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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.

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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

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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