in testimony that is closed to the community, Cue’s opening statements lose light on on aspects of the offer rarely talked over in the open.

“When we’re buying search engines, we decide the ideal just one and we permit the buyer easily improve them,” Cue reported. He later included that when it comes to choices that Apple offers, they have some that “buyers have never heard of,” which can make them afraid of creating the wrong decision.

Bernstein has estimated that Google could pay Apple as significantly as $19 billion this yr beneath the arrangement, although the specific conditions have not been discovered.

When Cue renegotiated the Information and facts Services Arrangement (ISA) with Google CEO Sundar Pichai in 2016, one of his goals was to get Google to raise the earnings share share it pays to Apple, Cue mentioned in his testimony. Underneath the terms, Google pays an undisclosed lower of the net profits it makes from promoting on searches run on Apple devices.

Cue explained he “considered it was the right detail and the honest issue for us,” to improve the revenue sharing share. Apple experienced created the technological innovation and “deserved” a increased income share, he testified.

Meagan Bellshaw, the Justice Division attorney, brought up a 2016 electronic mail correspondence with Apple CEO Tim Prepare dinner, Cue’s manager. Bellshaw directed Cue to reference a “Rosetta Stone” that matched letters to corresponding earnings sharing percentages, so that the specific numbers would not be disclosed in open courtroom.

In the first exchange that was shared, Cook questioned Cue how the meeting went, which Cue said he recognized to mean his conference with Pichai about the search contract. Cue responded that it was “excellent besides for the rev share.” Pichai “did not arrive back again with a certain amount, but claimed there is no way he could make C percentage get the job done,” referring to the selection Apple sought in the negotiation.

In the electronic mail to Cook, Cue claimed he essential to meet up with with Pichai “by yourself next week and concur to the financial conditions or we shouldn’t transfer forward,” referring to the revenue sharing number.”

But Cue said on the stand Tuesday that he was self-assured a deal would get worked out with Google and that he hadn’t seriously contemplated what Apple would do if it failed to.

“Unquestionably there was not a legitimate alternate we would have absent to,” Cue testified. “It is really not some thing that we at any time definitely truly viewed as.”

Finally, Cue claimed he felt it was in the most effective pursuits of each providers to finalize a offer.

Cue reported the two sides agreed to a profits sharing share that was unique from the number each offered in the beginning. The phrases of the deal were being renewed in 2021 to lengthen the contract.

The DOJ asked whether or not there was a provision in the settlement for Apple to guidance and protect the deal in connection to govt actions. Cue confirmed there was but that he did not know a lot about it. At the time, Cue stated, Google experienced requested the addition when it was underneath investigation in Europe, and Apple’s counsel had reported it was high-quality to incorporate.

The DOJ also asked Cue to detail how Apple decides where and how it will give customers a option about the setup of their iPhones. One different that Google opponents have floated to its default position on gadgets is to give people a chance to critique their lookup motor options in a way that presents them equally.

Cue’s testimony spoke to some of the issues that strategy could face.

He reported that when consumers get a new machine, they want it to operate rapidly.

“The extra options or the additional choices that you get, it frustrates prospects,” he reported. So when a consumer receives a new Iphone, for illustration, they will only be requested about choosing essential information they want to deal with proper away, like font sizing.

Cue stated that giving people a preference for their visual appeal settings out of the box is unique from choosing a research motor.

In particular nations around the world, like China and Russia, Apple has carved out the default status for Google simply because it determined that there was a far better selection for consumers in those people regions. But in other sites around the globe, the enterprise continue to sees Google as offering the greatest expertise, Cue reported.

In his testimony, Cue also reiterated criticism that Apple has when it will come to Google’s privateness methods. Cue claimed he agrees preserving privacy is important to Apple, such as on lookup, and claimed the corporation has taken measures to limit Google’s monitoring skill on its gadgets. For instance, it helps prevent Google from forcing end users to log in to use the look for motor.

The DOJ offered a slide deck Cue despatched to Cook dinner in January 2013 titled, “Competing on Privateness.”

A slide labeled “Privateness Timeline” involved a headline about Google’s $22.5 million settlement with the Federal Trade Fee in 2012 above claims it misled people about its monitoring on Apple’s Safari browser. Cue acknowledged he was informed of that settlement when negotiating the ISA, but additional, “we’ve generally thought we’ve had far better privacy than Google.”

A further slide referenced a quote from former Google CEO Eric Schmidt, who mentioned the company’s policy boils down to having “proper up to the creepy line” but not crossing it.

A later on slide called Google’s Android mobile operating method “a significant tracking product.”

“As I mentioned before, we assume the Iphone is a significantly extra private product,” Cue testified.

Google declined to comment on the testimony.

Subscribe to CNBC on YouTube.

Observe: Facebook battles Apple around person privacy characteristics in iOS update