Apple Socked for Antitrust Acts in 2 Rulings
MANHATTAN (CN) - Apple's "reprehensibility" in an e-book price-fixing scheme justifies assigning it both state and federal liability, a federal judge said today, while also advancing claims that antitrust violations harmed a nascent business.
"First, the 'reprehensibility' of Apple's participation in the price fixing conspiracy is proportional to the penalties sought," U.S. District Judge Denise Cote wrote. "Apple's lawyers and its highest executives orchestrated a price fixing scheme with blatant disregard for the requirements of the law. Apple has expressed no recognition that its conduct was wrongful, 'suggesting a lack of remorse and supporting further measures to deter future wrongdoing of a like type.'"
Apple was the lone holdout in several antitrust class actions against it and publishers Simon & Schuster, Macmillan, Penguin, Hachette and HarperCollins.
While the other publishers settled those claims for a total of $166 million, Apple went to a bench trial where it was slapped last year for having played a central role in the price-fixing conspiracy.
Cote later certified a class of e-book buyers, but the 2nd Circuit delayed sending notices to members of the class pending an appeal by Apple to postpone the trial and decertify the class.
That April ruling did not deter Cote from increasing Apple's potential liability for its antitrust behavior in two scathing opinions Thursday.
In the first, Cote rejects Apple's argument that piling claims from 33 states and U.S. territories onto the Clayton Act exposure would amount to "impermissible double recovery."
Calling this practice "not only proper but commonplace," Cote wrote: "It is fundamental to our republic that both the states and the federal government are empowered to punish those who violate their laws, even when both violations arise out of the same conduct.
Despite having alleged $155 million in damages to their citizens, the states seek to recover less than $9 million in civil penalties, the judge added.
"Finally, the civil penalties sought by the states are entirely reasonable in light of those for which any comparable antitrust violator would be liable," Cote wrote. "Any party that violates the relevant state statutes at issue would be subject to the same range of penalties that Apple is subject to here."
The second ruling deals with claims by Australian startup retailer DNAML that the antitrust behavior by Apple and the other publishers harmed its business.
Cote warned that it would be "challenging in the extreme" for DNAML to prove its case.
"Lost profits are quite speculative, as DNAML had only just entered the market and it will be difficult to determine what market share, if any, DNAML would have won from the 'large international conglomerates' that DNAML alleges occupy the retail market," the 22-page opinion states.
But she added: "It is more than plausible that a discount retailer was harmed by a conspiracy to remove retailers' ability to discount ebooks."
DNAML's attorney, Michael Guzman with Kellogg, Huber, Hansen, said it looks "forward to pursuing our claims aggressively."
"With regard to causation and damages, we note that the court fully endorsed our theory: 'It is more than plausible that a discount retailer was harmed by a conspiracy to remove retailers' ability to discount e-books,'" Guzman said in an email. "All things considered, we believe the case is off to a strong start."
Cote had noted that, while consumers were "the immediate victims of the defendants' price-fixing conspiracy," retailers faced directly effects as well.
"Their injuries were not 'too remote' from the defendants' unlawful conduct," Cote wrote.
Lawyers for Apple did not immediately respond to a request for comment.