10:07am PT by Eriq Gardner
Apple Loses Appeal Over Court-Appointed Antitrust Monitor
Apple Inc. is one of the five biggest corporations in the world. It also has a reputation for being one of the most secretive, so it's hardly a surprise that when a New York federal judge appointed an external monitor to look after the company, there would be trouble. On Thursday, however, the 2nd U.S. Circuit Court of Appeals rejected Apple's concerns.
Michael Bromwich was appointed Apple's monitor by U.S. District Judge Denise Cote after the computer giant lost a lawsuit brought by the U.S. Department of Justice alleging Apple conspired with publishers to illegally raise the price of e-books.
As part of the remedy, the Justice Department demanded Apple hire a full-time antitrust compliance officer. Over Apple's objection that such a measure would be "draconian," the judge agreed to appoint Bromwich.
Within a week of his appointment, Bromwich wanted to interview Apple's board of directors and encountered pushback. Apple wasn't happy that Bromwich was going directly to senior managers, while Bromwich became concerned that Apple was "using its outside counsel as a shield."
Then, there was the issue of fees. Bromwich wanted $1,265 per hour, and within two weeks of his appointment, he had billed Apple $138,432.
Apple probably can afford it, but thought it unreasonable, and when it asked Cote to hold off on the monitor pending an appeal, the computer giant became further upset when Bromwich coordinated with the DOJ on a response.
To settle its antitrust liability, Apple would agree to a deal with the DOJ and 33 U.S. states that provided up to $450 million if a federal appeals court affirmed a finding of liability.
The appeal over Apple's liability for colluding on e-book prices is still pending, which will determine what Apple ends up paying in settlement money. Meanwhile, a separate appeal about the monitor went before the 2nd Circuit.
In Thursday's opinion, U.S. Circuit Judge Dennis Jacobs explains how the issue of an aggressive court-appointed monitor touches upon fairness and integrity of courts. He writes that it is "certainly remarkable that an arm of the court would litigate on the side of a party," but adds that the "concerns are procedural rather than substantive," that Bromwich could have filed declarations on his own behalf.
"In short, the injunction that presently applies to the parties and the monitor does not permit the troubling consequences that Apple fears the injunction was modified to allow," he concludes. "Further, to the extent that Apple objects to any future actions of the monitor, it may avail itself of the district court’s dispute resolution procedure and, if appropriate, seek judicial relief."
Although the e-book saga may be coming to a conclusion soon, there's other aspects of Apple's behavior that could draw attention from a monitor tasked with ensuring the company doesn't abuse antitrust laws. For instance, Apple has reportedly been in talks with record labels for a price break on streaming music. In return, Apple would offer a "paid-only" service that could undercut Spotify's freemium model. According to The Verge, the DOJ has been paying close attention to what Apple's doing here.