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 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).