Telstra, Optus end Google deals after watchdog warning

Australia's two biggest telcos will be restrained from accepting further payments from Google for pre-installing software on their smartphones after a warning from the competition watchdog.

The Australian Competition and Consumer Commission (ACCC) revealed on Tuesday Google had struck deals with Telstra and Optus, which had been in place since at least 2017.

Under the agreements, the telecommunications firms ensured Google was the default search engine on all Android phones they sold in exchange for a share of Google's advertising revenue.

But the ACCC warned both companies the deals were potentially anti-competitive and could restrict the use of alternative search services.

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The agreements were discovered during the watchdog's investigation into Google's search services in Australia that stemmed from its Digital Platform Services Inquiry.

Commissioner Liza Carver said Telstra and Optus had both signed court-enforceable undertakings not to sign further contacts with Google over pre-installed or default phone services, or to promote one search service over another.

"In our view, these undertakings from Telstra and Optus are an important step in providing Australian consumers with more choice about the digital platforms and services they use and encouraging more competition," she said.

"The undertakings will allow alternative search engines to be able to compete to be a default search engine on the Android devices these companies supply."

Previous deals with Telstra and Optus expired on June 30.

Google dominates web searches in Australia with a 93.6 per cent share of the market over the past year, according to Statcounter, followed by Bing with 4.46 per cent, and Yahoo and DuckDuckGo with less than one per cent each.

Ms Carver said fostering competition in the digital economy was vital and may require changes to Australian competition and consumer laws.

"Practices such as entering into agreements to ensure exclusivity can limit consumer choice or deter innovation," she said.

"We are continuing our investigation into Google's conduct in entering into such agreements more broadly as we consider this raises potential competition concerns."

Google Australia has been contacted for comment.

Recommendations from the ACCC's Digital Platform Services Inquiry have included restrictions on pre-installation deals, greater transparency, fair treatment of business customers, and better protection from online scams, including a digital ombudsman scheme.

The ACCC is expected to release its ninth interim report in the inquiry in September, and its final report in March.