Washington, D.C. — Ahead of Apple’s earnings call this week, the American Economic Liberties Project urges investors and analysts to ask Apple about its contract with Google, where, according to the U.S. v. Google trial, Google has paid Apple billions of dollars for 18 years to remain the default search. Based on estimates, Google’s payment likely made up roughly 20 percent of Apple’s profits in 2021, making the contract incredibly important to Apple’s financial position. While the exact number it pays to Apple specifically is not public, it is known that the payment to Apple makes up the most significant chunk of that, with Goldman Sachs reporting as much as $19 billion annually to Apple.

“There are a number of questions that have come out of antitrust trial that investors should want answered during Apple’s earnings call tomorrow,” said Krista Brown, Senior Policy Analyst at the American Economic Liberties Project. “Most importantly, why hasn’t Apple ever disclosed the contract it has with Google? If the reportedly $19 billion amount is accurate, why does Apple not consider such a substantial sum, and that sum’s contingency on a singular contract, a material risk? Google could end this agreement — which may represent almost a fifth of Apple’s profits — at any time, presenting an ongoing risk to Apple’s bottom line and the future of the company’s financial stability.”

“It’s possible that Apple is violating federal laws by not disclosing the existence, let alone the details, of this contractual arrangement and its significant role in Apple’s profit margins,” added Brown. “The SEC has rules in place on disclosing material information to investors that make an investment in the company risky or speculative. Amid the secrecy around the trial and this agreement, it’s clear that both investors and regulators should be looking into this.”

When the contract was initially disclosed in the U.S. v. Google trial, Economic Liberties wrote a letter to the Securities and Exchange Commission (SEC) requesting that they investigate Apple Inc. for potentially violating securities laws. In the letter, the organization specifically asked the agency to determine whether the company’s decision to keep this contract secret has violated the antifraud provisions of Section 17(a)(2) and (3) of the Securities Act of 1933, as well as certain reporting provisions of the federal securities laws.

Last week, the U.S. v. Google trial revealed that Google paid a total of $26.3 billion to Apple, Samsung, LG, and others to make Google the default search engine on phones and web browsers. While the U.S. v. Google trial centers around whether this default agreement presents an antitrust violation, the trial has been shrouded in secrecy — which Apple has contributed to. Last month, Apple filed a petition in the United States of America v. Google trial to keep certain documents and examination details sealed. The company’s argument for such confidentiality is as follows, “DOJ’s insistence on questioning Mr. Cue about this information in open court represents a substantial risk of revealing non-public, market-moving information pertaining to Apple, not a party to the DOJ’s suit, and affecting Apple’s ongoing business relations and contract negotiations.” If the information is market-moving, it fits the definition of a material risk, and in accordance with SEC rules, must be disclosed to Apple’s shareholders and the investing public. The omission of this material information may have led investors to make decisions based on an incomplete or inaccurate understanding of Apple’s financials and diversified revenue sources.

Read the letter to the SEC here.

Learn more about Economic Liberties here. 

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.