Yes, I'm still harping on the Apple e-book anti-trust saga. Every writer and book lover ought to be paying attention to it. The outcome will decide the future of book publishing in the US. And, as an analyst, I find it fun mental exercise to parse through possible outcomes of stuff like this. If any readers are lawyers, feel free to correct my misunderstandings about the legalities over on my Facebook page.
The latest bit of news is that Apple agreed to pay $450 million to settle the inevitable class-action lawsuit that resulted Judge Denise Cote verdict that Apple colluded in price-fixing with publishers.
"The settlement was first announced last month, but the terms of the deal were not announced at that time. With the news of a $450 million agreement, Apple would save nearly $400 million from the $840 million the lawsuit originally sought, if it were to have gone to trial.
While Apple has agreed to the terms, they must still be ratified by U.S. District Judge Denise Cote. If the court's ruling that Apple violated antitrust laws is affirmed, consumers will receive $400 million from Apple."
This wasn't unexpected. Large corporations typically negotiate settlement agreements in class-action lawsuits rather than risk having to write a check for the maximum possible penalty. It's a simple cost-benefit calculation and guilt or innocence isn't part of the equation. Where the maximum penalty is $850 million, $450 million, a bit more than 50%, is a perfectly reasonable settlement. Apple is meeting DOJ halfway. That's righteous...assuming the judge doesn't hate you.
See, here's the interesting bit -- Judge Denise Cote has shown unremitting hostility towards Apple since before the anti-trust trial began and that accusation is a big part of the basis for the appeal of her guilty verdict. Which is why I find it notable that there's a clause that kicks in if the Appeals Court overturns her verdict and orders a t:
"...if the ruling is not affirmed and liability must be retried, the settlement provides a smaller recovery of $50 million."
Now, I'm not a lawyer (IANAL) so I don't know how common such provisions are in settlement agreements; but to my untrained eye, that bit of legal language looks like it's designed to twist Judge Cote's arm "Take the deal and we'll agree to $450 million. Reject the deal and it drops to $50 million." Why do I think that?
If Judge Cote is unfairly biased against Apple, that clause presents her with a choice she must find abhorrent:
1. Accept the settlement and Apple pays half the maximum penalty she probably wants to inflict if the Appeals Court sustains her verdict; or
2. Reject the perfectly rational settlement offer, thereby giving Apple more evidence of personal bias and strengthening their appeal while also positioning Apple to settle the whole morass for $50 million if the appeal succeeds. Apple has something north of $150 billion cash on its balance sheet at last report, so $50 million is .0003% of Apple's checking account. It's a rounding error (though $450 million is only a slightly larger rounding error and the full $850 million penalty Judge Cote would probably like impose would only be ~0.6% of Apple's cash on hand).
If #2 happens and the Appeals Court overturns her original verdict, the only way to slap Apple with any non-chump-change penalty would be for DOJ retry the case -- not a pleasant prospect. It would take years, Apple would come armed with an Appeals Court ruling that neutralizes at least some of their previous arguments, and Judge Cote can't force them to do it. So she either accepts the smaller settlement or Apple pays virtually no penalty at all no matter what happens unless the DOJ wants to start the whole mess all over again.
DOJ must be confident that Apple's appeal will fail; otherwise I can't imagine how/why DOJ's lawyers agreed to that clause. I don't know what Judge Cote thinks Apple's chances are on appeal, but if she's at all worried it will succeed, I can't imagine she's very happy with the DOJ right now.