By Maggie Shiels
Technology reporter, BBC News, Silicon Valley

The resignation of Google’s Eric Schmidt as a director of Apple’s board has failed to halt a government inquiry into possible antitrust violations.

Mr Schmidt stepped down because the search giant’s business increasingly competes with Apple’s.

The Google CEO recused himself when Apple’s board discussed the iPhone.

In a statement the Federal Trades Commission said "we will continue to investigate remaining interlocking directorates between the companies".

"We commend them for recognising that sharing directors raises competitive issues, as Google and Apple increasingly compete with each other," said the FTC’s Bureau of Competition director Richard Feinstein.

"Clubby"

Former Genentech CEO Arthur Levinson still serves on both boards.

The Consumer Watchdog has called for him to step down from either Google or Apple to avoid antitrust violations.

"It took Eric Schmidt far too long to realise that the two roles are incompatible; that’s not surprising considering the clubby atmosphere of Silicon Valley," said the non-profit’s consumer advocate John Simpson.

"Nonetheless, we’re glad Schmidt finally did the right thing; we call on Levinson to act responsibly and choose one company or the other."

News that the FTC will continue with its inquiry has highlighted a shift in how regulators are prepared to act under a new administration said Jo-Ellen Pozner, assistant professor of organisational behaviour at Berkeley’s Haas School of Business.

"Clearly the tone has changed in Washington and that makes it more difficult for a marriage like this of Google and Apple at the board level to go unnoticed and not scrutinised.

"When there is a visible conflict or issue like this, regulators will pay more attention to that sector. If these firms are smart they will regulate themselves and figure out which relationships they need to keep, or rectify or fix," Ms Pozner told BBC News.

The areas of competition between the two companies include mobile telephone technology and computer operating systems.

Aside from the issue of competition, Ms Pozner noted there were some practical reasons for Mr Schmidt’s much needed departure.

"It would have been increasingly difficult to attend to board matters. Apple has a small board so there is not that much room for someone constantly recusing themselves from so many areas of discussion if you want an active board."

"Enemy"

Industry watchers said Mr Schmidt’s resignation will allow Google to take the gloves off and compete more openly with Apple. The danger warned one top blog is that it could also turn the company into public enemy number one.

"If nothing else it does mark a shift in where power resides in Silicon Valley and who is the perceived enemy," said TechCrunch co-editor Erick Schonfeld.

"For a long time you could say that Mr Schmidt on the Apple board was because both Google and Apple looked at Microsoft as the enemy, the main competition for different reasons.

"As computing shifts to these web based apps it’s almost as if Google is taking the place as the most feared company in technology. Certainly for a lot of companies it has already taken that spot," Mr Schonfeld told the BBC.

"The bigger shift that is now happening is this shift to more web centric computing and Google wants to be the central player there.

"They want to be the operating system of that world and that world doesn’t care if you are using a MacBook, an iPhone, BlackBerry or Android. All this stuff happens in the cloud," said Mr Schonfeld.

"It’s not Goggle versus Apple. It’s really Google versus the old model of computing which increasingly means Apple has more in common with Microsoft."

"Fiasco"

TechCrunch is not the only blog to warn of trouble ahead.

The highly respected blogger Om Malik of Gigaom.com has said that when it comes to the issue of smartphones the "battle between Google and Apple is going to get very ugly – as it should."

He highlighted the recent decision by the iPhone’s App store to reject an application called Google Voice. That is now being investigated by the Federal Communications Commission.

"As the Google Voice apps fiasco has taken on a life of its own, I have been busy pointing out that this battle was between Apple and Google."

The timing of Mr Schmidt’s resignation has also resulted in comment coming days after the FCC announced its inquiry.

"The way I see it, he (Mr Schmidt) got shown the door by (Apple CEO) Jobs. Back in May, Schmidt said he had no plans to resign from Apple’s board," noted Mr Malik

For Harry McCracken, the editor and founder of Technologizer there remains a lot of unanswered questions.

"I would love to know the back story here because it was late on Friday that the FCC news came out about it investigating the rejection of Google Voice and here we are a few days later and Mr Schmidt has resigned from Apple.

"From the outside it looks like there is a connection, but who knows" said Mr McCracken.

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