Michael Bromwich, the combative antitrust monitor appointed seemingly due solely to his close relationship with original trial judge Denise Cote, has claimed that Apple
"is its own worst enemy" in terms of cooperation with the court-appointed monitor, but admitted that Apple's antitrust program is "substantially stronger" in what might be his final report for the court, unless Judge Cote extends his appointment. Bromwich, who was
restrained from previous excesses by an Appeals Court that
barely upheld Cote's original decision, has had a difficult relationship with the iPhone maker
from the start.
Bromwich told the court that Apple continues to impeded his investigations by raising objections to requests for information that are not strictly concerned with the e-book portion of the business. Apple has, on numerous occasions, rejected requests (for example) for Bromwich to interview board members and executives not connected to the e-book part of the iTunes stores, despite a reprimand from the Appeals Court that
found his inquiries to be overreaching the mandate of the court's order. Bromwich was also restrained by Cote shortly after the original judgement when critics pointed out that her
ex parte secret meetings with the monitor outside of public scrutiny and the scope of the case were likely to be illegal.
Despite claiming that Apple's lack of cooperation "has cast an unnecessary shadow over meaningful progress in developing a comprehensive and effective antitrust compliance program," he also noted that the program has become "substantially stronger," apparently without his help. Bromwich, who has
no previous background in antitrust law and was originally charging Apple more than $1,300 per hour for his "services," required the help of a deputy monitor with an actual antitrust background, who was paid $1,100 per hour.
Apple, and numerous legal, antitrust, and economic experts believe the case was not only misjudged but
misguided from the start, and that Cote's judgement relied on
a flawed basis to reach its conclusions, which Cote pre-announced ahead of the bench trial. While the Appeals Court upheld Cote's basic finding, it severely scaled back Bromwich's duties, and two of the three judges on the panel said they could not support Cote's methods or legal justifications for the finding, though two of the three rejected Apple's argument that its actions were pro-competitive for all entrants in the e-book market, rather than anti-competitive and designed to end Amazon's abusive monopoly.
Fortune reporter Roger Parloff writes that any future Apple's appeal "hinges on whether Judge Cote, in reaching her decision, used the proper framework of analysis and, as a result, whether she failed to adequately weigh the pro-competitive aspects of Apple's conduct-for instance, the fact that it was bringing competition to a market until then dominated by a near-monopolist." T
"Most conduct challenged as violating the antitrust laws is tested under a 'rule of reason' analysis, where the court weighs all the circumstances, including the potentially pro-competitive and anti-competitive effects of whatever the defendant did," Parloff wrote. "However, when certain categories of conduct are alleged -- including horizontal price-fixing -- courts have decided that there is such a longstanding consensus that such conduct is anti-competitive, that it can be considered illegal per se, freeing the judge from undergoing a full-blown rule-of-reason analysis."
This was the basis of Judge Cote's decision, but also included a perfunctory one-paragraph "rule of reason" analysis to protect her legal
error-filled ruling. Two of the three Appeals Court judges, including one that upheld the conviction on the per se basis, refused to agree that Cote's "rule of reason" analysis was a credible finding.
The company has applied for an appeal to the Supreme Court, and has said from the outset that it did not join in a pre-existing agreement among the publishing companies (which settled the case, but supported Apple's contentions in the bench trial) to force Amazon to stop selling e-books below cost, which the publishers felt was diminishing the value of e-books, and hurting the print side of the industry, booksellers, and preventing other companies from competing in the e-book market -- factors the DOJ and Judge Cote ignored during the trial.
The Department of Justice, and Judge Cote, have always portrayed the case as a rather simple-minded price war in which Apple conspired with publishers to raise prices to consumers slightly (from an average $10 to an average $12), solely to hurt Amazon. While Amazon was eventually forced by the publishers to abandon the money-losing "wholesale" model and adopt the publishers' preferred "agency" model (where publishers set the price), the price rise caused by this change was short-lived, and allowed both Apple and other companies, such as Sony, Kobo, Barnes & Noble and others to compete fairly with Amazon.
Legal experts believe that, should Apple's petition to the Supreme Court be accepted, the company has a good chance of having the original ruling sent back to the first court for reconsideration -- which would
nullify Apple's $450 million settlement with states attorneys general and consumer groups.
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