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According to a Reuters report, antitrust officials in Washington are looking into the hiring practices of some technology companies—including Google and Apple. Apparently, attorneys in the Department of Justice are concerned about alleged no-poaching pacts between the businesses.
I’m pleased to see the DOJ ditching its own pact with businesses—a non-aggression pact--and stepping up its enforcement of antitrust statutes. The fact is, the EU pretty much served as the defacto antitrust regulator for the United States under the Bush Administration.
But I’m not quite sure I get where Justice is coming from on this one. It seems to me that technology companies do steal away prized employees from rivals on a fairly regular basis. Unless the department can find hard proof—an email or some other document showing that these companies are in cahoots—it may end up with nothing on this one.
Actually, the government may do better with its reported probe into the seemingly cozy board ties at Apple and Google. In early May, rumors surfaced that the Federal Trade Commission had commenced a probe into the companies’ possible violation of the Clayton Antitrust Act of 1914. Section 8 of that law prohibits a director on one board from sitting on the board of a direct competitor (assuming the relationship restricts competition).
It certainly doesn’t take a gaggle of attorneys (insert joke HERE) to figure out that Apple and Google do share a common bond: Eric Schmidt. The CEO of Google sits on the Apple board. In addition, Arthur Levinson, the former chief executive of Genentech, sits on the boards of both companies, although that arrangement doesn’t seem to be much of a threat to competition.
Granted, attorneys say such probes rarely lead to much, other than a director agreeing to resign. Nevertheless, any probe is a bad probe (and that includes Ford Motor’s Probe, a car stuck with the most-disgusting name since the 1932 Austin Swallow).
Anyway, in the fast-changing world of technology, a non-competitor can turn into a rival practically overnight. In the case of Apple, Google’s original product—its search engine—was no threat at all. But now that Google has jumped into the smart phone market with its Android operating system, it clearly is butting heads with Apple and it’s popular iPhone.
Such quick shifts in technology can pose a problem for boards of technology companies—and it’s a problem that may get worse if the trustbusting fervor in Washington hots up.
The funny thing is, a company is probably well served by having a director who at least has some understanding of the company’s business model—and the technologies involved. But tough enforcement of Section 8 could lead a board to preemptively ditch a well-qualified director simply to avoid raising eyebrows in Washington.
And it’s not like it’s unusual in the tech industry for directors of rivals/partners to sit on each other’s boards. Take Salesforce.com. The board of the CRM specialist includes Maynard Webb, the highly respected former COO at eBay.
Webb’s current gig? CEO of LiveOps—another CRM specialist.
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