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Apple Loses Latest Bid to Stall eBook Antitrust Monitor

February 10th, 2014 by · 28 Comments · Antitrust, Apple

Apple’s 2351837814_1750ece1cf[1]hopes to block the court-appointed antitrust monitor were dashed today in NYC. A 3 judge appeals court panel has ruled that the monitor may continue to with his duties while Apple files their appeal.

The 2nd U.S. Circuit Court of Appeals in New York did not find Apple’s claims of irreparable harm to be plausible, and instead issued a short ruling that found that Michael Bromwich may continue to examine Apple’s antitrust compliance policies while the company pursues a broader appeal seeking to overturn the case which they lost in July 2013.

This decision is the latest in a string of court defeats that Apple has suffered since it was initially accused of antitrust violations in 2012.  At that time the US Dept of Justice, along with the attorneys general for 50 states, accused Apple of conspiring with 5 major US publishers to raise ebook prices in the US ebook market and prevent ebook retailers from competing on price.

The 5 publishers (HarperCollins, S&S, Penguin, Hachette, and Macmillan) all chose to settle before the case went to trial, but Apple decided to defend itself in court. Apple lost the case, and as part of the settlement with the DOJ which restricted its ability to control the iBooks. The judge also decided to appoint an antitrust monitor whose job would be to make sure that Apple was adopting policies which would ensure that Apple doesn’t break the law again.

Michael Bromwich was appointed by Judge Denise Cote as the antitrust monitor in late 2013, after he had been on the job for only a couple weeks Apple started complaining to the DOJ and to Judge Cote that he was being intrusive, was charging too much, and was generally a bother.

After a few rounds with the DOJ and Judge Cote, those complaints eventually resulted in Apple filing for an appeal several weeks ago.  Apple attempted to go over Judge Cote’s head and get the appeals court to block the antitrust monitor while Apple filed an appealed to overturn the case they lost.

And Apple lost – for the most part. The judges did put limits on Bromwich’s activities; he’s limited to assessing Apple’s compliance policies and its efforts to disseminate those policies to its workers, and is not allowed to actively investigate whether Apple employees are complying with antitrust laws.

Apple has lost almost every single major fight they picked ever since the trial began last June. I don’t know about you but now would seem to be a good time to simply cooperate and get on with their business of inventing the next hot gadget.

Apple being Apple, how much do you want to bet that they won’t stop fighting?

Reuters

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28 Comments so far ↓

  • William Ockham

    Where are the Apple fanboys now? I need to know if this is more government oppression or a great victory for free enterprise.

  • New Identity Same Guy

    LOL, they put big limitations on Bromwich. It ain’t a free for all anymore.
    So far, away from Cote, the legal trajectory has completely changed.

  • Mackay Bell

    Apple Fanboy here.

    So Cote gives Bromwich unlimited investigate powers and decides he will meet with her secretly and tell her what he’s learned. Totally wrong.

    Apple fights back and she instantly backs down, no secret meetings, but… he can still investigate whatever he wants.

    Apple win.

    Apple appeals and the Judges won’t throw out the monitor, but do limit his powers to what they should have been.

    Apple half-win. Cote down for 2.

    Apple now is appealing the entire ruling. We’ll see what happens. Me thinks they’re doing pretty good so far.

    The only bad thing in all of this is that Bromwich won’t get to meet Jony Ives after all.

    • Nate Hoffelder

      Pretty good would be not losing the trial. Pretty good would be getting rid of the monitor. This was not pretty good.

    • Nate Hoffelder

      To give you an analogy, this is like having an appeals court add superficial limits to the conduct of a parole officer. That’s good, but not nearly as good as getting the appeals court to remove the parole officer.

      • fjtorres

        And the DOJ can always file asking for higher penalties.
        The monitoring may only be until the second phase of the trial setting penalties is over.
        The more intransigent they act now, the more ammo for the DOJ to push for harsher penalties.
        Anti-trust is a process.

        • stef

          You do realize this is a civil, not a criminal, proceeding, yes? Search
          Apple vs. Judge Cote: The appellate court split the difference.

    • Anne

      @Mackay-

      Nothing changed with this ruling. Nothing. It’s just a restatement of the existing order from Cote.

    • stef

      Right. Search Apple vs. Judge Cote: The appellate court split the difference. Nate forgets this is a civil, not a criminal proceeding.

      • Nate Hoffelder

        Actually, this time around I’m pretty sure I avoided using words that implied a crime. In the past I have, but I’ve decided to be more factual on this point.

      • fjtorres

        What split?
        Apple wanted no monitor, they got one.
        Apple wanted to dictate who interviewed, he got carte blanche.
        All the court said was that he shouldn’t do anything he wasn’t going to do.
        That is in no way a split; that was a rout with a side of fig leaves.

  • William Ockham

    You guys are hilarious. The ‘limitations’ on Bromwich are essentially non-existent. The appeals court panel might as well as limited him from traveling to the moon. They just said he couldn’t do anything except exactly what he was authorized to do and had been doing. How exactly has “the legal trajectory totally changed”?

    You’ve totally bought in to Apple’s alternate reality. This decision was a total defeat for Apple. They got nothing that they asked for, just a fig leaf.

    The following claims are totally false:

    “Cote gives Bromwich unlimited investigate powers and decides he will meet with her secretly and tell her what he’s learned.”

    “Apple fights back and she instantly backs down, no secret meetings”

    “The only bad thing in all of this is that Bromwich won’t get to meet Jony Ives after all.”

  • New Identity Same Guy

    So damn tongue and cheek here. Like I said over and over and over and over and over, if Cote/Bromwich had operated with a degree of common sense instead of pursuing uber-Hitler tactics, Apple probably never would have tried to shut this down during the appeal. And and as Apple was forced to go to court why no try to shut Bromwich down. But the bottom line is that Bromwich has had his smelly little operation castrated, LOL.
    From MacWorld, ‘”The government conceded that the injunction would not allow the monitor to investigate whether such personnel were in fact complying with the antitrust or other laws,” the court observed. It ordered that the monitor was empowered to demand only documents relevant to his authorized responsibility, and to interview Apple directors, officers, and employees only on subjects relevant to that responsibility.’
    http://www.macworld.com/article/2096540/apple-monitor-to-stay-in-ebooks-case-with-boundaries.html

    • Chris Meadows

      Which is, uh, what he was doing in the first place.

      Effectively, the “limits” are the exact same limits that were there in the final order already. Which Bromwich has said all along he was requesting his interviews in compliance with. Indeed, even the appeal decision specifically recognized Bromwich “was empowered [...] to interview Apple directors, officers, and employees” as part of his job.

      So here we go again. Second verse, same as the first.

      It should be interesting to see if Apple finally complies and starts letting Bromwich talk to its executives. Will they bother to use the complaint resolution procedures Judge Cote pointedly reminded them were in place? Or will they just keep pushing things until Cote has to impose further sanctions?

  • Andrew

    You know what would solve this? An open market and multiple vendors competing for customers’ dollars. Android is essentially an open platform (close enough, anyway) and numerous media vendors can and do offer their wares on it.

    I actually don’t see the problem if Apple can charge high prices and make their platform uncomfortable for ereading customers. In Canada, I can buy a Kobo mini reader for $50 or a Kindle for $80 and avoid Apple’s far more costly offerings entirely. Market forces took down Sony, I’m sure they can keep Apple in check in the ebook marketplace.

    Unless I’m missing something – being a non-Apply fan I haven’t followed this too closely. Is Apple somehow jeopardizing book sales?

    • fjtorres

      That is exactly what they did.
      The served as a communications hub for 5 of the 6 to conspire to raise and fix ebook prices to prevent competition. They also strongarmed Random House to force them to join the conspiracy by denying them access to the iTunes app store until they gave in.
      All clearly and unequivocably documented.
      Unlike europe and canada where the conspirators got off with a warning and a promise to not be caught conspiring again, in the US the publishers got hit with restitution payments worth hundreds of millions of dollars to be returned to consumers. Payments are supposed to go up to $3 per book so some readers will be getting hundreds of dollars back.

      Apple’s penalties have yet to be determined.
      As the ringleader and essential component of the conspiracy, as well as the only one to go to court, Apple’s in-your-face grandstanding is practically begging for a slapdown. The federal court system is not a power to be trifled with.

      • Andrew

        I’m glad this was caught and handled then!

        Mailing cheques to buyers compensates them, but does not stop this kind of criminal behaviour – the people committing the crime are presumably not paying the bills themselves. I would have preferred to see them doing the “perp walk” into a jail for at least a few months.

      • Nate Hoffelder

        “They also strongarmed Random House to force them to join the conspiracy by denying them access to the iTunes app store until they gave in.”

        Technically Apple only strongarmed RH into signing up with iBooks, but as a result of that deal RH had to go agency every where else. That including renegotiating contracts with Amazon and ending price competition, effectively making RH part of the conspiracy.

        And this is a fact which cannot be disputed. Eddy Cue admitted as much in an email, and the DOJ submitted it as evidence.

        That one email is all you need to show to prove that Apple wasn’t just a bystander. They were an active participant in the conspiracy.

  • Paul

    @Anne. Based on the new book about Amazon, I think setting diapers.com up so they either sell to Amazon or be destroyed is a classic case of market intimidation based on scale (and I think its illegal).

    Its still crazy they can sell significant items at a loss without getting punished from the stock market.

    • Nate Hoffelder

      One problem with citing Diapers.com is that neither company had a significant chunk of the market. This came up in the comment section when I wrote about that book last year:
      http://www.the-digital-reader.com/2013/10/10/amazon-bullying-anti-trust-part-607/

      Being scary isn’t a crime, and that’s about all Amazon was doing.

      And Amazon turns a profit; they just reinvest it right away.

      • Paul

        Thanks for the update on Diapers, but how can Amazon make a profit on say, ebooks, if they change $3 less than their competitors? (i.e. Insurgent on amazon $6.99 and its $9.99 or $12.99 on Nook and Kobo). Their software can’t be that good can it?

        • Chris Meadows

          Same way they always have: they make bank on the other books you’re enticed to buy after snagging that one. Loss leaders.

        • Anne

          Loss leader pricing is legal. Amazon was found to be pricing some books as loss leaders but overall ebooks were profitable to them when investigated as part of the price fixing case.

          The Brad Stone book says that the diaper.com deal was investigated but was dropped.

          If nothing else, it has to be proven that consumers were harmed and the conclusion in both examples is that they weren’t.

          Amazon is currently reinvesting their profits in fixed assets. That takes a lot of cash but I don’t think the stock market is going to worry until growth slows. If they’re not showing profits then, I would expect to see a big drop in the price.

        • Timothy Wilhoit

          Google and Apple both have Insurgent for $6.99. There aren’t many books that Google doesn’t price match with Amazon. (Apple not so much) There’s little likelihood that Amazon will ever price Google out of business. Lots of competition is good for consumers.

  • READER

    How can an e-book cost more than a paperback. This only rip off to customers. Yes writers need to make some money.

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