Just hours after Google CEO Eric Schmidt resigned from Apple's board of directors, the Federal Trade Commission (FTC) said it will continue its antitrust investigation.
Schmidt stepped down after months of scrutiny and online chatter about the fact that he sat on the board of a company that increasingly competes with his own. Schmidt wasnt alone, though. Genentech Board Chairman Arthur Levinson also sits on the boards of both Google and Apple.
Since this past spring, the FTC has been investigating whether Apple and Google violated antitrust laws by sharing two directors: Schmidt and Levinson. The 1914 Clayton Antitrust Act prohibits one person from sitting on the board of two rival companies if it reduces competition.
FTC Bureau of Competition Director Richard Feinstein acknowledged in a statement today that the agency has been looking into the issue and will continue to do so. We have been investigating the Google/Apple interlocking directorates issue for some time and commend them for recognizing that sharing directors raises competitive issues, as Google and Apple increasingly compete with each other, said Feinstein in a post on the FTC Web site. We will continue to investigate remaining interlocking directorates between the companies.
With Schmidt off Apples board, the spotlight is shifting to Levinson who came under fire today from a consumer group that wants him to vacate his seat on the board of either Google or Apple.
Consumer Watchdog, formerly known as the Foundation for Taxpayer and Consumer Rights, called on Levinson to pick one board or the other. It took Eric Schmidt far too long to realize that the two roles are incompatible. Thats not surprising considering the clubby atmosphere of Silicon Valley, said John M. Simpson, a Consumer Watchdog consumer advocate, in a written statement. Nonetheless, were glad Schmidt finally did the right thing. We call on Levinson to act responsibly and choose one company or the other.
There has been increasing focus on Levinson and Schmidts roles in recent months as competition between Google and Apple has increased.
Googles Chrome browser goes up against Apples Safari, and Googles Android goes head-to-head with the iPhone.
That competition grew a little more heated when, just last month, Google announced that its developing the Chrome OS, which will go up against Apples Mac OS X.
Eric Schmidt stepping down from the Apple board certainly highlights the conflicts that are present on many boards of directors, said Dan Olds, an analyst at The Gabriel Consulting Group. There is a value to having a smart technology guy on your board. But when that board member is the CEO of a company that is becoming a direct competitor in some markets, then it's gone too far and something needs to change. With Levinson, it's an indirect conflict, he's on both boards. In light of how Google and Apple are becoming competitors, it would be a good idea for him to pick one boat to ride in and abandon the other.
Olds added that its a matter of logistics as well as a matter of perception negative perception.
It isn't that directors will do things to hurt either company, but directors get confidential information and are privy to long-range strategies and plans, he noted. There is a perception that this will color the opinion and advice they give to the other company. Plus, there is a higher risk that confidential info may slip out."