Apple monitor under fire for $2.6M bill, “roving inquisition”

The lawyer overseeing an Apple antitrust order is a political hack who has run roughshod over the judicial process during ten visits to the company’s Cupertino headquarters, a Wall Street Journal editorial charged Tuesday, and he should pay back the $2.65 million he has already charged the company for a court-ordered investigation

The page-long editorial (paywall) makes a case against Michael Bromwich, who was appointed by U.S. District Judge Denise Cote in 2013 to oversee issues related to her ruling that found Apple fixed the price of ebooks.

While the Journal has gone after Bromwich before, Tuesday’s editorial is especially provocative, and is paired with a separate article that excerpts parts of a transcript from a recent appeals court hearing. Here is some of what the Journal, which appears to smell blood in the water, had to say:

Mr. Bromwich has since charged Apple in excess of $2.65 million for his services through January, conducted some 80 interviews with executives and staff, and made 10 fact-finding missions to California. According to billing records and his semiannual reports to Judge Cote, which we reviewed, there are new reasons for the Second Circuit to sack Mr. Bromwich and end what is a major abuse even by the standards of modern antitrust.

The editorial goes on to repeat criticism that Bromwich, who is billing $1,100/hour, has no background in antitrust law, and that he is a friend of the judge. It also claims he has exceeded his authority, and conflated the role of the prosecution and the judiciary:

The problem is that Mr. Bromwich has been stumbling all around Cupertino to conduct a roving, unfettered inquisition into Apple’s business … He even probes units such as Siri voice recognition, the maps group and hardware engineering. None of this is relevant to antitrust.

As for Mr. Bromwich’s narrow ‘defined mission,’ he finds that the live or online antitrust training sessions that are mandatory for 5,000 employees are insufficient because they do not ‘acknowledge, dissect, and discuss past cases in which Apple was involved.’ Apparently he wants these seminars to be encounter groups in which Apple workers come to terms with misdeeds they vigorously deny.

You get the idea. While the Journal has vented about Bromwich before, the new editorial’s tone — and its assessment of an appeals court hearing in December — suggests Apple might just succeed in rolling back parts of Judge Cote’s landmark 2013 ruling. That’s because the new details of Bromwich’s activities (some of which were redacted until) may sway the appeals court judges, who have already appeared more sympathetic to Apple than Judge Cote, that this may be an investigation run amok.

Apple has already agreed to a $450 million settlement with the Justice Department and class action lawyers over claims it headed a price-fixing conspiracy, but the deal is contingent on the Second Circuit of Appeals’ review of the original 2013 decision. In addition to that case, which is still pending, the appeals court is also taking up the question of the Bromwich’s conduct in March.

Critics, including me, have argued that the Justice Department’s antitrust campaign against Apple has been misguided given that the company remains a bit player in a market dominated by Amazon. Now, the Journal‘s latest salvo (whose appearance may have been fostered by Apple’s lawyers) and the upcoming hearing, will but the long-running affair under yet more scrutiny. Here, by the way, is how the Journal thinks the whole thing should end:

If Apple prevails in the Second Circuit, it ought to sue Mr. Bromwich and attempt to disgorge the $2.65 million he has soaked from shareholders.

Rivals launch “Don’t Comcast the Internet” to oppose TWC merger

In the current debate over how the U.S. should oversee the internet, the worst case scenario for many is the web reinvented as cable TV: a service where subscribers pay a lot of money for a limited number of channels, and in which the distributor chooses which shows can even appear on the platform.

Rivals of the telco giant [company]Comcast[/company] fear this is exactly what the company is trying cook up through acquiring its next largest competitor, [company]Time Warner Cable[/company]. The proposed merger is already unpopular with consumer groups, and now industry opponents are going into high gear to try a stop it.

On Monday, a consortium of smaller phone and broadband companies launched a campaign called “Don’t Comcast The Internet” to draw attention to a parade of potential horribles that could arise if regulators allow the merger.

At an event in Washington to kick off the campaign, the group presented antitrust authorities who predicted that a combined Comcast-TWC would stifle would-be competitors. One way it could allegedly do so is by using its market power to pressure content partners to keep their content — which is the lifeblood of both TV and broadband — away from new entrants.

The group also warned of danger to another part of the internet, predicting that younger internet and content companies would struggle to obtain permission from Comcast-TWC to appear before subscribers in the first place.

Nick Grossman of venture capital firm Union Square Ventures said he worried that start-ups could find themselves asking “Will Comcast greenlight it?” as a pre-condition to launching their business on the internet.

Others worried that the Comcast would exploit its set-top box to control the user experience and business ecosystem, much as Microsoft exploited its operating system monopoly in the 1990s.

It’s too soon of course to say if all — or any — of these dire predictions might come to pass. The FCC and the Justice Department still appear to be months away from finishing a review of the merger, a process that Comcast VP David Cohen had earlier predicted would be finished by the end of 2014.

In recent months, however, Comcast critics appear to have gained momentum as approval for the merger, which once seemed a near-sure thing, has come under growing doubt.

Comcast, meanwhile, appeared unfazed by the appearance of the coalition, offering the following statement:

“There’s no real news here — just another group of existing opponents making the same arguments they have already made at the FCC for months, many of which weren’t found to be credible in our past transaction reviews, and all of which we’ve refuted directly with evidence in the FCC record.  The real facts remain the same:  consumers don’t lose choice in the broadband or video markets.  Consumers will see real benefits in faster broadband speeds and better video products, and a host of other benefits.  And there are no transaction-specific harms to this merger.”

The “Don’t Comcast the Internet” crowd consists of industry umbrella groups Comptel, ITTA (The Independent Telephone & Telecommunications Alliance) and NTCA–The Rural Broadband Association. It’s not the first anti-Comcast posse to spring up of late: content providers like Netflix and Dish launched an initiative late last year called “Stop Mega Comcast” to point out the alleged downsides of the deal.

This story was updated on Tuesday at 12:30pm ET to include Comcast’s statement.

Google to give all users clearer information about data use

Google has vowed to revise its privacy policy and account settings, in order to make it clearer to people what it does with their data and give them more control. This comes as part of a settlement with the U.K. Information Commissioner’s Office, announced on Friday, but the changes will apply globally.

The ICO and other data protection regulators across the EU have been coordinating a crackdown on Google’s practices since 2012, when the company introduced a new unified privacy policy. The unified policy allowed [company]Google[/company] to mix and match personal data across its various services – between YouTube and Search, for example. However, many people did not, and still do not, appreciate what this means in terms of user profiling.

Google has faced repeated fines over its refusal to change the policy in countries such as France, Italy and Germany, but the sums involved were chickenfeed for a company of Google’s girth. The U.K.’s ICO hasn’t fined Google in this way, but has repeatedly said that Google’s settlement proposals didn’t go far enough.

Now this long-running drama may be drawing to a close. On Friday the ICO triumphantly brandished an undertaking in which Google said it would do the following things during the next two years:

  • Make its privacy policy easier to find, and be clearer in that policy about what user information it processes and why.
  • Provide users with “information to exercise their rights” and launch a redesigned account settings version to give them more control.
  • Add two provisions from the Google terms of service to the privacy policy, regarding email data and the “shared endorsement” feature.
  • Add to the privacy policy information about “the entities that may collect anonymous identifiers on Google properties and the purposes to which they put that data.”
  • “Take several measures” to tell passive users – those using third-party services that are plugged into Google services, such as advertising – more about what’s happening with their data. Those running the third-party services will also need to “obtain the necessary consents” for this data collection.
  • “Enhance its guidance for employees regarding notice and consent requirements.”

Google also said it would continuously evaluate the privacy impact of future changes to its services and keep users informed, especially where the changes “might not be within the reasonable expectations of service users.” Particularly significant changes to the privacy policy will be “reviewed by user experience specialists and with representative user groups before the policy and associated tools are launched as appropriate.”

The changes will make sure Google is compliant with the U.K. Data Protection Act, which is based on European law. It is not yet clear whether this is the end of the matter as far as the other EU data protection authorities are concerned — I understand that the changes will apply in all countries around the world, though.

Here’s what ICO enforcement head Steve Eckersley said in a statement:

Google’s commitment today to make these necessary changes will improve the information UK consumers receive when using their online services and products.

Whilst our investigation concluded that this case hasn’t resulted in substantial damage and distress to consumers, it is still important for organisations to properly understand the impact of their actions and the requirement to comply with data protection law… This investigation has identified some important learning points not only for Google, but also for all organisations operating online, particularly when they seek to combine and use data across services.

Although the list of commitments is fairly comprehensive, some terms are vague and the proof may lie in the implementation. For example, the EU privacy watchdogs previously demanded that users get the opportunity to “choose when their data are combined, for instance with dedicated buttons in the services.” That’s not merely a matter of giving users “information to exercise their rights”, so it will be interesting to see what the redesigned account settings entail.

So far, Google has merely said:

We’re pleased that the ICO has decided to close its investigation. We have agreed improvements to our privacy policy and will continue to work constructively with the Commissioner and his team in the future.

Even if this does indicate a conclusion to the unified privacy policy saga, then Google still faces major regulatory headaches in Europe. These include the big search antitrust case – tied in with digital agenda commissioner Günther Oettinger’s apparent desire to extend a version of the “Google tax” copyright levy across Europe – and a potential second antitrust case over Android.

Still, one at a time, eh?

This article was updated at 8.15am PT to note that the changes will apply globally.

Apple, Google anti-poaching settlement now reported to be $415M

Four big technology companies involved in a wage-fixing scandal will reportedly add $90 million to top off an earlier proposed settlement that was rejected by a federal judge as too low. The overall deal is now reportedly worth $415 million, which will be distributed to current and former engineers at Google, Apple, Adobe and Intel, and to the lawyers who are representing them in a long-running class action case.

News of the revised settlement came Tuesday night via Reuters, which reported that the tech companies had decided to end an appeal of an August court ruling in which U.S. District Judge Lucy Koh concluded that an initial proposed settlement of $324.5 million was too low, and that any revised figure would have to be at least $380 millionThe New York Times, citing a source close to the case, reported the latest $415 million figure.

While these proposed settlement figures are peanuts for the giant tech companies, the antitrust issues at the heart of the case — especially the corporate skullduggery by powerful executives like the late [company]Apple[/company] CEO Steve Jobs — have been a source of fascination for Silicon Valley. These included a set of arrangements in which the companies kept “do no poach” lists as part of a conspiracy to suppress wages for engineers.

Judge Koh’s decision to reject the original $324.5 million proposal came after she compared it to an analogous wage-fixing settlement (involving [company]Pixar[/company], [company]LucasFilm[/company] and [company]Intuit[/company]) that paid the affected engineers a higher per capita amount.

Despite all the fuss, however, the revised deal will only produce modest payouts. After the lawyers receive their expected contingency fee of about 25 percent, the 64,000 or so engineers covered by the deal will likely receive a few thousand dollars each.

 

As Comcast merger enters final phase, deal may be on thin ice

When telecom giant Comcast announced plans in February to swallow its largest rival, Time Warner Cable, the consensus in Washington and on Wall Street was that regulators would let the deal go through. Now, as the final phase of an FCC comment period draws to a close, all bets are off.

Recently, views of the merger have shifted amid growing public concern over the state of U.S. broadband, which is rapidly eclipsing pay TV as consumers’ go-to source for entertainment and information. Meanwhile, Comcast’s rivals have gained momentum in their quest to stop the deal.

The final outcome of the review process involves many wild cards — from the fate of net neutrality to Republican control of Congress — but it’s safe to say for now, based on evidence and experts, that the merger’s chances of passing are lower than they were a few months ago.

A new skepticism

A shift in sentiment over Comcast’s proposed merger has been reflected in both stock market activity and by the behavior of the deal’s opponents.

Investors’ doubt about the merger’s fate can be seen in the fact that share prices of [company]Comcast[/company] and [company]Time Warner Cable[/company] are still valued as if the companies are separate entities. As the New York Times noted in November, the adjusted share price of two firms should move toward the same value as the close of the merger approaches — but that is not happening.

Corporate opponents, such as Netflix and smaller telecom firms, have recently ramped up their lobbying game, and launched a new anti-merger campaign.

According to sources in Washington, the fact these companies are bankrolling new initiatives like “Stop Mega Comcast” so late in
the process reflects a newfound hope that the FCC or the Justice Department will block the deal. This is a contrast from the summer when merger opponents sometimes conceded in private that they viewed Comcast as too big and too well-connected to stop.

These developments are evidence of the growing skepticism over the deal’s prospects, but they don’t describe the underlying reasons for that skepticism. Those reasons are rooted in evolving views over how regulators should examine the antitrust issues that led to a review of the deal in the first place.

When the deal was announced in February, Comcast sought to preempt antitrust objections by promising that it would divest some cable TV subscribers in order to ensure the combined company would have less than 30 percent of the U.S. market — thereby quelling concerns about monopoly.

The problem is that the monopoly fears surrounding the deal don’t just stem from its potential effect on the cable TV market.

big dog

Bully for broadband

“What makes Comcast unique is its power in three different facets — as a programmer, a distributor and an ISP,” Maurice Stucke, an antitrust professor at the University of Tennessee, told me in a recent interview.

According to Stucke, who opposes the merger, Comcast has tried to frame its proposed acquisition of Time Warner Cable through the lens of cable distribution and downplay other dimensions of the deal, especially its potential effect on the market for internet services.

Stucke suggests the combined company would have an unrivaled ability to leverage its broadband connections in order to get exclusive online deals from content providers, or to give special treatment to some websites over others.

In practice, this would see Comcast and its X-1 set-top box acting as a new type of master gatekeeper, determining which apps and websites can be easily accessed by consumers. Indeed, there are signs this is happening already.

[pullquote person=”Maurice Stucke, University of Tennessee professor” attribution=”” id=”902775″]”What makes Comcast unique is its power in three different facets — as a programmer, a distributor and an ISP.”[/pullquote]

Earlier this year, Comcast demanded that Netflix pay tolls to prevent its internet stream from being degraded. In the future, critics fear, a merger would make it easier for Comcast to exercise the same sort of control over a wide range of other over-the-top internet services, including a standalone HBO. Comcast could one day control online entertainment options in the same way that it currently controls TV channels.

Such fears have led merger opponents to say the FCC or the Justice Department should step in not because of cable TV concentration, but to ensure that Comcast can’t monopolize broadband-based content.

The actual amount of control that a combined Comcast–Time Warner Cable would wield over the internet is in dispute. Comcast claims the merger will not give it a commanding slice of the broadband marketshare, while critics warn the merger will hand the company control of over half the residential high speed connections in the country.

The question now is what the FCC will conclude, and how both the agency and the Justice Department will respond.

So far, FCC Chairman Tom Wheeler has been clear that he believes the U.S. needs more and faster broadband, and that competition is the key to achieving this. This could bode ill for Comcast’s merger plans if Wheeler agrees that the deal is indeed about internet service, not cable TV.

At the same time, Wheeler will have to contend with Comcast’s contention that internet competition should not be defined only by conventional connections, but by other forms of internet access like fiber, next generation DSL or over-the-air offerings from phone carriers and others.

“Anyone who tells you what the future of broadband holds is shooting in the dark. We’ve seen time and again people’s inability to predict what will happen in the real world,” said Christopher Yoo, a law professor at the University of Pennsylvania, who argues that the FCC should leave broadband build-out to the market and let the merger go through.

Entrepreneur Mark Cuban has likewise expressed concern that the FCC might do more harm than good by taking a hands-on role in promoting broadband. Others, however, point out that many consumers have only one realistic option for high speed-broadband and that a Comcast merger would result in these de facto monopolies becoming more entrenched.

comcast_xbox

Picking battles

Comcast’s proposed merger is facing an unprecedented level of opposition, which will grow more shrill in the wake of a final round of comments that poured in this week from competitors and public interest groups. Meanwhile, a new filing foul-up by Time Warner Cable has forced the agency to slow down the review process for a second time, and the longer the review process drags on, the less likely it will succeed.

While the momentum is on the sides of the opponents, the overall merger process itself is tied not only to the broadband debate, but to the greater game of the FCC and Washington politics. In this context, Chairman Tom Wheeler must take account of an incoming Congress that will be controlled by Republicans, many of whom support the merger.

While the FCC is an independent agency and Wheeler controls three of the five necessary votes to make decisions, any sign that he intends to block the merger could result in a partisan backlash in the form of threats to the FCC budget or a series of subpoenas. People who know Wheeler say he would find the latter possibility — in which he would have to sit before grandstanding minor-league Republicans — especially irksome.

The threat of partisan obstruction also has implications for the FCC’s other agenda items, including a major spectrum auction that Wheeler regards as critical to the country’s broadband future and that he hopes to make part of his legacy. A political blow-up with Republicans could make the auction harder to pull off.

Meanwhile, there is the ongoing dance over net neutrality, and whether the FCC will reclassify broadband providers as so-called Title II common carriers, which, for now, is the only legal path to prevent internet companies — including Comcast and Time Warner Cable — from giving special treatment to some websites over others.

After the White House delivered an unexpected declaration of support for Title II in November, the FCC is expected to go forward with the reclassification process early in 2015. The plans to do so, however, are already drawing howls of protest and political shenanigans from the telecom giants, including Comcast. As a result, a decision to block the merger would make Comcast a double loser, and potentially lead the company to seek political payback against the rest of Wheeler’s agenda. (For now, however, the outcome of the Title II is still up in the air pending the FCC’s decision and recent proposals for a new type of net neutrality legislation.)

A final piece of the political puzzle related to the merger lies with the Justice Department, which could offer the FCC important covering fire but has yet to do so.

Specifically, the Justice Department could declare that it regards the merger as a violation of antitrust laws, and that it intends to sue under the Clayton Act. The legal case for a lawsuit appears to be strong, and the mere threat of legal action would likely be enough to scupper the deal (as occurred when AT&T sought to acquire T-Mobile). But for now the file still lies in the FCC’s lap, in part because it can stop the merger simply by not acting.

Under the law, the FCC must conclude that a cable merger benefits the public before granting approval. In the case of Comcast and Time Warner Cable, the benefits are far from clear, which means the agency can stop the merger by demanding a sky-high host of concessions or simply by sitting on its hands.

Doing either of those things, however, would require Wheeler to absorb the full political backlash, which is why he may be waiting to see if the Justice Department will weigh in.

The end game

Right now, the proposed merger between Comcast and Time Warner Cable still stands a good chance of going through. Yoo, the law professor, and people at Comcast acknowledge that its prospects are not as rosy as before, but are ultimately optimistic about its chances.

The final outcome, though, is likely to be determined by a combination of politics and straight-up policy analysis. At Gigaom, the editorial staff is opposed to the merger on the grounds that it will diminish competition in the market for broadband, and allow Comcast to shoehorn the new era of online entertainment into the old bundle model of cable TV.

But these considerations may not be determinative. The ultimate decision, which is likely to come in February or March, must be made by Chairman Wheeler, and will be shaped in large part by the degree of support he receives from the Justice Department.

Federal Communications Commission (FCC) Chairman Tom Wheeler testifies before the Communications and Technology Subcommittee on Capitol Hill in Washington, DC, May 20, 2014.    (Photo by Jim Watson/AFP/Gett

Federal Communications Commission (FCC) Chairman Tom Wheeler testifies before the Communications and Technology Subcommittee on Capitol Hill in Washington, DC, May 20, 2014. (Photo by Jim Watson/AFP/Gett

Comcast-TWC merger delayed, FCC says 7,000 docs wrongly held back

Comcast’s plans to swallow its largest rival Time Warner Cable has suffered another setback as the FCC announced Monday it would once again halt its “shot clock,” which is the 180-day time period during which the agency seeks to complete its review of proposed mergers.

In a letter published on Monday, the [company]FCC[/company] said it had to impose the delay upon discovering that Time Warner Cable improperly classified more than 7,000 documents as attorney-client privileged.

The misclassification, which the FCC says it discovered in early December, meant that the agency has not been able to properly review aspects of the proposed merger, which has significant implications for consumers and for both the telecom and entertainment industries.

As the FCC explained, the delay has meant that the agency had to conduct portions of its review process anew:

The effect of these late disclosures has been to slow down the Commission’s review of the Comcast/TWC/Charter transaction, in particular because sections of the review that staff had thought were complete now must be reopened to take account of the additional documents that have been disclosed.

From the letter, it appears that [company]Time Warner Cable[/company] held back the documents in the first place by designating them as attorney-client privileged, which companies can use to withhold documents in a legal or regulatory matter. The privilege can only be invoked in very specific circumstances (typically when a lawyer is providing advice to a client), however, and a company must still put the documents in questions on a list it shows to the other side.

While the process of designating documents as attorney-client privileged can give rise to disputes, it is unusual for such a large number of documents to be misclassified.

The mistake has drawn what appears to be a rebuke by the FCC in its letter (emphasis mine):

While the Commission can understand and accept that minor errors can occur when preparing both documents for production and privilege logs; it expects applicants to promptly correct errors, without prompting, when they occur. Here, however, the magnitude of the errors, with respect to both the document production and the privilege log, is material and the delays in rectifying them were substantial so that the tardy productions have interfered with the Commission’s ability to conduct a prompt and thorough review of the pending applications

The upshot is that the merger review process will be delayed by another three weeks until January 12, 2015, according to the letter.

This delay comes after the FCC stopped the shot clock in November after content companies, including [company]Disney[/company] and [company]Viacom[/company], went to court to prevent disclosing sensitive contracts as part of the merger review process.

When [company]Comcast[/company] announced the proposed merger in February, executives predicted that the deal would go through by the end of the year. The latest delays do not necessarily mean the deal is in trouble, though anti-trust experts generally agree that the longer a merger review draws on, the less likely it is to go through.

Meanwhile, the FCC also said the shot-clock delay does not affect a Tuesday deadline by which parties interested in the merger must submit reply comments.

Here’s Monday’s letter:

FCC Letter Re Shotclock

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Microsoft axes its EU browser choice mechanism after five years

Five years ago, Microsoft began offering a choice of browsers to European customers who were booting up a copy of Windows for the first time. It did this in order to settle an antitrust case with the European Commission and avoid a hefty fine.

That commitment – which [company]Microsoft[/company] wasn’t entirely consistent in sticking to — ended on Wednesday. The firm has accordingly axed its browser choice mechanisms, telling users: “Microsoft encourages customers who want more information about web browsers or want to download another browser to do so by visiting the websites of web browser vendors directly.”

Windows is obviously still a big deal, but not as market-dominating as it was back in 2009. Back then, if you wanted a personal computer, you were most likely to buy a Windows PC. As of next year, according to analyst estimates, you’re as likely to buy a tablet instead – though don’t write off the PC just yet, particularly in Europe and the U.S.

The main reason that the European Commission wrung the browser choice concession out of Microsoft was that the company was trying to extend its market dominance past the operating system to the next big platform: the web. It was doing so by making Internet Explorer the default browser in Windows, something that the Commission saw as an anticompetitive abuse of its dominant position.

By removing that default status, other browsers got their chance to shine – it was no longer necessary for users to already know about that other browser and consciously visit its download site on Internet Explorer, for them to be a click away from downloading it. Five years later, Chrome is now the most popular browser in the world.

Internet Explorer browser choice

And the statistics for Europe versus North America, for example, are telling. Looking at desktops specifically, in North America, Chrome has a 41.52 percent share of the browser market and Internet Explorer is in second place with 32.75 percent. In Europe, Chrome has a 47.2 percent share and IE has just 17.53 percent, putting it in third place behind Firefox (on 25.68 percent.) While regulatory intervention isn’t the only reason for this situation — Chrome still beats IE in North America, where there was no intervention — it’s likely to have been a big one. Defaults matter.

The rise of Chrome across the desktop and mobile, with [company]Google[/company] as its default search engine, has become a key factor in Google’s 90+ percent dominance in the EU search market. Now it’s that company’s turn under the Commission’s antitrust spotlight, thanks to its abuse of that position to stamp out vertical search rivals and the like. If the Commission manages to cut Google down to size with whatever the settlement of that case entails, who knows which future monopolist will get the chance it craves?

This article was updated at 9.20am PT with some statistics about browser share, and slightly rearranged around that addition.

Google goes to court for antitrust claims over Android apps

Google will try to persuade a federal judge in San Jose, California on Thursday that its Android agreements, which requires Samsung and other phone makers to include products like Google Search and Maps as default apps, are not anti-competitive.

The hearing comes after a hard-nosed class action lawyer sued Google in May, claiming that consumers are harmed by Google’s so-called “MADA’s” (Mobile Application Distribution Agreements), which set out the terms under which device makers can use the Android operating system.

In its motion to dismiss the claim, [company]Google[/company] points out that, while the MADA’s require its own apps to be installed as a default choice, consumers are still free to add other apps, such as Bing Search.

Google also rebuts claims the lawsuit’s claims that its MADA contracts are akin to a famous anti-trust case in the 1990’s in which [company]Microsoft[/company] required computer makers to install its Internet Explorer browser:

But this case is not Microsoft. Plaintiffs ignore critical distinguishing facts, including that Microsoft prohibited OEMs from incorporating rival web browsers on new computers at all. Here, plaintiffs concede that rival search engines have a multitude of ways to reach consumers, including via web browsers (www.bing.com), preloading their search apps on devices, encouraging consumers to take advantage of near-instantaneous app downloads after purchase, or negotiating their own default search arrangements.

The company also asks the judge to throw out the case on the grounds that the lead plaintiffs in the case, including a Galaxy S III owner from Iowa, suffered any harm from Google’s decision to require that phone makers install its apps as a default.

According to the company’s filing, the economic harm theory of the case — which says the Android devices are more expensive because the MADA’s restrict device makers from accepting money from Microsoft and other competitors to make their apps the default ones — is remote and far-fetched.

While the antitrust claims are unusual (and thus may be unlikely to succeed), it is important to Google that it knock out the lawsuit at the preliminary stage. Otherwise, the case will proceed to the discovery phase, in which the opposing lawyers will be able to demand access to a range of the company’s sensitive internal documents, and to conduct depositions with senior executives.

Significantly, the lead lawyer in the case is Steve Berman, who defended Microsoft during anti-trust investigations in the 1990’s. More recently, he helped win a verdict against Apple for fixing the the price of ebooks, which was a high-profile case that yielded numerous documents about the controversial behavior of the company’s late CEO, Steve Jobs.

The hearing is set to take place today at 9am PT in San Jose. Here’s a document related to Google’s motion to dismiss with some of the key parts underlined:

Google Motion to Dismiss Android

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Judges question Apple ebook verdict and Amazon’s role

In a new twist in the long running antitrust case against Apple, an appeals court on Monday cast doubt on the Justice Department’s theory that the company brokered an illegal conspiracy among book publishers, and asked instead why the government’s focus has not been on Amazon.

The 90-minute hearing, which took place at the Second Circuit Court in Manhattan, represented a major shift in momentum in a case that has until now gone completely against Apple. On Monday, the three appeals court judges suggested that District Judge Denise Cote might have been too quick to conclude that Apple’s pricing arrangements with five publishers violated antitrust laws.

“Would it not matter that all those people got together to defeat a monopolist? It’s like the mice that got together to put a bell on a cat,” U.S. Circuit Judge Dennis Jacobs told the Justice Department’s lawyer, Malcolm Stewart.

The cat in question here is [company]Amazon[/company], which controlled over 90 percent of the ebook market in early 2010 when Apple and the publishers introduced “agency pricing,” which lets publishers set an ebook’s retail price and pay the publisher a commission. Amazon had previously used the wholesale model for all ebooks.

On Monday, Apple’s lawyer Theodore Boutros urged the appeals court to regard the pricing tactic as a legitimate business arrangement used to “come into a market dominated by a monopolist.”

The judges appeared to give weight to this suggestion, and to accept Boutros’ contention that a brief price spike, which damned Apple and the publishers before Judge Cote, should not result in an automatic finding of illegal price-fixing. Instead, Boutros said the price spike was limited only to the five publishers, and that the overall effect of Apple’s entry to the ebook market dramatically benefited consumers since many more players were willing to enter the market.

The appeals court judges also expressed skepticism over Stewart’s repeated attempts to liken the agency pricing arrangements to a criminal drug conspiracy in which [company]Apple[/company] was the driver.

“When you’re dealing with the illegal drug industry, you’re looking at one of the few areas where the law doesn’t look favorably on new entrants,” said Circuit Judge Debra Livingston.

$450 million settlement at risk

If the appeals court decides to disturb Judge Cote’s verdict, their ruling would have an immediate ripple effect on a related legal proceeding, involving class action lawyers and state governments, in which Apple has agreed to pay out $400 million to consumers and another $50 million in legal fees.

But in an unusual arrangement, the $450 payout is contingent on the Second Circuit upholding the verdict. If the appeals court judges remand the verdict, the payout could drop to a total of $70 million and, if they reverse it entirely, the payout will be nothing.

At the hearing, Boutros suggested that the appeals should overturn Court’s ruling as a matter of law, or at least remand it to a different judge.

The major legal issue at stake turns turns on competing antitrust doctrines known as “per se” versus “rule of reason” — which specify how courts should assess situations in which companies are found to have colluded on a given business issue.

The appeals court, however, may be hard-pressed to reverse Judge Cote, who found in a 160-page decision that Apple was liable under either standard.

In the event the appeals court does remand or reverse, its finding is likely to turn on whether Apple and the publishers’ behavior was justified in the context of what Judge Jacobs called a “new entrant breaking the hold of a monopolist” using “arguably predatory” tactics.

For the publishers, the outcome will not effect their liability since they have already agreed to pay out millions as a result of voluntary settlements.

A five-year cooling off period

A portion of Monday’s arguments were taken up by lawyers from Simon & Schuster and Macmillan, which are two of the five publishers that were caught up in the antitrust investigations (the others are Hachette, HarperCollins and Penguin, which has since merged with Random House).

Macmillan and Simon & Schuster were there to object to a part of Judge Cote’s order in which Apple must engage in a five-year “cooling off period” with the publishers, and engage in only arms-length negotiations. For practical purposes, this means that the publishers will not be able to limit Apple’s ability to engage in discounting, which could in turn complicate their negotiations with other retailers.

The publishers claim this five-year provision is unfair since they are this month coming to the end of their own two-year settlements with the government. They claim that the Justice Department is, in essence, reneging on its earlier agreement with them since the five-year arrangement with Apple will have knock-on effects in their negotiations with other ebook retailers.

The publishers asked the judges to excise a part of Judge Cote’s order that applies the five-year cooling-off period and, if necessary, to make a special preliminary decision on this matter so their pricing strategies are not compromised.

Finally, the appeals court judges also mulled what to do with the special monitor that Justice Cote appointed to oversee Apple’s compliance. The appointment has drawn criticism because the monitor selected by Cote was a friend of the judge who lacked antitrust experience and hired a special advisor at extra cost.

The appeals court said it will reserve its decision, meaning a ruling is likely to come sometime in 2015.

EU market tests Booking.com antitrust commitments

The European Commission has asked for comments as it tries to settle a series of antitrust cases surrounding the hotel-booking website Booking.com. The Dutch company, owned by U.S.-based [company]Priceline[/company], is being investigated by competition authorities in France, Sweden and Italy over its price parity clauses. Currently, Booking.com forces hotels that it lists to offer the platform’s customers the same room prices (or better) as they offer anywhere else, online or offline. The company has proposed allowing the hotels to offer better prices through other online travel agents, though they still wouldn’t be able to offer better prices through other channels. The Commission, which is coordinating the national investigations, is “market testing” these commitments until the end of January.