Print 35 comment(s) - last by HighWing.. on May 8 at 2:28 PM

Inquiry centers on common board members for the two companies including Google CEO Eric Schmidt

Apple is currently reaping a large portion of its profits from the sales of its popular iPhone. Sales for the firm's notebooks are slowing along with the global economy. At the same time, Google is fighting a slowing advertising market and looking to break into mobile advertising via its Android mobile phone OS.

The two companies work closer together than some might imagine and even share a significant board member -- Google CEO Eric Schmidt. Schmidt sits on the board of both companies, which are increasingly competing against each other as Google broadens its offerings and Apple does the same.

Google now competes in the mobile phone market with Android-powered smart phones like the Samsung i7500 and T-Mobile G1. With Android being eyed as a possible OS for netbooks, Apple and Google could soon find themselves competing in the notebooks market as well. Another area where the two technology giants overlap is in web browsers with Google's Chrome and Apple's Safari.

With the increasing overlap between the two companies, the FTC has notified the firms that it has began an inquiry into whether the ties between the two company's boards amount to a violation of antitrust laws.

The New York Times reports that The Clayton Antitrust Act of 1914 prohibits a person's presence on the board of two rival companies when it could reduce competition between the two firms. Experts say that the provision causing the issue is Section 8 which prohibits interlocking directorates -- it is a rarely enforced provision.

The NYT cites sources close to the matter saying that the FTC has notified both firms of its inquiry.

Antitrust division head Christine A. Varney singled Google out last year as a possible source of future antitrust concerns for its near monopoly on internet search and advertising.

Sanford Litvack from Hogan & Hartson said, "I expect the administration to be aggressive, generally, on antitrust enforcement. I don’t expect Google to either be singled out or to receive a free pass because of Schmidt’s relationship with the administration."

The NYT reports that interlocking directorates rarely leads to major confrontations between the company and the government because the executives in question typically just resign from one of the boards to prevent proceedings.

Google does say that Schmidt carefully removes himself from any board meetings where talk of overlapping products like mobile phones will be a topic. Interlocking directorates are not considered a problem within companies that compete in categories as long as the revenue for the categories is less than 2% of the company's entire sales.

Andrew I. Gavil told the NYT, "Government actions under Section 8 are rare, but they are brought under circumstances when the presence of a common director on competing boards is likely to be anticompetitive."

Gavil says that regulators are probably not concerned that the Apple and Google have a common rival in Microsoft, even if the two companies were found to be talking about ways to compete with Microsoft.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

Correct me if I'm wrong here
By FITCamaro on 5/5/2009 12:22:27 PM , Rating: 2
But doesn't the very nature of the fact that they heavily compete with each other mean they aren't violating anti-trust laws?

To me this would be likened to large automakers having a stake in or working with smaller ones being against anti-trust laws.

I'm not an expert so some explain to me why them merely sharing a board member and working together means they're violating anti-trust laws.

RE: Correct me if I'm wrong here
By rcc on 5/5/2009 12:32:04 PM , Rating: 1
I'd assume that the concern is that having a common board member might result in price fixing between the rival divisions.

RE: Correct me if I'm wrong here
By tmouse on 5/5/2009 12:44:07 PM , Rating: 2
Well I'm certainly no expert but here is my take. First the FTC is not accusing anybody of a violation yet, it's an inquiry. Being competitors doesn't stop them from working in unison to harm other entrants into the market. Care has to be taken to ensure a de facto cartel dose not form. If it's just a board member its somewhat less of a problem than if it's the CEO of one of the companies. It is a little silly to think a CEO excuses himself from every talk where the topic involves a direction where the company is planning to make major inroads into, or that he would not get the information other ways in the course of doing his job. Sooner or later Schmidt will almost have to leave Apple's board.

By PrezWeezy on 5/5/2009 1:38:02 PM , Rating: 2
Consider for a minute Intel and AMD sharing a board member. They don't, but if they did there would be nothing stopping them from deciding users should pay $2000 for a low end chip. That's obviously an extreme situation but when you start to think about volume, $1.00 per chip makes a big difference. Not to mention they don't have to compete so their products don't need to get better. Right now they are constantly trying to one-up the other. If they didn't have to worry about that then we wouldn't ever get anything better. The point of this law is to ensure that companies' board members don't stop progress.

RE: Correct me if I'm wrong here
By Kibbles on 5/5/2009 2:08:20 PM , Rating: 1
It's not just any board member, he's the CEO of Google.

RE: Correct me if I'm wrong here
By nafhan on 5/5/2009 2:50:33 PM , Rating: 3
They could definitely compete heavily with each other and still violate antitrust laws.
For example, lets say they were in a position to collude and push all other competitors out of a given market. This would effectively create a duopoly where they would still be competing with each other, but everyone else would be shut out.
That is the type of problem that they are probably trying to prevent. Whether it is on purpose or inadvertant collusion can stifle competition, and having board members in both companies makes collusion more likely to occur.

Case in Point: T-Mobile G1
By GTaudiophile on 5/5/2009 2:44:15 PM , Rating: 4
Didn't Apple play some role in the G1's development (via Google) and therefore the G1 was not developed with a 3.5mm mini jack?

By foolsgambit11 on 5/5/2009 4:32:24 PM , Rating: 4
Apple didn't have a role in developing the G1, per se. They were asked by Google - in order to cover their own asses, it seems - if the prototype G1 hardware infringed on any Apple patents. Apple said they had a patent on controlling music software with buttons attached to a standard headphone jack. So Google could (a) have no external control buttons for the G1, (b) have the external controls hooked up to a different port than the headphones, or (c) have both the headphones and external controls hooked up to a non-standard headphone jack. Or, I guess they could have done (d) licensed the patent, if Apple allowed it, or (e) not acknowledged Apple's patent claim, and gone forward with external controls through the standard headphone jack. But it looks like they weighed the pros and cons and decided on (c). I might have chosen any one of those options myself.

While Apple's involvement could be described as "play(ing) some role in the G1's development", a fuller view of the facts (as currently known) reveals their involvement to be far less sinister than your wording suggests.

Of course, they could have just released the G1 without checking for patent infringements, but in patent law, it is decidedly not better to ask forgiveness than permission.

RE: Case in Point: T-Mobile G1
By sprockkets on 5/5/2009 4:36:42 PM , Rating: 2
No, it has to do with the fact that HTC makes the G1 and uses their EXT USB jack.

By tech329 on 5/5/2009 2:31:45 PM , Rating: 2
Google fills a unique spot in the marketplace and the potential to abuse the ability to influence others ability to compete is what is of concern. Unlike Microsoft, Google is almost totally about marketing. And there is no subtle aspect to it. It is big time in your face marketing.

From a technical perspective the operating system is more important than search. However, the evolution of the Google model has become less about technical expertise and far more about money. That is what has thrust Google into it's dominant role.

Right now, Google, way more than Microsoft or any other company, has the means to influence the decisions of anyone who uses a computer. Individual opinions aside, that ability needs to be kept in check.

The question that must be asked is "why"?
By foolsgambit11 on 5/5/09, Rating: 0
By foolsgambit11 on 5/6/2009 7:22:38 PM , Rating: 2
Cool, I'm okay with being rated down. I'm not sure why, because nobody bothered to actually respond to my comment.

Again, this seems like a situation that would have been easy to avoid. Even if there isn't any illegal activity, the appearance of impropriety should be avoided, right? Is there something about Schmidt's expertise that makes him invaluable to both companies, to the point where they're willing to risk the appearance of improper association?

Now we know
By Devo2007 on 5/6/2009 1:43:31 AM , Rating: 2
I guess we now know why Google apps for the iPhone are able to use some restricted APIs that other apps are forbidden to use.

in the mean time...
By mattclary on 5/5/09, Rating: -1
RE: in the mean time...
By SandmanWN on 5/5/09, Rating: -1
RE: in the mean time...
By mattclary on 5/5/2009 1:43:58 PM , Rating: 2
I'm pretty sure that some due-diligence on the part of our government would be better served by fixing problems in the financial sector than worrying about Google and Apple sharing a board member. That's the problem with our country, sheeple are too easily distracted from the big problems and focus on inconsequential things.

and FYI, I don't own an Apple computer, and only have an iPod (gathering dust) because it was a gift.

RE: in the mean time...
By SandmanWN on 5/5/2009 1:54:08 PM , Rating: 2
until you go to buy a smart phone in the next few years which may be the only thing left and find they all costs hundreds of dollars because there are only two competitors left after the collusion of these companies. then you'll go cry to the government about anti-trust this, unfair business practice that...

RE: in the mean time...
By mattclary on 5/5/2009 2:02:32 PM , Rating: 3
That seems laughable to me. I can't really imagine a scenario where Apple and Google have the only smart phones around.

Smart phones are becoming more ubiquitous, in a few years, smart phones will be the only thing you can get, and they will be practically disposable.

RE: in the mean time...
By SandmanWN on 5/5/2009 10:58:58 PM , Rating: 1
its not the phone but the software that drives it. in any case most people laugh at the prospects of this company or that company taking over an industry until it happens. then the complaining starts.

RE: in the mean time...
By unableton on 5/6/2009 2:10:17 AM , Rating: 2
That's the problem with our country, sheeple are too easily distracted from the big problems and focus on inconsequential things.

Are you really going on about sheeple? This isn't infowars.. Talk like an adult, not an angsty teenager...

RE: in the mean time...
By mattclary on 5/6/2009 6:19:08 PM , Rating: 2
Most people ARE sheep.

a monoply on internet search....
By HighWing on 5/5/09, Rating: -1
RE: a monoply on internet search....
By theapparition on 5/5/2009 12:45:40 PM , Rating: 5

Google doesn't offer anything for free. No company does and thinking otherwise is just deluding yourself.

Google subsidises thier free apps by SELLING advertising space. If they were the only game in town to sell that advertising space, what would keep thier prices in check? Companies that pay more for advertising may pass that off on thier consumers. Companies that can't afford the increased advertising may go out of business, limiting competition in the marketplace....also bad for the consumer.

Microsoft doesn't charge for Internet Explorer, and look at all the hot water they've found themselves in.

Monopoly laws are there to protect the consumer.

RE: a monoply on internet search....
By acer905 on 5/5/2009 1:02:15 PM , Rating: 1
Where their revenue comes from really isn't the point though, Google simply produces a product that people want to use. Unless there is evidence found that Google has forcibly blocked other search engines from starting up, then Google has done nothing anti-competitive, and thus nothing wrong. Its the internet, come up with a better search engine, and you will knock Google off its podium, and there is nothing stopping that from happening.

RE: a monoply on internet search....
By omnicronx on 5/5/2009 1:22:49 PM , Rating: 2
Unless there is evidence found that Google has forcibly blocked other search engines from starting up, then Google has done nothing anti-competitive, and thus nothing wrong.
Yawn.. you seem to be missing that it is very much possible for this to be true the second a company becomes a monopoly. You do not necessarily need to 'do' anything to be anti-competitive. The fact that you own such a large portion of the market, and you are able to offer services for a fraction of the price because of your market position is anti competitive in itself. Thus the reason for not allowing monopolies in the first place..

Using your example of another startup, one would imagine said startup would probably have to take a loss for a number of years in order to become competitive. It would be quite hard for a startup to be able to match googles advertising prices while maintaining a profit. Especially when you consider how much larger the Google userbase is i.e Google is a better investment, a startup may be able to offer add space at a fraction of the price, but when its advertising audience is a fraction of Googles, its not exactly cost effective is it?

I'm not saying Google is necessarily in this position, but one could definitely argue it as such.

RE: a monoply on internet search....
By Alistar on 5/5/2009 2:18:19 PM , Rating: 2
Simply being good at your job is not anti-competitive.

Oh no, Joe is suing me for doing my job better and he got fired.

Anti-competitive behaviour requires an active attempt to be anti-competitive. Temporarily undercutting the competition until they go out of business then jacking the prices can count. Simply offering a consistent product or service does not. Purposely and specifically removing links to other search engines or advertising companies could count as well, but I don't think they do that.

RE: a monoply on internet search....
By omnicronx on 5/5/2009 2:31:33 PM , Rating: 2
You can't merely look up anti competitive behavior and get the answers you are looking for here. In this case Google would be a coercive monopoly, in which an active attempt to be anti-competitive is not required. Just ask Microsoft, being a coercive monopoly monopoly was the basis of their US anti-trust cases.(although some would disagree)

RE: a monoply on internet search....
By Alistar on 5/5/2009 2:48:17 PM , Rating: 2
I can see your point, but I am not sure I agree.

A coercive monopoly says that there is no means to compete on either technological innovation or price.

Simply having exclusive control over your own product is not a coercive monopoly simply because people are free to choose another company easily.

The fact that everyone freely chooses google does not make them a coercive monopoly. What could, and I say could make them a coercive monopoly is that by their sheer volume they beat any potential competitors on price. Effectively making them the only game in town.

Even then I would say that such a situation is not black and white, also, they do not have a monopoly on the technology or advertisements in general. Anyone is free to make their ads different to stand out, or offer to companies that Google won't, stuff like that.

RE: a monoply on internet search....
By omnicronx on 5/5/2009 4:20:24 PM , Rating: 2
Don't get me wrong, I agree with you. I was just making the point that you do not need to perform active anti competitive act in order to be considered anti competitive.

By meepstone on 5/6/2009 10:02:40 AM , Rating: 2
so your whole arguement was pointless because it doesnt apply to google???

what was the point of the bickering

By Flail on 5/5/2009 6:30:15 PM , Rating: 2
If they were the only game in town to sell that advertising space, what would keep thier prices in check?

Monopoly laws are there to protect the consumer.

yeah..... I'm not too knowledgable on US antitrust/monopoly laws, but the only thing google would be able to do would be to jack up how much it costs to buy its ad space... It's also... you know.... ad space. And it's On the stuff that google owns (besides YouTube and the search engine itself, those are only 2 "big" sites.) Businesses could just as easily start paying for more ad space elsewhere, which could/would drive Google out of business.

There might just as well be a "Monopoly law" preventing that sort of thing as you say, but I say again, I'm not 100% sure on that.

Monopolies themselves aren't illegal, it's the practices that allow them to remain a monopoly that are, just so you know.

By HighWing on 5/8/2009 12:55:12 PM , Rating: 2
Google doesn't offer anything for free. No company does and thinking otherwise is just deluding yourself.

gee that is funny because I do not remember ever "paying" Google to do a search or use any of their other products. In fact the only money that has ever changed hands is from them to me. Never the other way around. So tell me again how "I" am not using it for free?

By Free and the very defination of the word, is that "I/the user" do not have to pay anything to use it. Yes of course I know, and everyone else knows, they get money for it by other means. But my point is that WE the end user do not pay them to use it or any other service. And with that in mind, my question was how could any anti-trust case make any laws/changes that would prevent people from using Google and thus reducing their monopoly?

Come on people READ people's FULL comments before you rate them down!!

RE: a monoply on internet search....
By tmouse on 5/5/2009 12:49:24 PM , Rating: 2
"search and advertising"

Advertising, is the key word, its a HUGH money maker and gives the owner great power on the net.

By HighWing on 5/8/2009 2:28:07 PM , Rating: 2
Yes I see the advertising part now. But I was specifically talking about the "Interet Search" part. And with out that part, there is no advertising.

By foolsgambit11 on 5/5/2009 4:59:59 PM , Rating: 2
What you're getting at here is that having a monopoly isn't in itself illegal. It's what you do with that monopoly. It's not enough just to show that Google could do something anticompetitive, although a dominant position in a market can compel a company to take extra steps to ensure they don't abuse their position.

But I would agree with others' comments above that whether or not Google were to violate anti-trust laws, there are additional concerns with Google's position becoming too dominant in the industry.

It would be ironic if "Don't Be Evil" Google was struck with an anti-competition case.

"Folks that want porn can buy an Android phone." -- Steve Jobs
Related Articles
Samsung Unveils I7500 Android Smartphone
April 27, 2009, 10:29 AM

Latest Headlines
Inspiron Laptops & 2-in-1 PCs
September 25, 2016, 9:00 AM
The Samsung Galaxy S7
September 14, 2016, 6:00 AM
Apple Watch 2 – Coming September 7th
September 3, 2016, 6:30 AM
Apple says “See you on the 7th.”
September 1, 2016, 6:30 AM

Most Popular ArticlesAre you ready for this ? HyperDrive Aircraft
September 24, 2016, 9:29 AM
Leaked – Samsung S8 is a Dream and a Dream 2
September 25, 2016, 8:00 AM
Yahoo Hacked - Change Your Passwords and Security Info ASAP!
September 23, 2016, 5:45 AM
A is for Apples
September 23, 2016, 5:32 AM
Walmart may get "Robot Shopping Carts?"
September 17, 2016, 6:01 AM

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki