UPDATE 3-Levinson quits Google board, appeasing FTC

Mon Oct 12, 2009 3:26pm EDT

* Levinson is also an Apple board member

* Resignation comes soon after Google CEO quit Apple board

* FTC Chairman commends Google, Apple and Levinson

* Praises parties for willingness to resolve FTC concerns (Adds attorney comment, background)

By Alexei Oreskovic

SAN FRANCISCO, Oct 12 (Reuters) - Google Inc (GOOG.O) said on Monday that Arthur Levinson has resigned from its board in a move that appears to defuse regulatory scrutiny into the ties between the boards of Google and Apple Inc (AAPL.O).

U.S. Federal Trade Commission Chairman Jon Leibowitz praised the move in a statement, commending the companies and Levinson "for their willingness to resolve our concerns without the need for litigation."

The resignation by former Genentech CEO Levinson, an Apple director since 2000 and a Google board member since 2004, comes about two months after Google Chief Executive Officer Eric Schmidt quit the board of Apple.

The FTC has been looking into whether the so-called "interlocking directorates" between Google and Apple raise competitive issues.

Google, whose Internet search engine had a 64.6 percent share of the U.S. market in August according to comScore, is facing increasing scrutiny from regulators.

Last month, the Justice Department urged the court to reject a settlement between Google and the Authors Guild and Association of American Publishers that would allow Google to create a massive, online digital library. Google and the author and publisher groups are currently working to modify the deal. [nN07476286]

Phillip Zane, an antitrust expert with the law firm Baker Donelson Bearman Caldwell & Berkowitz PC, said he would expect Levinson's resignation to end the FTC investigation. "As a technical matter, if a board member resigns it does not moot the lawsuit," said Zane. "But as a practical matter, that's the essence of the violation."

Google and Apple, long seen as allies against Microsoft Corp's (MSFT.O) tech dominance, increasingly find themselves competing on a number of fronts: Google's Android smartphone software and its forthcoming Chrome operating system for PCs compete directly with Apple's iPhone and its Mac operating system, respectively. [ID:nN06438518]

The two companies are also involved in a high-profile spat regarding Google software that allows consumers to make low-priced international calls. Google has said that Apple rejected the Google Voice application for the iPhone, while Apple has maintained that it is still studying the software. The dispute has drawn the attention of the U.S. Federal Communications Commission.

Apple cited the increasing competition and conflicts of interest at the time of Schmidt's resignation in August, stating that Schmidt's effectiveness would otherwise be "greatly diminished" because he would need to recuse himself from larger portions of Apple board meetings.

Google's announcement of Levinson's resignation on Monday did not provide a reason for the move, which it said is effective immediately.

Google spokesman Matt Furman would not comment on the reason for Levinson's departure or on the status of the FTC inquiry. He said that Google has nothing to announce regarding the future size and composition of its board following Levinson's resignation.

One remaining link between the two companies is former U.S. Vice President Al Gore, an Apple board member who also serves as a Google "adviser." Furman said the company had nothing to announce regarding Gore's role at Google.

Google's Schmidt said at a conference in Washington earlier this month that he believed Levinson should remain on Google's board, noting that Google and Apple easily passed an antitrust test for overlapping board members relating to revenue overlap.

Schmidt also said at the time that he did not step down from Apple's board under pressure.

"Art has been a key part of Google's success these past five years, offering unvarnished advice and vital counsel on every big issue and opportunity Google has faced," Schmidt said in a statement on Monday. "Though he leaves as a member of our Board, Art will always have a special place at Google."

In afternoon trading, Google shares were up 1.4 percent to $523.30 and Apple shares were off 0.1 percent at $190.27. (Additional reporting by Diane Bartz and Franklin Paul; Editing by Lisa Von Ahn and Gerald E. McCormick)

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