Do ties between Apple, Google pose antitrust issues?

By Carol Eisenberg

May 6, 2009 at 8:45am

The Federal Trade Commission is looking into the relationships between technology stars Apple and Google to see if they might violate antitrust laws.

The boards of Apple and Google share two directors - Eric E. Schmidt, chief executive of Google, and Arthur Levinson, former chief executive of Genentech. Former Vice President Al Gore, who is a director for Apple, is also a senior adviser for Google.

The Clayton Antitrust Act of 1914 prohibits a person’s presence on the board of two rival companies when it would reduce competition between them.

Eric E. Schmidt
Eric E. Schmidt

But the FTC’s interest in the matter is unlikely to amount to much unless the agency uncovers substantial market impact, according to Information Week. While the two companies have been allies in certain areas, they compete increasingly in the cellphone and operating systems markets.

Schmidt joined Apple’s board about five months before it unveiled the iPhone, in 2006. Google announced its plans for Android, its mobile phone operating system, nearly a year later; Schmidt now recuses himself when Apple’s board discusses mobile phones.

The members of the company’s boards are interrelated in other endeavors as well. For instance, Google director L. John Doer is a partner in Kleiner Perkins Caufield & Byers, a venture capital group that invests in green technology and innovation. Other partners are Apple director Gore, former Apple EVP E. Floyd Kvamme and former Apple senior counsel Randy Komisar.

And Google is an investor in the venture capital group.

The antitrust inquiry suggests that despite the company’s closeness to the Obama administration, Google will not escape scrutiny from regulators. Another antitrust examination involving Google’s plan to digitalize books is also underway.

Christine A. Varney, who was recently confirmed as the head of the antitrust division of the Justice Department, has singled out Google as a probable source of future antitrust concerns because of its near monopoly on Internet search and advertising.

On the other hand, antitrust experts told the New York Times that the provision against “interlocking directorates” is rarely enforced.

Schmidt has been an outspoken supporter of Obama. As we have reported before, Schmidt not only backed Obama, but he joined him on the campaign trail, while his employees were among Obama’s most generous contributors.

After the campaign, Schmidt served on the Obama-Biden transition team, advising on issues involving technology.

Schmidt was also recently appointed to the President’s Council of Advisors on Science and Technology - along with E. Floyd Kvamme, Apple’s EVP and Craig J. Mundie, chief research and strategy officer of Microsoft.

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