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Archive for October 16th, 2009

Apple, Google, and more on Interlocking Directorates

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apple vs google_2

Last Monday, Arthur Levinson -until now a member of the board of both Apple and Google- resigned from the board of Google. The resignation follows that of Eric Schmidt (Google’s CEO), who abandoned his position on the board of Apple in August. Both moves were aimed at addressing the FTC’s concerns over the possible anticompetitive effects arising from the close inter-personal nexus between the two companies.

Even though the FTC’s investigation on this matter may have reached its end, Google has not moved away from the antitrust spotlight. The initial book settlement was derailed pursuant to the numerous objections put forward against it, and the District Court has required a new version to be delivered by November 9th for preliminary approval. Meanwhile, the DOJ’s investigation concerning hiring practices at Google, Yahoo and Apple is ongoing. And some suggest that this could only be the beginning…

Those cases, as well as last week’s announcement of the opening of an investigation about IBM’s conduct in the mainframes market, have been seen as consequences of the stricter approach undertook by antitrust enforcers under the Obama administration regarding high-tech markets, particularly in the presence of network effects.

Now, coming back to the Google/Apple issue: in the US, the Google/Apple investigation constitutes the second challenge to interlocking directorates brought by the FTC under Section 8 of the Clayton Act over the past two years (the case brought against Commscope was resolved by a consent decree in December 2007).

In Europe, the ECJ and the European Commission have acknowledged that interlocking directorates and, more generally, minority shareholdings, could wield anticompetitive effects. It has also been held that such effects could be dealt with under Articles 81 and 82 EC (see the Judgment in cases 142 and 156/84, British American Tobacco and Reynolds v. Commission, and the Commission’s decision in case 93/252, Warner-Lambert/Gillete).

However, in spite of recent evolutions in merger control (see the Ryanair/Aer Lingus decision, currently pending before the CFI), to my knowledge, the Commission has never initiated any proceedings challenging the acquisition of minority shareholding and/or interlocking directorates since the Gillete case in 1993.

As a consequence of this lack of interest on the part of antitrust authorities and, to a certain extent, of commentators too, this remains, one of the under-explored areas of EC competition law. In contrast with the clear prohibition contained in Section 8 of the Clayton Act, companies in Europe are again faced with considerable legal uncertainty. In sum, a great topic for research if anyone’s interested.

For a brief and recent account of the state of the law in the US and the EU on this subject, check out these: US – EU.

(Source: image possibly subject to copyrights)

Written by Alfonso Lamadrid

16 October 2009 at 12:14 am