Back to top

Analyst Blog

Apple Inc’s (AAPL - Analyst Report) e-book pricing case has taken a new turn, with the company objecting to the exorbitant fees charged by the court appointed monitor.

Michael Bromwich, a former U.S. Justice Department inspector general, is charging a 15% administrative fee on top of his hourly rate. Moreover, he is also said to include the cost of hiring other lawyers who assist him.

Management recently stated that Bromwich’s proposed hourly fee of $1,100 is the highest ever a lawyer has charged them. Bromwich, on his part, justified the amount by stating that he has been handling the case through his consultancy, the Bromwich Group instead of his law firm Goodwin Procter LLP.

For the first two weeks post his appointment, Bromwich charged $138,432, which is almost three-fourth of a federal judge’s annual salary.

The whole problem started in July 2013, when subject to some complaints regarding e-book pricing. The District Judge found Apple guilty of conspiring with five U.S. publishers that raised e-book prices by millions in total.

The accused publishers included companies such as Hachette Book Group, News Corp.’s (NWS - Snapshot Report) HarperCollins, Holtzbrinck Publishers, Penguin Group and CBS’s (CBS - Analyst Report) Simon & Schuster Inc. Using this strategy, Apple’s thought of competing Amazon (AMZN - Analyst Report) in the e-book market 

In this connection, the federal government and 33 states asked the court to appoint an antitrust monitoring authority, which will look after Apple’s compliance matters for a period of 10 years.

During this process, Judge Cote proposed that Apple should be forced to enter into separate contracts with each publisher and there should be a time gap of at least six to eight months between each contract. The court believed that this plan could restrict such pricing conspiracies in the future.

It remains to be seen how Apple deals with the whole issue going forward. Although Apple intends to carry on its fight, we believe that the company is running out of options. Nevetheless, since the e-book segment does not form a major part of Apple’s business, its impact on the stock will be limited.

Currently, Apple has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%