Tag Archives: Justice Department

There’s more than one way to (allegedly) bribe a Libyan — think Apple laptop

You might not think an Apple laptop is on the same level as a Cartier watch or an all-expenses-paid blowout in Morocco, but some authorities think different. The laptop was mentioned in an international corruption investigation into whether brokers Tradition






Apple caves in ebooks fight: what the big settlement means for you

Apple appears to have finally thrown in the towel in a two-year court fight over its role in brokering a conspiracy with publishers to fix the price of ebooks. The publishers have already paid millions to consumers, and now Apple could soon do the same under a sealed settlement  that came to light on Monday.

It’s not technically over but, for practical purposes, consumers can expect to collect before long. Here is a plain English Q&A about what the settlement means, and what happens next — including when a payout might occur.

So why is Apple prepared to pay ebook consumers?

Last July, a federal judge ruled that Apple organized a conspiracy in 2010 to raise the price of ebooks. In a related proceeding, class action lawyers and state governments sued on behalf of consumers — money from Apple is supposed to make them whole.

A trial over damages was supposed to start next month, but the lead class action lawyer told the court this week that Apple decided to settle.

How much will Apple pay out?

The proposed settlement is still under seal (we can expect to see details in July) but it’s a safe bet that it’s worth considerably less than the $840 million that the class action lawyers said Apple might owe. Keep in mind that the five publishers who were Apple’s co-conspirators paid a total of around $160 million.

We can expect Apple to pay more than the publishers since the court said it was the ringleader, and since the company initially chose to fight rather than settle. This means that a figure of $100-$300 million seems likely — but for now that’s just a guess.

So how much will I get and how will Apple pay?

We won’t know for sure until the settlement is published, but we can make a good guess based on the publisher settlements.

Under those terms, ebook buyers received $3.17 if a title they bought from Hachette, HarperCollins, Simon & Schuster, Penguin or Macmillan between April 1, 2010 and May 21, 2012 was ever a New York Times bestseller.  If it wasn’t, they got a credit of $0.73 per ebook. Nearly all consumers received the money as a credit to their Kindle, Barnes & Noble or iTunes accounts.

There’s no guarantee that the terms of the Apple deal will be the same, but they will likely be in the same ballpark.

Is this a sure thing?

No, since the settlement is contingent on the outcome of an ongoing appeal by Apple. The company has NOT conceded the judge’s finding last year that it violated antitrust laws, but it HAS agreed on the amount it should pay if the appeals court upholds the original decision.

Realistically, the appeal is a long shot since the appeals court judges have already ruled on other parts of the case, and nothing suggests they are interested in disturbing the underlying verdict. The settlement must also be approved by the trial court judge to ensure it’s fair — but that likely won’t be a problem.

“What we have is a settlement agreement that both sides are putting in front of her. Normally, a judge will accept an agreement by both parties,” said Andre Barlow, an antitrust expert and former Justice Department lawyer.

So why did Apple settle if it didn’t think it did anything wrong?

Apple has bitterly fought the antitrust charges since the get-go, and many people (including me) are on the company’s side — pointing out that Apple didn’t kill competition, but may have improved it in an ebook market that was (and is still) dominated by Amazon.

By now, however, Apple’s legal case looks hopeless, especially in the face of a hostile judge. Settling also helps Apple avoid another trial, and avoid exposure to antitrust rules under which plaintiffs can seek triple damages at trial.

“That’s the benefit for Apple. You don’t have to go through and determine damages. You avoid treble damages. I’m sure the amount is much lower than what could be proved at trial,” said Barlow, who added that a settlement also helps the plaintiffs since it avoids surprises at trial.

So when will I get paid?

Apple has yet to plead its case before the appeals court judges whose ruling is required before the payment provisions can be triggered. The lawyers will then have to work to notify customers by email, and to find a way to distribute the credits — or possibly cash. Realistically, this may not be resolved until late this year or early 2015.

This story was updated at 9PM ET to make clear that Apple’s payment is still contingent

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The absurd ebook case: Apple fights on as consumers spend settlement money at Amazon

The high-fives must have been flying at Amazon this morning: millions of the company’s customers got notices to spend credits at its Kindle store, and Amazon didn’t have to pay a cent. Meanwhile, rival Apple will likely underwrite an even bigger shopping spree for Amazon customers sometime yet year.

Welcome to the ironic denouement of l’affaire ebooks, which reached a climax in 2013 when a federal judge found that Apple had brokered a conspiracy with book publishers to fix prices. The legal tussle resulted in the publishers settling their cases — which is what paid for the customer credits that went out today — while Apple fought on alone.

For now, the biggest winner is Amazon, which already dominated the ebook market at the time of the price-fixing scheme in 2010. Today, as a result of lawsuits brought by the Justice Department and state governments, Amazon is in an even stronger position with the publishers; it will also get a healthy cut of the $160 million or so that the publishers agreed to pay under a settlement.

As part of the settlement, ebook customers received credits to their Amazon Kindle, Barnes & Noble or Google Play accounts. While all this cost the publishers a pretty penny, they didn’t make out so badly since much of the money they paid out will come right back to them as customers use their credits to buy new ebooks. Meanwhile, the retailers — most of all Amazon — will collect their usual commission.

For Apple, which chose to fight rather than settle, it’s a whole different story. Right now, the company is in the midst of high legal torture at the hands of a hostile judge, class action lawyers, state attorneys general and the Justice Department.

Recent court records show that the class action lawyers and the states want Apple to pay damages of $280,254,374; they will then seek to triple that amount under special penalty provisions — which would result in a final bill close to $1 billion. The damages trial is set to start in May and, if Apple loses, consumers (and indirectly Amazon) can expect to receive another bushel of ebook credits next year.

Meanwhile, Apple is waging an uphill fight against the Justice Department to overturn last year’s anti-trust verdict. Currently, the company is waiting for its appeals court trial to begin, and is also asking for a change of venue in related proceedings to get away from the clutches of Judge Denise Cote, who has been openly hostile to Apple — even requiring the company to pay for a monitor, who is reputedly Cote’s friend and colleague, to investigate itself.

The whole business is starting to look absurd, especially as Apple remains a marginal player at best in a world where Amazon is still dominant. While Apple deserves some of the blame, not least for its ongoing intransigence, it’s also about time for the states and the Justice Department to find another target.

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Apple provides update on government requests as tech companies reach settlement with DOJ

Apple-Account-informaiton-requests-01

Just a few days later after Apple CEO Tim Cook expressed his thoughts about the NSA and data collection transparency, Apple has posted an update to its website with new information regarding account data requests. The company’s press release comes as US Department of Justice comes to a settlement with technology companies over how they are allowed to disclose information about government data requests.

A statement from the DOJ explains the agreement will allow “detailed disclosures about the number of national security orders and requests issued to communications providers, and the number of customer accounts targeted under those orders and requests including the underlying legal authorities.” Due to these new guidelines, Apple has now been able to report FISA and National Security Letters separate from law enforcement requests as show in its graphics above and below.  It also notes the new data released today replaces the U.S. data from its Feb. 5 2013 Report on Government Information Requests.

Apple-National-Security-orders-02Apple has been working closely with the White House, the U.S. Attorney General, congressional leaders, and the Department of Justice to advocate for greater transparency with regard to the national security orders we receive. We believe strongly that our customers have the right to understand how their personal information is being handled, and we are pleased the government has developed new rules that allow us to more accurately report law enforcement orders and national security orders in the U.S.

Apple CEO Tim Cook said in a recent interview that he would push congress for more transparency regarding controversial surveillance programs and how companies can disclose information related to information requests. At the time, Cook said that there was much the company couldn’t speak about due to gag orders:

Number one, we need to be significantly more transparent. We need to say what data is being given, how many people it affects, how many accounts are affected, we need to be clear. And we have a gag order on us right now so we can’t say those things… .Much of what has been said isn’t true. There is no backdoor. The government doesn’t have access to our servers. They would have to cart us out in a box for that, and that just will not happen. We feel that strongly about it.

The full press release from Apple is below with the actual data on requests pictured above.

Screen Shot 2014-01-27 at 4.55.32 PM


Filed under: AAPL Company, Tech Industry Tagged: Apple, Apple CEO, DOJ, Government, Justice Department, Nation Security, NSA, Tim Cook, United States, White House

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No, the Justice Department didn’t cripple Microsoft — the internet took care of that

Not surprisingly, there’s been a lot written over the past few days about the upcoming retirement of Microsoft CEO Steve Ballmer and the impact his departure will have on the software giant, and also about his legacy, such as it is, and what he could have done differently. Some visions of this alternate future are more likely than others, but others are closer to being flat out wrong — like the version that Matt Yglesias tries to put forward in a piece at Slate, where he argues that the Justice Department’s prosecution of Microsoft saved us from a hideous future in which Apple and Google never existed.

Yglesias makes his point obvious in the headline of his piece, which is entitled “The Justice Department Was Absolutely Right to Go After Microsoft in the 1990s.” In a nutshell, the Slate writer argues that if the federal antitrust authorities hadn’t launched a case against the software company in 1998 and extracted a series of concessions from it during a long settlement process, we would be living in a very different world — one in which Microsoft us such an impervious monopoly that neither Apple nor Google are really able to build much of a business in search or mobile technology. For Yglesias, the lesson is:

“There was nothing foolish about the DOJ’s pursuit of a case against Microsoft, the settlement eventually reached with the company was perfectly reasonable, and what we’ve seen over the past decade or so is very possibly the benefits of that litigation — litigation that, in retrospect, has had no meaningful costs or downsides.”

No Google and no Apple iPhone?

Internet_Explorer_9-Firefox-4

According to Yglesias, forcing Microsoft to dismantle the integration of Internet Explorer and the Windows operating system — one of the main targets of the government’s antitrust case — was the key to unlocking the potential of the internet, which in turn led to the rise of Google and that company’s dominance of web search and related services (somewhat confusingly, Yglesias also argues in a separate piece for Slate that we should thank Microsoft for blunting the impact of a potential Google monopoly). As he describes it:

“Had that not happened, it’s entirely possible that Microsoft could have used its dominance of the PC marketplace to substantially pre-empt the rise of Google. Imagine a world in which more than 90 percent of people have Microsoft computers that default to a Microsoft Web browser that defaults to a Microsoft-owned search engine. Google search is out there as a kind of niche product for serious nerds, but it never generates the kind of revenue flow necessary to move in to start dominating the webmail and map spaces.”

Not only that, but Microsoft’s monopoly over the internet — in Yglesias’s version of events — also winds up blunting the impact of Apple, and thereby effectively prevents the company from building on its success with the iPod to launch the iPhone and reinvent the entire mobile phone market. Says Yglesias:

“With Microsoft-owned Web services for search and mapping dominating the Internet and exclusively available to users of Windows Phone, it’s not possible for rival smartphones to ever go mainstream… The mobile revolution looks more like a slow inching forward, with cutting-edge technology rarely finding marketplace acceptance and market-leading technology rarely being genuinely the best stuff [and] app-based services find it harder to take off.”

Is it possible that what the Slate writer describes might have actually happened if there had been no Justice Department prosecution of Microsoft? Theoretically anything is possible — but for me at least, his vision of a Microsoft-led future stretches the bounds of credulity to the breaking point.

The web disrupted Microsoft, not the JD

usinternet.gif

Why? Because even before the antitrust case was concluded and a settlement reached, it was already blindingly obvious that Microsoft had missed the potential of the internet completely. While it saw the browser as another piece of software it could tie into Windows and get people to use, it had no clue about the disruptive effects the web would have on virtually every aspect of the technology business over the subsequent decade, from search to advertising to mobile and personal web services. None of that even started to become obvious until Google came along, and even then it took awhile to sink in.

Internet Explorer was almost pathetically inadequate for a long time (although I am willing to admit that it did eventually get better), as were almost every single one of Microsoft’s attempts at web services such as MSN and all of its various related features, on which the company wasted untold billions of dollars. The web-ification of Office and other moves by the company eventually found a market with Windows users, but that also took years to accomplish.

The idea that the company could have built up this unassailable monopoly on the internet that would have ensured Google and Apple never became as dominant as they are in search or mobile borders on the ridiculous. And it also plays into a dangerously complacent view of antitrust investigations like the Microsoft one, which argues that if it wasn’t for the Justice Department swooping in to rescue us, we would have been condemned to a nasty future, trapped under the boot-heel of a monopolist, unable to save ourselves.

The reality is that in most cases, as in Microsoft’s, the disruptive effects of a changing technology environment have far more impact on dismantling a company’s monopoly control over a specific market than anything an antitrust regulator does. If Matt Yglesias wants to thank someone for crippling Microsoft, he should be thanking the internet — and the company’s own sclerotic management — not the Justice Department.

Post and thumbnail images courtesy of Flickr user Mark Strozier


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Apple faces triple damages, longshot appeal in ebook conspiracy

Five publishers agreed to pay a total of $166 million to settle their roles in a high-profile ebook price-fixing scheme. For Apple, however, the price tag could be much higher in light of a damning court decision that fingered it as the conspiracy’s ringleader.

The publishing and tech sector is still digesting the implications of Wednesday’s 160-page decision but, according to antitrust lawyers, Apple is in a tight legal spot. Here is an overview of what the company might pay and how the process will unfold.

Triple damages could mean large payout

Wednesday’s court ruling was a resounding victory for the Justice Department, which sued Apple and the publishers last year. The ruling will mean symbolic changes to Apple’s ebook pricing practices, but it also lays the table for cash damages in a parallel suit brought by state governments and class action lawyers.

The five publishers, who have already settled, will each pay amounts ranging from around $20 million to $75 million to compensate consumers who overpaid for ebooks — the money will come in the form of retail credits or, in some cases, small payments by check. It’s no coincidence, by the way, that Penguin, who fought the longest, will pay the most; those who settled early got a better deal.

Apple is in a different position. It vehemently denies wrongdoing and has fought the price-fixing accusations at all turns, in court and in the press. Now, if a verdict is entered after the damages phase of the trial, Apple is on the hook to pay special damages under a section of the Clayton Act that automatically triples antitrust awards.

Apple’s liability, according to lawyer Jeff Friedman, will be determined by this formula: harm to consumers x 3, minus the $166 million paid by the publishers.

Friedman is a partner with Hagens Berman, the lead class action firm in the case. He says the damages will be assessed by economists in court but that Apple’s ultimate payout will be in the hundreds of millions of dollars (this prediction, given his interest in the outcome, is likely on the high side).

The appeal and when Apple might pay

Apple says it will appeal Wednesday’s ruling, meaning the U.S. District Judge Denise Cote is likely to put the damages phase of the trial on ice.

According to Andre Barlow, a former Justice Department lawyer and antitrust expert, the judge who issued the ruling “will not want to waste time and resources” on assessing damages if her finding on Apple might not stand. From a technical standpoint, this means that Apple will file for a stay once the judge schedules the damages phase of the trial.

As for the appeal itself, Apple’s chances are slim. Prominent legal scholars told All Things D yesterday that they doubt the appeal will succeed because the decision is very fact specific — leaving Apple with few points of law to attack before the Second Circuit Court of Appeals.

This jibes with Barlow’s assessment:

“The Second Circuit may review the factual findings of the trial court, but typically may only overturn a decision on factual grounds if the findings are ‘clearly erroneous.’  Therefore, it is a huge hurdle in terms of arguing the facts.  If Apple loses at the Second Circuit, the case likely ends unless it is appealed to the Supreme Court and the Supreme Court could decide not to hear the case.”

Ripple effect unlikely

The upshot of the case is that Apple is likely to write a large check to consumers sometime in 2014. The dollar amount, however, is unlikely to faze Apple, which is rich enough to buy the entire publishing industry if it chose.

Instead, the episode will probably be remembered most as a PR headache for Apple, especially as the decision portrays the company’s executive and co-founder as ruthless arch-manipulators.

If there is a silver lining for Apple, it is that the decision is unlikely (as some have suggested) to ripple far beyond the ebook market, which is a relative drop in the bucket in the larger tech industry.

According to David Balto, a Washington antitrust lawyer, the decision could embolden others who deal with Apple — app makers, publishers and so on — to bring class action suits of their own.

Barlow and other lawyers, however, say the decision is very specific to the ebook conspiracy and doesn’t provide legal grounds to attack Apple’s other business practices.


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Apple faces triple damages, longshot appeal in ebook conspiracy

Five publishers agreed to pay a total of $166 million to settle their roles in a high-profile ebook price-fixing scheme. For Apple, however, the price tag could be much higher in light of a damning court decision that fingered it as the conspiracy’s ringleader.

The publishing and tech sector is still digesting the implications of Wednesday’s 160-page decision but, according to antitrust lawyers, Apple is in a tight legal spot. Here is an overview of what the company might pay and how the process will unfold.

Triple damages could mean large payout

Wednesday’s court ruling was a resounding victory for the Justice Department, which sued Apple and the publishers last year. The ruling will mean symbolic changes to Apple’s ebook pricing practices, but it also lays the table for cash damages in a parallel suit brought by state governments and class action lawyers.

The five publishers, who have already settled, will each pay amounts ranging from around $20 million to $75 million to compensate consumers who overpaid for ebooks — the money will come in the form of retail credits or, in some cases, small payments by check. It’s no coincidence, by the way, that Penguin, who fought the longest, will pay the most; those who settled early got a better deal.

Apple is in a different position. It vehemently denies wrongdoing and has fought the price-fixing accusations at all turns, in court and in the press. Now, if a verdict is entered after the damages phase of the trial, Apple is on the hook to pay special damages under a section of the Clayton Act that automatically triples antitrust awards.

Apple’s liability, according to lawyer Jeff Friedman, will be determined by this formula: harm to consumers x 3, minus the $166 million paid by the publishers.

Friedman is a partner with Hagens Berman, the lead class action firm in the case. He says the damages will be assessed by economists in court but that Apple’s ultimate payout will be in the hundreds of millions of dollars (this prediction, given his interest in the outcome, is likely on the high side).

The appeal and when Apple might pay

Apple says it will appeal Wednesday’s ruling, meaning the U.S. District Judge Denise Cote is likely to put the damages phase of the trial on ice.

According to Andre Barlow, a former Justice Department lawyer and antitrust expert, the judge who issued the ruling “will not want to waste time and resources” on assessing damages if her finding on Apple might not stand. From a technical standpoint, this means that Apple will file for a stay once the judge schedules the damages phase of the trial.

As for the appeal itself, Apple’s chances are slim. Prominent legal scholars told All Things D yesterday that they doubt the appeal will succeed because the decision is very fact specific — leaving Apple with few points of law to attack before the Second Circuit Court of Appeals.

This jibes with Barlow’s assessment:

“The Second Circuit may review the factual findings of the trial court, but typically may only overturn a decision on factual grounds if the findings are ‘clearly erroneous.’  Therefore, it is a huge hurdle in terms of arguing the facts.  If Apple loses at the Second Circuit, the case likely ends unless it is appealed to the Supreme Court and the Supreme Court could decide not to hear the case.”

Ripple effect unlikely

The upshot of the case is that Apple is likely to write a large check to consumers sometime in 2014. The dollar amount, however, is unlikely to faze Apple, which is rich enough to buy the entire publishing industry if it chose.

Instead, the episode will probably be remembered most as a PR headache for Apple, especially as the decision portrays the company’s executive and co-founder as ruthless arch-manipulators.

If there is a silver lining for Apple, it is that the decision is unlikely (as some have suggested) to ripple far beyond the ebook market, which is a relative drop in the bucket in the larger tech industry.

According to David Balto, a Washington antitrust lawyer, the decision could embolden others who deal with Apple — app makers, publishers and so on — to bring class action suits of their own.

Barlow and other lawyers, however, say the decision is very specific to the ebook conspiracy and doesn’t provide legal grounds to attack Apple’s other business practices.


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