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Apple files formal notice of appeal on external compliance monitor

updated 07:54 pm EST, Fri January 17, 2014

Will fight Bromwich appointment, 'roving' investigation, excessive fees and qualifications

Apple has officially filed for an appeal of US District Judge Denise Cote's recent decision, which denied both Apple's request to suspend an antitrust external compliance monitor (ECM) while an appeal of the main judgement is considered, and a request to disqualify the current appointee, Judge Cote's personal friend and former DOJ Inspector General Michael Bromwich.

The Department of Justice successfully sued Apple earlier this year, alleging that the company managed to "vertically" join an existing "horizontal" price-fixing conspiracy among publishers against Amazon's abusive-monopoly behavior and price model. Apple argued (and will argue in its appeal) that it did not participate in any conspiracy, and that its proposed "agency" model for e-book pricing in fact levelled the playing field, allowing more publishers and more e-book sellers to enter the market.

Cote, who has been the subject of adverse articles outside Apple's sphere of influence accusing her of bias and judicial overreach, named her friend Bromwich to the job of "confirming the existence of a genuine and effective antitrust compliance program within Apple," which was originally set to begin when Apple submitted its revised antitrust policies to the court later this month. Bromwich, who has no experience in antitrust matters, required an assistant lawyer with the requisite background for the job, and the court made Apple pay both Bromwich and the assistant, who both command more than $1,000 per hour.

Bromwich has also demanded a 15 percent "administrative fee" that is paid to his company, and began his work immediately after the final judgement was passed down rather than following the instructions in the order, billing Apple $160,000 for the first two weeks. He further violated the court's order by launching what Apple calls a wide-ranging, "roving" investigation of the company, demanding to interview executives and engineers who are not connected to the e-book side of Apple's business and disrupting their normal schedules. Bromwich also attempted to contact and interrogate subjects without their lawyers present, a direct violation of the court's order that Cote chose not to address.

Apple is appealing the judge's decision to both keep a monitor in place and also to keep Bromwich specifically. It is objecting to Bromwich's "unconstitutional overreach," his fees, his behavior, his bias against the company and his qualifications for the job. Apple has already forced the judge to drop a provision in her original order that called for secret, undocumented meetings between Bromwich and Cote to discuss Apple off-the-record.

She denied Apple's motions on Monday, but submitted a 64-page opinion on the matter on Thursday that contained Cote's astounding conclusion that Apple's objections in and of themselves proved that the company needed an ECM, though she did not provide any rationale on why other measures more normally taken in first-time antitrust cases would not be equally or more effective, nor did she directly address any of Apple's specific accusations about Bromwich apart from referring the fee dispute to a magistrate judge.

Cote wrote in her opinion that she hoped that the relationship between Bromwich and Apple can be "reset," but didn't entertain any possibility of replacing him with someone more qualified or with a tendency to stay within what she has ironically called the "narrow guidelines" of the ECM's mandate. Cote ordered the monitor after Apple failed to express remorse for its actions that led to the conviction in the e-book bench trial, which was decided by the judge following an unusual pre-announcement that Apple was likely guilty of the charges -- a tendency other lawyers who have dealt with this judge in previous cases have commented on publicly for years prior to the DOJ e-book case.

The opinion itself makes clear that Cote is intent on "breaking" the company into what the DOJ has called a "culture of compliance" with overly-severe restrictions and monitoring that are highly unusual for the type of case, and like Bromwich appears to harbor a bias against the company for continuing to question her judgements and maintain its innocence. In its appeal of Cote's trial ruling, Apple pointed to numerous errors and omissions in the judge's summary, including dismissing exculpatory evidence from publishers in favor of witnesses from Amazon whose credibility was questionable and testimony contradictory.

She has yet to provide any explanation for how Apple could "continue" to engage in antitrust behavior without the DOJ noticing, or enter into any "anti-competitive" deals with publishers without the court's approval -- which brings to question the entire point of the ECM, a factor Apple will undoubtedly raise in front of a new judge. A date for the first hearing the denial appeal has not yet been set.

by MacNN Staff



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