John Paczkowski

Recent Posts by John Paczkowski

Google Outside Counsel Clearly Well-Prepared for FTC Fight Over Apple Board Seat–See This Internal Doc

gooppleIf the Federal Trade Commission takes issue with Google and Apple’s interlocking boards, Google will be well prepared. Last October, Wilson Sonsini Goodrich and Rosati–the company’s outside law firm–gave a presentation on this very issue. (Though available on the Web at the time of this writing, the presentation document has since been removed. You can see it, however, in a Google cache or scroll to the bottom of this post.)

Ironic, yeah?

It’s not certain why WSGR prepared the presentation, but the document obviously applies to the close ties between Apple (AAPL) and Google (GOOG) and, if nothing else, offers insight into the “interlocking directorates” provision of the Clayton Antitrust Act of 1914 and just why the FTC might be concerned that the companies may be in violation of antitrust law by sharing four board members and advisers between them: Google CEO Eric Schmidt, Genentech (DNA) CEO Art Levinson, Intuit (INTU) chairman Bill Campbell and former vice president Al Gore.

According to the WSGR presentation, the Clayton Act stipulates that a person cannot serve as director or officer of two or more competing companies when the two are engaged in U.S. or foreign competition; each has $25,319,000 in aggregate capital, surplus, and undivided profits; and at least one has two percent in overlapping sales (note: while that $25 million figure was correct at the time the deck was prepared, it has since risen to $26,161,000). Now, Apple and Google clearly both meet the “aggregate capital, surplus, and undivided profits” condition. They probably don’t meet the second, but it’s conceivable that they might in the future as Google’s Android platform rises to challenge Apple’s iPhone in the mobile phone software and services market.

And if and when they should? Well, that leads to what WSGR describes as “occasion of sin”— a theological term that refers to circumstances that by their very nature lead to sin.


In other words, inevitable sin. And competition between the two companies is no absolution, either. As the presentation explains, there is “no safe harbor for de minimus competition.” Given the obvious overlaps between Google and Apple–between both products and directors–the two companies would seem to be heading for some sort of confrontation with the FTC. Especially if, as sources say, Google CEO Eric Schmidt has no intention of resigning from Apple’s board–even in the face of increasing government scrutiny of the company.

UPDATE: WSGR tells me the document was prepared for an internal training session. It had no explanation for why the firm published it on the Web.

UPDATE: As Danny Sullivan notes in the comments, Google has removed the cached version of the document — rather expeditiously. However, there’s still a cached version available over at Microsoft.

Clayton Act Section 8 Interlocking DirectoratesFree Legal Forms