Closing arguments

41 questions: Clues about the Apple e-book judge's thoughts

June 23, 2013: 12:55 PM ET

What do the patterns in Judge Cote's queries tell us about where the case is headed?

Judge Cote.

FORTUNE -- Veteran court watchers will tell you that it's dangerous to read too much into the questions judges ask during closing arguments in a trial. Some are probing, some are rhetorical, and in some cases the judge may be playing devil's advocate, seeming to take positions he or she doesn't actually hold.

Still, in a bench trial -- like U.S.A. v. Apple, the e-book antitrust case that wrapped up on Thursday -- the judge is the sole finder of fact and will make the final ruling. In such a trial, the questions the judge asks may be our best clues about where the case is headed.

So we took a close look over the weekend at the transcript of the Apple (AAPL) trial's final day to see if there were any telling patterns in the 41 questions U.S. District Judge Denise Cote put to Orin Snyder, representing Apple, and Mark Ryan for the U.S. Department of Justice.

Seven of the questions we can eliminate altogether. They were either simple clarifications or corrections that proved nothing more than that Judge Cote was paying close attention -- catching, for example, every time Ryan said "Apple" when he meant "Amazon."

Out of the 34 substantive questions that remain, the first thing that jumps out is that more were directed at Apple (21) than the government (13) and that the nature of the queries she put to each side was, for the most part, quite different.

Six of the questions Judge Cote asked Apple's attorney had to do with the alleged conspiracy among the publishers to raise the price of e-books, and the extent to which Apple consciously joined it. For example:

  • Q: Did Apple dispute the fact that the conspiracy took place? (A: Apple says it doesn't know one way or the other.)
  • Q: Was Apple aware before it came to New York that the publishers were willing to work together to put pressure on Amazon to raise e-book prices. (A: No.)
  • Q: Are you saying that Apple did not understand from newspaper articles that there was a collective effort by book publishers to withhold books from Amazon? (A: Absolutely not. It's no different than Wal-Mart lowering its price for a product to $8.99 and the next day K-Mart and Costco doing the same thing.)

Four of her questions had to do with Apple's intent as it entered negotiations. For example, at one point Judge Cote asked Snyder:

  • Q: So I take it from what I've just heard that you would agree that Apple should be found liable if it did act with intent to remove the $9.99 price point from the market? (A: No. If your Honor found that there was an agreement to restrain trade, to put it in legal terms, I think then our entry was not only inherently pro-competitive but effective.)
The MFN.

The MFN.

Judge Cote questioned both sides closely on the purpose of the MFN -- the "most-favored nation" provision in Apple's contract with the publishers that gave Apple the right to match its competitors' lowest prices.

  • Q: Didn't the MFN have two roles, she asked the government, 1) Provide price protection for Apple and 2) Ensure that the publishers would take control of pricing away from Amazon. (A: Right. And there was third: Change the bargaining equation, persuade Amazon that the five publishers were acting as one, and force it to capitulate.)
  • Q: If the MFN had multiple purposes, she asked Apple, and the government can prove that one of those purposes was illegal, then the fact one of the purposes was legal doesn't protect Apple, does it? (A: Yes it does, Snyder argued, because recent antitrust case law protects distributors and other vertical players, limiting the inferences the fact finder can draw from ambiguous evidence. The whole purpose of the Supreme Court's decision in the Monsanto case, Synder claims, is to avoid interpreting lawful behavior as conspiratorial behavior.)

Four of the questions she put to the DOJ seemed to cast doubt on the government's theory of the case. For example:

  • Q: Is it the government's theory that if I find there was a meeting of the minds between Apple and the publishers that e-book prices should go up to $12.99 and $14.99, the government has carried its burden of proof by that alone? (A: Yes, the law is clear in a per se case it's the agreement that's the violation.)
  • Q: Why does it follow that Apple wants to change the industry model? I can see it as the price of entry that it wants to meet the desires of the publishers to raise e-book prices. But why does it care once it has price protection whether or not the publishers actually follow through on what they've said they want, which is to take control of pricing and move the price up? (A: One of the reasons is that Apple believed it had a substantial advantage on device and Amazon had an advantage in price. Take that away, change the playing field so that it's not about price, and Apple can compete with Amazon on device.)
Cue. AP Photo.

Cue. AP Photo.

In seven of them, she seemed to be taking Apple's side. For example:

  • Q: "You want in a very short period of time to enter a market," she said of Apple's Eddy Cue's offer to let publishers raise e-book prices. "You've studied your audience as well as you can... You want to get a deal done in six weeks. What is your selling point to them? Your selling point to them is I'm okay with you raising prices." (A: Here's the problem," Ryan replied. "The only way that they could get the publishers to move was to assure the publishers that they would be moving together.")
  • Q: If you're arguing to me now that Apple did something illegal, for all the reasons you've explained, why have you not argued to me as well that Barnes & Noble did something illegal? (A: It's not a defense for Apple to say, why didn't you sue somebody else?)
  • Q: What about Apple's argument that it didn't raise prices, since the e-books would have been unavailable at any price but for Apple's entry into the market? (A: First of all, prices did go up substantially. And it's not so clear that, acting unilaterally, the publishers would have been successful in withholding eBooks for any substantial period of time or in any substantial number from Amazon or anyone else.)

So there you have it.

If Judge Cote believes the preponderance of the evidence shows that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books -- something she said she thought it would before the trial began -- Apple is in trouble.

If she buys Apple's argument that it was simply pursuing its own legitimate business interests and that the government has failed to provide evidence that shows unambiguously that the company was doing otherwise, then the government has wasted a lot of tax payers' money.

See also:

Court drawings: Illustrations by Elizabeth Williams

PED talks about the case: The Mac Observer's Apple Context Machine Podcast

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