Legal News

Have Apple, Google Boards Gotten Too Cozy With One Another?

By Ashby Jones

The above question is apparently at the forefront of the minds of trust-busters at the Federal Trade Commission, who are looking into whether the overlap of directors on the boards of Apple and Google violates antitrust laws.

Google Chief Executive Eric Schmidt and Arthur Levinson, the former chief executive of Genentech, sit on the boards of both companies. Section 8 of 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. The two companies increasingly compete in the cellphone and operating systems markets. Click here and here for stories from the WSJ and NYT, respectively.

Turns out that search-engine behemoth Google has become very interesting in recent months to Washington antitrust regulators. The investigation is the third inquiry regulators have taken up related to Google in the past year. Last fall, the Justice Department said it would sue to block Google’s attempted search-advertising deal with rival Yahoo, citing Google’s dominant share in Internet search and search advertising. More recently, the Justice Department has begun to look into whether Google’s proposed settlement with authors and publishers to gain copyright licenses over millions of digitized works is anticompetitive.

“It appears that Google is now in the sights of the antitrust enforcers,” said Samuel Miller, an antitrust lawyer at Sidley Austin in San Francisco. “Given its recognized dominance, it is going to be subject to greater scrutiny.”

The issue of board collusion is rarely pursued, lawyers say, in part because it is difficult to prove the impact of the overlapping directors. It is also relatively easy to address by resignations from boards.

Spokesmen for Google and Apple declined to comment. Mr. Schmidt and Mr. Levinson couldn’t be reached to comment.

Why the FTC is taking up the issue now remains unclear. But one possibility is that Google and Apple, which long dominated separate sectors, are competing in more areas. Google and Apple, for example, have both developed software for mobile phones. They also offer competing Web browsers, and are both major players in Internet video, through Google’s YouTube site and Apple’s iTunes online store.

Full post as published by Law Blog - WSJ.com on May 05, 2009 (boomark / email).