Apple Finally Comes Under Regulatory Eye

Under pressure from regulators, Google CEO Eric Schmidt this week resigned his position on Apple's board of directors. The resignation comes in the wake of a controversial episode in which Apple denied Google the right to publish an application for the iPhone, raising another round of antitrust worries.

"As Google enters more of Apple's core businesses, with Android and now Chrome OS, Eric's effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest," Apple CEO Steve Jobs noted in a prepared statement. "Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple's board."

The companies are currently involved in two related antitrust investigations, one formal and one in the gestation phase. In May, the Federal Trade Commission (FTC) began investigating whether the companies violated US antitrust laws by sharing common board members. "Sharing directors raises competitive issues," FTC Bureau of Competition Director Richard Feinstein said, noting that this week's change won't halt the investigation.

And last week, the Federal Communications Commission (FCC) began working toward a formal investigation of Apple when it demanded that the companies explain a recent episode in which Apple denied Google the right to publish a communications application on Apple's iPhone. Apple-friendly press and analysts immediately blamed Apple's US-based wireless partner AT&T for the denial, leading AT&T to issue a statement that says it has absolutely nothing to do with the iPhone App Store. That places the blame squarely where it belongs: on Apple.

Google's iPhone software, Google Voice, would allow users to consolidate their phone numbers into a single number that is centrally managed. But Apple will not publish the application because it duplicates some iPhone apps that Apple created, including the phone dialer and contacts list. That exclusionary and self-protective behavior immediately raises antitrust concerns. It won't be the last time Apple faces such charges.

In a related development, smartphone maker Palm alleges that Apple is violating US trade laws by preventing Palm Pre users from syncing music to the device via Apple's popular iTunes software. Palm engineered the Pre so that it works like an iPod via iTunes, but Apple tried to recently prevent this behavior by altering iTunes. Palm responded by issuing a patch that restored the functionality. Palm also issued a formal complaint to the USB Implementers Forum, an industry group representing the companies that created the hardware standard that both Apple and Palm use.

Expect Apple to continue its self-serving practices until it grows powerful enough that a regulatory body steps in. "As we've said before, newer versions of iTunes software may no longer provide synching functionality with unsupported digital media players," an Apple spokesperson reiterated this week. This kind of pettiness is typical for Apple—after all, Pre customers would likely use iTunes to purchase music from Apple's online store—and it underscores a corporate mentality that is both isolationist and extreme. But it may eventually get the company in trouble, now that it has finally come under the watchful eye of regulators. Sometimes, hubris really does get in the way