Antitrust Monitor Pleased with Apple's Cooperation

Michael Bromwich, the monitor Federal Judge Denise Cote placed in Apple to ensure the company doesn't engage in antitrust-related behavior, said that the iPhone and iPad maker is now far more cooperative compared to when he first started his job last year. Judge Cote appointed Mr. Bromwich as a monitor to oversee Apple's actions after she found the company guilty of conspiring with publishers to artificially raise the price of books.

Apple warms up a little to court appointed monitorApple warms up a little to court appointed monitor

Apple found Mr. Bromwich on its doorstep last October as part of Judge Cote's sentencing in the DOJ's antitrust violation case. She ordered Mr. Bromwich to monitor the company's business practices for two years with the option to extend that to five years.

Mr. Bromwich said Apple was refusing to cooperate with him, while Apple said he was overstepping his bounds and demanding interviews with company executives without attorneys present, and charging US$1,100 an hour. Apple filed an appeal in hopes of getting Mr. Bromwich removed, while he accused Apple of obstruction. The an appeals court ultimately ruled that Mr. Bromwich could continue as monitor, but it did limit his authority.

The clash between Apple and Mr. Bromwich stemmed from a Federal case filed by the Department of Justice accusing Apple and several of the top book publishers with conspiring to artificially raise book prices up by forcing retailers into an agency model where the publishers set book prices. Previously, stores worked under a wholesale model where they coul sell titles at whatever prices they choose.

Apple and the publishers argued that changing from a wholesale model to an agency model meant that Amazon would have to stop selling books below cost, which was driving competition out of the market. Instead of seeing Amazon as artificially lowering the price, the DOJ felt that Apple and publishers were artificially raising prices and filed a lawsuit alleging they conspired to push book prices up.

All of the accused publishers settled out of court to avoid legal expenses and potential fines, but Apple pushed ahead alone maintaining that it did nothing wrong and that there never was a conspiracy.

Judge Cote ultimately ruled that Apple had colluded with publishers and as part of her  her remedies placed Mr. Bromwich in the company as a third party observer to monitor business practices and to make sure it doesn't engage in activities that violate antitrust laws. The court also broke contracts Apple had with publishers that included any type of price restrictions, and blocked Apple from striking similar deals with publishers for four years.

Mr. Bromwich was placed in Apple without the company's consent, which is uncommon in court appointed monitor situations.

Now that Mr. Bromwich has narrower boundaries to work within, his relationship with Apple has improved. In a new report filed with the court, he said that Apple started working with him in February to "reset" their relationship, and that the situation was getting much better.

He said in his report, "We have started to receive more information, we have seen a greater commitment to resolve lingering disputes, and we are starting to see the original pledges of cooperation and collaboration, which for many months were at odds with the company's actions, fulfilled."

Apple is stil appealing Judge Cote's ruling, and ultimately hopes to get it overturned and remove Mr. Bromwich, too. Overturning Judge Cote's ruling won't break Amazon's control over the book market, but it will absolve Apple of any wrong doing -- and it will put Apple in a position where it can freely negotiate deals with publishers again.

Judge Cote is, however, standing firm on her ruling, so it'll be up to the Appeals Court to determine whether or not Apple conspired to drive up book prices.

[Thanks to the Wall Street Journal for the heads up]