Probe exposes wider issues

WASHINGTON: Google Inc Chief Executive Officer Eric Schmidt's resignation as an Apple Inc director shows that antitrust regulators may be gaining sway in Silicon Valley, threatening the way companies hire staff and run their boards.

Schmidt stepped down from Apple's board last Monday as the US Federal Trade Commission investigated whether Google and Apple were breaking antitrust laws by sharing board members. The Justice Department also is probing Silicon Valley companies, looking at whether they're colluding in hiring, two people familiar with the investigation said in June.

Schmidt's decision may be a symptom of broader pressure, said Samuel Miller, an antitrust lawyer at Sidley Austin LLP in San Francisco. Google's Android phone software and Chrome operating system are becoming direct competitors to Apple's products, increasing scrutiny of the companies.

"This is just one piece of a bigger puzzle, but it clearly reflects increased focus on technology companies by the antitrust authorities," said Miller, who represented the Justice Department in a monopoly case against Microsoft Corp in 1994. "It reflects recognition both in Washington and in Silicon Valley that the antitrust laws need to be followed."

The Federal Trade Commission said it would continue the probe. While Schmidt's move may soothe the concerns, another board member - Genentech Inc Chairman Art Levinson - serves on the boards of both Google and Apple.

Google's board also includes Paul Otellini, CEO of Intel Corp, the world's biggest chipmaker. Apple's board, meanwhile, includes Intuit Inc Chairman Bill Campbell. He also serves as an adviser to Google. Campbell didn't respond to a request for comment. Intel spokesman Chuck Mulloy declined to comment.

Levinson, 59, has been at Google since 2004 and at Apple since 2000. He declined to comment as well, Genentech spokesman Geoff Teeter said.

Silicon Valley is a "small area, geographically, with a high concentration of companies in that particular business", said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware in Newark.

"The best advice is to stay away from boards that may compete with the company on which you serve. The issue is, you can't share two masters."

The departure of Schmidt, 54, was probably seen as the quickest way to resolve the matter, said Greg Neppl, an antitrust lawyer at Foley & Lardner LLP in Washington.

"The inquiry by itself probably motivated the decision," said Neppl, a former trial attorney with the Justice Department's Antitrust Division. "This kind of government investigation is not the kind of hassle that any business wants to endure."

Even if Google can defuse the investigation, the company faces at least two other government probes. Google said in June that the Justice Department has asked the company and publishers for information about the settlement of a book-scanning dispute.

Google is also part of the Justice Department probe into hiring practices, according to the people familiar with the investigation. Microsoft and Yahoo Inc were said to be part of that inquiry as well.

David Bowermaster, a spokesman for Redmond, Washington-based Microsoft, declined to comment.

Bloomberg News

(China Daily 08/10/2009 page11)