Legal Eagles Ponder Why Google CEO Eric Schmidt Lingers On Apple's Board - Page 2

Apple makes the bulk of its money selling $1,000 desktop computers and also sells millions of iPhones for $200 a pop. Google offers Android and Chrome free under an open-source license, and Chrome OS will be open source when Google releases it to market. Google makes the bulk of its cash from online advertising tied to search and other content. In short, Schmidt and Apple CEO Steve Jobs may believe differences in how their companies make money should clear them of antitrust concerns.

However, that might not even be enough protection; Reback noted that Section 5 of the Federal Trade Commission Act could also be invoked to prevent unfair competition. This act does not have percentage thresholds that would protect Google and Apple.

Common sense dictates that Schmidt and Jobs are well aware of the sensitivity and soberness with which Schmidt's position on Apple's board must be treated. The track records of Schmidt and Jobs stand up to almost all scrutiny; surely these leaders, who have navigated their companies through rough waters many times, warrant some trust in their actions and rationale.

Maybe the media and other pundits should give them a break and trust them to handle any conflicts of interest or steer the companies away from potential antitrust violations?

Eric Goldman associate professor, Santa Clara University School of Law and director of the High Tech Law Institute, said he agreed that board directors should be able to manage their own conflicts. However, he told eWEEK via e-mail:

Interlocking directors can have anti-competitive effects if the companies--as directed from the top--start coordinating their actions. The coordination can be express, like the 2 companies agreeing to carve up markets ("you go into mobile operating systems and we'll stay out of it"). The coordination can also be subtle, like a director's suggestion to focus on one area knowing that will tie up from the company from moving in a different direction.Even if the competitive overlap doesn't increase, at this point I can't understand why Schmidt doesn't step off the Apple board. The DOJ is watching Google like a hawk, so the last thing Google needs is any extra areas of concern. In other words, I can't understand how the benefit of Schmidt sitting on Apple's board is greater than the potential costs of exacerbating the DOJ's scrutiny.

eWEEK asked Google three questions to get more insight into Schmidt's reason for remaining on Apple's board.: 1) What market areas does Google see itself competing in with Apple, and how does "Google's free" model play into this? 2) 1) What is Google's defense on why Schmidt shouldn't step down? 3) What value does Google get from Schmidt being on the board?

Answers leading to greater insight were not forthcoming. Google spokesperson Jane Penner told eWEEK July 14: "Eric has made it clear that he currently recuses himself from iPhone discussions on the Apple board and that he'll discuss this matter further with Apple, as appropriate. At the moment, there's no change."

Industry analyst Rob Enderle, who follows the moves of Google, Apple and Microsoft, also suggested Schmidt simply enjoys the limelight of being both Google's CEO and an Apple board member:

"[Schmidt] shouldn't be on the board, way too many conflicts. Phone, browser and now OS. He doesn't appear to be doing that much to run Google, and like a lot of folks before him, seems to be enjoying the celebrity of being a high profile CEO way too much. One of the dangers of the job, I'm afraid."