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Digital River - Talk to the Experts

Apple's Court-Appointed Watchdog May Not Have Much Bite

By John P. Mello Jr. MacNewsWorld ECT News Network
Oct 18, 2013 5:00 AM PT

The federal district court judge who found Apple guilty of violating U.S. antitrust laws has appointed a watchdog to make sure the company toes the legal line in its dealings with e-book publishers.

Apple's Court-Appointed Watchdog May Not Have Much Bite

Judge Denise Cote on Wednesday appointed Michael Bromwich -- a high-profile Washington, D.C., attorney who focuses on internal investigations, compliance and monitoring -- to supervise a court-ordered antitrust compliance training program.

Apple is appealing Cote's ruling that it colluded with five of the six largest publishers in the United States in an e-book price-fixing scheme. The company also has opposed the appointment of an external monitor to ensure its compliance with federal law.

In arguments before Cote in August, Apple maintained it could handle compliance itself and that appointing a monitor would be "extremely costly and burdensome." The U.S. Department of Justice countered that it was unreasonable to assume that a lawyer on Apple's payroll would be able to do what needed to be done to bring the company in line with the law.

Neither Apple nor the DoOJ responded to our requests to comment for this story.

Probed Iran-Contra

While not unheard of, the use of monitors in antitrust cases is not common.

"It's unusual, but the judge said it was necessary to prevent the sort of collusion that was going on," Cass & Associates President Ronald Cass, former vice chairman and commissioner of the U.S. International Trade Commission, told MacNewsWorld.

Apple's attitude during the proceedings in the case may have influenced Cote's decision to appoint monitors.

"Apple has been bullheaded about this," Joseph P. Bauer, a professor at Notre Dame Law School, told MacNewsWorld. "It's been so uncooperative with the court that the court has reacted a little more harshly than it would with a defendant who said, 'We will violate no more.'"

Another unusual aspect of the new appointments is "to have somebody overseeing an antitrust remedy who doesn't have an antitrust background," Cass pointed out.

Bromwich is one of two candidates recommended for the monitor's position by the DoJ. Currently with Goodwin Procter, Bromwich previously was a federal prosecutor in New York and was part of the team that prosecuted Marine Lt. Col. Oliver North for his role in Iran-Contra.

Bromwich, who is also managing principal of The Bromwich Group, has been an inspector general in the DoJ and was appointed by President Obama to head the Bureau of Ocean Energy Management, an agency established to monitor oil and gas development following the Deepwater Horizon oil spill.

Caged Watchdogs

To assist Bromwich in his oversight duties of Apple, Cote appointed Barry Nigro, the chairman of the antitrust department at Fried Frank. Previously, Nigro served as deputy director of the Bureau of Competition with the Federal Trade Commission, where he specialized in anticompetitive practices investigations and litigation.

In their court-appointed roles, the two men will keep a watchful eye on Apple's antitrust compliance policies and employee training for the next two years.

Those two years may not be easy ones for the monitors.

"The reason the monitors are there is because of a potential violation of the law, which means most internal activity around those potential violations is going to be under some attorney-client or work product privilege," David Vance Lucas, an attorney with Bradley Arant Boult Cummings, told MacNewsWorld.

Without access to that kind of material, the monitors may not be able to fully ensure compliance.

"Without the consent of Apple, these monitors will only be able to look at non-privileged, external-facing communication," Lucas said. "I believe they will be limited in their effectiveness. It may well be that Apple will be able to effectively firewall them."

Crimp in Business

Still, the court's verdict and its monitors looking over Apple's shoulder could put a crimp in the company's e-book business.

"Because there are a small number of players here, it's less of a problem than it would be in some circumstances," said Cass, "but still, I think it would be an added difficulty for their business."

Arguably, the court's findings as a whole put a crimp in Apple's ability to manage its e-book operations, observed Yasha Heidari, managing partner at the Heidari Power Law Group.

"This is not necessarily a bad thing, though, as their e-book business was based on some monopolistic practices," he told MacNewsWorld. "The monitors should act as a safeguard to prevent Apple from running afoul of the law in the future."

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