updated 11:30 pm EDT, Wed August 14, 2013
Apple's lawyer fears punitive costs in 'the hundreds of millions,' vows appeal
Judge Denise Cote -- who already pre-announced her belief that Apple was guilty of e-book price-fixing with publishers, then found Apple guilty, then denied the company a stay on her judgement until the appeal is heard -- has now set a trial date of May 2014 to determine damages in the case. Because the publishers who were also involved in the supposed conspiracy had already settled with the government, Apple alone may be on the hook for what the company's lawyer has said may run into "hundreds of millions of dollars."
The Department of Justice has been unusually aggressive in offering harsh recommendations for penalties for Apple, to the extent that even Judge Cote has rebuffed some of the suggestions -- such as that Apple should have a governmental watchdog for the next decade, or that the DOJ should be able to review the company's deals with other media entities.
Cote ruled that Apple had acted as a facilitator and played a "central role" in getting publishers to move to the "agency model" of pricing, where publishers set prices rather than distributors. She again sided with the prosecution in giving the damages trial the dates for discovery, affadavits and other procedural matters the timeframe requested by the DOJ.
Before Apple entered the e-book market, Amazon used its monopoly to strike deals with publishers allowing Amazon to set the price. It then began selling e-books below cost, a move that helped grow the e-book market and solidify its monopoly, but which left publishers unhappy and made it difficult for other companies to enter the market. Apple had argued during the trial that Amazon's monopoly had and would eventually cause more harm to consumers, and that Apple's entry and move to agency pricing (a standard in the publishing industry for decades) levelled the playing field and allowed more competitors such as Barnes & Noble to enter the field.
However, evidence showing that Apple Vice President of Internet Software and Services Eddy Cue had told different publishers general terms of the contracts Apple was negotiating with others, along with emails that suggested publishers were talking to each other about how to get out of Amazon's contracts convinced the government and Judge Cote that Apple's model ended up costing consumers $3-$5 per e-book more than they would have otherwise paid under Amazon's pricing -- ignoring the fact that Amazon could not have kept selling e-books below cost indefinitely.
Apple will appeal both the judge's decision, and her more recent ruling blocking a stay of any penalties until the appeal is heard. The company believes it has a strong case for appeal, pointing to several judicial errors, deliberate omission of exonerating evidence, and the credibility of some key witnesses for the prosecution. Apple has further said that the penalties outlined by the DOJ are unusually punitive and unwarranted by the verdict. The five major publishers who settled with the government before the trial have also complained that the proposed settlement is equally or more damaging to them than it is to Apple.