By Joe Palazzolo
A federal appeals court rejected Apple Inc.'s efforts to rid
itself of a corporate monitor appointed after a judge found the
company liable for conspiring to raise the price of e-books.
Michael Bromwich, a former Justice Department inspector general,
began assessing Apple's antitrust compliance policies six days
after he was appointed in October 2013 by U.S. District Judge
Denise Cote, who held the company liable for a price-fixing
conspiracy in a July 2013 decision.
Since then, the technology company has been trying to shake him
off, arguing that he began work prematurely and exceeded the scope
of his mandate, and that his $1,000-an-hour fees were
exorbitant.
Mr. Bromwich, in turn, has accused the company of stonewalling
him. In a 2013 declaration filed in federal district court in
Manhattan, Mr. Bromwich said that he received "far less access"
than in his previous stints as a corporate monitor.
The declaration was attached to a Justice Department legal
brief, which Apple said was evidence of his partiality to the
government. Monitors are extensions of the courts and have a duty
to remain independent.
On Thursday, the Second U.S. Circuit Court of Appeals ruled 3-0
that Mr. Bromwich's role was "appropriately constrained" and said
Apple could continue to raise objections in the lower court, if it
believes overstepped his bounds.
Mr. Bromwich kept his job but received some criticism in
Thursday's ruling. The Second Circuit panel said submitting the
2013 declaration as part of the government's brief was "the
opposite of best practice for a court-appointed monitor." But it
wasn't so serious as to warrant his disqualification, the panel
said.
A spokeswoman for Mr. Bromwich declined to comment. Lawyers for
Apple didn't have an immediate comment.
In a February 2014 ruling, the Second Circuit clarified Mr.
Bromwich's role, saying that he was authorized to request
interviews and documents from the company only to ensure that Apple
has policies in place to prevent future antitrust violations and
that senior executives and board members understand them.
Mr. Bromwich also drew complaints from Apple for writing to the
company's officers, rather than through their lawyers, and
proposing they communicate with him directly.
Mr. Bromwich later explained in the declaration that he wrote
the letters because he believed the company was using its outside
counsel "as a shield."
On Thursday, Judge Jesse M. Furman, a member of the Second
Circuit panel, said Apple failed to follow a process established by
Judge Cote to mediate disputes between the company and the monitor.
"Instead, the company largely sat on its hands, allowing issues
with the monitor to fester and the relationship to deteriorate,
mostly without the district court's knowledge," Judge Furman wrote
in a concurring opinion.
The Justice Department's case against Apple laid bare the
company's efforts in 2009 and 2010 to gain a foothold in a market
that Amazon.com Inc. commanded with between 80% and 90% of all
e-book sales. At the time, publishers were dissatisfied with
Amazon's aggressive discounts, over which they had no control.
Apple ceded to publishers the power to set their own prices, in
agreements that the Justice Department said led almost immediately
to an increase in the price of new and best-selling e-books.
Apple is appealing Judge Cote's decision finding it liable for
price-fixing. A ruling could come any day.
Write to Joe Palazzolo at joe.palazzolo@wsj.com
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