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Google's Schmidt says he won't resign from Apple board amid FTC inquiry
May 07, 2009 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) --
Google Chief Executive Eric Schmidt said Thursday he is not considering resigning from Apple"s board of directors despite an inquiry by federal regulators into whether the companies" close relationship violates antitrust laws.
The possibility "hasn"t crossed my mind," Schmidt told reporters before the annual shareholders" meeting at the company"s Mountain View headquarters. "I don"t think Apple sees Google as a primary competitor," he said.
Schmidt and former Genentech Chief Executive Arthur Levinson sit on the boards of both Google and Apple.
According to the Clayton Antitrust Act of 1914, "no person shall, at the same time, serve as a director or officer in any two corporations" that are "engaged in whole or in part in commerce."
Said Kent Walker, Google"s general counsel: "The law is clear there is a safe harbor under the Clayton Act for companies that don"t have overlapping revenue."
But Gary Reback, an attorney at Carr & Ferrell in Palo Alto, said he was surprised by Schmidt"s response. "This inquiry is a serious inquiry," he said. "It"s a real law, and law enforcement officials take the law seriously."
Reback said Schmidt"s remarks reminded him of a famous comment Microsoft Chief Executive Steve Ballmer made in response to an antitrust investigation into his company. "To heck with Janet Reno," Ballmer told a room of software developers in 1997. Microsoft was later found to be guilty
of anticompetitive business practices, and the quip was seen as a major blunder.
According to Ted Henneberry, an antitrust attorney at Orrick, investigators from the Federal Trade Commission said that whether the "safe harbor" rules will apply in this case depends on whether overlapping areas are a major part of the companies" total businesses. "The fact that they are looking at it tells me they must have some basis to think that it violates the safe harbor rules," he said.
In addition to mobile phone software, Apple and Google have a variety of competing products, including Internet browsers, e-mail, online calendar, software for managing digital photos, file storage and word processing.
During the annual meeting with shareholders, the issue came up again. "Google is a great natural monopoly; let"s make sure the company is not an illegal monopoly," said Brandon Rees, a representative of the AFL-CIO.
Schmidt responded that it was "both legal and proper" to sit on both boards, and that he recuses himself when competitive issues such as the iPhone arise.
Shareholders endorsed three company proposals: the re-election of Google"s board of directors, the re-appointment of Ernst & Young as Google"s accounting firm and an amendment to the stock plan.
Two shareholder proposals, one regarding health care reform and another regarding Internet censorship, were defeated following Google"s recommendations.
Google"s top three executives and the board of directors control 71 percent of any vote, thanks to a dual corporate structure that entitles owners of Class B stock "" including Schmidt and co-founders Larry Page and Sergey Brin "" to 10 votes per share. Class A stock is worth one vote per share.
Brin abstained from voting on the Internet censorship proposal, as he did last year.
Contact Elise Ackerman at eackerman@mercurynews.com or (408) 271-3774.
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