Cor! Apple peeled and pared until the pips squeak. Not.

Dec 2, 2013

Although Apple HQ is in sunny Cupertino on the US west coast, the suit has been filed in the New York federal court. In the filing, Apple lawyers write "Mr Bromwich appears to be simply taking advantage of the fact that there is no competition here or, in his view, any ability on the part of Apple, the subject of his authority, to push back on his demands." How wonderful is that?

Here's the back story. This summer past, Apple, running scared of Amazon's market dominance in the ebook market, was found guilty of conspiring with various traditional publishers such as Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, artificially to raise and maintain the price of ebooks.

The US Department of Justice (DoJ) was not amused and brought Apple to account (as well as the publishers, most of whom settled out of court) for anti-competitive behaviour. At first the DoJ wanted to throw the book at Apple (if you'll forgive the pun) and for the investigation to delve much more deeply than just into the price of ebooks and Apple's illegal determination to corner the market by forcing retailers to use iTunes and pay Cupertino a 30 per cent surcharge. In the end though the investigation was limited to the one area only.

Nonetheless, the decision was clear-cut. David Balto, now a public interest antitrust lawyer but once the erstwhile policy director at the Federal Trade Commission, (FTC) commented, “The Court’s decision is crystal clear that Apple violated antitrust law. This [the court's] decision is a declaration of independence for consumers, freeing them from Apple’s strong-arm tactics that raised prices and stifled competition.”

After being found guilty of such naughtiness, the court ordered Apple to take on the services of an independent and external "compliance monitor" whose job would be to ensure that Apple toes the legal line in future.

That compliance monitor is one Michael Bromwich, sometime inspector-general of the US Justice Department. Apple doesn't like the fees he is charging and doesn't want to pay them. The company claims they are "exorbitant", and “higher than Apple has ever encountered for any task”. But probably comparatively no higher than some Apple customers have had to pay when a device fails one day after the warranty period expires. That seems to happen quite a lot.

Mr Bromwich is billing an hourly fee of US$1,100 plus a 15 per cent 'administrative fee' and any and all further costs incurred in appointing additional attorneys to assist him. The 'hired help' from the up-market law firm of Frank Field charge $1025 per hour.

In due course Michael Bromwich sent Apple his invoice for two full week's work by his team. The bill comes to $138,432. Apple claims that the sum is "unprecedented in its experience."

And it's not just the money Apple is ranting about. The company is also very exercised that Mr. Bromwich is committing the unforgivable sin of lèse-majesté in demanding to interview Apple CEO Tim Cook and other top management bods. What a nerve, eh? Doesn't he realise these men are no mere mortals and must never be approached as such. Supplicants must approach crawling on their bellies with eyes averted lest they be blinded by the ethereal effulgence of the gods.

When requests for a meeting with the Grand Panjandrum and his chums fell on deaf ears Mr. Bromwich compounded his sin by writing to both Tim Cook and the Apple’s Board of Directors to complain at his treatment and to note that he had suffered "a surprising and disappointing lack of cooperation from Apple and its executives. Requests to meet with key Apple personnel have been largely ignored, and when not ignored the responses have been extremely slow in coming." Quelle bloody surprise.

Michael Bromwich also points out, in no uncertain terms, that Apple has absolutely no role whatsoever to play in determining his remuneration or what it must pay for the entirety of the independent external monitoring. In his letter to Tim Cook and the Apple board he states, "The company [Apple] has spent far more time challenging the terms of our compensation and raising other objections related to administrative matters, even though the Court’s Order provided no role for Apple in setting the monitor’s compensation".

Bromwich continues, "You people seem to think I’m working for you. Apple has sought for the last month to manage our relationship as though we are its outside counsel or consultant. We are not. My fees are reasonable, and you have no idea what a reasonable fee looks like. Also, it doesn’t matter if you think my fees are reasonable, because you don’t get to negotiate them: You just pay them. The court will approve them".

Ouch! And ha, ha! Isn't it wonderful to see the boot on the other foot for once?

Apple wriggles on though like a worm on a hook and has complained to the court that Bromwich's invoices and his demand to interview Apple's top executive are "inappropriate". Apple is therefore asking the court to issue a judgement limiting the extent of his monitoring of the company.

So, in essence, Apple is found guilty of price-fixing and breaches of anti-trust laws. As part of its punishment it has to submit to the appointment of an independent external monitor whose remit is to ensure that Apple stays on the straight and narrow in future. Apple is not responsible for his appointment or his management. Nor has it any say in how the monitor's charges and remuneration are calculated and applied. It just has to show it complying with the law and pay-up for the monitor's services with good grace and a rueful smile. But can it do that? Can it hell as like.

This year Apple's net income garnered from beautiful but, it is generally agreed, over-priced products will exceed $37 billion. Bromwich's fees won't make much of a dent in that.

Apple has something of a reputation for being rather churlish and cavalier in its treatment of customers who complain about broken kit. Remember the iPhone antenna debacle? Apple claimed it was the customer's fault for not holding the phone properly! That's why the chances are that few ordinary punters will be sympathetic to Apple's complaints. Indeed, many will positively enjoying Cupertino's discomfiture.

Meanwhile there's a question that Apple needs to answer. How much has the company spent on lawyers as it continues its endless and pointless patent wars with the likes of Samsung and others? I think we should be told.

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