By Allison F. Sheedy

Apple’s aggressive challenge to an external compliance monitor’s investigation into Apple’s antitrust compliance policies may be planting seeds of doubt that Apple hopes will bear fruit in its appeal of Judge Denise Cote’s decision in United States v. Apple, Inc. that Apple conspired to raise e-book prices.

Apple is charging that the court-appointed monitor has unreasonably demanded that he meet with Apple’s top executives, attempted to expand his reach far beyond Apple’s e-books line of business, and charged the company more per hour than Apple has ever paid an outside counsel.  After Judge Cote rejected Apple’s arguments in the U.S. District Court for the Southern District of New York last week, Apple immediately filed an interlocutory appeal of that decision.

On Tuesday the U.S. Court of Appeals for the Second Circuit granted Apple a temporary administrative stay of the monitor until a three-judge panel can rule on Apple’s motion for a full stay pending appeal.

Judge Cote hand picked Michael Bromwich in September to serve as an external compliance monitor “to review and evaluate Apple’s existing internal antitrust compliance policies and procedures, and to recommend to Apple changes to address any deficiencies in those policies and procedures.”  Although Bromwich lacked antitrust credentials, he had longstanding ties to the Judge herself.  Because of Bromwich’s lack of topical experience, Judge Cote appointed an assistant monitor with more antitrust experience, Bernard Nigro, to help him navigate the terrain.  In December, Apple complained to the Court about the monitor’s purportedly intrusive conduct. click here for more »

By Ankur Kapoor

In the latest skirmish in the e-books case of United States v. Apple, Inc., Apple has accused the external compliance monitor appointed by the court of conducting a “roving” and “unfettered” investigation into Apple’s business practices, including seeking to interview lead designer Jony Ive and board member and former Vice President Al Gore.

Apple is now moving the U.S. District Court for the Southern District of New York to suspend the court’s appointment of the external compliance monitor pending Apple’s appeal of that appointment.  According to Apple, the monitor is not only interfering with Apple’s business by exercising wide-ranging investigative powers, but is also charging excessive fees.  In a December 13, 2013, letter to the court responding to Apple’s court filings, the U.S. Department of Justice disputed Apple’s accusations and stated that, based on the DOJ’s review, the monitor’s “actions to date have been wholly within the scope of his authority under the Final Judgment.”  Judge Denise Cote will hear oral arguments on Apple’s motion on January 13, 2014.

In its filings with the court, Apple portrays an aggressive monitor seeking to examine Apple’s internal antitrust compliance program well before the court ordered Apple to have that program in place.  While the monitor certainly needs to understand Apple’s business before he can begin to evaluate Apple’s internal compliance program, it is questionable that needing to understand Apple’s business would justify seeking interviews with individuals who have little, if anything, to do with Apple’s day-to-day business operations and antitrust compliance program.  click here for more »

By Jeffrey I. Shinder

The proposed P3 shipping alliance among the world’s three biggest container shipping companies encountered more rough seas this past week.

The U.S. Federal Maritime Commission (“FMC”) has requested additional information from the parties.  This request will delay the implementation of the proposed alliance because, after the parties comply with the request, a new 45-day regulatory review period will begin.  While this request should not be interpreted as indicating that the alliance will not be approved by regulators, it almost certainly reflects the significant issues that the proposed deal raises for competition.

The proposed P3 vessel-sharing alliance among Maersk, MSC and France’s CMA CGM S.A has the expressed goal of dealing with overcapacity and declining freight rates through an agreement to share ships and engage in related cooperative operating activities, under a common management, while retaining individual commercial status and control of consignments.

The issues that are raised by this plan to create the world’s largest shipping alliance came into sharp focus last week when reports surfaced that the FMC is apparently questioning “operational contradictions” and “gaps” in the duties of the liners.  See Lewis Crofts,  “P3 shipping lines face questions over alliance’s scope ahead of US, EU, China meeting,” http://www.mlex.com/US/Content.aspx?ID=479918 (MLex, Dec. 6, 2013) (subscription required).  click here for more »

By Jean Kim

The European Commission (the “EC”), as expected, has approved Microsoft’s proposed acquisition of Nokia’s handset devices business, demonstrating that antitrust enforcers no longer view the operating system Goliath of the 1990s as a tempting target.

The European approval was the last remaining regulatory hurdle for the parties to go forward with the $7.2 billion acquisition.  The FTC granted “early termination” approval last week, which means that it will take no action to block the merger.

These relatively easy approvals by U.S. and European regulators are consistent with the similar ease with which Microsoft’s acquisition of Skype (worth $8.5 billion) sailed through U.S. and EC merger review in 2011.  Antitrust enforcers apparently are not concerned with Nokia’s 3% share of the smartphone market going to Microsoft, particularly when Apple and Samsung together account for almost 50% of worldwide smartphone sales in 2013.

Microsoft, after emerging in 2011 from a decade of oversight by the U. S. Department of Justice following the settlement of the DOJ’s 1998 antitrust suit, has truly entered a new era.  Antitrust enforcers have turned their gaze to bigger fish like Google and Apple, and no longer have a knee-jerk reaction to Microsoft’s every move in tech markets.

The EC has not completely withdrawn its scrutiny of Microsoft, however.  As late as March of this year, the EC fined Microsoft $730 million for breaching its five-year commitment to give customers a choice of browser in connection with the upgrade of its Windows 7 operating system.  This penalty was in addition to the more than 1.6 billion euros in fines that the EC had already levied on Microsoft over the last decade.

But Microsoft’s commitment with the EC expires in 2014 (unless extended), and Microsoft may well be left unfettered to pursue an acquisition strategy aimed at making it more competitive in a technological world that is no longer dominated by the personal computer.  Microsoft certainly has the funds for a shopping spree with its $77 billion war chest.

With the rollout of Surface tablets, and Xbox’s healthy 30% plus share of the console market, the Nokia acquisition will round out Microsoft’s portfolio and give it a foothold in three device markets where it can deploy and unify its Windows platform.

— Edited by Gary J. Malone

By Gary J. Malone

The record fines imposed by the European Union today as part of its settlement with eight global financial institutions for fixing benchmark interest rates highlight both the risks of collusion and the rewards of coming clean.

Although the EU fined the group of financial institutions a record total of 1.7 billion euros (about $2.3 billion), two of the participants in the cartels—UBS and Barclays—escaped any fines because they alerted the European officials to the wrongdoing.

The financial institutions settled charges that they fixed rates for the London interbank offered rate (“Libor”) in the Japanese yen and the euro interbank offered rate (“Euribor”) in euros.  Four of these financial institutions—Barclays, Deutsche Bank, RBS and Société Générale—conspired to fix interest rate derivatives in the euro.  Six of them—UBS, RBS, Deutsche Bank, Citigroup, JPMorgan and broker RP Martin—participated in cartels that fixed interest rate derivatives in the yen.  Pursuant to the Commission’s cartel settlement procedure, the companies’ fines were reduced by 10% for agreeing to settle.

The Europeans’ investigation follows related investigations into conspiracies to fix the Libor rate by U.S., British and Swiss regulators that led to five financial institutions, including Barclays, RBS and UBS, admitting wrongdoing and agreeing to pay more than $3 billion.

In announcing the settlement, Joaquín Almunia, the EU’s competition commissioner, stated that “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.”

The banks’ settlement with the EU marks the first time that Citigroup and JPMorgan, will pay penalties in the rate-fixing investigations.  Citigroup, which will pay 70 million euros in fines, avoided fines of an additional 55 million euros because it cooperated with the European investigation.

The international expansion of investigations into international conspiracies to fix benchmark interest rates is not surprising.  Competitors that collude to eliminate competition put themselves at the mercy of not just the multiple regulators that police competition around the world, but also of their co-conspirators when their interests diverge.

As soon as members of a price-fixing conspiracy suspect that cartel activities may be revealed, there can be a race to prosecutors’ doors to get a deal avoiding civil fines or even criminal penalties.  After the first whistle-blower reveals the existence of a cartel, however, the next conspirator through the door has to reveal some new wrongdoing in order to get a deal.  If that conspirator is aware of any related cartels, they are likely to be revealed to the prosecutors, who will then start new investigations.

After that point, all the other conspirators may soon come to realize that their elaborate cartels were really interlocking houses of cards that could not survive even one defection.