Thursday, May 7, 2009

FTC investigates Google and Apple

Google and Apple are learning that while it is important to keep friends close, sometimes the Federal Trade Commission may want to know just how close those friends really are.

According to The New York Times, the FTC has opened an investigation to determine whether or not there are antitrust concerns over the two companies' close relationship. Specifically, the potential problems arise from the fact that both Google and Apple share two directors, Eric Schmidt, CEO of Google, and Arthur Levinson, former CEO of Genetech.

The Clayton Antitrust Act of 1914 specifically prohibits the presence of two companies sharing board members when those companies compete. The act is aimed at ensuring that competition between the two companies would be decreased.

The Times reports that the provision against "interlocking directorates," or Section 8 of the Act, is not enforced regularly. Still, as both technology companies continue to expand their reach the FTC has apparently decided that an investigation is warranted—even if the provision is rarely invoked.

In the case of Apple and Google, concerns are likely being raised over the fact that both companies have been making strong pushes into the mobile device market with the iPhone and G1, respectively. In addition, both of the companies compete in the Web browser space, with Apple offering Safari and Google offering Chrome.

Beyond the mobile device and Web browser market, there are other areas where the two companies overlap in a competitive sense. Apple's iTunes and Google's YouTube both distribute video and media on the Web.

Android, Google's mobile device operating system, is in the process of being developed into an OS for netbooks. Apple, of course, has long been a systems maker that loads machines with its own operating system.

The key for Apple and Google to come away from this probe relatively unscathed may center on whether or not the two companies can prove that their competition overlap is minimal. The Clayton Act stipulates that interlocking directorates are not problematic so long as the total revenue overlap between the companies is less than 2 percent, according to the Times.

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