FTC investigating Apple and Google for monopoly ties

The FTC is investigating Apple and Google for having two people simultaneously on both companies' Boards of Directors. Those two people are Google CEO Eric Schmidt and Art Levinson from Genentech. The Clayton Antitrust Act of 1914 prohibits the participation on the board of two rival companies when it would reduce competition.

google-apple-schmidt.jpg

The investigation revolves around whether or not Google and Apple's "interlocking directorates," as they are called in Section 8 of the act, are acting in a Monopolistic sense.

According to the NYTimes,

[The FTC] has already notified Google and Apple of its interest in the matter, according to the people briefed on the inquiry, who agreed to speak on condition of anonymity because the inquiry was confidential.

Antitrust experts say the provision against “interlocking directorates,” known as Section 8 of the act, is rarely enforced.

Google and Apple do compete in a growing number of areas. They are both in:

  • Smartphone software. iPhoneOS vs. Android
  • Webpage building software iWeb vs. Google Pages
  • Calendar software - iCal vs. GCal
  • Document writing software - iWork vs. Google apps (Docs, spreadsheets and presentations)
  • Feedreading software Mail.app vs. Google reader.
  • Email software Gmail vs. Mail.app
  • The both give away photo editing software - Picassa vs. iPhoto.
  • Web Browsers (both based on the same Open Source Webkit and sold for free) Safari and Chrome
  • Web Services with Apple's MobileMe and Google's Google Apps and Gmail.
  • Video services - Youtube vs. iTunes

There are probably many other areas where they "compete". They also collaborate on a lot of projects. Google Maps integration on the iPhone sticks out the most.

But they aren't likely to need too much help. One thing exempts them from the act for the time being. IF you look at the wording of the Clayton anti-trust Act of 1914, you'll see that:

§ 19. Interlocking directorates and officers

(a)

(1) No person shall, at the same time, serve as a director or officer in any two corporations (other than banks, banking associations, and trust companies) that are—

(A) engaged in whole or in part in commerce; and

(B) by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws;

if each of the corporations has capital, surplus, and undivided profits aggregating more than $10,000,000 as adjusted pursuant to paragraph (5) of this subsection.

(2) Notwithstanding the provisions of paragraph (1), simultaneous service as a director or officer in any two corporations shall not be prohibited by this section if—

(A) the competitive sales of either corporation are less than $1,000,000, as adjusted pursuant to paragraph (5) of this subsection;

(B) the competitive sales of either corporation are less than 2 per centum of that corporation’s total sales; or
(C) the competitive sales of each corporation are less than 4 per centum of that corporation’s total sales.

Google makes 98 percent of its revenues from advertising. It makes most of the rest from stuff like Google Apps for business. Appel doesn't compete in either of these areas.

Therefore, according to point B above, the two companies aren't in violation. However, it wouldn't surprise me to see one or both of the directors step down as iPhone vs. Android competition heats up over the coming years.

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