Unites States of America v. Apple, Inc. et al
Second Report of the External Compliance Monitor (Redacted Version). Covering Activities for dates of early March 2014 through the end of August 2014. (gr)
Second Report of the External Compliance Monitor
United States v. Apple, Inc., et al., No. 1:12-CV-2826, and
The State of Texas, et al. v. Penguin Group (USA) Inc., et al., No. 1:12-CV-3394
Michael R. Bromwich
External Compliance Monitor
October 14, 2014
This is the second semi-annual report (“Report”) submitted by the
External Compliance Monitor (the “Monitor”) in United States v. Apple, Inc., et al.,
No. 12-cv-2826, and State of Texas et al. v. Penguin Group (USA) Inc., et al., No. 12cv-3394 (“ebooks Litigation”).
In the September 5, 2013 Final Judgment and Order Entering Permanent
Injunction (the “Final Judgment”), this Court ordered the Monitor to submit
reports every six months “setting forth his . . . assessment of Apple’s internal
antitrust compliance policies, procedures, and training and, if appropriate,
making recommendations reasonably designed to improve Apple’s policies,
procedures, and training for ensuring antitrust compliance.”1 The Monitor is
required to evaluate whether Apple’s policies and procedures are “reasonably
designed to detect and prevent violations of the antitrust laws” and whether
Apple’s antitrust training program is “sufficiently comprehensive and
We issued our “First Report” on April 14, 2014. At that time, for reasons
set forth in detail in the First Report, we had very little information on which to
assess the comprehensiveness and effectiveness of Apple’s antitrust policies,
procedures, and training (Apple’s “Antitrust Compliance Program” or
“Program”). We had experienced substantial delays in our efforts to obtain
relevant documents and interview relevant personnel, in part due to litigation
initiated by Apple beginning in late November 2013 and continuing until
February 2014, when we were able to resume our work. In addition, although
the Final Judgment established that we were to review Apple’s Antitrust
Compliance Program as of mid-January 2014, Apple had not, by then, completed
revisions to various elements of its Program.
For these reasons, the assessment and recommendations we set forth in
the First Report were very preliminary. We credited Apple with a promising
start to developing and implementing its revised Antitrust Compliance Program,
but it was clear that the company still had a great deal of work to do. Our review
of various pieces of work in progress, including drafts of Apple’s revised
policies, some procedures it had developed, and three live training sessions that
had taken place, prompted us to make a number of recommendations for
improvements to the Program.
Final Judgment § VI.C.
The time period addressed in this Report is from early March 2014
through the end of August 2014. During the past six months, we were able to
perform our work uninterrupted by the legal challenges and other sustained
disruptions that characterized the period covered in the First Report. Our
relationship with Apple during this period has been more productive and
constructive than it was during the first few months of the monitorship. But by
no means were we at all times satisfied with Apple’s level of cooperation and
responsiveness. In fact, we continued to experience some resistance to our
monitoring work as well as attempts to limit and delay access to relevant
personnel and materials. As a result, on too many occasions, we experienced
substantial delays in receiving relevant information, some of our requests for
various categories of relevant information were rejected, others were ignored,
and our ability to perform live monitoring of antitrust compliance training
sessions and other relevant activities was inappropriately limited. These
limitations on access to information are fully described in the body of this
Despite these impediments, we are able to report that we have made
significant progress during this reporting period in fulfilling our responsibilities.
We gathered a substantial amount of information about Apple’s businesses
through interviews with personnel at various levels of the company, as well as
through the collection and review of relevant documents. The interviews
included personnel holding various positions in Apple’s content businesses,
including iTunes, the App Store, and the iBooks Store – parts of the company
specifically identified in the Final Judgment. The interviews also included
members of Apple’s Competition Law and Policy Group, which has been
significantly augmented in recent years.
Importantly, after being denied such access during the earlier reporting
period, we interviewed during this reporting period most of the senior
executives in the company, including its Chief Executive Officer, Tim Cook. The
executives we interviewed included the heads of Internet Software and Services,
Operations, Hardware Engineering, Software Engineering, and Retail and Online
Stores, as well as Apple’s Chief Financial Officer. These interviews provided us
with relevant and necessary information about Apple’s businesses, aspects of the
businesses that pose antitrust risks, and the factual foundation for assessing
whether Apple’s revised antitrust Program has been appropriately constructed
for – and tailored to – the risks the company faces. We were disappointed that,
despite repeated requests, we were unable to speak with the executives who
head Marketing and Design, but we have been promised interviews with those
senior executives in the near future.
This Report focuses on Apple’s revised Antitrust Compliance Program –
the principal components of which were completed and released within the
company on June 30, 2014, and provided to us on July 1. We also provide our
assessment of those components and our recommendations for improvement.
The elements of Apple’s revised program are:
An Antitrust and Competition Law Policy (or “Policy”). The Policy is
a brief, four-page statement of essential principles of antitrust and
competition law. It contains a section on dealing with competitors,
which addresses price-fixing, market allocation agreements, group
boycotts, bid rigging, and – significantly in the context of this case – a
brief subsection on facilitating unlawful agreements. This last
subsection warns Apple personnel about sharing competitively
sensitive information between competitors because such activity “may
create the appearance of facilitating price-fixing or other unlawful
agreements among competitors,” thus creating the risk of legal
liability. The policy also contains a section about dealing with
resellers, distributors, and suppliers – addressing price maintenance,
tying arrangements, and exclusive arrangements. The Policy
concludes by encouraging Apple personnel to consult in-house
lawyers with questions and to report actual or potential antitrust
violations to the Antitrust Compliance Officer or the Business Conduct
Helpline. It also reminds personnel of the company’s anti-retaliation
We view the revised Policy as an improvement over the company’s
previous antitrust policy – it is more clearly written, includes an
endorsement from the company’s chief legal officer, and provides
more helpful guidance on how to seek advice and report violations.
Nonetheless, we believe that its substantive content must be expanded
to cover all relevant antitrust risks, and its dissemination throughout
the company should be improved: for example, some of the
interviewees we asked about the Policy did not recall reading it, and
others seemed to confuse it with other Apple compliance documents.
A new online antitrust compliance training course. Apple made its
new online antitrust training course available to employees on June 30.
It is mandatory for more than 5,000 Apple employees, including
personnel in Sales, Internet Software and Services, and Procurement,
as well as for Apple’s lawyers. The course is an interactive program
that incorporates audio and video features, real world examples,
questions, and hypothetical scenarios. The course takes between 45
minutes and an hour to complete and is divided into substantive
sections entitled “What is Antitrust,” “Types of Agreements,“ and
“Monopolies.” Apple’s Antitrust Compliance Officer provides an
introduction at the beginning of the session. At the end of the online
training course, the user must answer ten questions, at least eight of
which must be answered correctly to obtain credit for successfully
completing the course. Although the course directs the user to
download the Antitrust and Competition Law Policy and certify that
he or she has reviewed and understood the Policy, our tests showed
that one could obtain a Certificate of Completion without
downloading or opening the Policy.
We interviewed a total of five Apple employees in July and August
who had taken the online training course. They said they had
favorable reactions to the style and substance of the course.
A revised Competition and Trade Practices section of Apple’s
Business Conduct ebook. Apple has expanded the portion of its
compliance ebook devoted to antitrust law and competition. The
ebook, which we discussed briefly in our First Report, employs
storytelling techniques to explain antitrust and competition issues. It
uses various media elements to tell the story of the 1990s lysine pricefixing conspiracy involving Archer Daniels Midland, including
excerpts from a movie made about the case. The competition and
trade practices chapter of the ebook illustrates the central principles of
antitrust law regarding agreements with competitors, agreements with
resellers, and unfair bidding practices. It features a question-andanswer section with Apple’s senior antitrust lawyer and provides
information to the reader about whom to contact with antitrust issues.
The competition and trade practices chapter of the ebook concludes
with a series of examples drawn from many industries illustrating the
impact of antitrust on consumers. Although the ebook reflects that
substantial time and attention went into its creation and many
employees we interviewed were aware of its existence, few had
reviewed it to any significant degree.
Live training provided to various personnel. Live, in-person antitrust
and competition training is among the most important components of
Apple’s revised Program. At its best, live training can engage
personnel on both the general principles of antitrust law and the
specific applications that are most relevant to their work, provide a
forum for asking questions of a lawyer experienced in dealing with
antitrust issues, and provide instruction on whom to contact with
questions and with reports of suspected violations of law and policy.
The Final Judgment requires Apple to provide training to its Board of
Directors, its CEO, all of its Senior Vice-Presidents, employees
involved in activities relating to the iBooks Store, and “appropriate
employees” who work with iTunes and the App Store. To meet this
requirement, Apple has conducted six live training sessions since May
2014, four led by senior lawyers in the Competition Law and Policy
Group and two of them – the training of the Executive Team and the
Board – led by David Boies, a partner at the law firm Boies, Schiller &
As discussed more fully in the Report, we have monitored most but
not all of the live training sessions either in person or by videotape.3
We have also reviewed the slides used during the training sessions
and any speaker’s notes that Apple has made available to us. The four
sessions provided by internal personnel were relatively brief, covered
the same basic material, and were largely lectures by the trainer rather
than truly interactive training sessions. Although the personnel we
interviewed who attended the sessions told us that they found the
sessions useful and instructive, we found them to be somewhat
abstract and removed from the day-to-day business of the people who
attended the sessions (mostly iTunes, App Store, and iBooks Store
Based on our review of these elements of Apple’s revised Antitrust
Compliance Program, we have concluded that Apple has developed, and has
taken important steps toward implementing, the basic elements of the sound
antitrust compliance program required by the Final Judgment. Apple has spent
substantial time, effort, and thought to revise and expand the Program. As the
summary above suggests, Apple has made relatively minor revisions to some
parts of its Program (the Antitrust and Competition Law Policy), substantially
expanded others (the Antitrust and Competition Section of Apple’s ebook), and
developed new training programs (online and live training). These are real
While Apple has made significant progress, there remain aspects of its
Program we have not yet explored, and areas of weakness and deficiencies that
Apple must address before we can determine that its Program is comprehensive
and effective. In short, the company has laid the foundation for its Program, but
much additional work lies ahead.
In the Assessment and Recommendations section of this Report, we make
a number of recommendations that we believe would substantially enhance
The Board training was conducted at the very end of this reporting period, and we did
not receive the videotape until the draft of this Report was largely complete. We will discuss the
Board training in our next report.
Apple’s Antitrust Compliance Program. We also identify important components
of the Program about which we have yet to obtain adequate information.
First, our First Report recommended that Apple conduct a formal risk
assessment to ensure that its Antitrust Compliance Program was appropriately
matched to the risks that exist in Apple’s businesses – “a systematic assessment
of the risks that arise from Apple’s businesses, the activities of its employees, and
its third-party interactions.”4 This type of risk assessment is fundamental to any
antitrust compliance program. We interviewed two of Apple’s in-house antitrust
lawyers, who mentioned their involvement in risk assessment discussions, but
Apple did not provide us with any written risk assessment, nor did any of the
business personnel we interviewed tell us they had participated in a process to
assess the antitrust risks involved in their activities.
After several specific inquiries, and a discussion with Apple’s most senior
antitrust lawyer, Apple belatedly provided us with some basic information about
the company’s efforts to assess antitrust risk. Because this information was
provided to us only days before the end of the reporting period, we have not yet
had an opportunity to fully review or evaluate the process by which Apple has
conducted these assessments, or the result of its efforts. Apple claims to have
started to perform the type of risk assessment that is necessary and that we
recommended – but the information Apple has provided requires substantial
follow-up and confirmation. As a result, any conclusions about the adequacy of
Apple’s risk assessment at this point would be premature. As a matter of
process, we recommend that Apple explicitly assign ownership within the
company of the risk assessment process, and that it develop a procedure for
reporting formal results of its antitrust risk assessments to relevant groups
within the company. At a minimum, these groups include the Audit and
Finance Committee and the Risk Oversight Committee, which are, respectively,
the Board and management entities responsible for risk assessment and
Second, we have found Apple’s revised Antitrust and Competition Law
Policy, which was introduced to employees on June 30, to be sufficient in many
respects – it is succinct, it is clearly written, and it touches on many of the
antitrust and competition issues that are most relevant to Apple’s business. But
we recommend that Apple expand its substantive coverage to address additional
antitrust concerns, such as those related to employee hiring agreements, the
service of senior executives and directors on other companies’ boards, and
additional issues Apple identifies as part of its antitrust risk assessment. Apple
should take additional steps to ensure that the Policy is fully disseminated,
See First Report at 45.
understood, and used. Finally, we recommend, as we did in our First Report,
that Apple require appropriate employees to certify that they have read,
understand, and agree to comply with the Policy. Apple has not yet
implemented such a system.
Third, Apple needs to establish more formal procedures governing
components of its Antitrust Compliance Program, including not only risk
assessment, but also procedures such as the following:
Communications Regarding the Antitrust Compliance Program.
Apple should adopt procedures to ensure that relevant employees
receive periodic communications regarding changes or upgrades to the
Helpline. Apple’s Business Conduct Helpline provides an important
avenue for Apple employees to ask antitrust-related questions and
report potential antitrust violations. We recommend that the Antitrust
Compliance Officer, in conjunction with Apple’s Internal Audit office,
undertake audits to measure the use and effectiveness of Apple’s
Business Conduct Helpline.
Record Keeping. In response to a recommendation we made in our
First Report, Apple attempted to improve the accuracy of its live
training attendance records. Apple made some progress, but further
steps are required to improve the accuracy of these records. It should
also extend its record keeping efforts to additional aspects of the
Antitrust Compliance Program, such as feedback received from
employees, to ensure that progress is tracked and elements of the
Program are documented.
Detection, Investigation, and Reporting of Violations. Apple should
adopt a set of procedures aimed at detecting potential antitrust
violations in areas that the company’s antitrust risk assessments
identify as posing a moderate or high level of antitrust risk. In
addition, Apple must develop procedures to investigate and report
potential antitrust violations. These procedures are necessary for
Apple’s compliance with Section V.G and V.H of the Final Judgment,
and they are a critical component of any effective antitrust compliance
Incentives and Disciplinary Procedures. In response to our specific
inquiries, Apple has advised us of ways in which the company
provides employees with positive and negative compliance-related
incentives. A system of such incentives is an extremely important
feature of an effective Antitrust Compliance Program. Apple should
therefore make additional efforts to communicate the existence of these
incentives to employees.
Formal Feedback Procedures. Apple has made limited efforts to
collect employee feedback regarding aspects of the Antitrust
Compliance Program. The limited nature of these efforts is
unfortunate because employee responses provide an important means
to improve the Program. Apple should take various steps to obtain
additional feedback from employees. For example, Apple should
routinely and promptly issue surveys requesting feedback on various
components of the Program, including live and online training.
Identification of Critical Employees. Apple has provided us with
information on how it has identified employees who are subject to the
certification, logging, training, and audit requirements imposed by
Section V of the Final Judgment. Nonetheless, the process by which
Apple identifies these employees is still less than clear. Apple should
incorporate the identification of other critical employees into its
antitrust risk assessment and make sure those employees receive
appropriate training. The company should ensure it provides all highrisk employees with live antitrust training, while employees whom
Apple identifies as posing lower risk should be required, at a
minimum, to take the online antitrust training course.
Audits. We recommend that Apple’s Antitrust Compliance Officer
supplement the steps she originally proposed for the audit required by
Section V.E of the Final Judgment with additional steps to make the
audit more substantive and comprehensive. These additional steps
include conducting employee interviews, distributing a survey to a
broad set of employees, and reviewing the materials associated with
Apple’s New Employee Orientation to ensure the program adequately
covers antitrust issues. In addition to the audit required by Section V.E
of the Final Judgment, the Antitrust Compliance Officer should
conduct annual audits as a regular component of the Antitrust
Compliance Program, and she should share the results of those audits
with the Audit and Finance Committee.
Fourth, we were favorably impressed with some aspects of the live
antitrust compliance training sessions we monitored during this reporting
period, but we think the live training can be substantially improved. Apple
should incorporate into the training more “real-life,” Apple-specific examples
and discussion, including examples based on the company’s past encounters
with antitrust allegations. In addition, Apple should hold future training
sessions in a more informal setting that encourages increased interaction
between the trainer and trainees. Although we had been told that live antitrust
training sessions conducted before June, when we began monitoring the sessions,
were extremely interactive, those sessions that we monitored, which targeted
iTunes, App Store, and iBooks Store personnel, were not.
Fifth, Apple should ensure that employees whose activities pose moderate
to high levels of antitrust risk receive live, in-person training. Apple should
provide appropriately tailored training to additional business groups, including
Marketing, Sales, Procurement, and other groups identified in the risk
assessment as presenting non-trivial antitrust risk. Apple should also provide
specialized antitrust compliance training to its business lawyers, whom we have
learned are consulted far more frequently in the first instance than the company’s
antitrust and competition law specialists when antitrust questions or issues arise.
Sixth, Apple’s senior management should address compliance issues more
directly, specifically, and explicitly. Apple’s Executive Team should take an
active role in monitoring the Antitrust Compliance Program. Members of the
Executive Team and other managers should use staff meetings and similar
venues as opportunities to convey information about the Program, to encourage
discussions about such issues, and to communicate other compliance-related
messages. Based on our interviews with Apple personnel, they have confidence
in their leadership and in the commitment of their leaders to behaving
appropriately and ethically. Because of that confidence, an explicit and
articulated commitment to compliance generally, and antitrust compliance
specifically, would carry substantial weight and is therefore that much more
Finally, we have not yet been provided with sufficient evidence to
determine whether the company’s Board or the Board’s Audit and Finance
Committee adequately oversees Apple’s Antitrust Compliance Program. At this
point, we have very little information about whether the Board is more than
superficially knowledgeable about – or is satisfied with – Apple’s Antitrust
Compliance Program. We do know, however, that the Board was not provided
with a copy of our First Report, which is surprising and disappointing given that
the Report provided an initial assessment of the same Program for which they
have critical oversight responsibility.
The Audit and Finance Committee should be fully informed regarding
significant and high-risk antitrust areas, the effectiveness of reporting
mechanisms, protocols for detecting violations and investigating complaints, and
other important aspects of the Program. The Board has a critical role to play in
overseeing and supporting a strong culture of compliance. We have not yet seen
evidence of such oversight, possibly because of our very limited access to Board
members. Now that Apple’s Board members have received live antitrust
compliance training, we will be interviewing them in the near future. Those
interviews will provide us with a basis for assessing the adequacy of the Board’s
oversight of the Antitrust Compliance Program generally, as well as its actions to
address the strengths and weaknesses identified in the First Report and this
* * * *
As our Report demonstrates, Apple has made significant progress during
this reporting period. Among other things, it improved its Antitrust and
Competition Law Policy, created a new online training course that close to 5,000
employees have completed, and provided live training to groups of personnel
engaged in activities that create potential antitrust risk, including personnel in
Apple’s content businesses and the company’s Board and senior Executive Team.
Our assessment is that the company has taken significant steps toward
enhancing its Antitrust Compliance Program, especially with respect to its
policies and training. However, our review has also revealed weaknesses and
deficiencies, especially with respect to the procedures necessary to implement
Apple’s Program. In addition, there remain significant gaps in our knowledge
that prevent us from drawing conclusions about major aspects of Apple’s
Antitrust Compliance Program, including with respect to Apple’s efforts to
conduct a comprehensive antitrust risk assessment and regarding the level of
Board oversight of the Program. The Antitrust Compliance Program that exists
today is undeniably an improvement on what existed before the Final Judgment
and reflects the investment of substantial time, effort, and resources, but it
remains very much a work in progress. We look forward to working with Apple
as it continues to advance, extend, and improve its Antitrust Compliance
TABLE OF CONTENTS
Background of the Monitorship ...........................................................................................2
The Final Judgment..............................................................................................................3
Section V: Antitrust Compliance Officer..................................................................5
Sections III and IV: Prohibited Conduct and Affirmative Obligations.....................4
Section VI: External Compliance Monitor................................................................6
Initial Activities: September 2013 to March 2014...............................................................8
Selection of the External Compliance Monitor.........................................................8
The Monitorship Begins: October-November 2013.................................................9
Interviews and Challenges to the Monitorship: December 2013-February
1. December Interviews.........................................................................................12
2. Subsequent Correspondence in December ........................................................13
3. Apple’s December 12, 2013 Motion to Stay.....................................................14
4. Subsequent District Court Proceedings.............................................................15
5. Proceedings before the Second Circuit .............................................................18
February 2014: Resumption of Monitoring Activities ............................................19
1. Communications with Apple.............................................................................19
2. March 4 Meeting with Apple ............................................................................19
Activities during the Second Reporting Period: March to August 2014 ...........................22
Interviews and Meetings .........................................................................................23
1. Board of Directors .............................................................................................23
2. Executive Team.................................................................................................24
3. Personnel in Content Businesses.......................................................................25
4. Members of the Competition Law & Policy Group ..........................................27
5. Compliance and Legal Personnel ......................................................................27
1. July 1 Production...............................................................................................28
2. July 31 Document Request................................................................................29
3. Other Documents Produced During the Reporting Period................................30
1. Challenge to Fees Associated with Preparation of First Report........................31
2. Objections to the Monitoring Team’s “Work Plan”..........................................32
3. Live Monitoring of Training .............................................................................33
4. Monitoring of New Employee Orientation .......................................................36
5. Video Recordings of Town Hall Meetings........................................................37
6. Antitrust Risk Assessment.................................................................................37
Apple’s Business Organization..........................................................................................40
Internet Software and Services................................................................................40
1. iTunes ................................................................................................................41
2. iTunes Store, App Store, and iBooks Store.......................................................42
3. Siri .....................................................................................................................43
4. Maps ..................................................................................................................43
5. iCloud ................................................................................................................43
6. iAd .....................................................................................................................44
Software Engineering ..............................................................................................46
Retail and Online Stores..........................................................................................47
The Structure of Apple’s Legal and Compliance Functions..............................................48
The Legal Function .................................................................................................48
1. Overall Structure ...............................................................................................48
2. The Role of the CLPG.......................................................................................49
The Compliance Function .......................................................................................51
1. Overall Structure ...............................................................................................51
2. The Role of the ACO.........................................................................................51
3. Antitrust Compliance Program Committee.......................................................53
The Board and Its Audit & Finance Committee......................................................53
Apple’s Revised Antitrust Compliance Program...............................................................56
New Antitrust and Competition Law Policy ...........................................................57
1. Development and Rollout..................................................................................57
2. Content ..............................................................................................................57
3. Revisions from Prior Versions ..........................................................................58
Online Antitrust Training Course............................................................................58
1. Development and Rollout..................................................................................58
2. Summary of Content .........................................................................................59
Business Conduct Ebook.........................................................................................61
1. Development and Rollout..................................................................................61
2. Summary of Content .........................................................................................62
Antitrust and Competition Intranet Site ..................................................................63
Live Antitrust Compliance Training .......................................................................64
1. Overview of Training Sessions .........................................................................64
2. Further Dissemination of Antitrust Training.....................................................71
Assessment and Recommendations ...................................................................................72
Context of the Assessment ......................................................................................72
Antitrust Risk Assessment.......................................................................................74
1. Recommendations from the First Report ..........................................................74
2. Apple’s Prior Formal Risk Assessments ...........................................................76
3. Apple’s Antitrust Risk Assessment Efforts.......................................................78
4. Further Assessment and Recommendations......................................................81
Apple’s Revised Antitrust Compliance Policies .....................................................84
1. Antitrust and Competition Law Policy..............................................................84
2. Business Conduct Policy (Competition and Trade Practices Section)..............88
3. Business Conduct ebook (Antitrust and Competition Law Chapter) ................90
Apple’s Revised Antitrust Compliance Procedures ................................................91
1. Establishing Adequate Procedures ....................................................................91
2. Communications Regarding the Antitrust Compliance Program......................91
3. Business Conduct Helpline ...............................................................................92
4. Record Keeping.................................................................................................93
5. Detection, Investigation, and Reporting of Violations......................................94
6. Incentives and Disciplinary Procedures ............................................................97
7. Formal Feedback Procedures ............................................................................98
8. Identification of Critical Employees ...............................................................100
9. Review of Agreements ....................................................................................103
10. Audits ..............................................................................................................104
Apple’s Revised Antitrust Compliance Training Program ...................................106
1. Overview .........................................................................................................106
2. Recommendations from the First Report ........................................................107
3. Live Training – Further Assessment and Recommendations..........................107
4. Online Training – Further Assessment and Recommendations ......................115
Senior Commitment to Compliance ......................................................................115
1. The Executive Team and Compliance.............................................................118
2. Managers and Compliance ..............................................................................120
Oversight of the Antitrust Compliance Program...................................................121
1. Role of the Antitrust Compliance Officer .......................................................122
2. Role of the CLPG ............................................................................................123
3. Board Oversight ..............................................................................................124
The External Compliance Monitor (“Monitor”) respectfully submits this
second semiannual Report pursuant to Section VI.C of the Final Judgment in
United States v. Apple, Inc., et al., No. 12-cv-2826, and State of Texas et al. v. Penguin
Group (USA) Inc., et al., No. 12-cv-3394 (the “ebooks Litigation”).
Section VI.C of the Final Judgment required the Monitor, within 180 days
of appointment, to “provide a written report to Apple, the United States, the
Representative Plaintiff States, and the Court setting forth his . . . assessment of
Apple’s internal antitrust compliance policies, procedures, and training and, if
appropriate, making recommendations reasonably designed to improve Apple’s
policies, procedures, and training for ensuring antitrust compliance.” The initial
report (“First Report”) was filed with the Court on April 14, 2014. Under Section
VI.C, the Monitor is required to provide subsequent written reports at six-month
intervals for the duration of the monitorship. This Second Report covers the
period from early March 2014 through the end of August 2014.
Our First Report provided a detailed account of some of the obstacles and
challenges we5 faced at the outset of our work. Those obstacles and challenges
necessarily limited our assessment of Apple’s antitrust compliance policies,
procedures, and training. Since the publication of the First Report on April 14,
2014, we have been working steadily to gather information necessary to make the
required assessments of Apple’s antitrust policies, procedures, and training
(Apple’s “Antitrust Compliance Program” or “Program”). During this reporting
period, our relationship with Apple has improved; the company has been more
responsive to our requests for information; and we have had greater access to the
people and materials necessary to perform our assigned role. As a result, we are
more informed about the company’s business and associated antitrust risks than
we were when we submitted our First Report. Even so, there remain major
aspects of the company’s business that may pose significant potential antitrust
risks but about which we know relatively little – e.g., marketing – and other
areas of the company’s business where we have gained some basic knowledge
but need to learn more.
In our First Report, we discussed in detail the history of the monitorship,
including this Court’s decision to require a Monitor, the Monitor’s obligations
under the Final Judgment, and the activities conducted by the Monitor from
appointment through early March 2014. We concluded by presenting an initial
assessment of Apple’s antitrust compliance policies, procedures, and training,
Throughout this report, the use of pronouns such as “he,” “we,” and “our” refer in
some instances to the Monitor individually and in other cases to the monitoring team.
and, to the extent we could with the information available at the time, some
preliminary recommendations. Although this Report will focus primarily on our
activities over the past six months, we have prepared this Report so that it can
stand on its own, without requiring frequent reference to our First Report.
Accordingly, we have included sections on the background of the monitorship,
the Final Judgment, and the events from October 2013 through March 2014,
although these matters are covered in far less detail than in our First Report.
Background of the Monitorship6
On July 10, 2013, after a three-week bench trial, this Court ruled that
Apple had violated Section 1 of the Sherman Act.7 The Court concluded that
Apple “facilitat[ed] and encourag[ed]” a “collective, illegal restraint of trade” by
five major publishers when it simultaneously negotiated agency agreements to
sell the publishers’ ebooks through its iBooks Store in late 2009 and early 2010. 8
The Court concluded that the plaintiffs—the United States Department of
Justice (“DOJ”) and thirty-three U.S. states and territories (the “Plaintiff States”
and, collectively with DOJ, the “Plaintiffs”)—were entitled to injunctive relief
against Apple. After a series of hearings in August 2013 on the specific contours
of the injunction, the Court created the position of external compliance monitor.
As the Court would later explain in its January 16, 2014 opinion denying Apple’s
motion for a stay of the monitorship, it decided a monitorship was necessary
Apple made little showing at or before the August 9 conference
that it had taken to heart the seriousness of the price fixing
conspiracy it orchestrated. Nor did Apple provide the Court with
any evidence that it was seriously reforming its internal antitrust
compliance policies to prevent a repeat of its violation. Apple’s
submissions failed to demonstrate that it took seriously the burden
that its participation in the price fixing conspiracy imposed on
consumers and on the resources of the federal and state
governments that were compelled to bring Apple and the
publishers into federal court to put an end to that harm.9
6 This section is a shortened version of the Background section that appears at pages 2 to
6 of our First Report.
15 U.S.C. § 1.
8 United States v. Apple Inc., 952 F. Supp. 2d 638, 709 (S.D.N.Y. 2013). The five publishers,
also defendants in the litigation, reached settlements with the Plaintiffs before trial. See id. at 645.
United States v. Apple Inc., 992 F. Supp. 2d 263, 267 (S.D.N.Y. 2014).
At a hearing on August 27, 2013, the Court explained that it would define
the monitor’s responsibilities to include evaluating Apple’s internal antitrust
compliance policies and procedures and its antitrust compliance training
program.10 The Court ruled that it would set the external compliance monitor’s
presumptive term at two years, rather than the five- or ten-year term the
Plaintiffs had requested.11 Finally, while the Court made clear that it had “tried
to fashion an injunction that intrudes as little as possible on [Apple’s]
business,”12 the Court expressed the hope that Apple would view the Final
Judgment as a valuable opportunity:
I am hopeful that Apple will bring its culture of excellence and
exceptionalism to this task. I am hopeful that it will devote its
considerable resources and creativity to construct a training
program that will be a model for American business.
But, even if it chooses not to create a model program, it must create
a meaningful training program, one that is comprehensive and
effective. . . .
Apple could, of course, think of this training and any
improvements to its policies and procedures as mere window
dressing, the price it must pay to appear to comply with the
injunction. I trust, however, that it will make a sincere commitment
to reform its culture. I believe that it is in Apple’s long-term
interest to make these reforms and change its culture to one that
includes a commitment to understand and abide by the
requirements of the law.13
The Court held an additional proceeding on September 5, 2013, during
which the terms of the injunction were finalized. The Court issued the Final
Judgment later that day.
The Final Judgment
The Final Judgment prohibits Apple from engaging in certain types of
conduct; requires Apple to take specified affirmative actions, including revising
its antitrust compliance training and policies and hiring an internal Antitrust
Compliance Officer; and defines the responsibilities of the Monitor.
8/27/13 Tr. 17-18.
Id. at 17-18, 20.
Id. at 20.
Id. at 19-20.
Sections III and IV: Prohibited Conduct and Affirmative
Section III of the Final Judgment prohibits Apple from entering and
maintaining certain types of agreements and from engaging in specified types of
communications with ebook publishers. In particular, Sections III.A through
III.C bar Apple from “enforc[ing] any Retail Price MFN in any agreement with an
E-book Publisher relating to the sale of E-books,”14 from “enter[ing] into any
agreement with an E-book Publisher relating to the sale of E-books that contains
a Retail Price MFN,” and from “enter[ing] into or maintain[ing] any agreement
with a Publisher Defendant that restricts, limits, or impedes Apple’s ability to set,
alter, or reduce the Retail Price of any E-book or to offer price discounts or any
other form of promotions to encourage consumers to purchase one or more Ebooks.”
Section III.D of the Final Judgment prohibits Apple from retaliating
against or punishing an ebook publisher “for refusing to enter into an agreement
with Apple relating to the sale of E-books or for the terms on which the E-book
Publisher sells E-books through any other E-book Retailer,” as well as from
threatening such retaliation or punishment or urging another party to engage in
such retaliation or punishment. Section III.E prohibits Apple from sharing
information related to its negotiations and contractual agreements with one
ebook publisher with any other ebook publishers. Finally, Sections III.F and III.G
prohibit Apple from “enter[ing] into or maintain[ing] any agreement” with an
ebook publisher or retailer “where such agreement likely will increase, fix, or set
the price” at which other ebook retailers can acquire or sell ebooks or affect other
terms on which ebooks are sold.
The Final Judgment also imposes affirmative obligations on Apple.
Section IV.A requires Apple to modify or terminate its agreements with the
publisher defendants as necessary to bring the agreements into compliance with
the Final Judgment. Section IV.B requires Apple to “apply the same terms and
conditions to the sale or distribution of an E-book App through Apple’s App
Store as Apple applies to all other apps sold or distributed through Apple’s App
Store.” Finally, Section IV.C provides that Apple must “furnish to the United
States and the Representative Plaintiff States, within ten business days of
An “MFN” is a “most-favored nation” clause, or a clause under which one party to a
contract typically promises to treat the other party as favorably as it treats any other entity. The
Court found that, while the inclusion of an MFN clause in a contract is not necessarily unlawful,
the MFN clauses incorporated in Apple’s contracts with the publisher defendants were an
important element of Apple’s unlawful conduct in this case, as they were “the term that
effectively forced the Publisher Defendants to eliminate retail price competition and place all of
their retailers on the agency model.” See Apple, 952 F. Supp. 2d at 698-701.
receiving such information, any information that reasonably suggests to Apple
that any E-book Publisher has impermissibly coordinated or is impermissibly
coordinating the terms on which it supplies or offers its E-books to Apple or to
any other Person.”
Section V: Antitrust Compliance Officer
Section V of the Final Judgment requires Apple to appoint an internal
Antitrust Compliance Officer (“ACO”) to oversee the company’s antitrust
compliance efforts and to be responsible for many of the company’s specific
responsibilities under the Final Judgment. Under Section V, Apple’s Audit
Committee or another committee of outside directors was obligated, within
thirty days of the effective date of the Final Judgment, to “designate a person not
employed by Apple as of the Effective Date of the Final Judgment to serve as
Antitrust Compliance Officer, who shall report to the Audit Committee or
equivalent committee of Apple’s Board of Directors and shall be responsible, on
a full-time basis until the expiration of [the] Final Judgment, for supervising
Apple’s antitrust compliance efforts.”
Specifically, Section V requires the ACO to provide copies of the Final
Judgment to certain Apple personnel and their successors (“Section V
personnel”);15 ensure that Section V personnel, as well as “appropriate
employees in [the] Apple iTunes and App Store business,” receive
“comprehensive and effective training annually” regarding the Final Judgment
and the antitrust laws;16 and obtain annual certifications that Section V personnel
have read and understand the Final Judgment and are not aware of unreported
potential violations of the Final Judgment or the antitrust laws.17 “[I]n
consultation with” the Monitor, the ACO is also required to conduct an annual
antitrust compliance audit covering all Section V personnel. 18
In addition, the ACO must inform Apple employees annually of their
right to disclose to her, without fear of reprisal, information regarding potential
violations of the Final Judgment and the antitrust laws.19 If she discovers or
receives credible information concerning an actual or potential violation of the
Final Judgment, the ACO must ensure that Apple’s conduct is terminated or
modified to assure compliance with the Final Judgment. She must provide the
Final Judgment §§ V.A-V.B.
Id. § V.C.
Id. § V.D.
Id. § V.E.
Id. § V.F.
Plaintiffs with information regarding the actual or potential violation and the
corrective action that resulted.20
The ACO is also required to communicate certain information to the
Plaintiffs: she must provide, on a quarterly basis, non-privileged
communications containing allegations of noncompliance with the Final
Judgment or antitrust violations,21 as well as a log of communications between
Section V personnel and other specified persons outside Apple.22 Finally, the
ACO is required to provide the Plaintiffs annually with a written statement
regarding Apple’s compliance with Sections III, IV, and V of the Final
Section VI: External Compliance Monitor
Section VI of the Final Judgment provides for the appointment of an
External Compliance Monitor for a presumptive two-year term.24 The External
Compliance Monitor is required “to review and evaluate Apple’s existing
internal antitrust compliance policies and procedures and the training required
by Section V.C . . . , and to recommend to Apple changes to address any
perceived deficiencies in those policies, procedures, and training.”25
The specific duties of the Monitor are as follows:
To “conduct a review to assess whether Apple’s internal antitrust
compliance policies and procedures, as they exist 90 days after his . . .
appointment, are reasonably designed to detect and prevent violations of
the antitrust laws.”26
Id. § V.G.
Id. § V.H.
Id. § V.I.
Id. § V.J.
The Court may extend the external compliance monitorship by one or more one-year
periods, either sua sponte or on the application of any Plaintiff, “if necessary to ensure effective
relief.” Id. § VIII.C.
Id. § VI.B.
Id. § VI.C.
To “conduct a review to assess whether Apple’s training program,
required by Section V.C of [the] Final Judgment, as it exists 90 days after
his . . . appointment, is sufficiently comprehensive and effective.”27
Within 180 days of appointment and at six-month intervals thereafter, to
“provide a written report to Apple, the United States, the Representative
Plaintiff States, and the Court setting forth his . . . assessment of Apple’s
internal antitrust compliance policies, procedures, and training and, if
appropriate, making recommendations reasonably designed to improve
Apple’s policies, procedures, and training for ensuring antitrust
compliance.” In addition, the Monitor may provide additional written
reports if requested by the Plaintiffs and the Court, or on his own
To provide the Plaintiffs promptly with any evidence the Monitor
“discovers or receives” that suggests “that Apple is violating or has
violated [the] Final Judgment or the antitrust laws.”29
Apple is required to “assist the External Compliance Monitor in
performance” of his duties and to refrain from “interfer[ing] with” or
“imped[ing]” the Monitor’s work.30 The Final Judgment specifically authorizes
the External Compliance Monitor, “in connection with the exercise of his . . .
responsibilities under . . . Section VI, and on reasonable notice to Apple,” to:
“[I]nterview, either informally or on the record, any Apple personnel, who
may have counsel present; any such interview to be subject to the
reasonable convenience of such personnel and without restraint or
interference by Apple.”31
“[I]nspect and copy any documents in the possession, custody, or control
“[R]equire Apple to provide compilations of documents, data, or other
information, and to submit reports to the External Compliance Monitor
Id. § VI.D.
Id. § VI.F.
Id. § VI.G.
Id. § VI.G.1.
Id. § VI.G.2.
containing such material, in such form as the External Compliance
Monitor may reasonably direct.”33
The Final Judgment provides a mechanism for the resolution of objections
that Apple may have to the Monitor’s activities: “[a]ny objections by Apple to
actions by the External Compliance Monitor in fulfillment of the External
Compliance Monitor’s responsibilities must be conveyed in writing to the United
States and the Representative Plaintiff States within ten calendar days after the
action giving rise to the objection.”34 If the parties are unable to reach agreement,
the Court will promptly schedule a conference to resolve the dispute. 35
Initial Activities: September 2013 to March 2014
This section of the Report provides a brief overview of our activities from
appointment through early March 2014. A more comprehensive account of our
activities during this period appears in the First Report, at pages 11 to 41.
Selection of the External Compliance Monitor
The Court issued an order on September 27, 2013 governing the monitor
selection process. On September 30, 2013, the Plaintiffs submitted the names of
two candidates to serve as monitor, one of whom was Michael R. Bromwich. On
October 16, 2013, the Court issued an order appointing Mr. Bromwich as the
Monitor in this case and providing that Bernard A. Nigro Jr. of Fried, Frank,
Harris, Shriver & Jacobson LLP (“Fried Frank”) would assist Mr. Bromwich
(“October 16 Order”).
Immediately after appointment, the Monitor assembled a small team to
assist in fulfillment of his obligations.36 The Monitor selected Maria R. Cirincione
of Fried Frank and Sarah W. Carroll of Robbins, Russell, Englert, Orseck,
Untereiner & Sauber LLP (“Robbins Russell”) as members of the monitoring
team. In June 2014, Lee Turner Friedman of Robbins Russell was added to the
Id. § VI.G.3.
Id. § VI.H.
35 See, e.g., Apple, 992 F. Supp. 2d at 277. By Order dated February 19, 2014, the Court
referred this matter to Magistrate Judge Michael H. Dolinger for resolution of any disputes that
might arise, subject to appeal to the Court.
See Final Judgment § VI.I (“The External Compliance Monitor may hire, subject to the
approval of the United States, after consultation with the Representative Plaintiff States, any
persons reasonably necessary to fulfilling the External Compliance Monitor’s responsibilities.”).
The Monitorship Begins: October-November 2013
On October 22, 2013, after initial communications between Apple and the
Monitor, members of the monitoring team met with representatives of Apple
(“October 22 Meeting”) at the New York offices of Gibson, Dunn & Crutcher LLP
(“Gibson Dunn”). At the meeting, the Monitor described his approach to the
monitoring assignment in this case, including that the Monitor’s actions are
limited by the terms of the Final Judgment and his hope for a collaborative
relationship with Apple. Apple’s representatives stated that the company was
committed to ensuring that it had an effective and robust antitrust compliance
During the October 22 Meeting, we explained that we planned to use the
initial 90-day period under the Final Judgment, during which Apple was to
revise its policies, procedures and training,37 to gain important background
information that would be necessary to undertake a meaningful assessment.
Specifically, in order to assess whether Apple’s revised antitrust compliance
policies, procedures, and training materials were reasonable and effective for the
company, we explained that we needed to understand Apple’s reporting
oversight structure for antitrust compliance; Apple’s existing antitrust policies,
procedures, and training; the ongoing processes to revise and update Apple’s
policies and procedures; and the roles of the Audit and Finance Committee and
Risk Oversight Committee in compliance matters. We asked Apple to provide us
with documents relevant to those issues.38
The Monitor asked to schedule a series of brief preliminary meetings or
interviews with various Apple personnel that would be helpful to understanding
Apple’s businesses and structure. Because the Court had specifically expressed
concern with Apple’s compliance at the highest levels of the company, the
Monitor requested preliminary meetings or interviews during the week of
November 18, 2013 with members of Apple’s Board of Directors (or “Board”),
senior management, and senior personnel responsible for the iBooks Store,
iTunes, and the App Store.
Apple expressed concern about the interview requests because, according
to its representatives, the proposed interviewees were busy and there remained
“a lot of anger” regarding the ebooks Litigation. The Monitor explained that he
believed early interviews with high-level personnel were essential but said he
was flexible regarding the timing and length of these preliminary interviews.
37 Section VI.C of the Final Judgment requires the Monitor to evaluate Apple’s antitrust
compliance policies, procedures and training as they exist 90 days after the Monitor’s
appointment, or on January 14, 2014.
As described below, we reiterated this October 22 request on numerous occasions.
Apple responded that any plan that included interviews of senior Apple
personnel was problematic.
The Monitor also informed Apple at the October 22 Meeting that the
monitoring team would like to observe live antitrust compliance training
sessions because such observations would be important to our evaluation of the
comprehensiveness and effectiveness of the new training programs Apple was
preparing to implement. Apple also expressed concern about that request.
On October 31, 2013, Gibson Dunn sent a letter to the Monitor outlining
Apple’s objections to the timing and scope of our proposed activities. The letter
asserted that we should not interview senior Apple employees or Board
members until after January 14, 2014, 90 days after the monitorship began.
Concerned that an immediate course correction was necessary, we responded by
letter the next day and enclosed a separate letter addressed to Tim Cook, Apple’s
Chief Executive Officer, and D. Bruce Sewell, Apple’s General Counsel. In the
November 1 letter to Mssrs. Cook and Sewell, the Monitor introduced himself,
outlined his responsibilities under the Final Judgment, and repeated the
principles to which the monitoring team would adhere in our monitoring
activities. He expressed the hope for a constructive relationship and explained
that the relationship with Apple should not be adversarial. The Monitor
expressed concern that we had not yet received any of the documents Apple had
promised and that the company had not meaningfully responded to our request
for brief preliminary interviews with certain Apple personnel.
Mr. Sewell responded to the November 1 letter on November 4, 2013. He
promised that he would provide us with a “comprehensive update on [Apple’s]
progress” and would “facilitate whatever meetings [were] appropriate for [the
Monitor] to fully and completely discharge [his] responsibilities.” He also
explained that the newly hired ACO would “dedicate the next two months to
developing new training materials and redesigning [Apple’s] compliance
program,” and that she needed to work “uninterrupted” during that period.
Finally, he emphasized that Apple’s disputes with our team should “in no way
diminish the fact that executives at the highest levels of management . . . are
extremely attentive to the issue of compliance with the Final Judgment and are
taking active steps to meet the remediation time line expressed by Judge Cote.”
Over the next week, the Monitor had numerous communications with
Apple’s outside counsel, which culminated with Apple offering interviews of
two Apple employees – Tom Moyer, the company’s Chief Compliance Officer;
and Gene Levoff, Senior Director and Associate General Counsel – during the
week of November 18. Apple did not make available the other individuals the
Monitor had asked to interview.
On November 18, we conducted one-hour interviews with Mr. Moyer and
Mr. Levoff, which provided helpful background about the company and its
overall compliance and risk management systems. Mr. Moyer summarized
Apple’s Business Conduct and Compliance Program, providing an overview of
the structure of Apple’s compliance functions and of the core components of the
company’s compliance policies and training. Mr. Moyer also shared with us an
ebook Apple had developed to communicate its Business Conduct Policy to
employees. Through Mr. Levoff’s interview, we learned about important
components of Apple’s risk management and compliance structures—Apple’s
Audit and Finance Committee and its Risk Oversight Committee. This
introductory information was useful.
On November 22, 2013, we sent a letter to Apple’s Board of Directors. We
took this step because of what we viewed as a disturbing lack of cooperation
from Apple in the month since we had assumed our responsibilities despite
repeated promises by Apple that it would cooperate. Because the Monitor had
been treated from the outset as an adversary, we thought it was important that
we bring our concerns to the attention of Apple’s governing body in an attempt
to avoid further actions that would prevent the Monitor from fulfilling his
responsibilities under the Final Judgment.
The letter to the Board explained our responsibilities under the Final
Judgment and described our disappointment at Apple’s lack of cooperation in
the early stages of our work. We described our largely unsuccessful efforts to
schedule employee interviews for the week of November 18 and the unexplained
delays in Apple’s responses to our requests, including our request for
documents. The letter concluded by expressing hope that our relationship with
Apple would become collaborative and positive, and we requested the Board’s
support in working toward that goal. We never received any communication in
response from the Board or any of its members.
Later that day, we received a letter from Simpson Thacher & Bartlett LLP
(“Simpson Thacher”), which included a proposed interview schedule for
December 4-6 that included ten Apple employees, as well as Dr. Ronald Sugar, a
member of Apple’s Board and Chairman of the Audit and Finance Committee.
The letter also contained an offer to schedule a telephone interview of Bruce
On November 20, 2013, the Court issued an order (“November 20 Order”),
pursuant to Federal Rule of Civil Procedure 53(b)(2), which governs the use of
“masters,” regarding a proposed amendment to the October 16 Order that
appointed the Monitor, including a proposal that the Court receive periodic ex
parte briefings or reports from the Monitor. On November 27, Apple filed
objections to the November 20 Order, alleging that the Monitoring team was
“operating in an unfettered and inappropriate manner, outside the scope of the
Final Judgment, admittedly based on secret communications with the Court, and
trampling Apple’s rights.” In addition, Apple objected to our requests to
interview Board members and senior executives, most of whom Apple claimed
were “not . . . relevant to [our] mandate”; our attempts to begin work before
expiration of the ninety-day period for revision of Apple’s antitrust compliance
policies and training documents; and our “personal financial interest [in
conducting] as broad and lengthy an investigation as possible.”
In response to Apple’s November 27 filing, the Court issued an order on
December 2, 2013 (“December 2 Order”), stating that neither the parties nor the
Monitor had “informed the Court about the Monitor’s fees,39 the work of the
Monitor or of any problems associated with that work. There has been no ex
parte communication between the Court and the Monitor or between the Court
and any of the parties about these issues.” The December 2 Order provided that,
because of Apple’s objection, the Court would not receive ex parte briefings or
reports from the monitoring team. Finally, the December 2 Order directed Apple
to resolve its additional objections to the monitorship in accordance with Section
VI.H of the Final Judgment.
Interviews and Challenges to the Monitorship: December 2013February 2014
From December 4 to December 6, 2013, we interviewed the following nine
Apple employees and one member of Apple’s Board of Directors:
Chris Keller, Vice President, Internal Audit
Doug Vetter, Vice President and Associate General Counsel
Kyle Andeer, Senior Director, Competition Law & Policy
Annie Persampieri, Corporate Counsel, Internet Services & Software
Deena Said, Antitrust Compliance Officer40
39 Apple’s November 27 filing objected to the Monitor’s fees, alleging that they violated
the Final Judgment.
A more detailed discussion of Ms. Said’s background and the process leading to her
selection as Apple’s ACO was provided at pp. 24-26 of our First Report.
Dr. Ronald Sugar, Director and Chair of the Audit and Finance
Rob McDonald, Head, U.S. iBooks Store
Tom Moyer, Chief Compliance Officer (by telephone)
Gene Levoff, Associate General Counsel, Corporate Law
Keith Moerer, Director, iTunes
The December 2013 interviews provided information about each
interviewee’s job responsibilities, some information about Apple’s structure and
business operations, and preliminary information about Apple’s compliance
programs, including the role of its Audit and Finance Committee, the Risk
Oversight Committee and the company’s Helpline. Some of the interviews,
particularly those of Mr. Moerer and Mr. McDonald, helped us to begin to
understand Apple’s general practices in negotiating contracts with publishers.
We were advised about steps Apple was taking to comply with the Final
Judgment, including its recent hiring of an ACO, its collection of the employee
certifications required by Section V.D, and initial live training sessions that Mr.
Andeer had conducted to ensure that employees whose work focused on the
iBooks Store understood the requirements of the Final Judgment. We had our
first opportunity to interact with Deena Said, the ACO whom Apple had recently
hired pursuant to Section V of the Final Judgment.
On December 10, 2013, we interviewed Mr. Sewell by telephone. Among
other matters, Mr. Sewell discussed the structure of the legal and compliance
departments at Apple, including some comparisons to those at other companies
with which he is familiar; the evolution of Apple’s antitrust compliance functions
during his time at the company; and his experience with the ebooks Litigation.
Subsequent Correspondence in December
On December 17, Apple’s outside counsel sent us a copy of a letter the
company had written to the Plaintiffs, addressing, among other things, the scope
of our responsibilities. Apple proposed that our total fees for 2014 and 2015 be
capped at $250,000; that we conduct no further work until after January 14, 2014,
when the 90 days provided in the Final Judgment for Apple to revise its antitrust
policies and procedures had elapsed; and that we adhere to a plan set out by
Apple.41 Apple’s proposal would have put Apple in charge of determining
whom we could interview and which documents would be provided, and it
would have placed unrealistic financial constraints on our activities. The
proposal was antithetical to the notion of an independent monitor and wholly
inconsistent with the Final Judgment.
Apple’s December 12, 2013 Motion to Stay
On December 12, 2013, Apple filed a Motion by Order to Show Cause for a
Stay of the Injunction Pending Appeal (“Motion to Stay”). Apple contended that
we were “conducting a roving investigation that is interfering with Apple’s
business operations,” as well as “risking the public disclosure of privileged and
confidential information” and “imposing substantial and rapidly escalating
costs” that Apple would be unable to recover if it prevailed on appeal. Apple
argued that the Court had improperly modified the Final Judgment with the
amendments it proposed by the November 20 Order, the Final Judgment was not
authorized by Federal Rule of Civil Procedure 53 and violated the constitutional
separation of powers, and the Final Judgment “deprive[d] Apple of its right to a
‘disinterested prosecutor’ without ‘a personal interest, financial or otherwise.’”
Apple claimed that our “inappropriate demand for access to Apple’s senior
leadership—including officers, directors, and employees who have little or
nothing to do with antitrust compliance or the iBooks Store—ha[d] already
inflicted significant and irreparable harm by interfering with Apple’s ability to
manage its business.” It asserted that the Monitor had “consistently demanded
that Apple’s senior leaders meet with him on his schedule and on short notice—
sometimes as short as two days” and that our “investigation significantly
interfere[d] with the ability of Apple’s managers to lead the company.” Apple
also contended that, in the absence of a stay, it would suffer irreparable injury
through the disclosure of privileged or confidential information and through its
payment of costs and expenses associated with the monitorship.42
41 The plan Apple proposed provided that “there [would] be no further interviews of
Apple employees or Board members by Mr. Bromwich prior to his review of Apple’s revised
antitrust compliance policies, procedures, and training materials”; that after January 14, 2014,
Apple would provide us with certain materials required by the Final Judgment and we would, in
turn, provide Apple with recommendations regarding those materials; that Apple would make
“certain Apple executives and employees” available for interviews after January 14, 2014; and
that “Mr. Bromwich [would] not seek interviews with Apple’s employees and Board members
who are not relevant to his mandate of assessing Apple’s revised antitrust compliance policies
and procedures and Apple’s antitrust training program.” Letter from Noreen Krall, Apple Inc.,
to Lawrence J. Buterman, Department of Justice & Eric Lipman, Office of the Texas Attorney
General (Dec. 17, 2013).
The December 17 filing contained numerous mischaracterizations and
misrepresentations. Apple’s assertions that we were conducting a “roving investigation” and
On December 30, 2013, the Plaintiffs filed their opposition to Apple’s
Motion to Stay, arguing that the steps the Monitor had taken were fully justified
and consistent with the Final Judgment. The Plaintiffs argued that Apple had
neither shown a likelihood of success on the merits nor made a showing of
irreparable harm if the monitorship were not stayed. Attached as an exhibit to
the Plaintiffs’ brief was a seventeen-page declaration prepared by the Monitor in
an effort to provide the Court with facts relating to the assertions in Apple’s
December 17 filing. The declaration provided a detailed summary of our
interactions with Apple and attached a number of our communications with
Apple as exhibits. On January 7, 2014, Apple filed a letter with the Court
arguing that the Monitor should be disqualified because submission of the
declaration allegedly showed impermissible bias against Apple. That same day,
Apple filed a reply brief in support of its motion to stay the injunction.
Subsequent District Court Proceedings
On January 13, 2014, this Court held a hearing on the parties’ filings,
including the Motion to Stay and Apple’s January 7, 2014 letter seeking
disqualification of the Monitor. The Court expressed its disappointment at the
state of the relationship between Apple and the monitoring team, noting that it
had been unaware “that the monitor was making all these requests and Apple
was doing its best to slow down the process if not stonewall the process.”43 The
Court described the 90 days prior to Apple’s implementation of revised policies
and training as
the period when the monitor could be expected to want to get the
documents he needs and conduct the interviews he needs so that he
would be in a position, on the 90th day, to look at whatever Apple
submitted to him as its revised, improved new procedures and
training program and practices, so that he could efficiently and
effectively, and hopefully in a way to Apple helpfully, comment on
it and give Apple the benefit of his best advice and counsel so that
Apple could have the kind of program put in place that’s required
by Article VI.44
exercising “broad investigatory powers” were at odds with the extremely modest requests we
had made for documents and interviews. Its claims that we had inappropriately sought
interviews with members of Apple’s Board of Directors and senior management overlooked the
flexibility that we had offered in scheduling the interviews, as well as the fact that such
interviews were appropriate given the Court’s emphasis that the violations occurred at the
highest levels of the company. A more complete catalogue of the inaccuracies in the factual
assertions contained in Apple’s Motion to Stay was provided at pages 27 to 28 of our First Report.
1/13/14 Tr. 41.
Id. at 42.
As the Court noted, we had been effectively stymied during that 90-day period
from moving forward with preliminary work necessary to evaluate Apple’s
The Court also emphasized that the Final Judgment, not Apple, controls
the monitorship, and that the monitoring team must be able to gather enough
information about the company to understand the organizational context of
Apple’s revised antitrust compliance policies and training:
In terms of practices and policies and training programs, it’s not
one size fits all. This is to be an effective program within Apple.
[The Monitor] has to understand enough about Apple and its
business and these practice[s], policies, and training programs in
order to recommend to Apple changes to address any perceived
deficiencies in those policies, procedures, and training. And
looking at paragraph C, these policies and procedures, which are
antitrust compliance policies and procedures, have to be reasonably
designed to detect and prevent violations of the antitrust law,
within Apple, within its business. They have to be comprehensive
and effective within Apple, within its business.46
The Court noted that Section VI.G of the Final Judgment requires Apple to
“assist the monitor” and to refrain from interfering with the fulfillment of the
Monitor’s responsibilities under the Final Judgment.47 Furthermore, the Court
noted, Section VI.G authorizes interviews of Apple personnel without restraint
or interference and to inspect and copy documents in Apple’s possession.48 The
Court expressed the hope that the parties would “press a restart button” on their
relationship and that Apple “would come to see that it is in its interest to
comply” with all of the provisions of the Final Judgment.49 Summarizing, the
In retrospect, Apple’s arguments about the significance that should be attached to the
90 days provided for in the Final Judgment to allow Apple to revise its antitrust compliance
policies, procedures, and training are somewhat ironic. Although Apple did, as the Court
suggested, submit some draft materials for the Monitor to review in late February, the revisions
to Apple’s antitrust policies, procedures and training, including materials that the Monitor had
not previously reviewed, were not completed until June 30, more than five months after the 90day period expired.
Id. at 45-46.
Id. at 46.
Id. at 47.
Now, Apple is not in a position to define for the monitor the scope
of the monitor’s duties or how the monitor carries out those duties.
The injunction is the path we shall all follow. And if the monitor
ever imposes upon Apple in a way that is inappropriate or difficult
or intrusive, there will be a process. And there has been a process
in place and there will be a process in place so that Apple can be
heard, because, again, I intend no disruption of Apple’s business
and have tried to craft an injunction that can rest as lightly upon it
as possible and yet achieve the very legitimate ends of this
So I am hopeful that Apple will show it is serious about
cooperating with the monitor going forward, assisting him so he
can perform his function, and not interfere with that. I expect the
Department of Justice to be responsive to any complaints that
Apple might have or requests—it doesn’t have to be a
[complaint]—a request or a discussion, and to work in cooperation
and collaboration with the monitor and Apple to resolve
outstanding issues, and to do so promptly. I expect the monitor to
adhere to the terms of his mandate in Article VI, and also to work
collaboratively and cooperatively with Apple and the Department
of Justice so that his responsibilities can be performed effectively
and efficiently and promptly.50
The Court denied Apple’s Motion to Stay and rejected its attempt to
disqualify the Monitor, stating that it would file an opinion explaining further its
reasoning and analysis. The Court granted a 48-hour stay from the filing of that
opinion to allow Apple to appeal to the Second Circuit.
On January 16, the Court issued its opinion on Apple’s pending motions.
The Court explained its reasons for denying Apple’s Motion to Stay, including
that some of Apple’s arguments had been waived or had become moot, that the
dispute resolution mechanisms under the Final Judgment were sufficient to
ensure that our activities did not exceed the bounds of the Final Judgment, and
that Apple had made no showing that the Monitor should be disqualified or that
Apple would suffer irreparable harm if the stay were denied.51 The Court also
provided a detailed summary of the interactions between Apple, the Plaintiffs,
Id. at 47-48.
Apple, 992 F. Supp. 2d at 266.
and the monitoring team from the hearings preceding issuance of the Final
Judgment through the filing of the January 16 opinion.52
Although the Court denied Apple’s Motion to Stay, the parties agreed that
the Court would stay Section VI of the Final Judgment until noon on January 21,
2014, to allow Apple to pursue its appeal to the Second Circuit.
Proceedings before the Second Circuit
On January 21, 2014, the Second Circuit issued an order establishing a
briefing schedule and granting the administrative stay requested by Apple until
a panel resolved Apple’s motion for a stay pending appeal.
On February 4, 2014, a three-judge motions panel heard argument on
Apple’s motion to stay the injunction pending appeal, and on February 10, 2014,
the panel issued an order (“February 10 Order”) denying the motion. The
February 10 Order explained that, as the parties had agreed at oral argument, the
Final Judgment tasks the Monitor with “assess[ing] the appropriateness of the
compliance programs adopted by Apple and the means used to communicate
those programs to its personnel,” including ensuring that “Apple’s employees
particularly, senior executives and board members are being instructed on what
those compliance policies mean and how they work.” As the appeals court
noted, the Monitor is not authorized to “investigate whether such personnel [are]
in fact complying with the antitrust or other laws.” Moreover, the February 10
Order provided that “the monitor [is] empowered to demand only documents
relevant to his authorized responsibility as so defined, and to interview Apple
directors, officers, and employees only on subjects relevant to that
We had ceased all monitoring work during the pendency of the temporary
stays granted by this Court and the Second Circuit, which amounted to a period
of more than three weeks. And, as a practical matter, we were effectively
prevented from carrying out our responsibilities for two full months following
the filing of the December 12 Motion to Stay. With the issuance of the Second
Circuit’s February 10 Order, the administrative stay was lifted, and we resumed
our monitoring activities.
See id. at 265-78.
From our perspective, the Second Circuit’s Order confirmed the scope of the Final
Judgment as we had interpreted and applied it.
February 2014: Resumption of Monitoring Activities
Communications with Apple
Our monitoring activities resumed promptly after the Second Circuit’s
ruling. Within several days, we were in touch with Apple and arranged for a
meeting in Washington, D.C., in early March to discuss the company’s progress
on revisions to Apple’s antitrust compliance policies, procedures, and training
On February 18, 2014, we sent a letter to the Court providing an update on
the status of our monitoring activities. The letter explained that we were
prepared to reset our relationship with Apple and to attempt to overcome the
obstacles that had prevented us from making adequate progress. On February
19, the Court issued an order (“February 19 Order”) that required Apple to
provide to us “on a rolling basis, with final production being made no later than
February 26,” the documents we had requested, “including those the Monitor
requested in October, as well as any additional documents that Apple wishes the
Monitor to review.” On February 26, consistent with the Court’s February 19
Order, Apple provided us with two sets of additional documents. 54
March 4 Meeting with Apple
On March 4, 2014, we met with Mr. Vetter, Mr. Andeer, Mr. Moyer, Ms.
Said, and Matthew J. Reilly of Simpson Thacher (“March 4 Meeting”). The
purpose of the meeting was for Apple to share with us the progress it had made
in revising its antitrust compliance policies, procedures, and training over the
previous several months.
Based on the representations that had been made to us and to the Court
between October and January, we had expected that we would be presented with
completed revised antitrust policies and procedures, rather than drafts.
However, during the course of our subsequent discussions, it became clear that
at least one of the reasons the materials were still in draft form was to solicit the
views of the monitoring team on the drafts – and consider making changes based
on our comments – before distributing them to Apple employees. This was
consistent with the Court’s suggestion during the January 13 proceedings.
At the March 4 Meeting, Apple provided a detailed presentation of the
steps the company had taken to comply with the Final Judgment. Apple
described the various audits of publisher contracts that Ms. Said had been
A complete description of the documents produced at this time was provided at page
36 of our First Report.
conducting, the steps Apple had taken to familiarize employees with Ms. Said
and emphasize her availability as a resource regarding antitrust issues, and the
various ways in which Apple had incorporated the requirements of the Final
Judgment into its training and draft revised policies.
Much of the meeting focused on draft documents that Apple had
prepared as part of its efforts to revise its antitrust compliance program. These
included a revised Antitrust and Competition Law Policy, a revised antitrust
section of Apple’s Business Conduct Policy, and proposed revisions to Apple’s
Business Conduct Policy ebook. In addition, Apple showed us an online
compliance training program addressed to corruption issues, which as a matter
of style and aesthetic would serve as the model for the online antitrust
compliance training program that was still in development, as well as some of
the proposed text of the online antitrust course. Rather than discuss the details
of the draft documents at this point,55 we will provide our assessment of the final
versions of these materials later in this Report.
At the March 4 Meeting, the Apple representatives informed us that some
of the policy and training documents were ready to be circulated to employees,
but they said that they planned to wait to introduce them simultaneously in June
2014, when all of the materials were ready, so that they could make a “big
splash” that would catch employees’ attention.56
Later in the meeting, Mr. Andeer provided us with abbreviated
summaries of the two live training presentations he had made to employees
since the issuance of the Final Judgment. He said that each training session was
about ninety minutes long: his presentations lasted for about sixty minutes, and
he responded to questions from employees for about thirty minutes. Mr. Andeer
said that he received many questions at each of the training sessions.
The first presentation, which was an overview of the Final Judgment, was
given by Mr. Andeer in September and December 2013 to groups of iBooks Store
employees and other personnel identified by Apple as covered by Sections V.A
and V.B of the Final Judgment.57 Mr. Andeer said that he had tried to make the
We provided our observations on the initial draft versions of these materials at pp. 3740 and pp. 47-50 of our First Report.
56 Apple did not explain at the time why it settled on the June 2014 date.
subsequently advised us that the timing was dictated by the desire to release all elements of the
program at the same time rather than issue them piecemeal.
At the time, Apple had provided us with lists of employees who represented that they
planned to attend each live training session, but Apple was unable to confirm which employees
actually attended. Apple subsequently issued an electronic survey to the intended participants to
confirm their attendance at the September and December 2013 training sessions, and Apple
Final Judgment easily comprehensible to the employees, most of whom do not
have legal training. The presentation slides set forth various “[d]os and don’ts
(for now)” under the Final Judgment, including with respect to Most Favored
Nation clauses (“MFNs”), discounting of “Big 6” publisher titles, threats and
retaliation, information sharing, terms affecting other retailers’ prices,58 and App
Store terms and conditions. Mr. Andeer explained that he summarized the Final
Judgment, section-by-section, and also emphasized that he and other members of
the legal team are available to speak with them about potential antitrust issues.
The second presentation, which Mr. Andeer gave at a “worldwide
summit” of iBooks Store employees on February 3, 2014, was a general overview
of antitrust law.59 Mr. Andeer said this presentation emphasized the types of
conduct that are the most significant potential pitfalls for employees of Apple or
a similar company, involving communications with competitors and groups of
competitors. Mr. Andeer said that he incorporates real-life examples throughout
his training sessions that he believes employees will find helpful in
understanding the antitrust concepts he is explaining. The slides for this
presentation contain much less text than do the slides for the Final Judgment
presentation; many slides have no text whatsoever and include only an evocative
image that Mr. Andeer used to launch his oral presentation on the relevant
topic.60 One of the final slides states that “[a]ntitrust [v]iolations MUST be
reported” and lists Ms. Said as the relevant contact, with Ms. Persampieri and
Apple’s competition lawyers listed under the subheading “[q]uestions or
concerns.” The next slide lists the relevant “[t]akeaways” as “Apple is under
scrutiny,” “Aggressive regulatory landscape,” “Talking about a competitor’s
price is risky,” and “Awareness of what you say.”
The March 4 Meeting was the last substantive contact between Apple and
the monitoring team before the preparation of the First Report, which was filed
with the Court on April 14, 2014.
provided us with a list of confirmed attendees on May 19, 2014. Apple did not provide us with
such a list for the February 2014 training session.
Mr. Andeer told us that he fielded many questions on retail pricing during trainings.
Mr. Andeer said he has told employees that they should focus on the terms in Apple’s
agreements and what is best for Apple.
59 Presentation slides for the February 3, 2014 live training session are attached as Exhibit
Mr. Andeer explained at the March 4 Meeting that his presentation slides generally do
not include much text. He made the Final Judgment presentation slides more text-heavy, he
explained, because the Final Judgment is complex and difficult for many employees to
understand, so he wanted them to be able to take with them – and be able to refer later to – a
document explaining its terms.
Activities during the Second Reporting Period: March to August 2014
We have made significant progress during the second reporting period,
which ran from the March 4 Meeting through the end of August 2014.61 During
this period, we obtained far more of the information necessary to fulfill our
responsibilities under the Final Judgment than we had during the initial
reporting period. Even so, we frequently had to deal with delays in receiving
requested materials, and, in cases that will be discussed in Section V.D below,
Apple has refused to provide certain information. In addition, Apple has
unnecessarily complicated our monitoring efforts by making unilateral decisions
that have affected our ability to discharge our responsibilities.62
We had three primary objectives during this second reporting period.
First, we needed to develop a better understanding of Apple’s business.
As noted in our First Report, we knew comparatively little about the structure
and operation of Apple’s business six months ago, when we issued the First
Report. Information about the aspects of a company’s operations that create
antitrust risks and vulnerabilities, however, is critical both to the development of
a comprehensive and effective antitrust compliance program and to our
evaluation of that program. For that reason, many of the recommendations and
assessments we included in the First Report were preliminary and tentative.
Although our knowledge of Apple’s business remains far from complete, we
have, with Apple’s improved cooperation, learned a great deal during the second
reporting period, primarily through interviews and meetings with relevant
personnel, as well as through documents and other materials Apple has
provided to us.
Our second goal during this reporting period was to learn more about
Apple’s Legal and Compliance functions, including how they are organized and
how they interact with the company as a whole. Before this reporting period
commenced, we had spoken with some of the relevant personnel, including Tom
Moyer, the company’s Chief Compliance Officer and Head of Global Security;
Deena Said, the ACO; and several Apple lawyers. During this reporting period,
61 The period from the March 4 Meeting through April 14 was largely devoted to the
preparation of the First Report.
For example, in a set of interviews scheduled for June, Apple unilaterally determined
that the interviews would be limited to one hour, even though previous substantive interviews
had lasted significantly longer. Though the interviews were eventually extended, the issue could
have been entirely avoided by prior consultations. More recently, Apple chose not to videorecord makeup training sessions that took place on September 11 and September 23, without
notifying us in advance of that decision.
we developed a more detailed understanding of the Legal and Compliance
functions. We also obtained useful information from Apple business personnel
regarding their contacts and communications with Legal and Compliance
Our third and ultimate objective was to review and assess the revised
antitrust policies, procedures, and training that were introduced to Apple
employees as part of the new Antitrust Compliance Program rollout on June 30,
2014 (the “June 30 Rollout”). This is the first date on which Apple rolled out its
complete revised compliance program that originally was to be finished by
January 14, 2014. The information we obtained regarding Apple’s business and
Legal/Compliance structure has been critical to making this assessment. We also
asked a wide range of interviewees directly about their experience with Apple’s
Antitrust Compliance Program and, in the interviews we conducted after June
30, about their reactions to the new and revised antitrust materials introduced as
part of the June 30 Rollout.
Interviews and Meetings
Between March 2014 and August 2014, we interviewed thirty-six people
affiliated with Apple, including one outgoing Board member (by telephone);
seven of the ten members of Apple’s Executive Team, including CEO Tim Cook;
ten employees who report directly to Eddy Cue in his Internet Software and
Services group; and four members of Apple’s Legal team, among others. We also
had several meetings with key individuals involved in Apple’s antitrust
compliance efforts, including Mr. Sewell, Ms. Said, Mr. Vetter, Mr. Andeer, and
Apple’s outside counsel at Simpson Thacher. With the exception of the
telephone interview mentioned above, all of our interviews and many of the
meetings took place during four visits to Apple’s offices in California: on April
23-25, June 25-27, July 17-18, and August 20-21.
Board of Directors
On July 30, we conducted a telephone interview with William V.
Campbell, who had resigned in mid-July from Apple’s Board of Directors. As
described above, we had been seeking to interview Board members since we
began our work in October 2013. With the exception of the interview of Dr.
Sugar in December and the interview of Tim Cook in April, Apple had made no
Board members available to us. Apple’s General Counsel, Mr. Sewell, requested
in mid-June that our interviews of Board members be deferred until the Board
had received antitrust compliance training, which eventually took place on
August 27.63 Although reluctant to delay Board member interviews still further,
we agreed to defer the rest of our Board member interviews until after August
27. However, Mr. Sewell arranged for an earlier interview with Mr. Campbell
because his Board service ended in mid-July.
Mr. Campbell, who served on Apple’s Audit and Finance Committee
(“AFC”) from 2006 until his resignation, discussed his views on the compliancerelated responsibilities of the AFC. He also provided us with information
regarding the types of oversight the Board exercises, his own interactions with
Apple’s compliance function, and his perception of Apple’s response to the Final
Judgment and other matters related to antitrust compliance. This interview
advanced our understanding of the Board’s oversight of antitrust compliance at
Apple, an issue we will assess further in the next reporting period.
During this reporting period, we interviewed seven of the ten members of
Apple’s Executive Team:
Tim Cook, CEO
Eddy Cue, Senior Vice President of Internet Software and Services
Craig Federighi, Senior Vice President of Software Engineering
Luca Maestri, Senior Vice President and CFO
Dan Riccio, Senior Vice President of Hardware Engineering
Jeff Williams, Senior Vice President of Operations
Angela Ahrendts, Senior Vice President of Retail and Online Stores
As mentioned in Section IV.C.1, we interviewed an eighth member of the
Executive Team, Bruce Sewell, by telephone during the previous reporting
period. The Monitor also met with Mr. Sewell on June 12 in Washington, D.C.
That meeting is summarized in more detail in Section V.D.3.
From the outset, we have viewed the Executive Team interviews as
particularly important to the fulfillment of our mandate under the Final
At the March 4 Meeting, Apple told us the Board would receive antitrust compliance
training in May. In late April, Apple informed us that the Board training session had been
postponed until August due to conflicts in the schedule of David Boies, who led the Board
Judgment, given this Court’s specific concerns regarding compliance among
Apple’s highest-level personnel.64 The Executive Team interviews that we have
completed thus far have greatly enhanced our understanding of Apple’s
business, the antitrust risks the company faces, and the ways in which the
company has responded to those risks. Each Executive Team interviewee has
provided us with an overview of the specific areas of the business he or she
oversees and identified his or her direct reports. The interviews have also
provided helpful insight into Executive Team members’ perspectives on
compliance at Apple, including their efforts to communicate the importance of
antitrust compliance throughout the company, the sufficiency of the legal and
compliance resources that support their activities, and their perceptions of the
quality of antitrust compliance resources available to them.
There remain two members of Apple’s Executive Team whom we have
not yet interviewed: Phil Schiller, Senior Vice President of Worldwide Marketing;
and Jonathan Ive, Senior Vice President of Design. We had hoped to interview
the entire Executive Team during this reporting period, but, despite our requests,
Apple did not schedule interviews with Mr. Schiller or Mr. Ive. It is our
understanding that Apple made that decision because Mr. Schiller and Mr. Ive
did not receive antitrust training until after we had finished conducting
interviews for this reporting period.65 We have requested to interview Mr.
Schiller and Mr. Ive as early as possible in the next reporting period.
Personnel in Content Businesses
During this reporting period, we also interviewed several senior but nonExecutive Team Apple employees whose work relates to Apple’s content
businesses. We initially focused these interviews on personnel within Mr. Cue’s
group, interviewing ten of Mr. Cue’s direct reports:
Robert Kondrk, iTunes Music & Design
Matt Fischer, iTunes apps
Tracy Pirnack, iTunes Business Management
Jennifer Bailey, iTunes Special Projects
64 See, e.g., 8/27/13 Tr. 17 (noting that the conduct underlying the ebooks Litigation
“demonstrated a blatant and aggressive disregard at Apple for the requirements of the law,”
including among “Apple lawyers and its highest-level executives”).
Attendance lists Apple produced to us on August 29 show that Mr. Schiller attended
the Board live training session on August 27 and that Mr. Ive’s training date remained “TBD.”
Bill Stasior, Siri
Todd Teresi, iAd
Roger Rosner, apps Admin
Jeff Robbin, iTunes Store apps
Steven Leung, iTunes Retail
Patrice Gautier, Maps and iCloud66
We also interviewed a number of less senior employees within Mr. Cue’s
Internet Software and Services organization.67 In April, we interviewed the three
iBooks account managers who are responsible for day-to-day dealings with the
publishers who distribute works through the iBooks Store.68 We interviewed
several employees who do App Store–related work and report to Matt Fischer.
We also interviewed four employees whose work relates to iTunes operations
and who are overseen by Tracy Pirnack.
Like the Executive Team interviews, these interviews provided us with
relevant and helpful information regarding Apple’s business and the antitrust
risks posed by its activities. Given the involvement of Apple’s content
businesses in the events underlying the ebooks Litigation, we sought to gain a
deeper understanding of the content-related activities in which Apple engages.
We learned what Apple has done, both before and after issuance of the Final
Judgment, to mitigate the antitrust risks associated with its content businesses.
For example, we interviewed Mr. Cue’s direct reports about their access to legal
and compliance resources when confronted with situations they view as
presenting potential compliance risks, the ways in which Apple lawyers are
embedded in business units and assist in the day-to-day decision-making of nonAn organization chart Apple provided to us shows three additional direct reports to
Mr. Cue, including Mr. Cue’s administrative assistant and an employee whose responsibilities
appear to focus solely on Europe. We plan to interview the one remaining direct report, Val Cole,
whose work appears to be relevant to our responsibilities, but have determined that interviews
with the other two remaining direct reports are not necessary at this time.
67 Apple selected many of the personnel we interviewed in November 2013, December
2013, and April 2014 based on its assessment that speaking with them would help us understand
the company’s content businesses. In April 2014, we also interviewed several people we had
specifically requested. Starting with the June 2014 interviews, we specified witnesses we wanted
to interview based on information we had obtained about their roles.
In the previous reporting period, we had interviewed these employees’ direct
supervisor, Rob McDonald, and his supervisor, Keith Moerer. Mr. Moerer reports to Robert
Kondrk, whom we have also interviewed.
attorney employees, and the availability and sufficiency of antitrust compliance
training and other resources both before and after issuance of the Final
Members of the Competition Law & Policy Group
In April, we interviewed Sean Dillon and Brendan McNamara, two of the
three attorneys hired to join Mr. Andeer in Apple’s Competition Law & Policy
Group (“CLPG”). The third member of the team, Per Hellstrom, is based in
Europe. Mr. Dillon and Mr. McNamara both joined Apple from the Federal
Trade Commission, Mr. Dillon in November 2011 and Mr. McNamara in
February 2014. Those interviews informed our understanding of how the CLPG
interacts with Apple’s business personnel, the steps the CLPG has taken to assess
and mitigate the antitrust risks Apple faces, and the CLPG’s involvement in the
revision of Apple’s Antitrust Compliance Program.
On August 21, near the end of this reporting period, we also met with Mr.
Andeer, with whom we had previously met during the first reporting period.
That meeting focused on the feedback Mr. Andeer had received on Apple’s
revised antitrust compliance materials, his plans for further development of
those materials, the evolving role of the CLPG, and the status of our
recommendation in the First Report that Apple conduct a formal antitrust risk
assessment. The meeting, and the interviews with his colleagues in the CLPG,
provided us with important information about all of those topics, which serves
as the basis for the discussion and assessments below.
Compliance and Legal Personnel
During this reporting period, we also interviewed several compliance and
legal personnel who are not members of the CLPG. The goal of these interviews
was to learn how the relevant personnel work with Apple’s businesses, as well as
with Apple’s antitrust specialists, and to learn more about the evolution of
Apple’s Antitrust Compliance Program.
In June, we interviewed Kathleen Emery and Sharon Joyner, both of
whose work relates directly to Apple’s antitrust compliance infrastructure. Ms.
Emery manages Apple’s Business Conduct Helpline, a telephone service
employees can contact with compliance-related questions, complaints, and
allegations. Ms. Joyner works as a project manager and is specifically
responsible for the development of online training at the company. She has
played an important role in the development of Apple’s revised antitrust
compliance materials, including the revised policies, the antitrust section of the
compliance ebook, online training, and the “Antitrust Intraweb Site” Apple
launched on June 30.
We also interviewed two Apple lawyers who work with content-related
businesses at Apple: Robert Windom, who provides legal advice in connection
with all of Apple’s content businesses, and Emily Blumsack, who reports to Mr.
Windom and provides legal support related to the App Store.69
In addition to our interviews with Apple personnel, we requested and
received various Apple documents during the reporting period.
July 1 Production
Most of the documents Apple produced to us during this reporting period
were produced on a rolling basis, in response to specific requests we made.
There were two exceptions, the first of which was a production Apple made
relating to the June 30 Rollout. On July 1, Apple provided us with 65 pages of
documents reflecting the revisions to the Antitrust Compliance Program the
company had just introduced. Specifically, Apple produced:
The company’s revised Antitrust and Competition Law Policy;
A copy of the email announcement that was sent to employees on June 30
regarding the online antitrust training;
A copy of the slides from David Boies’s June 30 presentation to the
Executive Team regarding antitrust law;
A copy of the email announcement that was sent to employees on June 30
regarding the revised Business Conduct ebook;
A screenshot of the Antirust Intraweb Site from which employees could
download the revised Business Conduct ebook;
Screenshots of promotions for the Business Conduct ebook on the
Antitrust Intraweb Site, the Business Conduct & Compliance intraweb
site, and the AppleWeb home page;
A June 30 email from Eddy Cue to his reports emphasizing the
importance of the online antitrust training course;
A revised summary of the Final Judgment;
During the first reporting period, we interviewed Annie Persampieri, another in-house
attorney who also reports to Mr. Windom and provides legal support related to the iBooks Store.
The text of the Final Judgment certification distributed to Section V
The text of the communications certifications distributed to Section V
employees to cover the first two quarters of 2014; and
A July 1 memorandum from Ms. Said to the Monitor setting forth her
proposal for the audit she is required to conduct under Section V.E of the
July 31 Document Request
On July 31, we sent Apple a document request (“July 31 Document
Request”), asking that the documents be produced on or before August 31. The
July 31 Document Request was aimed, in large part, at obtaining answers to
questions we had highlighted in the First Report.
The requests covered a range of broad categories, including:
The Board’s oversight of compliance-related matters at Apple;
Additional materials related to the antitrust training that had been
provided to Apple employees since issuance of the Final Judgment;
Any antitrust risk assessments Apple had prepared since receiving our
Agendas from Executive Team meetings referring to or reflecting
discussion of antitrust compliance;
Communications from Apple’s Board or Executive Team to Apple
employees regarding antitrust compliance; and
Transmission of the First Report to the Board, the Executive Team, or
other Apple personnel, and any feedback received concerning that report.
On August 1, Simpson Thacher asked to meet and confer with us
regarding the July 31 Document Request. Although Apple did not file formal
objections to any of our requests, it expressed initial concern about some of them,
and we agreed to narrow the date range of two of our requests. On August 29,
Apple produced documents responsive to the July 31 Document Request
(“August 29 Submission”).
In addition to these materials, Ms. Said provided the monitoring team with the means
to gain access to Apple’s new online training.
In addition to requests to which Apple represented that no responsive
documents existed, Apple refused to produce documents in response to two of
our requests. First, Apple produced no documents in response to our request for
Executive Team meeting agendas; on September 5, Simpson Thacher emailed us
and asked to continue meeting and conferring on that request in hopes of finding
other ways to convey information sought from the agendas. Second, Apple also
refused to produce emails, even in redacted form, showing transmission of our
First Report to Apple personnel, although it did produce a privilege log showing
information about two April 14 emails that Apple represented contained advice
of counsel regarding the First Report. According to the privilege log, Mr. Vetter
and Mr. Sewell sent the emails to Mr. Andeer, Ms. Said, Mr. Moyer, and two
individuals who appear to be members of Apple’s public relations team.
Simpson Thacher confirmed that the First Report was not transmitted to the
Board, the Executive Team, or to any additional Apple personnel.
Other Documents Produced During the Reporting Period
Among the additional documents produced on a rolling basis during this
reporting period were:
Slides, speaker’s notes, and attendance lists for most of the live antitrust
training sessions Apple has conducted since issuance of the Final
Brief written reports Ms. Said provided to the AFC in February and May
A list of personnel with whom Ms. Said has “standing meetings,” grouped
by frequency of the meetings;
The detailed work plan Ms. Said has created to track the progress of
Apple’s efforts to satisfy various Final Judgment requirements;
A document reflecting the procedure by which antitrust-related Helpline
calls are to be escalated to Ms. Said;
Updated live training schedules; and
Organization charts and rosters of the employees who report to Mr. Cue.
As noted earlier in this Report, our relationship with Apple has been more
productive and constructive during this reporting period than it was during the
first few months of the monitorship. In the First Report, we expressed optimism
that the relationship had taken a positive turn, and that optimism has for the
most part proved to be justified: Apple was far more responsive to our requests
during this reporting period and was cooperative in scheduling interviews and
coordinating other activities. Nonetheless, we encountered several difficulties
that warrant brief discussion.
Challenge to Fees Associated with Preparation of First
The first significant issue related to Apple’s objections to the scope and
length of our First Report. The First Report laid out, in significant detail, the
procedural history of the first several months of the monitorship, including
conflicts between Apple, the Plaintiffs, and the monitoring team. We felt that it
was vital that we include this information to provide an accurate account of the
early months of the monitorship, since we spent the bulk of our time during
these months dealing with these obstacles instead of making substantive
progress. We were not parties to the litigation initiated by Apple challenging our
activities, and therefore our First Report was the first full opportunity to present
an account of the events during the first months after the Monitor’s appointment.
We also felt this information helped to explain why the First Report could not
offer more than a relatively preliminary assessment of Apple’s antitrust
compliance policies, procedures, and training.
Apple objected strenuously to our inclusion of the procedural history in
the First Report. In an April 4 email transmitting Apple’s comments on the First
Report, Mr. Reilly explained that Apple was surprised and displeased with the
length of the report, and particularly with the length of the procedural history.
He added that Apple was concerned about being charged for the time spent
generating that history, which Apple considered to be outside the proper scope
of the report. Mr. Reilly told us that Apple would like to discuss the issue when
it received our invoice for the work completed in March.
On May 1, Simpson Thacher provided us with Apple’s formal objections
to our March invoice. Apple estimated that “at least . . . approximately half of
the [First] [R]eport [was] devoted to a rehash of prior submissions that was
unrelated to [our] mandate under the Final Judgment.” In total, Apple requested
that we reduce our March 2014 bill by approximately 35%, noting its view that
that proposal represented a compromise and that even the reduced bill would be
“excessive under the circumstances.”
We responded by email, copying the Plaintiffs, and stated that Apple’s
position was unacceptable. In accordance with Section VI.H of the Final
Judgment and the December 2 Order, Apple and the Plaintiffs met and conferred
on May 2 and 5 regarding the objections. When they were unable to resolve the
issue, we appeared, with the parties, before Magistrate Judge Dolinger on May 9
(“May 9 Hearing”). Judge Dolinger rejected Apple’s objections to the March
invoice and ordered Apple to pay that invoice in full.71 Apple did not appeal
Judge Dolinger’s May 9 rulings and has paid our subsequent invoices promptly
and without objection.
Objections to the Monitoring Team’s “Work Plan”
The May 9 Hearing also addressed a second issue—Apple’s objections to
an allegedly overbroad and overly burdensome “work plan” that the company
claimed we had issued.
On April 29, the Monitor spoke with Mr. Reilly and Sara Y. Razi of
Simpson Thacher, who suggested that Apple wanted to appear before Judge
Dolinger in the near future to clarify the scale and scope of our future activities.
The Monitor responded that he did not think it was necessary to present those
issues to Judge Dolinger but that, in any event, he would like to discuss the
issues in person first.
On May 1, the Monitor, Mr. Nigro, and Ms. Carroll had an in-person
meeting with Mr. Reilly and Ms. Razi (“May 1 Meeting”). The meeting focused
on Apple’s desire to clarify the monitoring team’s plan for the next few months
and, in particular, which additional personnel we planned to interview. We said
that we knew we needed to interview the members of Apple’s Board and
Executive Team in coming months, but that, with respect to other personnel, it
would be useful to know whether Apple believed there were individuals who
could efficiently help us understand Apple’s business and the associated
antitrust risks. Mr. Reilly expressed the view that the interviews we had already
conducted had provided us with a great deal of information about Apple’s
antitrust risks, and he said he was not sure he could suggest any additional
interviews. We agreed to give Simpson Thacher an initial list of Apple business
people we hoped to interview in the coming months.
On May 5, before we had had the opportunity to prepare a list of
proposed interviews, Simpson Thacher sent the Plaintiffs an email setting forth
See 5/9/14 Tr. 38-39 (“[T]o the extent that Apple is criticizing the monitor and saying it
shouldn’t have to pay for the time spent on at least part of the report, I find that objection to be
utterly and completely groundless. The report is an appropriate document. It is necessary for
the monitor to be able to set forth the context for the substance that he presents. And whatever
went on procedurally and otherwise that led to, shall we say, at least some delays in the monitor
being able to grapple with the substance of what Apple was proposing to do in compliance with
the judgment, that has to be and is appropriately explained in the report. Apple’s request insofar
as it’s premised on this objection, its request not to have to pay the full invoice is emphatically
Apple’s objections to our “proposed work plan.” The email stated that we had
“met and conferred” with Simpson Thacher on May 1 and had expressed an
intention to engage in activities that would be “well beyond the authority
granted to the monitor as part of the Final Judgment, . . . not in any respect costeffective, and . . . wholly inconsistent with a monitorship that is supposed to ‘rest
lightly’ on Apple.” We were puzzled by these objections, not having thought
that the May 1 Meeting was a “meet and confer” or that our preliminary
statements at that meeting constituted a “work plan.”
At the May 9 Hearing, Judge Dolinger rejected Apple’s objections to what
Apple claimed was our “work plan.” He rejected Apple’s request for an order
limiting our activities going forward, emphasizing the discretion that is inherent
in a monitorship such as this one72 and noting that there was, in any event, “no
record on which to deem that to be an appropriate request” due to the lack of
“specifics” in Apple’s presentation of the issue.73 As with its challenge to our
March invoices, Apple did not appeal Judge Dolinger’s rulings on this issue.
Live Monitoring of Training
Another significant obstacle involved our request to conduct live
monitoring of antitrust training sessions led by Mr. Andeer, Mr. Andeer’s
colleagues in the CLPG, and Mr. Boies. We became aware during our very first
meeting with Apple, on October 22, 2013, that this might be a troublesome issue.
At that meeting, Mr. Andeer advised us of Apple’s view that the live antitrust
training sessions he conducted would be protected by attorney-client privilege,
since he planned to provide employees with advice based on real-world
examples during the sessions. We told Mr. Andeer that, even assuming the
sessions included some privileged communications, we did not think our
presence at the sessions would waive the privilege. Nonetheless, we did not
press to attend the training sessions Mr. Andeer led in September and December
2013 and in February 2014 because of the many other unresolved issues and
because of the litigation Apple initiated.
We had a preliminary discussion during the March 4 Meeting regarding
ways we could monitor future training sessions, noting our strong preference to
perform live monitoring. Over the next few weeks, the Monitor and Mr. Vetter
engaged in an extended email exchange, in which Mr. Vetter reiterated Apple’s
position that live training sessions might include exchanges that would either
72 See id. at 40 (“It is apparent that the monitor must be able . . . to determine step by step
what additional information he requires and how best to achieve and obtain that information.”);
id. at 41 (“[Although] the monitor has very specific tasks to perform and specific issues to deal
with, he must be given some fairly broad discretion in deciding how to proceed.”).
Id. at 37-41.
implicate the attorney-client privilege or reveal confidential business
information. He also expressed a concern that our presence would diminish the
openness and robustness of the discussions that would take place at live training
sessions. Mr. Vetter offered to provide us with a limited number of redacted
video-recordings of live training sessions. We took the position that the training
sessions were not privileged and suggested various ways of addressing Apple’s
privilege concerns, including pursuant to Federal Rule of Evidence 502(d), which
authorizes a federal court to issue an order stating that privilege “is not waived
by disclosure connected with the litigation pending before the court—in which
event the disclosure is also not a waiver in any other federal or state
Because no training sessions took place in March or April, we made no
progress toward resolving the issue for several weeks. On May 14, Simpson
Thacher informed us that Apple had decided not to permit us to monitor the
June 30 training session for Executive Team members in any manner—either live
or by video. Simpson Thacher clarified that Apple would provide us with copies
of the slides and handouts associated with the training session and also offered
to provide us with a two-angle videotape of one of the upcoming training
sessions for non-executive employees.
On May 19, the Monitor emailed Simpson Thacher to formally request
(among other things) that Apple videotape all of the non-Board, non-Executive
Team training sessions, rather than the single session that Apple had offered.
We believed this was particularly appropriate in light of Apple’s prior
representations that it intended to tailor the training sessions to different
employee groups.75 The Monitor also formally reiterated the monitoring team’s
request that Apple permit us to attend the Board and Executive Team training
sessions, emphasizing that the Court had focused on compliance weaknesses
among Apple’s highest-level personnel and that live monitoring was necessary
for us to fully evaluate whether the training they received constituted a sufficient
response to the Court’s concern.
74 We offered to accommodate Apple’s concerns about the disclosure of confidential
business information through the protective order that was being negotiated or, if Apple thought
it appropriate, through a separate confidentiality agreement. There have been extensive
negotiations between Apple, the Plaintiffs, and the monitoring team during the second reporting
period regarding a protective order. Although no protective order has been finalized as of the
date of this Report, we are prepared to resume discussions at the parties’ convenience. In the
meantime, the monitoring team has agreed not to share or disclose sensitive or proprietary
information without prior approval from Apple.
In fact, in Simpson Thacher’s May 12 letter responding to the recommendations we
made in the First Report, Simpson Thacher argued that it was not necessary for Apple to develop
tailored antitrust compliance policies for different employee groups because it would tailor the
antitrust compliance training provided to different employee groups.
In response, Simpson Thacher offered to videotape and produce nonprivileged portions of two upcoming, non-Board and non-Executive Team
antitrust training sessions. Apple also agreed for the first time to produce
redacted video-recordings of the Board and Executive Team training sessions.
We responded that, at a minimum, we believed Apple should video-record all of
the non-Board, non-Executive Team training sessions, and we reiterated our
request that Apple permit us to conduct live monitoring of the Executive Team
and Board training sessions.
On June 2, we discussed these issues with Simpson Thacher by telephone.
During that conference call, Simpson Thacher conveyed Apple’s offer to
videotape all remaining antitrust training sessions, and we discussed potential
compromises regarding our monitoring of the Executive Team training session.
On June 4, Simpson Thacher informed the Monitor that Mr. Sewell would
like to discuss with him our monitoring of live training. A little over a week
later, the Monitor met in person with Mr. Sewell in Washington, D.C. Mr. Sewell
said he understood the importance of monitoring Executive Team and Board
training but was very concerned that our presence at those sessions would
unacceptably chill the discussion between participants and Mr. Boies. He said he
will not object to our attending Executive Team and Board sessions in 2015 but
would strongly prefer that we not attend those sessions in 2014. As a substitute,
he offered to provide us with redacted videos of the 2014 Executive Team and
Board training sessions. Mr. Sewell added that he did not object to our attending
in person as many non-Executive Team and non-Board training sessions as we
wanted, and he promised that Apple would also video-record all of those
In the spirit of compromise, we agreed to Mr. Sewell’s proposal. Members
of our team attended two live training sessions: Mr. Nigro attended a June 17
session for App Store employees, and the Monitor attended a June 23 session for
Productivity Engineers.76 Consistent with the agreement we reached with Mr.
Sewell, Apple provided us with redacted video-recordings of all of the sessions
that took place between June 10 and the end of this reporting period. The
Executive Team session contained approximately 35 minutes of redacted video
footage. Although we requested on three separate occasions that Apple provide
us with a list of the issues or subjects discussed during the redacted portions of
the training session, Apple ignored our request and follow-up requests. We have
never received this information.
Our substantive evaluations of those training sessions are discussed in Section IX.E
Monitoring of New Employee Orientation
We have also requested to monitor Apple’s New Employee Orientation
(“NEO”), an extensive training program that many interviewees told us
incorporated compliance-related material and that, in their view, set the tone for
the attitude towards compliance at Apple. We viewed monitoring at least one of
these sessions to fall within our mandate under the Final Judgment to evaluate
the comprehensiveness and effectiveness of Apple’s antitrust compliance
policies, procedures, and training. Nonetheless, Apple rejected the request as
beyond the scope of our mandate and, to date, has not permitted us to monitor
We first learned during our April interviews that Apple’s NEO program
might incorporate antitrust-related information. For example, a member of the
CLPG told us that, although the NEO session in which he participated had lasted
for an entire morning and covered a broad range of issues, his ears had “perked
up” during the discussion of competition law, which he thought was well done.
Other interviewees also recalled that NEO included discussion of antitrust topics.
We also hoped to evaluate new employees’ exposure to compliance more
generally and the emphasis Apple gave this information relative to other
instruction received during NEO.
For these reasons, we asked at least as early as April 29 to conduct live
monitoring of NEO. On May 14, Simpson Thacher informed us that Apple
would not permit us to monitor NEO, representing (contrary to what we had
heard from three people we interviewed) that NEO was “not pertinent to
antitrust compliance or training.” Simpson Thacher told us that NEO covers “a
wide range of topics meant to familiarize a new employee with Apple, but little if
any of this relates to business conduct policies,” although Simpson Thacher
promised to confirm with Apple that that understanding was correct. We
subsequently reiterated our request more than once; it took more than two
months for us to receive a substantive response.
On July 24, Simpson Thacher again told us that Apple would not allow us
to monitor NEO because it did not relate to antitrust. We informed Simpson
Thacher later that day that, although we viewed our request as very reasonable,
we did not plan to take the issue to Judge Dolinger for resolution. We said that
we would note Apple’s delay in responding to the request, as well as the
ultimate decision to reject the request, in this Report.77
In response to our draft report, Apple contended that it has informed us that our
attending these sessions “would cause significant disruption to an important, multi-day
orientation that only briefly touches on business conduct issues generally, not antitrust
compliance specifically.” We disagree. If our attendance were handled appropriately, there
Video Recordings of Town Hall Meetings
During this reporting period, we also learned that Apple holds periodic
“town hall” meetings in which senior executives address Apple employees
regarding issues that are important to the company. We have inquired
repeatedly about whether these meetings ever incorporate compliance messages
and whether they are video-recorded. As with our NEO request, Apple rejected
our request to monitor town hall meetings, after lengthy delays, and only after
we followed up with the company many times.
We first asked in late April whether Apple records its town hall meetings.
In an April 29 telephone conference, Simpson Thacher attorneys represented that
they did not know the answer. Despite reminders in April, May, and June that
we were interested in such materials, we did not receive a substantive response.
Finally, in July, Simpson Thacher told us that at least some town halls were
recorded but that Apple had reviewed the recordings and represented that they
did not involve antitrust or compliance. As with NEO, we informed Simpson
Thacher later that day that we viewed the request as very reasonable and were
disappointed at the response.78
Antitrust Risk Assessment
One of the most specific recommendations in our First Report was that
Apple undertake a formal risk assessment to identify and assign priorities to the
antitrust-related risks the company faces. For example, we explained in the First
An antitrust risk assessment is a fundamental component of any
antitrust compliance program, and a systematic assessment of the
risks that arise from Apple’s businesses, the activities of its
employees, and its third-party interactions will help ensure that its
Antitrust Compliance Program makes sense for Apple. We believe
that such an assessment is a key component in making Apple’s
Antitrust Compliance Program comprehensive and effective. . . .
[I]f current and geographically relevant risk assessments do not
exist, Apple should conduct an antitrust risk assessment to identify
would be little or no disruption, and we would be able to monitor the extent to which compliance
issues are addressed during an employee’s introduction to the company.
In response to the draft report, Apple asserted that it had informed us that “these town
hall sessions are outside the scope of [the] monitorship,” as they do not relate to “business
conduct issues” or the antitrust laws.
the specific needs that the company should be addressing through
its Antitrust Compliance Program.79
We strongly believe that, to develop a comprehensive and effective antitrust
compliance program, a company must undertake a comprehensive and
systematic assessment of the particular antitrust risks that it faces. Apple did not
object to this recommendation, but we received little information related to it—
and no information presented as specifically responsive to the
recommendation—until the very end of this reporting period.
Beginning with our April 2014 interviews, after the submission of the First
Report, we asked Apple personnel, primarily in Eddy Cue’s content groups,
whether they had been involved in any kind of antitrust risk assessment. Most
interviewees said that they had not, although some of the CLPG members we
interviewed in April suggested that Apple had been deliberating about how best
to implement our recommendation.
In the July 31 Document Request, having heard nothing additional about
Apple’s response to our risk-assessment recommendation, we asked the
company to provide us with “[a]ny antitrust risk assessments prepared since
March 2014.” Several days after we transmitted the request, Simpson Thacher
told us that, if a written risk assessment existed—and Simpson Thacher did not
tell us whether one did, in fact, exist—Apple would be concerned about waiving
privilege by producing it to us. We responded that we believed any privilege
concerns could be remedied through appropriate redactions.
We also raised the issue in our late August meetings with Ms. Said, Mr.
Vetter, and Mr. Andeer. Ms. Said told us that Apple had discussed our risk
assessment recommendation at length. Oddly, during our August 21 meeting
with him, Mr. Andeer asserted that the First Report had not included a specific
recommendation that Apple conduct a formal antitrust risk assessment, a point
that was simply contrary to fact. He then described the CLPG’s efforts to assess
antitrust risk, including through weekly meetings and the preparation of lists of
questions to use in assessing risk. He told us about the means through which he
transmits the CLPG’s conclusions to others at Apple, such as monthly briefings
he makes to Mr. Sewell, although, in response to our questions, Mr. Andeer said
he has not briefed the Board or the AFC.
Mr. Vetter highlighted Apple’s privilege concerns and emphasized that,
even if Apple had not memorialized a risk assessment on paper, the company
had done a great deal to assess and react to potential antitrust risks. The Monitor
responded that we attached a high priority to confirming that an organized and
First Report 45-47.
disciplined risk-assessment process had taken place, and expressed
disappointment that Apple had not raised these issues more promptly after
issuance of the First Report and provided us with a window on the company’s
risk assessment activities.
In subsequent days, Mr. Vetter gave us additional information regarding
Apple’s efforts to assess antitrust risk, although he continued to resist our
request that Apple provide us with the substance of those assessments. He said
that Apple had begun to conduct antitrust risk assessments long before the Final
Judgment was issued and continued to do so through the present. For example,
he said that, when Mr. Andeer joined Apple, he met with all of the senior leaders
in Apple’s Legal department and with “key business leaders” to understand the
risks associated with Apple’s businesses. He also cited the frequent
conversations that the CLPG and other Apple lawyers have with employees
regarding antitrust-related issues, as well as conversations between the CLPG
and the lawyers who support various business units. Mr. Vetter explained that,
shortly after issuance of the First Report, and presumably in response to our
recommendation, the CLPG began to hold additional weekly meetings that are
devoted solely to discussing antitrust risks Apple faces. He added that, in
connection with the meetings, the CLPG created questionnaires, one of which he
sent us, to help its lawyers “drill down” into Apple’s business units and assess
risk in a systematic way.80 Mr. Vetter also noted that Mr. Andeer meets regularly
with Mr. Vetter, Mr. Moyer, and Ms. Said to discuss developments in Apple’s
antitrust compliance program, and he emphasized that Mr. Andeer is given
information regarding Apple’s unannounced products and offerings, which he
characterized as a very significant fact given the high level of secrecy that exists
within the company regarding such matters.
Mr. Vetter also emphasized the ways in which Apple’s revised antitrust
compliance materials incorporated the risk assessment the CLPG had conducted,
both in the substance of the guidance provided and in the hypotheticals, quizzes,
and examples the materials incorporated. He expressed the view that it is
unnecessary to reduce the CLPG’s findings to writing because the findings are
consistently shared across a broad group of legal and compliance personnel; Mr.
Vetter wrote that there is an ongoing, collaborative, and robust discussion at
Apple about antitrust risk, which is and will continue to be reflected in Apple’s
antitrust compliance materials.
In subsequent correspondence, Mr. Vetter explained that Apple had developed the
questions that are included in the questionnaires over the last three and a half years. He said that
the questionnaires themselves, however, had been created in the last six months and had arisen
from the CLPG’s weekly risk assessment meetings initiated after issuance of our First Report.
Apple’s Business Organization
Apple’s operations are organized into several distinct business units.
These are: Internet Software and Services, Operations, Hardware Engineering,
Software Engineering, Channel Sales, Retail and Online Stores, Marketing, and
Design. Each of the above businesses reports through regional operating
segments, and among the corporate support personnel assigned to each business
by region is a dedicated team of lawyers.
Because of the domestic focus of our work, we have concentrated almost
exclusively on the company’s U.S. operations and have included information
about international operations only when necessary to provide context.
We have gathered information about each of Apple’s business units in
order to assess the effectiveness and comprehensiveness of the company’s
Antitrust Compliance Program in the context of Apple’s business activities. We
have interviewed key personnel and received information from Apple regarding
each of Apple’s main business units, with the exception of the Marketing and
Design organizations. We had hoped to learn about all of Apple’s business units
prior to issuance of this Report and made repeated requests to schedule
interviews with senior executives responsible for Marketing and Design. Apple
has not yet made those executives available. We hope to include a review of
Marketing and Design in our next report.
Below is a brief summary of Apple’s business units, which highlights
information of greatest relevance to our assessment of Apple’s Antitrust
Internet Software and Services
Eddy Cue manages Apple’s Internet Software and Services business,
which includes but is not limited to Apple’s content businesses. The Internet
Software and Services business includes approximately
groups in Internet Software and Services include iTunes, the App Store, the
iBooks Store, Siri, Maps, iCloud, and iAd. We interviewed Mr. Cue, almost all of
his direct reports, and several people within the Internet Software and Services
organization at various levels of seniority. From these interviews, from
information provided by Apple, and from publicly available information,81 we
have gained a basic understanding of the structure and operations of the groups
Some information in this section was taken from Apple’s public financial filings and
other publicly available Apple documents.
Mr. Cue oversees. Below we provide a high-level summary of relevant
information for each of these groups.
“iTunes,” as used in Apple’s corporate structure, refers to more than just
the iTunes “product,” which is Apple’s platform for storing and organizing user
music, movies, and TV shows. iTunes is integrated with the iTunes Store, the
App Store, and the iBooks Store, and the iTunes group therefore includes
employees that support all three of these stores. During this reporting period,
we interviewed various personnel from the iTunes Content, Operations, Retail,
and Engineering groups. These included, for example, iTunes Content personnel
with responsibility for acquiring book content for the iBooks Store, Operations
personnel who support app development for the App Store, and Engineering
personnel who support the iTunes Store.
iTunes Content is responsible for the acquisition and sale of music, TV,
and book content. A separate team handles the acquisition of apps for the App
iTunes Operations is responsible for the general operations of the content
distribution stores. The group focuses on acquiring music, movies, TV, and
books; customer support; production support; pricing; compliance; analytics;
internal and external reporting; music publishing; the iTunes gift card business;
and Engineering Project Management. Most of the pricing-related work done by
the iTunes Operations group involves implementing prices submitted by content
providers by making the adjustments to Apple’s system that are necessary to
make product prices visible to users.
some senior members of the group are occasionally involved in negotiations for
content with major music labels and in relationship management. Members of
the group also attend various trade association meetings. Although teams within
the group have other external contact with third parties, that contact is generally
limited to technical coordination.
iTunes Retail is responsible for the iTunes gift card business, which is a
global business with approximately $
in annual sales. The iTunes Retail
group includes teams dedicated to sales, marketing, and merchandising.
Physical retailers, such as Target, Walmart, and Best Buy, conduct a significant
part of the business through sales of gift cards, while a smaller portion is
conducted through online sales by retailers and through the iTunes Store.
Members of this group have external contact with multiple competing retailers
and “integrators,” which are third-party intermediaries that activate gift cards
and collect payment from retailers. Members of the group also help develop
financial models for the business.
iTunes Engineering is responsible for technical and engineering matters
related to iTunes, Apple TV, and iOS applications. The group includes teams
dedicated to the Music Player, Video Player, and iAd; User Interface Design; the
iTunes Store; Digital Rights Management; Engineering Project Management; iOS
Apps; Quality Assurance; Mac and Windows Engineering; and Apple TV
Engineering. The team is largely internal-facing. However, at times senior
leaders in the group have been involved in license negotiations with providers of
services (such as streaming services) that relate to the products covered by the
Engineering team. Their involvement in license negotiations largely has been
technical in nature.
iTunes Store, App Store, and iBooks Store
The iTunes Store is a platform for purchasing and downloading music
and TV shows, and for renting and purchasing movies. iTunes U, which is part
of the iTunes Store, provides downloads of free lectures, videos, and other
content from universities, museums, and other institutions. iTunes Radio, which
is also part of the iTunes Store, is a free streaming service available on iOS
devices, Mac, Windows computers, and Apple TV.
The App Store is Apple’s platform for downloading and purchasing apps
and in-app content.82 The App Store contains apps developed by Apple and by
third parties, some of whom compete directly or indirectly with Apple on apps,
app platforms, and other products. The App Store organization includes teams
dedicated to Store Management (business development), Editorial, and
Marketing. The Store Management and Marketing teams have extensive, direct
contact with app content developers for the development and acquisition of apps
sold in the App Store, including discussions about app feature development,
marketing and placement, and the price of apps. Although the editorial team has
some contact with developers when products are presented to Apple, that
contact is relatively limited.
The Productivity Group includes Productivity Engineers who are part of
the Apps Software Engineering organization and who report to Roger Rosner, a
direct report of Eddy Cue. Productivity Engineers are responsible for creating
“In-app content” refers to premium content, virtual goods, and subscriptions.
proprietary Apple apps used for “productivity,” such as Numbers (spreadsheet),
Pages (word processing), and Keynote (presentations). While largely internally
facing, the team has contact with suppliers when purchasing software or
hardware and also has contact with customers when soliciting feedback for app
The iBooks Store is Apple’s platform for offering ebooks from both major
and independent publishers. We interviewed several account managers with
responsibility for acquiring book content from various publishers.
Although Siri is grouped within Internet Software and Services, it is not a
content business like the businesses described above. Siri is Apple’s voiceactivated knowledge manager, which interacts with consumers seeking
information through their iPhones and iPads. The organization includes teams
dedicated to data analytics, search, user interface, engineering, “intelligent
suggestions,” speech technology, and servers. Members of the Siri organization
have little contact with external parties. However, some personnel within the
organization have contact with partners that provide data feeds and with
suppliers that license technology to Apple.
The Maps group is responsible for developing and maintaining Apple’s
Maps app, which provides turn-by-turn navigation directions. The Maps
organization includes teams dedicated to software development, data collection
and aggregation, and quality assurance.
iCloud is Apple’s data-storage cloud service for music, photos, apps,
contacts, calendars, documents, and other data. The iCloud organization includes
teams dedicated to engineering, quality assurance, and design. Aside from the
limited purpose of licensing tools it uses in internal work, the iCloud team does
not have contact with third parties.
iAd, Apple’s mobile advertising platform, allows third-party app
developers to place ads directly in applications sold in the App Store. The
organization includes teams dedicated to product management, engineering,
operations (both internal and across customers), sales, and marketing. Thirdparty app developers can join the App Network, through which they voluntarily
opt in to the iAd program and permit iAd to place advertisements on their apps
pursuant to a revenue-sharing agreement. Pricing is determined through a
“dynamic auction market.” Members of the iAd organization have frequent and
direct contact with marketers, advertising agencies, and publishers of third-party
apps. Members of iAd also attend industry events at which competitors are
Jeff Williams heads Apple’s Operations business unit, which consists of
employees, a significant percentage of whom are based
overseas. The Operations group is responsible for Apple’s supply chain and
production process; it includes subdivisions that are responsible for
procurement, manufacturing, “enclosure activity,”83 sales operations planning,
supplier responsibility, and worldwide service and support, including
AppleCare, Apple’s paid customer service business.
Although many of the group’s functions face inwards, personnel in
procurement negotiate deals with a large number of third-party suppliers. In
addition, Apple outsources most of its hardware manufacturing to a small group
of third parties. Mr. Williams’s group sometimes negotiates deals that include
exclusivity provisions. When Apple has worked with a supplier to build a
customized component and Apple has invested significant resources into the
item’s development, it has in various circumstances limited the supplier’s ability
to distribute the product to other companies for a period of time. The head of the
strategic deals team within the organization is a lawyer.
Mr. Williams told us that the group that focuses on “enclosure activity” determines
how to build and assemble Apple products, including locating and purchasing the necessary raw
Dan Riccio oversees Apple’s Hardware Engineering business unit, which
consists of approximately
people. The Hardware Engineering business
deals with a broad range of technical and engineering issues relating to the
iPhone, iPad, iMac, wireless connectivity (antennas and wireless subsystems),
wireless electrical engineering, safety compliance, display technologies, and
Mr. Riccio’s team works closely with the procurement team (part of
Operations) when contracting with manufacturers for hardware components,
such as batteries, displays, and chips. Mr. Riccio’s team provides technical input,
based on a product’s engineering specifications, for these procurement-related
transactions but does not directly negotiate the procurement contracts.
Global Supply Managers (“GSMs”) within Hardware Engineering
communicate with component manufacturers. GSMs are typically assigned to a
particular component, such as plastic or batteries, and are thereafter responsible
for communicating with third-party manufacturers regarding functionality and
the “look and feel” of relevant products.
“Special projects,” as used throughout this Report, denotes confidential Apple projects.
Consistent with Apple’s extraordinary secrecy about products and services not yet announced,
we were not provided with information about such projects.
Craig Federighi manages Apple’s Software Engineering business unit,
which consists of approximately
Mr. Federighi said that his organization is largely inward facing and that
any interactions with external parties are brokered by Apple’s Marketing and
Legal teams. Like the Hardware Engineering business unit, however, Mr.
Federighi’s teams provide technical input for business negotiations with third
parties, with their contributions typically relating to feasibility issues. These
issues are addressed in direct meetings between members of Mr. Federighi’s
team and engineers and other representatives from third-party partners. In
addition, we understand that the wireless team communicates directly with
wireless carriers. Although the IMG group interacts with vendors regarding
chips, all procurement deals are undertaken by Operations.
Apple’s Sales organization covers sales to third-party resellers,
educational institutions, and the government. The group is organized
Cook became CEO, Sales and Operations reported to him in his role as Head of
has a dedicated sales team for the Americas, including both North and South
America; Greater China, including mainland China, Hong Kong, and Taiwan;
This software supports WiFi, Bluetooth, cellular voice, and data.
This group is responsible for the software that supports high performance 3-D
This group is responsible for developing the tool set for developers to build OS X apps.
88 This group is the iOS counterpart to OS X Platform Experience and Developer
This group includes web technologies, Safari, and the WebKit, as well as
communication apps, such as iMessage and FaceTime.
Asia, including the remaining countries in Asia, except for Japan; Japan; and
Europe, including Europe, the Middle East, and Africa.
Retail and Online Stores
Angela Ahrendts began managing Apple’s Retail and Online Stores in
May 2014. There are a total of
employees in Ms. Ahrendts’s group, which
we understand comprises more than half the personnel employed by Apple.
Apple’s retail stores are organized by geography, with managers for each region
reporting directly to Ms. Ahrendts. These regions are organized into the
following regional segments: China; Europe and emerging markets; the Eastern
half of the Americas and Canada; the Western part of the Americas and Mexico;
and Southeast Asia and Japan. Apple’s Online Stores and Market Support are
managed globally. Ms. Ahrendts’s organization also includes a corporate
support team, which includes Finance, Human Resources, Technical Support,
Legal, and Supply Chain teams. Mr. Andeer is the primary legal contact for
Retail and Online Stores. Ms. Ahrendts explained that her teams interact with
customers but otherwise have little or no communication with external parties.
Phil Schiller manages Apple’s Marketing organization. Through
interviews of other Apple personnel and senior executives, we believe that Mr.
Schiller’s organization is highly relevant to our evaluation of Apple’s antitrust
Apple also holds a Worldwide
Developer Conference that is attended by Apple engineers and thousands of app
developers. Partnership Managers are involved in encouraging participation in
the conference and also attend other industry events, including events attended
by Apple competitors. In addition, we understand that Marketing is heavily
involved in the negotiation of various third-party agreements across Apple’s
As noted in Section V.B.2, Apple has not yet made Mr. Schiller available
for an interview, and we have interviewed only one person from the Marketing
group. Accordingly, we are unable to report on the structure and relevant
components of Mr. Schiller’s organization in this Report. Apple has informed us
that Mr. Schiller will be available for an interview in the near future.
Jonathan Ive manages Apple’s Design organization. As noted in Section
V.B.2, Apple has not yet made Mr. Ive available for an interview. Accordingly,
we are unable to report on the structure and relevant components of Mr. Ive’s
organization in this Report. Apple has informed us that Mr. Ive will be available
for an interview in the near future.
The Structure of Apple’s Legal and Compliance Functions
During this reporting period, we learned more about the structure of
Apple’s legal and compliance functions, as well as the ways in which legal and
compliance personnel interact with each other and with Apple’s business units.
The Legal Function
Apple has a large team of attorneys, led by Senior Vice President and
General Counsel Bruce Sewell. Mr. Sewell oversees a broad range of legal
matters at Apple. He told us in his December 2013 interview that Apple’s Legal
department employs approximately
of whom are lawyers.
Among Mr. Sewell’s direct reports are Mr. Andeer, whose responsibilities as
head of the CLPG will be discussed in more detail in the next section; Mr. Vetter,
who is responsible for overseeing the legal support that is provided to major
business groups at Apple (and who has acted as our primary in-house contact
since February); and Gene Levoff, who is responsible for corporate law matters
and serves as counsel to various Board committees, including the AFC.90
During this reporting period, we focused on learning about two primary
groups of in-house counsel at Apple—first, the lawyers who support Apple’s
content-distribution businesses, and, second, the CLPG. Robert Windom, who
reports to Mr. Vetter, supervises the group that focuses on content distribution.
Mr. Windom told us that he has approximately thirteen direct reports, about half
of whom are lawyers. Many of the lawyers in Mr. Windom’s group are
embedded in particular content-distribution business units at Apple: for
example, Annie Persampieri is integrated into the iBooks team, and Emily
Blumsack is integrated into the App Store team. It is our understanding that a
business group’s assigned lawyer acts as a generalist within that group, assisting
with all types of legal matters that arise in that business and interacting on a dayto-day basis with the group’s personnel. A significant number of business
Mr. Sewell identified several additional direct reports, including Mr. Moyer, the Chief
Compliance Officer, who is discussed in Section VII.B, and individuals who oversee litigation,
government affairs, privacy, intellectual property, and international law.
people we interviewed told us that they consult with their business group’s
assigned lawyer frequently and consider that lawyer to be their first resource
when they encounter a legal question. Although those lawyers handle all types
of issues that arise in their assigned groups as an initial matter, they can and do
escalate issues to more senior Apple lawyers or to attorney specialists (such as
the CLPG, for antitrust-related issues) when needed.
The Role of the CLPG
The CLPG consists of four attorneys who specialize in antitrust and
competition law—Kyle Andeer, Sean Dillon, Brendan McNamara, and Per
Hellstrom, all of whom have significant prior government experience. 91 We
interviewed Mr. Andeer in the previous reporting period. During this reporting
period, we had one meeting with Mr. Andeer, as well as initial interviews with
Mr. Dillon and Mr. McNamara. We have not met Mr. Hellstrom, who is based in
Brussels and whose work focuses on European competition law.
Mr. Andeer reports to Mr. Sewell. He told us in December 2013 that he
meets with Mr. Sewell at least once a month, and he also interacts with Mr.
Vetter quite frequently. When we met with him in August, Mr. Andeer told us
that he has never interacted with the Audit and Finance Committee or other
members of Apple’s Board. Mr. Dillon, Mr. McNamara, and Mr. Hellstrom
report to Mr. Andeer.92
Apple began to create what is now the CLPG when it hired Mr. Andeer in
late 2010; before that time, Apple never had a dedicated in-house antitrust
lawyer. The CLPG spends much of its time counseling Apple’s business
personnel regarding day-to-day antitrust issues and advising the company on
contemplated “landmark” business events, such as acquisitions and new product
offerings. Apple has emphasized that, despite the company’s famous secrecy
about new products and other ventures, Mr. Andeer is “disclosed” on – i.e.,
informed about – confidential information as much as necessary to evaluate
antitrust risks and to advise the company. The group also frequently interacts
with antitrust regulators, and it has a role in antitrust litigation to which Apple is
The CLPG members are antitrust generalists, handling issues
interchangeably within the group, rather than individually specializing in
particular subject matters or business groups (although Mr. Hellstrom focuses on
91 Mr. Andeer told us in August that he could envision the CLPG expanding to include
members based in Asia and/or Washington, D.C.
We understand that Mr. Hellstrom also reports directly to Mr. Sewell in a government
European issues). The CLPG generates weekly reports of the issues with which
its members are dealing, which the group discusses at a weekly meeting and also
shares with Mr. Sewell. Since we issued the First Report, we have been advised
that the CLPG has begun to hold an additional meeting each week that is
specifically devoted to the assessment of antitrust risk. The CLPG—Mr. Andeer
in particular—has also played an important role in shaping the substance of
Apple’s revised antitrust compliance materials and has had primary
responsibility for the live antitrust training sessions that have taken place since
issuance of the Final Judgment.93
All three of the CLPG members we interviewed emphasized that, when
they arrived at the company, they spent a great deal of time getting to know
Apple’s business lawyers and business people in order to learn about the
company’s antitrust risks, to prepare themselves to respond to inquiries from
regulators, and to make Apple personnel feel comfortable approaching the CLPG
with antitrust issues.
The business lawyers we have interviewed appear to be comfortable
discussing issues with and requesting assistance from the CLPG. Mr. Windom
told us that he personally has sought advice from the CLPG on multiple
occasions, and he said that the lawyers he supervises frequently approach the
CLPG with antitrust issues that arise in their businesses. Similarly, Ms.
Blumsack and Ms. Persampieri said that they each consult with the CLPG
regularly—perhaps once a week, on average. They said they tend to interact
with the CLPG on an ad hoc basis, presenting particular issues as they arise,
rather than interacting in a more formal or structured way.
The CLPG also has direct interaction with business people at Apple.
Although personnel we interviewed from some business groups had not
interacted with the CLPG much or at all,94 personnel involved in Apple’s
content-distribution business expressed general familiarity and comfort with the
CLPG.95 For example, Mr. Cue told us that Mr. Andeer has been actively
Mr. Andeer led all but three of the live training sessions that occurred during this
reporting period. The sessions Mr. Andeer did not lead are the June 30 and August 27 training
sessions that David Boies provided to Apple’s Executive Team and Board, respectively, and the
June 17 session for App Store personnel, which Mr. Dillon led.
94 For example, Luca Maestri, Apple’s Chief Financial Officer, and Dan Riccio, Apple’s
Senior Vice President for Hardware Engineering, said in their interviews that they had had very
limited interaction with the CLPG.
Ms. Ahrendts, who joined the company in May 2014 and leads Apple’s Retail and
Online Stores division, said she was very familiar with Mr. Andeer. However, that familiarity
arises primarily from Mr. Andeer’s additional role as Apple’s head sales lawyer, rather than from
his role on the CLPG.
involved in many major business decisions his group has made. He told us that
Mr. Andeer has “become part of the team” and his involvement is “now just part
of the normal process”; Mr. Andeer is routinely present at the meetings during
which new initiatives are discussed. With respect to non-executive members of
Mr. Cue’s team, while the CLPG encourages Apple business people to approach
the group directly with antitrust-related issues, many employees told us they feel
far more comfortable approaching their dedicated business lawyers first, who
then seek assistance from the CLPG if needed. Business personnel whom we
interviewed tended to be more familiar with Mr. Andeer than with Mr. Dillon,
Mr. McNamara, and Mr. Hellstrom.
The Compliance Function
Apple’s Compliance group is led by Tom Moyer, who reports directly
both to Mr. Sewell, the General Counsel,96 and to the Audit and Finance
Committee of the Board of Directors. Mr. Moyer has two direct reports: Joe
Santosuosso, who is Apple’s Director of Business Conduct and Global
Compliance, and Deena Said, the ACO, whose role will be discussed in the next
Mr. Santosuosso oversees various compliance subgroups, including
groups that are responsible for compliance training, the Helpline, channel
compliance,97 and compliance issues in specific geographic regions. As
described above, during this reporting period, we interviewed two people from
these groups: Kathleen Emery, who manages the Helpline, and Sharon Joyner,
who specializes in the development of online compliance training at Apple.
The Role of the ACO
After issuance of the Final Judgment, Apple hired Deena Said as the
company’s new ACO. Ms. Said reports directly to Mr. Moyer, as well as to the
Audit and Finance Committee. (In his November 2013 interview, Mr. Moyer told
us that he and Ms. Said would have the same reporting relationship to the Audit
and Finance Committee.) Ms. Said also interacts frequently with members of
Apple’s Legal group, working closely with lawyers in connection with the June
30 Rollout and other matters. She also has told us that she consults regularly
with Apple’s business lawyers and non-lawyer personnel regarding training and
96 As noted in our First Report, Mr. Sewell told us that he believes it is a corporate best
practice to have the compliance officer report to the General Counsel. See First Report 26 n.72.
Channel compliance involves the evaluation of third parties that sell Apple products.
other issues related to the fulfillment of Apple’s obligations under the Final
As explained in more detail in Section III.B, the Final Judgment gives the
ACO substantial responsibility for the enhancements Apple must make to its
antitrust compliance program. Among other duties, Ms. Said is required to
ensure that certain personnel receive “comprehensive and effective training
annually” regarding the Final Judgment and the antitrust laws, to conduct an
annual antitrust compliance audit in consultation with the Monitor, to take
action in response to allegations of actual or potential violations of the Final
Judgment, and to log information regarding certain types of allegations and
During this reporting period, Ms. Said had primary responsibility for
managing and tracking the various projects Apple undertook to prepare for the
June 30 Rollout and otherwise comply with the Final Judgment. In early May,
she provided us with a work plan that included a detailed schedule for the
completion of specific tasks associated with these initiatives. The vast majority of
the work reflected on the work plan took place in the first several months of
2014, in preparation for the June 30 Rollout, but the work plan includes some
tasks in late 2014 and 2015, including Ms. Said’s quarterly reports to the Board
and quarterly review of publisher contracts. She has told us that she will also
focus in coming months on her antitrust compliance audit, the collection of
certifications required by the Final Judgment, revisions to training materials, and
development of a training plan for 2015. In addition, Ms. Said has regular
meetings with various Apple personnel, including weekly meetings with Mr.
Andeer, Mr. Moyer, Ms. Joyner, and Leslie Gaines, a contract project manager
assigned to assist Ms. Said; bi-weekly meetings with Mr. Vetter, Mr. Santosuosso,
Ms. Emery, Mr. Dillon, and Mr. McNamara; and less frequent (but still regular)
meetings with Ms. Persampieri, Dr. Sugar, Mr. Sewell, Mr. Cue, Mr. Windom,
and Ms. Blumsack, among other personnel. Overall, Ms. Said’s role has become
largely that of a project manager of the Antitrust Compliance Program, a role
that she appears to have performed quite ably, having overseen the June 30
Rollout with no major problems of which we are aware.
Ms. Said provided two reports to the Audit and Finance Committee
during this reporting period—an oral report (accompanied by a short
PowerPoint presentation) in May and a short written memorandum in August.
Both of those reports focused on compliance with the Final Judgment and the
progress of the June 30 Rollout. Ms. Said also was present at the Board’s
antitrust training session in late August, although, to our knowledge, she did not
have any substantive contact with the Board during that session. Finally, we are
told that Ms. Said met with Dr. Sugar on August 26 to discuss the June 30
Rollout, but we have no details about the duration or substance of that meeting.
We understand these interactions to be her only contact with the Board or any of
its members during this reporting period; Apple has represented that, aside from
her written reports to the Audit and Finance Committee, there is no written
correspondence between Ms. Said and any Board member, and she told us that
no member of the Board has ever contacted her.
Antitrust Compliance Program Committee
Ms. Said’s February 19 and August 20 memoranda to the Audit and
Finance Committee refer to an “Antitrust Compliance Program Committee,”
which, according to the August 20 memorandum, consists of Ms. Said, Mr.
Andeer, Mr. Moyer, and Mr. Vetter. Neither memorandum provides much
detail about the Committee’s activities; both state simply that the Committee’s
objective is “to ensure progress on program goals.” Based on interviews,
meetings, and telephone calls, our understanding is that Ms. Said, Mr. Andeer,
Mr. Moyer, and Mr. Vetter comprise the core group that has been working to
revise Apple’s antitrust compliance program materials and ensure compliance
with the Final Judgment. In a May 16 telephone conference, Ms. Said told us that
the group had been meeting on an ad hoc basis to discuss the development of
Apple’s revised training materials.
The Board and Its Audit & Finance Committee
Apple currently has an eight-person Board of Directors, consisting of
seven independent directors and Mr. Cook. As we discuss in more detail in
Section IX.G.3, it is well recognized that the oversight role exercised by a
company’s Board of Directors is critical to ensuring that the company’s
compliance program is effective.98 Apple’s publicly available Corporate
Governance Guidelines reflect this principle:
The Board oversees the Chief Executive Officer . . . and other senior
management in the competent and ethical operation of the Corporation on
a day-to-day basis and assures that the long-term interests of the
shareholders are being served. To satisfy its duties, directors are expected
to take a proactive, focused approach to their position, and set standards
to ensure that the Corporation is committed to business success through
the maintenance of high standards of responsibility and ethics.99
See infra Section IX.G.3.
Apple Inc., Corporate Governance Guidelines (Feb. 23, 2012), available at
The Corporate Governance Guidelines provide that directors are expected to
attend Apple’s annual meeting of shareholders, as well as Board meetings, which
take place at least four times per year.100
Particularly relevant to our mandate under the Final Judgment is the
Audit and Finance Committee, which is required by its charter to include at least
three independent Board members101 and currently includes four—Arthur D.
Levinson, Robert A. Iger, Ronald D. Sugar, and Susan L. Wagner.102 The Audit
and Finance Committee’s charter requires the group to assist the Board in,
among other things, “oversight and monitoring” of “compliance with legal,
regulatory and public disclosure requirements” and enterprise risk
management.103 The Committee is required to meet at least once per quarter,
and it is also required to meet with Apple management, as well as the company’s
Vice President of Internal Audit, at least quarterly.104
The charter requires the Audit and Finance Committee to “[r]eview and
discuss with management the program that management has established to
monitor compliance with the Corporation’s Business Conduct Policy” and
“[r]eview and discuss with management . . . management’s program to identify,
assess, manage, and monitor significant business risks of the Corporation,
including financial, operational, privacy, security, business continuity, legal and
regulatory, and reputational risks [and] management’s risk management
decisions, practices, and activities,” along with other responsibilities.105 The
Audit and Finance Committee must report the substance of these discussions to
the full Board and, “as necessary, recommend to the Board such actions as the
Committee deems appropriate.”106 We understand, based on the two Board
interviews we have conducted thus far, that the Audit and Finance Committee
makes a short presentation to the full Board each quarter.
101 Apple Inc., Audit and Finance Committee Charter (Dec. 7, 2012), available at
http://files.shareholder.com/downloads/AAPL/3456999969x0x443005/adc3ad8b-5a18-4add8b5b-2221773c5b3b/audit_charter.pdf. Mr. Campbell told us in his interview that Apple’s Board
revises its committee charters annually, although the most recent Audit and Finance Committee
Charter is dated December 2012.
See Apple Inc., Apple Leadership, https://www.apple.com/pr/bios/ (last visited
Sept. 10, 2014).
Audit and Finance Committee Charter, supra note 101.
To date, we have interviewed the Chairman of the Audit and Finance
Committee, Dr. Sugar, and one former member of that Committee, Mr.
Campbell. Those interviews provided us with a limited window into the Audit
and Finance Committee’s fulfillment of its important responsibilities. Although
Dr. Sugar and Mr. Campbell expressed the general view that the members of
Apple’s Audit and Finance Committee take a “hands-on” approach in the
exercise of the Committee’s oversight responsibilities, they did not provide us
with specific information to support this view.107 Dr. Sugar said he speaks with
Mr. Moyer on at least a quarterly basis, although they “occasionally” interact
between those meetings. Dr. Sugar and Mr. Campbell said that compliance and
enterprise risk issues are discussed at every quarterly Board meeting; Mr.
Campbell added that the Board is provided with “formal training” at the end of
its meetings about twice per year. Both Dr. Sugar and Mr. Campbell expressed
the view that Apple’s compliance programs have grown and improved
significantly in the course of their interactions with the company.
We have also begun to learn about the formal means through which
Apple provides the Board and the Audit and Finance Committee with
information relevant to their oversight roles. It is our understanding that Mr.
Sewell provides updates regarding legal and compliance issues at every Audit
and Finance Committee meeting and that Mr. Moyer reports to the Committee
twice per year. Mr. Campbell told us in his interview that the Audit and Finance
Committee has a “calendar” of topics that need to be discussed at various points
in each year, but he said that Mr. Sewell, Mr. Moyer, and other Apple personnel
raise additional issues as they arise. Mr. Campbell described the Board’s
meetings with Mr. Moyer as highly interactive. As noted in Section VII.B.2, there
have been only a few limited interactions between the Audit and Finance
Committee and Ms. Said, the ACO, during this reporting period, even though
Ms. Said at least formally reports to the Audit and Finance Committee.
Apple’s Risk Oversight Committee helps the Audit and Finance
Committee fulfill its oversight responsibilities with regard to risks faced by the
company. The Risk Oversight Committee was created in 2010 and consists of
Apple executives and senior employees; among the group’s responsibilities are
the evaluation, ranking, and formulation of responses to various risks.108 During
107 After reviewing a draft of this Report, Apple provided excerpts from their internal
interview memoranda in an effort to support Dr. Sugar’s and Mr. Campbell’s view that the
Committee has taken a hands-on approach. We find the material submitted by Apple
unconvincing on this point. However, this is an issue we will address in future interviews with
Dr. Sugar and other members of the Audit and Finance Committee. We look forward to
obtaining additional information through those interviews and through relevant documents that
support Apple’s view.
Risk Oversight Committee Charter (Apple Document 000007).
the previous reporting period, Apple provided us with redacted documents
reflecting these assessments between 2011 and 2013. The Risk Oversight
Committee is required to report to the Audit and Finance Committee at least
once per year, although it is our understanding that, in practice, the Risk
Oversight Committee participates in every meeting of the Audit and Finance
To deepen this preliminary understanding of how the Board and Audit
and Finance Committee fulfill their responsibilities, we need significantly more
information. We have repeatedly asked to interview members of Apple’s Board,
and we have made many requests for other information relevant to the oversight
activities of the Board and the Audit and Finance Committee. Apple has
consistently resisted and been unresponsive to these requests, however,
ultimately deferring the interviews until after the Board’s training session on
August 27 and generally providing little information in response to our requests
for documents and other materials. For that reason, we currently have very
limited knowledge of the Board’s exercise of that function. Because—as set forth
in more detail in Section IX.G.3—we view the Board’s oversight role as critical to
Apple’s compliance with the Final Judgment, we plan to devote significant
attention to learning about Apple’s Board and Audit and Finance Committee
during the next reporting period.
VIII. Apple’s Revised Antitrust Compliance Program
As part of Apple’s efforts, as required by the Final Judgment, to enhance
its Antitrust Compliance Program, Apple introduced significant updates to its
antitrust compliance materials on June 30. The June 30 Rollout included (a) a
revised Antitrust and Competition Law Policy (or “Policy”); (b) a new antitrust
and competition eLearning (online) course; (c) a new antitrust and competition
law chapter in the company’s Business Conduct ebook; 109 and (d) a new
Antitrust and Competition intranet site accessible to Apple personnel. In
addition to the online training and the launch of these other compliance-related
materials, Apple has conducted several live antitrust training sessions since May
2014 in furtherance of its obligations under the Final Judgment to develop a
comprehensive and effective antitrust compliance program.
As discussed in Section IX.C, the ebook is a more detailed and more technically
innovative version of Apple’s Business Conduct Policy. The Business Conduct Policy and the
ebook each contain a section dedicated to antitrust and competition compliance. The
Competition and Trade Practices section of the Business Conduct Policy is discussed further in
New Antitrust and Competition Law Policy
Development and Rollout
As discussed in Section IX.C.2 of our First Report, Apple’s revised
Antitrust and Competition Law Policy has been a work in progress over the last
year. In November 2013, Apple provided us with its original policy. Apple then
produced a revised draft in February 2014. The draft was discussed at the March
4 Meeting, after which we provided comments on the draft. Apple incorporated
many of our suggestions into the final four-page version that was distributed to
Apple employees on June 30.110
The June 30 version of the Antitrust and Competition Law Policy begins
with a short letter to Apple employees from Mr. Sewell. It explains the
importance of competition and innovation and the need for Apple to “work
vigilantly to prevent antitrust violations.” The letter emphasizes that antitrust
violations can subject Apple and individual employees to investigations,
lawsuits, fines, and even criminal charges. Finally, it notes that employees are
obligated to report potential antitrust issues to Ms. Said or to Apple’s Business
Conduct Helpline. It refers employees with questions to their “local legal
counsel” or to Apple’s competition law team.
The remainder of the document sets forth Apple’s policies regarding
various types of business conduct that could implicate the antitrust laws. It
highlights and briefly describes potentially problematic dealings with
competitors (price-fixing, market allocation agreements, group boycotts, and bidrigging). This section also emphasizes that Apple “should be careful never to
facilitate or encourage price-fixing between competing suppliers or resellers”
and that Apple employees should be careful about sharing competitively
sensitive information about one company with that company’s competitors.
Second, it highlights potentially problematic dealings with resellers, distributors,
and suppliers (price maintenance agreements, tying arrangements, and exclusive
arrangements). This section emphasizes that, because Apple is often perceived
as holding a dominant market position, these types of agreements with resellers,
distributors, and suppliers could subject the company to antitrust scrutiny.
The Policy concludes by directing Apple employees to contact legal
counsel or the competition law team with questions about the meaning and
The final version of Apple’s Antitrust and Competition Policy is attached as Exhibit B
application of the Policy. It again notes that any misconduct that raises antitrust
risks must be reported to the Antitrust Compliance Officer (although it does not
provide Ms. Said’s contact information) or through Apple’s Business Conduct
Helpline. Finally, it explains that Apple will not tolerate retaliation against an
individual who files a good-faith antitrust complaint.
Revisions from Prior Versions
The final Antitrust and Competition Law Policy differs in several ways
from the one Apple had in place in November 2013. Substantively, it covers
many of the same topics, in particular the categories of potentially problematic
dealings with competitors and distributors. The categories of agreements are,
however, more clearly described and delineated. The new Policy emphasizes
more forcefully than earlier versions that Apple employees must exercise caution
not just in their communications with competitors and distributors, but also in
their communications and relationships with content suppliers. The Policy also
emphasizes that employees should avoid sharing competitively sensitive
information about one supplier with another. The concept of Apple’s
“perceived” market power, and the potential scrutiny that comes along with that
perception, is also new – the prior versions of the policy noted only that
companies with a dominant market share may be subject to additional scrutiny.
The opening letter from Mr. Sewell, stressing the importance of antitrust
compliance at Apple, is also a new addition, as is the reference to Apple’s antiretaliation policy. Finally, the new Policy more clearly emphasizes whom Apple
employees should contact with questions: the Antirust Compliance Officer,
Apple’s Business Conduct Helpline, and the CLPG are mentioned both at the
beginning and at the end of the document.
Many of these additions result from the collaborative drafting process that
has taken place over the last year. For example, following the March 4 Meeting,
in response to feedback we provided, Apple revised the February 2014 working
draft of the Policy to emphasize that Apple should not facilitate unlawful
agreements between competitors and to emphasize why Apple’s relationships
with resellers, distributors, and suppliers might give rise to antitrust scrutiny in
light of Apple’s perceived market power.
Online Antitrust Training Course
Development and Rollout
Apple’s new online antitrust training course was also among the materials
included in the June 30 Rollout. Apple has informed us that this course will be
mandatory for employees in the United States and Canada who work in Sales,
Internet Software and Services, Legal, and Direct Procurement (within the
Operations organization), which altogether include more than 5,000 employees.
As briefly discussed in Section IX.C.4 of our First Report, the online
antitrust training course was developed over several months. In February 2014,
Apple provided us with drafts of some of the proposed text and video clips that
would be incorporated into the online training, although the training module
was not yet complete. After the course was assigned to employees in June,
Apple provided us with log-in credentials to view the training. Members of the
monitoring team have reviewed the training.
Summary of Content
The new training is an interactive program that allows Apple employees
to enter, exit, and move around various sections of the online training at their
own pace. The slides have audio and video features and include real case
examples, as well as questions and hypothetical scenarios to promote trainee
engagement. The training is designed to be viewed on an iPad or Mac, but it can
also be viewed on a PC using the Google Chrome browser.
When a trainee signs into the website, an introduction to antitrust appears
on the screen, stating the general goal of the antitrust laws: “to protect consumers
through open and unfettered competition.” It states that the course—which
should take about 60 minutes to complete is intended to help Apple employees
detect potential antitrust issues before they become a problem.
A main menu displays the following sections:
What is Antitrust?
Types of Agreement
Wrapping it Up
Each section contains between one and eleven slides, as well as a
dropdown menu with links to the slides for that section. For example, within the
“Introduction” section, trainees can select four slides: “Antitrust Awareness at
Apple,” “A Few Tips Before You Start,” “A Message from Deena Said,” and
“Course Objectives.” Each link takes the trainee to a single slide on that topic.
For example, the “A Message from Deena Said” slide has a brief video of Ms.
Said introducing herself, explaining the importance of antitrust at Apple, and
encouraging employees to contact her with questions. Once an employee has
viewed a slide within a section, “back” and “next” arrows (or the swipe feature
on the iPad) can be used to move between slides.
The “What is Antitrust?” section covers high-level points about antitrust
law: the basic purpose (to protect competition) and prohibitions (agreements that
restrain trade, monopolies); an introduction to the Sherman Act and EU antitrust
laws; and the elements of prohibited agreements (agreement, harm to
competition). Interactive slides are interspersed throughout this section,
requiring trainees to analyze whether various scenarios would violate the
antitrust laws. No explanation for the answers – either correct or incorrect – is
provided in this section. The section does, however, conclude with a
hypothetical that asks trainees to consider whether various communications
between an Apple employee and a film executive at Sundance about pricing
would be problematic from an antitrust perspective. The training explains why
the answers selected by trainees to this hypothetical are correct or incorrect.
The “Types of Agreement” section instructs trainees about four different
kinds of agreements: price-fixing, market allocations, bid rigging, and group
boycotts. First, a slide explains that these four types of agreements between
competitors are always unlawful, whereas agreements between manufacturers
and suppliers or distributors are tested for their reasonableness. Price-fixing gets
the most attention in this section, including an interactive slide asking trainees to
identify examples of price-fixing and a hypothetical involving an Apple
employee who discusses the prices of LCD panels with competitors over lunch.
The slides explaining the types of agreements use real world examples, such as
the Samsung LCD price-fixing case and FTC investigations into market
allocations. Trainees are then given four business scenarios and asked to match
each with one of the four types of restraints described in this section. Finally,
there is a hypothetical scenario regarding an agreement between Apple and a
distributor/reseller, to reinforce the point that Apple, as a matter of policy, does
not set resale prices, which would be considered a serious offense under the
The “Monopoly” section opens by noting that, although Apple is not
dominant in any market, it should “still be aware of the scrutiny and perception
that comes with being one of the world’s most successful companies and
valuable brands.” The presentation notes that many large firms, including
Microsoft, IBM, and Google, have encountered antitrust scrutiny for maintaining
monopoly positions through predatory behavior. Trainees are informed of the
two elements of monopoly offenses: (1) monopoly power, usually tied to market
share; and (2) exclusionary or predatory conduct. The remainder of the section
focuses on two kinds of exclusionary conduct: exclusive dealings and
tying/bundling. The slides use examples from real cases, including the
Microsoft case involving the bundling of operating systems and Internet
browsers that was pursued by the Department of Justice in the 1990s. The
section concludes with a takeaway message from the Microsoft case: there may
be nothing wrong with tying or bundling products, but employees should
contact the CLPG before entering into any such arrangement.
The “Wrapping It Up” section emphasizes that the antitrust laws are
complex and that the line between legal and illegal can be blurry. A “Key
Takeaways” slide emphasizes three prohibitions: (1) do not agree with
competitors on prices; (2) do not agree to allocate markets; and (3) do not refuse
to seek help from the CLPG. This section encourages trainees to contact Apple
legal counsel or the CLPG with questions and notes that all potential antitrust
violations must be reported to the Antitrust Compliance Officer. It provides
contact information for Ms. Said and for the Business Conduct Helpline. Ms.
Said provides a closing video message.
Trainees receive credit for the course only if they score 80% or higher on a
ten-question assessment that is placed at the end of the training course. The
questions highlight the main aspects of the training: prohibited communications
and agreements with competitors, problematic minimum resale price
agreements, the four kinds of unlawful agreements between competitors,
exclusionary conduct by a dominant company, and personnel to contact at Apple
with questions. When trainees successfully complete the knowledge check,
explanations of why the correct answers are correct – but not why incorrect
answers are incorrect – become available for review.111
Finally, to receive a Certificate of Completion, trainees must certify that
that they have reviewed and understood Apple’s Antitrust and Competition Law
Policy. The training provides a link to AppleConnect, where the Policy can be
downloaded. In our review of the training, we were able to certify having read
and understood the Policy without having physically opened or downloaded the
Policy. We have no evidence one way or the other as to whether any Apple
employee in fact certified completion without reviewing the Policy.
Business Conduct Ebook
Development and Rollout
Among the materials introduced on June 30 was a new antitrust and
competition law chapter in Apple’s Business Conduct ebook.112 The ebook is
111 In response to our draft report, Apple states that it is willing to consider providing
further explanation of the reasons why incorrect answers are incorrect.
Screenshots of the antitrust chapter in the Business Conduct ebook are attached as
Exhibit C (redacted).
available on an iPad and Mac. As briefly discussed in Section IX.C.3 of our First
Report, Apple developed this ebook chapter over several months. We reviewed
draft materials at the March 4 Meeting and provided comments on the draft
Summary of Content
The cover page of the new antitrust chapter begins with a quote
emphasizing that “[c]ompetition fuels innovation.” It then launches into a story
about “how one man and an ugly green lamp brought down an international
price-fixing cartel.” The story explains price-fixing by recounting the details of
an international scheme between biotech and chemical companies, including
Archer Daniels Midland (ADM), in the mid-1990s to fix the price of lysine. A
senior ADM executive cooperated with the FBI by placing a green lamp
equipped with audio and video recording capabilities in hotel conference rooms
around the world where cartel meetings were taking place. As a result of the
investigation, ADM was fined $100 million dollars, and a class action lawsuit by
consumers resulted in more than $45 million in restitution.113 Apple’s
presentation of the story ends by emphasizing that DOJ has collected more than
a billion dollars in fines involving price-fixing cartels. As Apple employees read
through the green lamp story, a link to a six-minute video clip from the 2007 film
“Fair Fight in the Marketplace” is displayed at the bottom of the screen. The
video describes the lysine price-fixing scheme through clips of interviews with
DOJ personnel and others.
The next page of the ebook highlights some of the main principles of
antitrust law regarding agreements with competitors, agreements with resellers,
and unfair bidding practices. It provides a link to the CLPG’s contact
information and a link to the Antitrust and Competition Law Policy. From here,
Apple employees can also link to a Q&A sequence featuring Kyle Andeer that
contains several pages of text addressing basic antitrust questions, such as why
antitrust matters to Apple, what types of behavior the antitrust laws prohibit,
what red flags employees should look for, and when employees should get help
with antitrust issues. Employees are directed at several points to contact the
CLPG with questions and to report potential antitrust violations to Ms. Said. The
anti-reprisal policy is noted here as well.
The last page of the ebook contains a flip-through gallery describing
various real-life examples of “how antitrust impacts consumers around the
world”: a monopoly in the artificial teeth industry; the Samsung LCD priceThe lysine conspiracy is described generally in the training materials without
mentioning ADM by name. The ADM price-fixing example is not used in the online training
course and has not been used in the live antitrust training sessions.
fixing case; a minimum resale price agreement for baby formula distributors; the
DRAM price-fixing case; a DOJ investigation into market allocation, bid rigging,
and price-fixing in the market for rubber parts for cars; the 1990s Microsoft
bundling case; and a Mylan pharmaceutical case involving attempts to limit
access to generic drugs.
Antitrust and Competition Intranet Site
As part of the June 30 Rollout, Apple launched a new Antitrust and
Competition Intranet Site, which is available to all Apple employees. Apple
included screenshots of the intranet site in its July 1, 2014 document
production.114 Ms. Said also showed us the new site, as it appears on the Apple
network, during our July 17-18 trip to Cupertino.
The screenshots show that the home page of AppleWeb, Apple’s main
intranet site, contains a teaser for the FBI price-fixing cartel story now contained
in the ebook, stating, “Learn how the FBI and an ugly green lamp brought down
a global price fixing cartel.” The link takes Apple employees to the Business
Conduct intranet site. From there, Apple employees can download the new
Business Conduct ebook to read the price-fixing story. The home page also
provides a direct link to the online antitrust training and provides Ms. Said’s
From the Antitrust Intranet home page, Apple employees can link to a
separate screen for the Business Conduct Policy. This provides another way to
download the ebook, as well as answers to technical FAQs related to the ebook,
such as how to download it in other languages, how to search it, and how to
bookmark or save pages.
From the Antitrust Intranet home page, Apple employees can also link to
a separate screen for Antitrust & Compliance. This area of the website contains
the same Q&A session with Kyle Andeer contained in the ebook. It also
provides contact information for the competition law team and for Ms. Said.
Finally, there is a section of “related links” where Apple employees can
download and access the Antitrust & Competition Law Policy, Summary of
Antitrust Final Judgment, ebook Final Judgment, Antitrust & Compliance
Training, Overview of Recruiting Requirements, Recruiting Final Judgment,
Recruiting Competitive Impact Statement, and Recruiting No Direct Solicitation
These screenshots are attached as Exhibit D (redacted).
The last four items relate to Apple’s 2010 Settlement with the Department of Justice
regarding employee non-solicitation (no-poach) agreements.
Live Antitrust Compliance Training
Overview of Training Sessions
The Final Judgment requires Apple to provide training to each member of
its Board of Directors, its Chief Executive Officer, each of its Senior VicePresidents, and each of its employees engaged, in whole or part, in activities
related to Apple’s iBooks Store.116 To meet this requirement, and in addition to
the training discussed in Section IX.C.5 of our First Report, Apple has conducted
six live antitrust training sessions since May 2014.
Two senior attorneys in the CLPG, Kyle Andeer and Sean Dillon, have
conducted most of the training sessions. Mr. Andeer led four training sessions –
on May 13, June 10, June 23 and July 23, 2014. Mr. Dillon led a fifth session on
June 17, 2014. The May 13 session was for the senior personnel in Apple’s
Internet Software and Services group who report directly to Eddy Cue, Apple’s
Senior Vice President for Internet Software and Services. The four other sessions
were attended primarily by iTunes and App Store personnel. The sign-in sheets
Apple provided to us reflect that, altogether, 105 Apple employees participated
in these five training sessions, and Apple permitted an additional thirteen
employees to remotely stream video of the June 10 and June 23 sessions.
On June 30, 2014, David Boies, of the law firm Boies, Schiller and Flexner
LLP, conducted a live antitrust compliance training session in Cupertino for
Apple’s Executive Team. This training was attended by eight of the ten members
of Apple’s Executive Team Tim Cook, Craig Federighi, Jeff Williams, Luca
Maestri, Dan Riccio, Angela Ahrendts, and Bruce Sewell – as well as by other
Apple personnel and two of Mr. Boies’s law firm partners. Mr. Boies also
conducted a training session for Apple’s Board of Directors on August 27,
Members of the monitoring team attended the June 17 and June 23
training sessions. In addition, all of the sessions, except the May 13 session, were
videotaped, and Apple provided us with the recordings. Mr. Andeer and Mr.
Dillon used very similar PowerPoint presentations during their training sessions,
and Mr. Boies used a different PowerPoint presentation during his training.
Apple has provided us with copies of all of the PowerPoint presentations.
See Final Judgment §§ V.A-V.C.
117 We received the materials relating to the August 27 session on September 23, too late
for us to analyze for this Report. We will discuss the antitrust compliance training for Apple’s
Board of Directors in our next report.
The training sessions conducted by Mr. Andeer and Mr. Dillon were
substantially similar: they followed the same format, addressed the same
content, and largely used the same PowerPoint slides.118 Although it had been
our understanding that Apple intended to tailor each training session to the
particular business group at which it was directed, we saw very little
differentiation in the training sessions we monitored live and by video. Mr.
Andeer explained to us on August 21 that we had not observed differences in the
training sessions conducted thus far because all of these sessions were directed at
employees working in content-distribution groups and, in Mr. Andeer’s view, all
of those groups face similar antitrust risks. Thus, unless otherwise noted, the
following summary generally describes all four sessions (June 10,119 June 17, June
23, and July 23). A separate summary of Mr. Boies’s training session for Apple’s
Executive Team follows (“the ET training session”).
The Apple Non-Executive Live Training Sessions
The live training sessions had three main components: (1) an
introduction, (2) a presentation of basic principles of antitrust law, and (3) a
discussion of the ebooks Litigation and the Final Judgment. In addition,
personnel attending the training had the opportunity to ask questions.
By way of introduction, the trainer (either Mr. Andeer or Mr. Dillon)
explained that the purpose of the training was to enable the attendees to spot
antitrust issues in their daily business and reach out to counsel with questions.
The trainers then asked: “What comes to mind when you hear the word
antitrust?” They displayed a slide with several pictures, including of John D.
Rockefeller, the Microsoft Windows 98 logo, and the Monopoly board game. The
trainers used this first slide to explain the origin of the antitrust laws in the
United States, including the central role played by Standard Oil in the early
1900s. They explained, in generally similar terms, Standard Oil’s monopoly of
oil production, the enactment of the antitrust laws, and the resulting lawsuit by
DOJ that ultimately caused Standard Oil to be split into more than thirty
different companies. The trainers distilled a central message from this example:
antitrust is an area of law that Apple needs to take very seriously because highprofile companies like Apple will inevitably face scrutiny, and the enforcement
of these laws can have dramatic consequences, including companies’ dissolution.
They also stressed that antitrust violations can result not only in significant fines,
but also in jail sentences for individual executives involved in the violations (in
particular, price-fixing). The trainers noted that many familiar companies have
118 Mr. Dillon used more slides in his presentation (45 slides) than Mr. Andeer did in his
(22-30 for each session) but the content covered was substantially similar.
Presentation slides for the June 10, 2014 live training session are attached as Exhibit E
dealt with antitrust issues over the years, including Google, Microsoft, and
AT&T. Mr. Andeer and Mr. Dillon also noted that scores of different
jurisdictions around the world have antitrust laws today, which Apple needs to
be aware of because of the company’s global presence.
The trainers then discussed the purposes of antitrust: protecting
competition and consumers and ensuring consumer choice. They summarized
the basic principles of antitrust law, emphasizing that it has many grey areas and
no clear list of “Dos” and “Don’ts,” and that Apple personnel should always
keep the primary purpose of antitrust law – the protection of competition and
consumers – in mind.
The trainers explained that the main focus of antitrust law is on
agreements between competitors. Here, Mr. Andeer used Amazon as an
example, noting that any agreement between Apple and Amazon, which
compete directly for music, television, and movie sales, would generate
substantial suspicion and scrutiny if the agreement affected the terms of that
competition. Mr. Andeer and Mr. Dillon both explained that an “agreement”
does not need to be in writing to be problematic from an antitrust perspective; an
agreement can be inferred from emails, casual conversations, or circumstantial
evidence. During some but not all sessions, the trainer showed a slide with a
picture of a beer coaster with writing on it; the purpose of the slide was to show
the kind of evidence antitrust regulators can might rely on to assess whether an
agreement was reached.
The trainers discussed the types of agreements that can be problematic
under the antitrust laws, beginning with price-fixing, which they described as
one of the few clear “no-nos” of antitrust law. They described various Samsung
price-fixing litigations to make this issue concrete, and they stressed the
importance of taking price-fixing very seriously, explaining that DOJ has been
focusing on price-fixing in its antitrust enforcement efforts in recent years. Next,
the trainers discussed other types of agreements that might raise antitrust
concerns, displaying a slide that said, “Competitors cannot: Agree on other terms
of sale; Agree to cut supply or restrict output; Agree to allocate markets:
Products, Geographies, Customers; Agree to refuse to deal with a supplier or
customer. When in doubt, ASK!” The trainers discussed each of these topics,
providing examples for each one. For example, on the topic of prohibited
agreements to allocate markets, they offered the hypothetical example of
someone from Apple proposing to Netflix that they divide up the market (i.e.,
Apple streams TV shows, Netflix streams movies). After discussing the
examples, the trainers concluded their presentation of examples by emphasizing
that when in doubt, Apple employees should seek legal counsel.
The next topic addressed was information sharing. The trainers explained
that regulators become very suspicious when competitors sit down to discuss
sensitive information. They noted that this is where the publishers in the ebooks
Litigation got in trouble, and they briefly outlined the relevant facts. They
emphasized that Apple employees need to be careful in how they communicate
and the substance of what they communicate. They also discussed information
sharing with content providers at length, providing various examples of how the
issue might arise in Apple’s business and emphasizing that Apple employees
should be wary of sharing with one content provider the terms of Apple’s
negotiations with another supplier. They noted that there are legitimate ways of
dealing with multiple suppliers, such as by offering standard terms, but that
Apple employees should be careful in communications with suppliers.
The trainers then briefly discussed monopolies, although they noted that
they could not think of any markets in which Apple has a monopoly. The
trainers explained that Apple employees should nonetheless be extremely careful
because of a difference between “perception and reality,” a theme emphasized
The trainers briefly addressed a list of issues that
can be problematic for dominant market players, or those market players that
appear dominant: exclusive arrangements, market share agreements, refusals to
deal, and MFNs.
Finally, the trainers touched briefly on mergers and acquisitions. They
explained that regulators scrutinize acquisitions to make sure companies are not
merging in a way that would harm competition. They displayed a slide with a
picture of runners at the start of a race and the text, “Gun-Jumping. Cannot
assert operational control prior to closing an acquisition. Dictating negotiations
with third parties. Hiring/Firing Employees. Terminating contracts. Must be
careful about exchanging competitive sensitive info.” In connection with this
slide, the trainers emphasized that, during negotiation of a merger or acquisition,
it is very important to continue to treat the other party as an independent and
After presenting these basic principles of antitrust law, Mr. Andeer and
Mr. Dillon each spent approximately five to ten minutes discussing the
requirements of the Final Judgment. They used different slides to convey this
information and presented the requirements in a different order, but each
covered the following five points:
Apple’s agreements with book publishers must not include retail
Apple must apply the same terms and conditions to ebook apps as
to other apps;
Apple may discount books of the five defendant publishers without
limitation, even within its current agreements;
Apple cannot retaliate against book publishers for refusing to agree
to Apple’s terms, or because of its terms with other retailers; and
Apple cannot share with any publisher competitively sensitive
information it learned from another publisher.
The trainers opened each session for questions. No questions were asked
at the June 17 or July 23 training sessions. One question was asked during the
June 23 training session, but it was a question about one of the examples and was
asked during the presentation, not at the end. Several questions were asked
during Mr. Andeer’s June 10 session, which was the most interactive. The
questions, which were interspersed throughout that session, largely focused on
how to distinguish antitrust violations from acceptable agreements and
information sharing with content providers. Some questions sought additional
detail about particular issues, such as the meaning of a refusal to deal, the
threshold for a monopoly, and whether minimum advertised price agreements
implicate the antitrust laws. Some questions and answers were redacted for
privilege, consistent with an agreement between Apple and the Monitor.
The trainers concluded their training sessions by displaying a slide with
contact information for the CLPG, encouraging attendees to contact legal counsel
with questions. The slide also stated that antitrust violations must be reported to
Deena Said, Apple’s Antitrust Compliance Officer, and that Apple has a strict
“no retaliation” policy for reporting violations. Finally, the Business Conduct
Helpline was mentioned as an available resource at two training sessions, but not
at the others.
Executive Team Training Session
The Executive Team training session took place on June 30, 2014, the same
day that the bulk of Apple’s revised antitrust compliance program was made
available to employees. Before introducing Mr. Boies, Mr. Sewell, Apple’s
General Counsel, began the training session by encouraging the attendees to tell
their staffs about the newly available suite of antitrust materials and to
“waterfall” the materials to the rest of the company.120
Although Mr. Sewell was not specific about how the senior executives should help
disseminate and “waterfall” information about antitrust and the new antitrust compliance
Mr. Boies spent approximately thirty minutes discussing the
fundamentals of antitrust law. By way of introduction, he said that the two basic
areas of antitrust law are “horizontal” relationships between competitors and
“vertical” relationships with suppliers and customers. He explained that the
antitrust laws are designed to promote and protect competition – not to protect
competitors – and that courts are increasingly trying to align the antitrust laws
with this purpose. He noted that violations of the antitrust laws are extremely
expensive, resulting in large civil fines and penalties as well as criminal liability.
He emphasized that, because the antitrust laws provide for triple damages, as
well as attorneys’ fees, the costs can be quite substantial.
Mr. Boies explained that relationships with competitors, suppliers, and
customers fall under Section One of the Sherman Act, which addresses
agreements in restraint of trade, whereas Section Two of the Sherman Act deals
primarily with unilateral conduct, meaning monopolization. He briefly
discussed the various types of problematic agreements among competitors (price
fixing with competitors, market allocations, agreements to boycott particular
customers or suppliers) and with customers or suppliers (exclusivity agreements,
market share agreements, MFNs, resale price maintenance). He also touched on
mergers and acquisitions.
All antitrust violations other than monopolization claims, Mr. Boies
explained, have to start with proof of an agreement. The problem, he noted, is
that it is not always clear when an “agreement” has been reached. To illustrate
this point, he used the example of the LCD antitrust case, describing the evidence
that was used to establish an agreement. Once an agreement is established, Mr.
Boies explained, the second element of an antitrust claim is that the agreement
must harm competition and consumers. He explained the difference between
agreements deemed “per se” unlawful – such as those that involve price fixing,
market or customer allocation, bid rigging, and boycotts – and those evaluated
under the “Rule of Reason.” He emphasized that if a company is considering
any kind of horizontal agreement with a competitor, a very careful legal analysis
needs to be conducted, since those agreements are rarely lawful. He explained,
however, that certain joint ventures, mergers, or “no poach agreements among
particular competitors may very well . . . be legal,” depending on the context.121
materials, we have followed up with the senior executives whom we interviewed after the June
30 Executive Team training session. These executives have advised us that they either have
already taken steps to disseminate information about the antitrust compliance materials and to
arrange for specific relevant antitrust training, or, in response to questions about how they
planned to implement Mr. Sewell’s recommendation, that they are actively considering such
Following Mr. Boies’s explanation of the types of problematic agreements, Apple
redacted a long portion of the training video for privilege (approximately 25 minutes). Another
Mr. Boies emphasized the importance of documentation. He encouraged
the Executive Team to make all of their documents as truthful, accurate, and
precise as possible, and to avoid including phrases like “Destroy after Reading”
that could be taken out of context. He stressed the importance of having a
document retention policy that is followed consistently, since abrupt changes in
document retention practices can raise red flags. He noted that this is
particularly important in the era of electronic documents and that Apple should
have a program that manages electronic documents in a way that is comparable
to how paper documents are managed.
Finally, Mr. Boies made two brief points about mergers and acquisitions.
He stressed the importance of conducting an antitrust analysis before any
acquisition. He said it is important to remember the Hart-Scott-Rodino Act,
which requires pre-merger notification to antitrust enforcement agencies. He
said this notification can sometimes result in an elaborate process and can delay
mergers, and that it is very important to keep the merging entities separate
during this time.
The second part of the training focused on the Final Judgment and on
responding to questions asked by the attendees. Mr. Boies noted that the Final
Judgment, which has a five-year duration, prohibits certain conduct and requires
certain conduct. He focused on two aspects of the Final Judgment. First, he
discussed the prohibition against sharing with any publisher competitively
sensitive information learned from another publisher. Mr. Boies said this
prohibition was at the heart of the Final Judgment. He emphasized that,
although this discussion was about a court order, everyone in the room should
recognize that they should be careful, even outside the context of the Final
Judgment, about sharing with one firm non-public, competitively sensitive
information learned from that firm’s competitor. He also discussed the Final
Judgment’s prohibition of coercion or threats aimed at ebook publishers who
refuse to deal with Apple on Apple’s terms. A question was asked on this topic,
which led to a substantial discussion about the line between normal business
conduct and impermissible threats.
Mr. Boies covered the remaining sections of his presentation without
discussion: the terms and conditions that must be offered for the ebook app
compared to other apps offered through the App Store; the appointment of an
Antitrust Compliance Officer; the emphasis on anti-reprisal; the obligation to
redaction (approximately 4 minutes) occurs later in the training. Taken together, the redacted
portions of the training session amount to close to a third of the session as a whole. Apple
provided a privilege log confirming that these portions of the training reflect the transmission of
legal advice, but without any information, even in general terms, about the subject matter of the
report to the government evidence of collusion among ebook publishers; the
obligation to furnish a copy of the Final Judgment to certain employees and
executives and obtain annual certifications of compliance; the obligation to log
communications with ebook retailers and publishers; antitrust and compliance
training; and how Apple should handle suspected violations of the antitrust laws
or Final Judgment. Finally, Mr. Boies noted that the Final Judgment is not
simply something that says, “Don’t commit these violations”; instead, it is an
order that might preclude Apple from doing things it might ordinarily do when
Members of the Executive Team asked questions at various points during
the training session, but Mr. Boies also reserved time for questions at the end.
Mr. Sewell brought up one issue he thought was particularly important for the
group to understand: whether Apple – when working vertically and unilaterally
with multiple suppliers – can tell them that others are participating in order to
secure their participation. Mr. Boies admitted that he had to provide an
unsatisfying answer to this question: it depends on the facts. He said the closer
you get to talking about agreements on pricing, the more red flags are raised. He
said the important thing is to recognize that this is a dangerous area where a
person needs to be careful about what he says and to whom he says it.
Other questions focused on whether the Final Judgment relates solely to eproducts, and on agreements and communications with suppliers, such as
MFNs, pricing discussions, and exclusive arrangements. Mr. Boies responded to
each question by explaining where the line might be between legal and
prohibited conduct, encouraging the executives to consider in every case how
their actions might be perceived from an antitrust perspective in order to reduce
the risk that actions taken now will be misinterpreted later.
Further Dissemination of Antitrust Training
We understand that the CLPG has provided additional training sessions
since issuance of the Final Judgment, in part because of Mr. Sewell’s directive as
well as discussions we have had with those senior executives during interviews.
For example, when we interviewed Luca Maestri, Senior Vice President and
CFO, on July 18, 2014, we asked him how he intended to waterfall or cascade the
new antitrust materials to the employees in his organization. Mr. Maestri said he
intended to have Mr. Andeer train his direct reports at a staff meeting. Mr.
Andeer informed us on August 21, 2014 that he had provided that live antitrust
training to Mr. Maestri’s direct reports, which he acknowledged had been a
result of the monitoring team’s interview with Mr. Maestri. Mr. Andeer agreed
to supply us with materials related to that training, but those materials have not
been provided as of the date of this Report. Similarly, Jeff Williams, Senior Vice
President of Operations, explained that, within his organization, procurement
likely presents the most significant antitrust risks.122 Mr. Williams said that he
planned to invite Mr. Andeer to one of his staff meetings so that even his reports
whose activities create relatively little antitrust risk will understand the most
important issues. We expect that that these and other training sessions will be
videotaped so that we can properly assess and evaluate whether Apple is in fact
tailoring its antitrust compliance training to different audiences as it has said it
would do. Our understanding is that the training provided to Mr. Maestri’s
direct reports was not recorded.
Apple has informed us that the company is continuing to evaluate what, if
any, additional groups of personnel might require live antitrust training. For
example, we have had discussions with Apple about a separate live antitrust
training for the attorneys who are embedded in Apple’s business units and who
serve as the first line of legal support for the business people.123 We also
understand that Apple’s sales team has received “Deals 101” training. 124
Assessment and Recommendations
Context of the Assessment
Because of the work we have done over the past several months, we are in
a significantly better position to evaluate Apple’s Antitrust Compliance Program
than we were when we submitted our First Report. We have interviewed a
significant number of people from Apple’s executive, legal, compliance, and
business teams. Apple has provided more information and generally has been
more responsive to our requests. Since the First Report, we have gained a much
better understanding of Apple’s business organization and operations and the
manner in which its lawyers work with its legal team. Most importantly, as of
Mr. Williams’s procurement team has received training from Mr. Andeer in the past
year at an annual training session regarding procurement deals, but Mr. Williams’s stated
intention is to extend the antitrust training more broadly.
123 Mr. Andeer has suggested that a course on antitrust law might be offensive to
experienced lawyers. We are confident that Mr. Andeer and his colleagues are capable of
fashioning a training session that is appropriately calibrated for lawyers who deal with antitrust
issues from time to time but who are not specialists. After all, continuing legal education, which
is a common feature in the legal community and required in many states, is based on that
We received slides from a Deals 101 presentation as part of the August 29 Submission.
Some of the slides overlap with those used by Mr. Andeer and Mr. Dillon in their live trainings to
iTunes and App Store employees, suggesting that Deals 101 covered some of the same basic
antitrust principles as those trainings (agreements between competitors, perception of monopoly,
mergers and acquisitions). There was also a slide about the poaching case. Otherwise, the slides
shed little light on the substance of the Deals 101 training.
June 30, Apple has developed, modified, and introduced specific components of
its enhanced Antitrust Compliance Program.
Even so, we still lack information that is necessary for a comprehensive
analysis of Apple’s Program. First, we have not had the opportunity to interview
all members of Apple’s Executive Team. Despite requests to interview all ten
Executive Team members during this reporting period, Apple has not yet made
two Executive Team members available. Second, with the exception of former
Board member William Campbell, Dr. Ronald Sugar, and Tim Cook, we have not
interviewed any other members of Apple’s Board of Directors. Apple has agreed
to make the Board members available for interviews and we hope to meet with
them in the very near future.
As discussed in this Section of the Report, Apple’s senior leaders,
including its Executive Team and its Board, are key to the success or failure of
Apple’s Antitrust Compliance Program. The Board and Executive Team are
responsible for exercising adequate oversight of the Antitrust Compliance
Program, establishing the company’s tone on antitrust compliance standards,
and displaying a strong commitment to following the antitrust laws. The tone
must be established at the top and transmitted throughout the company on a
continuing basis by word and deed. Our assessment of Apple’s Antitrust
Compliance Program will remain incomplete until we have greater access to the
personnel responsible for compliance oversight, especially Apple’s Board
The United States Sentencing Guidelines,125 direction from this Court, and
other compliance standards set the framework for assessment and evaluation of
Apple’s Program. During our initial discussions with company representatives,
we learned that Apple, like most companies, looks to the Sentencing Guidelines
for the framework and guiding principles of its own Program.
Our view is that over the last few months Apple has developed, and has
taken important steps toward implementing, the basic elements of a sound
antitrust compliance program. This is far beyond what existed previously. As
discussed in Section VIII, the June 30 Rollout consisted of several critical
Program components, including revised policy documents and resources, live
and online training courses, and an internal website dedicated to antitrust
compliance. We discuss our specific assessment of these components in greater
detail in this Section.
We have observed two main weaknesses in Apple’s Program. First,
perhaps because of its infancy, the Program lacks clear procedures for its full
U.S. Sentencing Commission, Organizational Compliance Guidelines § 8B2.1.
implementation. We recommend that Apple adopt adequate procedures to
implement its Program (such as risk assessment and feedback solicitation),
including the procedures to detect risk that should be embedded in its regular
Second, we have not yet seen evidence that Apple’s Program is
adequately overseen by the Board or the Board’s Audit and Finance Committee.
Indeed, because of the delayed rollout of the Program and our lack of access to
Board members, we have very little information about whether the Board is
knowledgeable regarding Apple’s Antitrust Compliance Program, and no
information about whether the Board is satisfied with the company’s efforts to
implement the Program. Finally, perhaps because of our lack of access to the
Board, we have seen little evidence of the Board’s engagement in, or oversight of,
Antitrust Risk Assessment
Recommendations from the First Report
We recommended in the First Report that Apple undertake a formal
antitrust risk assessment as a central component of its Antitrust Compliance
Program. At a minimum, our recommendation was meant to require a
“systematic assessment of the risks that arise from Apple’s businesses, the
activities of its employees, and its third-party interactions.”126 In addition, we
recommended that the assessment include consideration of antitrust concerns
that have historically been relevant to the company, including non-public
instances in which antitrust issues have been detected and addressed
internally.127 Finally, we recommended that Apple structure a formal risk
assessment process that is dynamic, so that Apple’s Antitrust Compliance
Program continues to develop as Apple’s business changes and expands128 and
First Report 45.
The new product and service Apple announced on September 9 (Apple Watch and
Apple Pay, respectively), highlight the dynamism of Apple’s business. See, e.g., Press Release,
Apple, Apple Unveils Apple Watch—Apple’s Most Personal Device Ever (Sept. 9, 2014), available
at http://www.apple.com/pr/library/2014/09/09Apple-Unveils-Apple-Watch-Apples-MostPersonal-Device-Ever.html; Press Release, Apple, Apple Announces Apple Pay (Sept. 9, 2014),
available at https://www.apple.com/pr/library/2014/09/09Apple-Announces-Apple-Pay.html.
Apple also frequently engages in acquisitions that expand the lines of business in which it
engages. See, e.g., Press Release, Apple, Apple To Acquire Beats Music & Beats Electronics (May
28, 2014); available at http://www.apple.com/pr/library/2014/05/28Apple-to-Acquire-BeatsMusic-Beats-Electronics.html.
as the antitrust regulatory environment changes.129
Our recommendations were based on several important factors. First, we
believe that an antitrust risk assessment is a necessary component of any
comprehensive and effective antitrust compliance program. As this Court
recognized, compliance programs are not “one size fits all.”130 An effective and
comprehensive antitrust compliance program must be structured to match the
company’s antitrust risks, which are determined by assessing potential exposure
created by the company’s operations and activities. As Apple has
acknowledged,131 applying general compliance concepts or adopting an off-theshelf compliance program would not lead to an effective and comprehensive
Antitrust Compliance Program for the company.
In addition, the Antitrust Division of the U.S. Department of Justice and
several other respected authorities132 have recognized the importance of aligning
a company’s compliance program with identified risks. The Antitrust Division
has recently reminded the business community that an effective antitrust
compliance program must be “designed to account for the nature of a company’s
business and for the markets in which it operates.”133
See First Report 45.
1/13/14 Tr. 45-46.
On numerous occasions Ms. Said, Mr. Moyer, Mr. Vetter, and others have described
Apple’s goal to develop a customized Program that is tailored to Apple’s culture, operations, and
The United States Sentencing Guidelines contain a general provision requiring
periodic risk assessments. See U.S. Sentencing Commission, Organizational Compliance
Guidelines § 8B2.1(c), available at http://www.ussc.gov/guidelines-manual/2011/2011-8b21
(“The organization shall periodically assess the risk of criminal conduct and shall take
appropriate steps to design, implement, or modify each requirement set forth in subsection (b) to
reduce the risk of criminal conduct identified through this process.”). The OECD has issued
similar guidance on the importance of risk assessments, see OECD Good Practice Guidance on
Internal Controls, Ethics, and Compliance, adopted 18 February 2010, available at
http://www.oecd.org/investment/anti-bribery/anti-briberyconvention/44884389.pdf, as has
the United Kingdom, see Ministry of Justice, The Bribery Act 2010 (Mar. 2011), available at
http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf. Finally, the
International Chamber of Commerce’s Antitrust Compliance Toolkit includes risk identification
and assessment as a foundational element of a compliance program. See ICC Comm’n on
Competition, The ICC Antitrust Compliance Toolkit (2013), available at
Brent Snyder, Deputy Assistant Attorney General, Antitrust Division, U.S. Dep’t of
Justice, Compliance is a Culture, Not Just a Policy, Remarks as Prepared for the International
Chamber of Commerce/United States Council of International Business Joint Antitrust
Second, periodically conducted risk assessments allow the company to
modify its program to respond to new risks as they develop. The markets in
which Apple is active are constantly evolving, and, as its most recent product
announcements demonstrate, Apple continues to enter new markets.134 The
antitrust regulatory environment is also dynamic. These facts deepen the need
for a risk assessment that will keep the company’s compliance standards in line
with or ahead of its business activities. To ensure that Apple’s program endures
beyond the life of the Final Judgment in a way that comprehensively and
effectively guards against future antitrust risks, Apple’s Antitrust Compliance
Program should be informed by a comprehensive risk assessment that is
reviewed and modified on a regular basis.
Finally, we explained in the First Report that a formal risk assessment
would allow for a more efficient evaluation of various elements of Apple’s
Antitrust Compliance Program. Although our recommendation was framed in
terms of our ability to evaluate the comprehensiveness and effectiveness of
Apple’s Program, a risk assessment is central to the ability of the Board and
senior management to ensure that the company’s Antitrust Compliance Program
is properly designed to address the antitrust risks Apple faces.
Apple’s Prior Formal Risk Assessments
When we issued the First Report, we understood formal risk assessments
to be a standard part of Apple’s auditing and internal controls functions. Apple
informed us that the Audit and Finance Committee is generally responsible for
overseeing risk assessments. The Audit and Finance Committee consists of
independent members of Apple’s Board of Directors and, according to its
charter, is responsible for monitoring and overseeing “compliance with legal,
regulatory and public disclosure requirements” as well as enterprise risk
management.135 The Risk Oversight Committee, which consists of Apple
executives and senior employees, assists the Audit and Finance Committee in
fulfilling its oversight responsibilities with regard to risks faced by the
Through our interviews of Apple employees after issuance of the First
Report, and interviews of members of the CLPG in particular, we learned that
Apple was considering our recommendation to implement a formal risk
Compliance Workshop (Sept. 9, 2014), available at
See supra note 128.
Audit and Finance Committee Charter, supra note 101, at 1.
Risk Oversight Committee Charter, supra note 108, at 1.
assessment process. Sean Dillon described a seemingly informal process to
assess risk that had taken place since he joined the company. He described
discussions with Mr. Andeer regarding areas of the business that could create
antitrust exposure, and “whiteboarding” as a brainstorming process that he and
Mr. Andeer used to identify potential antitrust risk in the Apple businesses. He
said that he and Mr. Andeer had met with various business units to learn about
each unit’s operations and that together he and Mr. Andeer had assessed
antitrust risk through a “continuing process.” He said that the company was
considering a more formal process in light of the First Report’s recommendation,
but noted his belief that enacting a formal process would simply memorialize a
process already taking place.
Although Apple made no objection to our recommendation to conduct a
formal antitrust risk assessment, as of July 31, 2014, more than three months after
submission of the First Report, Apple had not provided us with any evidence
that such an assessment had taken place. The information Mr. Dillon and others
provided shortly after submission of the First Report137 suggested that relevant
informal conversations and brainstorming were taking place, but such activity
did not necessarily accomplish the formal risk assessment we had recommended
in the First Report. Accordingly, we asked in the July 31 Document Request that
Apple provide documents and information relating to any risk assessment
conducted since we had shared the First Report with Apple.
As described in Section V.D.6 above, in response to the July 31 Document
Request, we engaged in oral and email discussions with Apple concerning the
company’s response to our request for documents regarding the company’s
performance, if any, of a formal antitrust risk assessment. On August 21, 2014,
members of the monitoring team met with Mr. Andeer to discuss our request in
greater detail. Despite comments from Mr. Dillon and others at Apple regarding
contemplation of a formal risk assessment in response to our recommendation,
Mr. Andeer’s initial response to our request for further information was that the
First Report did not include a clear recommendation that Apple conduct a formal
risk assessment. Moreover, Mr. Andeer asserted that a formal risk assessment
process was already in place, but he told us that no written document reflecting
such an assessment existed. Mr. Andeer firmly stated his opposition to
preparing a written record of a risk assessment that went beyond the “summary
form” that his team had previously used.138
See supra Section V.D.6.
As of the date of this Report, we have not been provided with the “summary form” of
a risk assessment that Mr. Andeer described.
Through email correspondence after the August 21 meeting with Mr.
Andeer, Mr. Vetter informed us that, after we issued the First Report, Apple had
indeed engaged in “multiple very serious discussions about [an antitrust risk
assessment] and [the Monitor’s] request for a written report.” Although those
discussions never resulted in a response to the Monitor’s recommendation,
Apple apparently concluded that the activities it had undertaken since issuance
of the First Report (as described in Section IX.B.3 below) in substance satisfied
the Monitor’s recommendation to undertake a formal risk assessment.
Apple’s Antitrust Risk Assessment Efforts
Beginning with the August 21 meeting with Mr. Andeer, and extending
through multiple emails following that meeting, Apple for the first time
provided us with some information regarding the risk assessment process it had
conducted, which the company believes is an adequate response to the First
Report’s recommendation. Apple represented to the monitoring team that the
company had undertaken the following efforts with respect to an antitrust risk
Communications with Legal Personnel. Apple told us that Mr. Andeer
began his tenure at Apple by meeting with all of the senior leaders in
Apple’s Legal Department to better understand the businesses they
support and the risks they encounter. In addition, Apple told us that Mr.
Andeer, Mr. Dillon, and Mr. McNamara, as well as other lawyers working
with specific business groups (such as Emily Blumsack and Annie
Persampieri), identify risks on a daily basis based on the questions asked
by Apple employees. Apple told us that Mr. Andeer and others
incorporate the antitrust considerations raised by those questions into an
ongoing, unwritten risk evaluation. Because it is unwritten, we obviously
have not received or reviewed it.
Apple also informed us that Mr. Andeer has met with numerous in-house
lawyers in key roles (most on multiple occasions) for the sole purpose of
assessing antitrust risks they may encounter in the businesses they
support. Apple stated that these lawyers include Annie Persampieri
(iBooks Store); Emily Blumsack (App Store); Jay Lee (iPhone carrier
relationships); Kim Cooper (iPhone carrier relationships); Robert Windom
(iTunes content); Michael Miramontes (Global Supply Chain); and Doug
Vetter (all Apple product offerings).
The information concerning Apple’s risk assessment process was summarized in a
series of lengthy emails by Mr. Vetter to the Monitor over the course of the two weeks following
the August 21 meeting.
Apple told us that, even before Mr. Andeer was promoted to Chief Sales
Counsel approximately one year ago, he met with Mr. Vetter, who was the
then-acting Chief Sales Counsel, for the specific purpose of discussing
antitrust risk in the Sales groups. Apple further informed us that Mr.
Andeer also met with the lawyers leading Channel Sales Support in the
United States and Apple’s Chief International Lawyer. Apple considers
Mr. Andeer to be “embedded” in the Sales business.
Communications with Business Personnel. Apple informed us that Mr.
Andeer has also met with business leaders to better understand their
businesses and to start analyzing the types of competition law risks they
may face. Apple said these business leaders include Eddy Cue and
members of his team (all forms of iTunes content); John Brandon and his
team (Channel Sales); and Mike Fenger (iPhone carrier
relationships). Apple represented that these meetings are in addition to
the day-to-day interactions that Mr. Andeer, other CLPG members, and
Apple business lawyers have with the business people in the relevant
business units when fielding questions and discussing potential antitrust
Internal Antitrust Risk Discussions. Apple informed us that, beginning
shortly after issuance of the First Report, Mr. Andeer began meeting once
per week with his antitrust team solely to discuss relevant antitrust risks
(separate and apart from his regular staff meeting, which is held on a
different day of the week). Apple described the meeting as an
opportunity for Mr. Andeer and his lawyers to strategize about where the
company may have antitrust exposure and how best to address these
risks. We are not aware whether these discussions have been
memorialized in writing.
Collaboration between Legal and Compliance. Apple states that Mr.
Andeer meets regularly (at least every other week) with Mr. Moyer, Ms.
Said, and Mr. Vetter to discuss the status of Apple’s antitrust compliance
efforts, including new information learned from follow-ups on the live
training sessions, feedback from the online training course, and any
business developments that might affect the antitrust risk assessment.
Apple considers one of Ms. Said’s main contributions in her role as the
Antitrust Compliance Officer to be working with Mr. Andeer to analyze
the trainings and to determine how to better tailor them to potential
We do not know whether or to what extent the training has been tailored based on
these discussions. We have no way of testing Apple’s representation, made in response to the
Additional Support from Outside Counsel. Apple informed us that the
company has worked with Simpson Thacher to survey Apple-specific
risks based on the relevant business units, interactions with competitors,
and collaboration with business partners and suppliers. Apple
represented to us that the findings from this survey are reflected
throughout Apple’s revised antitrust trainings and policies, both with
respect to the substance of the guidance provided and in the specific
hypothetical examples and quizzes embedded throughout the online
training. We currently have no detail about this – i.e., we have no
information on which aspects of the survey led to which hypothetical
examples or which quiz questions.141
Elevated Access to Information. We understand from Apple that Mr.
Andeer is “disclosed” on Apple’s unannounced products and service
offerings, which Apple argues is a significant step because information on
unannounced products and services is tightly controlled within the
company. Apple informed us that it recognizes that, as the company
enters new markets or modifies the way in which it does business, such
actions may change the company’s antitrust risk profile. We were told
that Mr. Andeer is one of the first people in the company to be provided
insight into these changes.142
Risk Assessment Tools. Apple told us that Mr. Andeer and his team
have been preparing questionnaires for the various business units that
will be used as a template to drill down further into the organizations as
the CLPG continues its risk assessment efforts. Apple provided us with
draft report, that it has used information derived from these sources to focus on issues relevant to
specific business groups.
141 Apple notes that its communications with outside counsel in connection with its
revised Antitrust Compliance Program are privileged. We fully accept the privileged nature of
such communications, but we are confident much of the information we are seeking could be
supplied without implicating such communications.
We appreciate the importance and significance of this development, and we think it is
an absolute necessity in allowing Apple to assess antitrust risks at critical stages of product and
service development. It would be a matter of great concern if antitrust risks were not considered
at the earliest possible stage and antitrust advice were not sought. We understand that Mr.
Vetter, as New Products Counsel, has for the past fourteen months consulted Mr. Andeer in
connection with new products that may have antitrust implications; previously, Mr. Andeer was
consulted by Bruce Sewell or former New Products Counsel, Kevin Saul. To be clear, Mr. Andeer
is not provided such access for all new products, but only those which Mr. Vetter believes may
have antitrust implications. Based on the information Apple recently provided, it is unclear
whether Mr. Andeer’s access today is greater than before Mr. Vetter became New Products
the questionnaire prepared for the iTunes business unit,143 but has so far
declined to provide questionnaires for other business units or to identify
the full set of business units for which such questionnaires were being
prepared based on claims of privilege.
Further Assessment and Recommendations
As we learned about Apple’s risk assessment efforts only at the end of this
monitoring period, we have had no opportunity to fully evaluate or assess them.
We have had to rely solely on Apple’s representations that such efforts have
taken place. As they have been described to us, Apple’s efforts to undertake an
antitrust risk assessment since the First Report would constitute a reasonable
foundation for assessing potential antitrust risk. The Monitor hopes to engage
with Apple in the near future to obtain more detail regarding the specific risk
assessment efforts that have been undertaken and to provide a more complete
assessment of those efforts in future reports. The Monitor’s preliminary
evaluation and assessment of the company’s risk assessment activities, as
represented by the company, is discussed in more detail below. We must
include the important caveat that we have not yet confirmed or verified these
Apple’s representations suggest it has taken several positive steps toward
implementing a risk assessment process. Frequent communication with leaders
from each of the business units, as well as with the legal personnel who support
those business units, is an essential first step for understanding antitrust risks
within the company. Business unit leaders and the lawyers who support them
are in the best position to provide a basic understanding of the operations,
personnel, and third-party interactions that implicate antitrust risk for each of the
Equally important, if we are able to confirm them, are Apple’s efforts to
broaden the risk discussions within the CLPG and across the compliance team
and devote significant time to such discussions. The company has made a
substantial investment in its internal antitrust resources by hiring Ms. Said as the
company’s Antitrust Compliance Officer, as required by the Final Judgment, and
adding members to the CLPG. We need to learn more about the evolving
relationship between the CLPG and compliance teams in identifying and
addressing antitrust risk.
In return, we agreed that we would not contend that the disclosure of this
questionnaire would constitute a waiver as to claims of privilege with respect to other
We currently lack clarity on the process by which results of any risk
assessment efforts will be incorporated in Apple’s Antitrust Compliance
Program. For example, although we are aware of Apple business units and
employees that manage sales to channel partners, have pricing responsibilities,
and interact with Apple competitors, we are aware of no procedures in place to
formally monitor and audit these particularly risky activities.144 Apple would
benefit from a formal process for identifying, ranking, and connecting these risks
to the Program, especially with respect to new risks that develop as Apple’s
business and relevant markets evolve.
In addition to Mr. Andeer’s elevated access, we recommend that Ms. Said,
as the person charged with day-to-day management and oversight of the
Antitrust Compliance Program, be provided elevated access to information
about confidential product and offerings. Mr. Andeer’s elevated access to
unannounced products and offerings is another positive step toward giving key
personnel the right tools to increase the effectiveness and comprehensiveness of
the Antitrust Compliance Program. Without specific knowledge of the
company’s full operations, any antitrust expertise offered by the CLPG would be
significantly limited. Ms. Said also should have full information regarding the
identification and assessment of antitrust risks and the implementation of
Program components to address those risks. As a court-mandated official with
key responsibility for Apple’s Antitrust Compliance Program, we believe it is just
as important that Ms. Said have access to such information as it is that Mr.
Andeer have such access.
With specific regard to Apple’s risk assessment tools, we believe the
iTunes antitrust risk questionnaire that Apple provided to the monitoring team
on August 26 provides valuable insight into Apple’s developing process for
learning about the operations and functions of each business that could expose
the company to antitrust risk. Apple informed the Monitor that, although the
questionnaire was memorialized in written form as a result of the First Report,145
the questions contained in the questionnaire were developed over the last three
and a half years as the result of numerous conversations between the CLPG and
various iTunes business and legal personnel.146
Section IX.D.5 contains further discussion of procedures to monitor activities with a
145 Apple told the Monitor, “A determination was made that it might help to document
the precise nature of the questions that have been asked of these individuals in the course of this
process.” Thus, Apple prepared a written questionnaire.
Apple told us that these iTunes business and legal personnel included Robert
Windom, Annie Persampieri, Keith Moerer, Eddy Cue, Robert Kondrk, Josh Lipman, Patrice
Gautier, Kevin Saul, Emily Blumsack, and a number of others.
Although the iTunes questionnaire appears to be a very helpful
preliminary tool for assessing antitrust risk in the iTunes business, we have
relatively little information about it. For example, we currently do not know
how the iTunes questionnaire is used in practice and how information learned
from answers to the questionnaire is incorporated into the Antitrust Compliance
Program. Further, we understand that Apple has prepared similar antitrust risk
questionnaires for other business units, including Procurement and Sales. As of
the date of this Report, Apple has not provided these documents, even in
redacted form, or the names of the other business units for which they have been
prepared. We believe there are ways to provide us with these additional
questionnaires while addressing Apple’s concerns, and we will work with Apple
to that end.147
Based on the risk assessment information we received from Apple, we
remain unclear as to who within the company owns the risk assessment process
and what the procedures are for sharing the results of the assessment with the
Risk Oversight Committee and the Audit and Finance Committee. Although we
understand that Mr. Andeer and other attorneys have been responsible for the
risk assessment efforts described above, Apple should make ownership of the
process explicit to ensure clarity. In addition, a procedure should be defined for
reporting the results of antitrust risk assessments to the Risk Oversight
Committee and the Audit and Finance Committee. The results of the antitrust
risk assessment will inform the Committees about the company’s antitrust risk
profile and will, in turn, guide the Committees’ evaluation of Apple’s Antitrust
Although Apple’s representations regarding its risk assessment efforts
suggest important steps in the right direction, more is required. In the First
Report, we recommended a formal risk assessment; we view this to mean an
organized process that is institutionalized, dynamic, and continuing. In
addition, the risk assessment should result in a formal report that is reviewed
and analyzed by the Risk Oversight Committee and the Audit and Finance
Committee. Although Apple has latitude regarding the specific method for
conducting a risk assessment, Apple’s chosen method must adequately inform
the Antitrust Compliance Program and be a basis for evaluation by the Risk
Oversight Committee and the Audit and Finance Committee. We do not possess
enough information at this time to conclude that Apple’s efforts satisfy this
Although Apple provided more insight into efforts relating to risk
assessment in the weeks leading up to issuance of this Report, many employees,
In response to our draft report, Apple continued to press its arguments regarding
privilege but also expressed its commitment to work with the Monitor to resolve these issues.
including Executive Team members, told us that they had never met with Mr.
Andeer or anyone on his team to discuss risk in their respective organizations.
Many told us that they were unfamiliar with Mr. Andeer and the members of his
team until the live antitrust training session they attended. This is troubling,
especially given the importance of such discussions and the inconsistency
between that evidence and the information Apple conveyed to us about its risk
assessment efforts. Apple must further develop and deepen its efforts to
identify, assess, and rank antitrust risk.148
As suggested above, Apple has declined to provide us with substantial
information regarding its risk assessment efforts, in part because of privilege and
work product concerns. We need to confirm that Apple has a process in place for
identifying and prioritizing antitrust risks and addressing those risks through
the company’s Antitrust Compliance Program. We are confident that the
company can provide adequate detail for us to evaluate its risk assessment
process without revealing privileged information. For example, in our
discussion with Mr. Andeer on August 21, he offered to walk the Monitor
through his approach for conducting a risk assessment and to provide an outline
of the process. We welcome Mr. Andeer’s offer and any additional efforts from
Apple to make risk assessment information available.
Apple’s Revised Antitrust Compliance Policies
The Monitor is required to evaluate whether Apple’s antitrust policies are
“reasonably designed to detect and prevent violations of the antitrust laws.” 149
As described above, Apple’s June 30 Rollout included three revised antitrust
policy documents.150 First, Apple issued a revised version of its Antitrust and
Competition Law Policy. Second, Apple revised the section on Competition and
Trade Practices in the company-wide Business Conduct Policy. Third, Apple
issued a revised version of the chapter on Antitrust and Competition Law in its
company-wide compliance ebook.
Antitrust and Competition Law Policy
As noted in the First Report, Apple provided us with several versions of
its Antitrust and Competition Law Policy, the latest of which was distributed to
In response to the draft report, Apple stated, “It is Apple’s position that Mr. Andeer
and his team have met on a day-to-day basis with numerous key businesspeople and members of
the legal and compliance team, and that they will continue to solicit input from relevant
employees (including the Executive Team, as appropriate) in connection with this process.”
Final Judgment § VI.B.
Apple also prepared a summary of the Final Judgment and distributed it to Apple
employees whom Apple identified as covered by Sections V.A and V.B of the Final Judgment.
employees as part of the June 30 Rollout. The final version of the Policy reflected
various changes, including changes made in response to our comments.
While Apple has provided three revised policy resources as enhancements
to its program, we view the Antitrust and Competition Policy as the most critical.
Based on our interviews of Apple employees and information received from the
company, we believe the Policy’s style, format, and level of detail make it a
useful tool for the Apple personnel who will need it the most. We view the
Policy as Apple’s primary substantive antitrust guide, while the Business
Conduct Policy and the Business Conduct ebook are important high-level
supplements to the Policy.
Our review of the final version of the Policy was greatly enhanced by the
additional information we acquired about Apple’s business organization and
about the company generally during this reporting period. Our evaluation of the
final Policy focused on several criteria, including (i) affirmative communication
of the company’s standard of conduct with respect to antitrust compliance, (ii)
comprehensive coverage of substantive antitrust issues, (iii) adequate
explanation of Apple’s anti-reprisal policy, (iv) sufficient information to elevate
questions, concerns, or potential violations, (v) adequate dissemination, and (vi)
comprehension and use of the Policy by employees.
Affirmative Communication of the Company’s
Standard of Conduct
Apple’s Policy clearly and effectively communicates the company’s
standard of conduct with respect to antitrust compliance. The Policy begins with
a written message from Mr. Sewell that emphasizes each employee’s
responsibility to guard against antitrust violations. Following Mr. Sewell’s letter
is a statement of Apple’s standard of conduct regarding antitrust compliance.
The statement includes a description of Apple’s commitment to competition,
innovation, and compliance with the antitrust laws. It also contains a description
of potential penalties for violations, including employment termination, fines,
and imprisonment. Finally, the statement encourages employees to contact the
CLPG with questions.
Comprehensive Coverage of Substantive Antitrust
We recommended in the First Report that Apple move forward with its
plans to tailor separate antitrust policies to each of its relevant business units.
We understood at that time that Apple’s initial intention was to create separately
tailored antitrust policies based on the antitrust risks and challenges faced by
different business units. Apple informed us in May 2014 of its desire to maintain
a single, comprehensive policy that would be globally applicable. Based on
Apple’s representation of its intention to tailor live training sessions for each of
its business units, and with the understanding that the Policy would be broad
enough to cover all areas of antitrust risk faced by the company, we agreed on
May 23, 2014 to hold in abeyance our recommendation for tailored polices until
after our review of Apple’s final Policy and tailored training sessions.
Apple’s Policy appears to provide adequate coverage of most substantive
antitrust issues applicable to Apple and individuals affiliated with the
company.151 The body of the Policy contains a brief overview of the substantive
provisions of the antitrust laws, as well as a list of practices that employees must
avoid and must report if encountered or suspected. The Policy also describes
certain activities that employees must not undertake without first consulting
To satisfy Apple’s goal of adopting a single, comprehensive policy for all
Apple operations and individuals, however, Apple must expand the substantive
coverage of its current Policy. For example, the Policy does not currently discuss
antitrust concerns related to employee hiring agreements or service of senior
executives or Directors on other company boards,152 two activities for which
Apple has come under antitrust scrutiny in the past. Although these activities
will not have broad application to Apple employees, these issues merit formal
attention in Apple’s Antitrust and Competition Law Policy. We recommend that
Apple modify the Policy to include coverage of these activities, and as necessary
based on the results of its risk assessment efforts. As we continue to learn more
about Apple’s business operations, we may have further recommendations for
substantive expansion of the Policy.
Adequate Explanation of Apple’s Anti-Reprisal Policy
and Sufficient Information to Elevate Questions,
Concerns, or Potential Violations
Apple’s Policy concludes with a statement regarding the company’s antireprisal policy, a statement requiring that potential or actual violations be
151 Further discussion of the issue of appropriately tailoring training sessions is contained
in Section IX.E.3.
Apple has provided a policy document called “Guidelines Regarding Director
Conflicts of Interest” which provides procedures for membership of senior executives and
Directors on other boards. However, the main focus of this document is on conflicts of interest,
such as a contract or other transaction, or pending or threatened litigation, between the company
and a Director. While the guidelines also note a prohibition on the use of confidential
information by a company with which a Director has a material financial interest, the guidelines
do not adequately cover potential Clayton Act Section 8 and related concerns regarding
interlocking directorates or incorporate procedures to address those concerns.
reported to the Antitrust Compliance Officer or the Business Conduct Helpline,
and a statement encouraging employees to contact local counsel or the CLPG
with antitrust questions. We believe these statements meet applicable
requirements of the Final Judgment, and our interviews suggest that the antireprisal policy and reporting mechanisms are generally known. However, we
recommend that contact information, including names, telephone numbers, and
email addresses for all members of the CLPG and the Antitrust Compliance
Officer, be included in the Policy. We believe this addition will remind
employees about the individuals available to them for assistance, and how to
We recommended in the First Report that all Apple employees be
required to certify compliance with the Antitrust and Competition Law Policy,
reasoning that a separate annual certification for the Policy would provide
assurances that employees had in fact reviewed the document. After we filed
our First Report with the Court, Apple represented that all employees who took
the online antitrust training course would be required to certify that they had
read and understand the Policy. On May 23, 2014, we agreed to hold our
recommendation in abeyance, so long as all appropriate groups of employees
received online training and completed the certification regarding the Antitrust
and Competition Law Policy as described by Apple.
There remains room for significant improvement in Apple’s dissemination
of the Antitrust and Competition Law Policy. We evaluated dissemination
through direct questions during interviews of Apple personnel. Of those
employees we directly asked about use of the Policy, some said they were
familiar with the Policy, some could not recall reading it, and others seemed to
confuse it with other Apple compliance documents.
We also measured Policy dissemination using statistics Apple provided
regarding employee views and downloads of the Policy. We have no way of
confirming how many relevant employees actually accessed Apple’s revised
Antitrust and Competition Law Policy, let alone read or understood the Policy.
Apple’s records showed that the Policy was viewed or downloaded a total of 60
times from the Antitrust Intraweb Site from the June 30 Rollout through August
22. Unfortunately, Apple’s records do not include the number of times the Policy
was viewed or downloaded through the online antitrust training course, which
contained a link to the Policy and required employees to certify they had read it.
Further, we determined through our own review of the online training course
that a user was not required to physically open or download the Policy in order
to certify to having read and understood it, and to receive credit for completing
the course. Thus, it is possible that employees completed the online training
without ever reading the Policy. Accordingly, we are unable to conclude that the
employees who are expected to read and understand Apple’s Antitrust and
Competition Law Policy have even seen the Policy. We simply have no evidence
one way or the other on this issue.
Against this background, we conclude that the online training process is
not an adequate substitute for a separate certification and recommend that the
certification be required for relevant employees. The certification should state
that an employee has read, understands, and agrees to comply with the Policy.
Because relevant employees should review the Policy itself, and because Section
V.F of the Final Judgment imposes specific requirements on what must be
communicated to Apple employees about protected disclosures to the Antitrust
Compliance Officer concerning any potential violation of the Final Judgment and
the antitrust laws, we believe that, at a minimum, all Apple employees specified
in the Final Judgment should be required to certify that they have read and
understand the Policy, as well as other personnel identified as having jobs with
heightened antitrust risk.
Comprehension and Use of the Policy by Employees
As noted above, most of the Apple employees we interviewed after the
June 30 Rollout exhibited some confusion about the existence of the Antitrust
and Competition Law Policy. From these anecdotes, and our inability to confirm
actual review of the Policy by individual employees, we conclude that Apple
personnel are not receiving the full benefit of the written Policy. Apple needs to
take additional action to ensure complete dissemination, comprehension, and use
of the Policy.
Business Conduct Policy (Competition and Trade Practices
As noted in the First Report, Apple provided us with several versions of
the Competition and Trade Practices section of Apple’s Business Conduct Policy.
Although the latest version was not introduced to employees as part of the June
30 Rollout, Apple has previously presented the revised document as part of its
efforts to enhance its Program. We understand that the Business Conduct Policy,
including the chapter on Competition and Trade Practices, is available to
employees on AppleWeb as well as the external Apple investors’ page. 153 The
Business Conduct Policy is Apple’s version of a business code of conduct
featuring the company’s policies regarding categories labeled as follows:
Every new employee also receives a copy of the revised Business Conduct Policy.
Responsibilities to Apple,
Customer and business relationships,
Governments and communities, and
Employee obligations to take action.
The final version of the Competition and Trade Practices section provided
by Apple reflects our comments and was otherwise largely unchanged from the
version we reviewed and discussed in the First Report.154
Apple has confirmed that the Competition and Trade Practices section of
the Business Conduct Policy is a shorter summary of the larger Antitrust and
Competition Law Policy. Like the other topics covered in the Business Conduct
Policy, the summary on antitrust and competition is meant to capture the most
important antitrust compliance points that are relevant to a company-wide
audience. As we recommended in the First Report, the Competition and Trade
Practices section contains a link to the standalone Antitrust and Competition
Law Policy. The Business Conduct Policy is available on the Business Conduct
We believe that the Competition and Trade Practices section of the
Business Conduct Policy meets its limited purpose, as explained by Apple. With
the standalone Antitrust and Competition Law Policy serving as a more
comprehensive explanation of Apple’s antitrust policy and employee obligations,
the dedicated chapter in the Business Conduct Policy adequately serves its
purpose. Employees can use the chapter as a quick guide to the company’s most
basic Policy components and as a resource to access the more comprehensive
Antitrust and Competition Law Policy or contact information for antitrust
resources. Further, based on our interviews with employees, we do not believe a
lengthier and detailed section in the Business Conduct Policy is necessary or
would be frequently consulted.
The final version of the Business Conduct Policy is attached as Exhibit F.
Business Conduct ebook (Antitrust and Competition Law
The Business Conduct ebook is an interactive, highly polished, and
detailed version of Apple’s Business Conduct Policy. It was originally completed
in fall 2012 and has since been revised a number of times. We learned at the
March 4 Meeting that, before issuance of the Final Judgment, the ebook included
only one page dedicated to antitrust compliance. The final ebook, as made
available to employees as part of the June 30 Rollout, contains a new chapter
dedicated entirely to antitrust and competition issues. The ebook is available on
an iPad and Mac to Apple employees globally in nine languages. 155
In addition to substantive information from the Competition and Trade
Practices section of the Business Conduct Policy, the ebook contains several
interactive features. It includes training modules, a question and answer session
with Kyle Andeer, and an interactive “widget” that explores the impact antitrust
violations have on consumers. The ebook also features information about the
ADM price-fixing case.
The antitrust and competition law chapter of the ebook is a helpful
supplemental resource for employees. The ebook is a user-friendly tool that
achieves Apple’s goal to achieve a look and feel that employees (and the outside
world) have come to associate with Apple. As we noted in our First Report, we
agree that the ebook has great potential as a vehicle for communicating
additional information regarding antitrust compliance, as well as many other
subjects. The final version is consistent with what we have learned about the
style of communication that resonates with Apple personnel. The ebook presents
Apple’s compliance message in a way that will be useful and convenient for
Apple employees and will help to make concepts that can be difficult for nonlawyers to understand more comprehensible, without excessive simplification.
The main drawback we have identified is that, although most of the employees
we interviewed seemed generally aware of the existence of the ebook, few of the
employees we interviewed after the June 30 Rollout had reviewed its revised
antitrust and competition law chapter.
The ebook can be accessed via Apple’s intranet homepage, the Antitrust Intraweb Site,
and the Business Conduct homepage. The ebook has also been disseminated to employees
through Switchboard, an internal app store for Apple employees. The revised ebook is not
mandatory reading for employees.
Apple’s Revised Antitrust Compliance Procedures
Establishing Adequate Procedures
Apple’s Antitrust Compliance Program generally lacks adequate
procedures for implementing a comprehensive and effective Antitrust
Compliance Program. Apple has implemented such formal procedures for two
components of the Program. First, Apple has a set of procedures to be followed
for calls received by the Helpline, which assist the call recipient in determining
whether the call could be antitrust-related, and the steps that should be followed
to properly route the call. In addition, Apple has a set of procedures to identify
employees covered by Section V of the Final Judgment. These are the only
formal procedures included in Apple’s Antitrust Compliance Program of which
we are aware.
We recommend that Apple establish procedures for other components of
the Antitrust Compliance Program, including the antitrust risk assessment;
detection, investigation, and reporting of potential violations; and collection of
Throughout this section we recommend that Apple adopt and implement
various procedures that are more formal and permanent than what currently
exists. By doing so, Apple will ensure that these procedures remain in place
even when key personnel changes take place.
Communications Regarding the Antitrust Compliance
Prior to issuance of the First Report, Apple informed us of its plans to
announce the June 30 Rollout to employees. We understood that Apple planned
to develop an internal antitrust compliance website (the Antitrust Intraweb Site),
which would include resources and information on antitrust law and the Final
Judgment, as well as contact information for reporting suspected antitrust
violations. The company also planned to launch antitrust “marketing segments”
through AppleWeb and RetailMe, the company’s intranet sites for corporate and
retail employees, respectively. Apple explained to us that it planned to launch
the Antitrust Intraweb Site and the marketing segments from the intranet sites as
part of the June 30 Rollout.
Apple advertised the June 30 Rollout through a promotion tile icon
showing a green lamp on AppleWeb, Apple’s internal intranet home webpage,
for a two-week period. The green lamp icon linked to the Antitrust Intraweb
Site. The Business Conduct and Compliance webpage also contained the green
lamp icon, which linked to the Antitrust Intraweb Site. When we conducted
interviews in July at Apple, Ms. Said demonstrated the new Antitrust Intraweb
Site and its links to training and resource materials. Finally, Apple provided us
with an email Mr. Cue sent to employees in the Internet Software and Services
organization, announcing the new mandatory online training course.
As noted in the First Report, we believe that the way Apple communicates
information about antitrust compliance and the Antitrust Compliance Program is
vital. In Section IX.F, we discuss these communications in the context of senior
commitment to compliance and reasonable expectations for the role of Apple’s
senior leaders. However, the Program managers, and Ms. Said in particular,
should also be responsible for promoting and maintaining awareness of antitrust
compliance and the many components that make up the Program. While the
effort to market the new Program on Apple’s intranet sites was a good start, we
believe that the Program itself should include built-in procedures that guarantee
communications about the program are updated, frequent, and routine. For
example, some companies distribute newsletters and other compliance updates
to employees or the legal team. A compliance update on relevant antitrust
developments or important case studies would serve multiple purposes:
employees would stay current on potentially relevant antitrust developments;
routine updates would signal a strong commitment by senior leaders to antitrust
compliance; and updates would signal the ongoing relevance of antitrust issues
to Apple personnel.
Business Conduct Helpline
As discussed in the First Report, Apple’s Business Conduct Helpline
(“Helpline”) is not a recent addition to the Program. The Helpline has existed
since sometime before 2009. Tom Moyer, Apple’s Chief Compliance Officer and
Head of Global Security told us that, under his oversight (which began in 2009),
employee use of the Helpline has increased, which he views as evidence that
there is broad awareness of the Helpline within the company. The Helpline is
operated by employees of Apple, as well as by a third-party provider,156 but all
calls are ultimately referred to Kathleen Emery, who manages the Helpline and
reports to Mr. Moyer. Apple has told us that the Helpline is global and that Ms.
Emery has counterparts in Europe and Asia. In accordance with Apple’s
“Escalation Procedure for Calls in Regards to Anti-Competitive Behavior,” all
calls and emails received by the Helpline that relate to anti-competitive behavior
must be reported immediately to the ACO.
At the March 4 Meeting, Apple told us that employees can choose between speaking
with an Apple employee or a third-party provider when they call the Helpline.
A successful helpline is an important component of any effective
compliance program157 and will continue to be an important part of Apple’s
Antitrust Compliance Program. Employees must have access to a potentially
anonymous means of communicating antitrust questions or concerns.
Employees must also feel comfortable using the Helpline and must have
confidence in Apple’s policy against retaliation for making reports. Finally,
employees must trust that their questions and concerns are properly routed and
investigated. It will be important for Apple to provide follow-up to those
employees who report an antitrust question or concern.
While we believe that it is important for Apple to maintain the Helpline as
a resource for employees, particularly for those who wish to report
anonymously, we have learned through our interviews of employees that
Apple’s Helpline may not necessarily be the first or the most widely used
resource by employees requiring antitrust advice or assistance. Apple’s legal
structure and real world operations make employees more likely to report
questions or concerns to their primary legal contacts; in fact, Apple has
represented that the Helpline has not received any calls related to antitrust issues
Even if the Helpline is not the first or most used resource for antitrustrelated assistance, we believe that the Helpline provides one of many
opportunities for Apple employees to report antitrust issues and questions.
Throughout interviews with employees, we learned that some feel the Helpline
could be improved. For example, one employee expressed disappointment that
his call to the Helpline was routed to voicemail. We recommend, as discussed in
Section IX.D.10, that Ms. Said undertake audits to measure the use and
effectiveness of the Helpline by speaking candidly with employees. Through
these audits, Apple will be able to improve its Helpline and learn about other
more effective channels for employee communication that may require
additional efforts by the company.
As we discussed in the First Report, Apple must keep accurate and
comprehensive records of its antitrust compliance efforts. Many requirements of
the Final Judgment are predicated on accurate and detailed records; more
The U.S. Sentencing Guidelines state that an effective compliance program must have
“a system, which may include mechanisms that allow for anonymity or confidentiality, whereby
the organization's employees and agents may report or seek guidance regarding potential or
actual criminal conduct without fear of retaliation.” U.S. Sentencing Commission, Organizational
Compliance Guidelines § 8B2.1(b)(5)(C).
generally, an antitrust compliance program that is reasonably designed to detect
and prevent violations of the antitrust laws requires accurate record keeping.
At the time of the First Report, we had been provided very few records
created for the Antitrust Compliance Program. The Program was in the early
stages of development, and the most pressing need for record keeping at the time
related to training attendance. Apple provided us with various lists of
employees who accepted invitations to attend the training sessions Mr. Andeer
conducted in September and December 2013 and in February 2014, but we
learned that these lists were not necessarily accurate records of which employees
actually attended the training sessions. We concluded that Apple had to make
significant improvements to its record keeping procedures.
Since the First Report, Ms. Said has improved the procedures for
maintaining training attendance records, but we believe there is room for further
improvement in Apple’s record keeping procedures. All attendees at live
training sessions are now required to sign a physical attendance sheet at the
entrance to the training room. Apple has hired a contract employee to help
maintain these records. However, since the First Report, on at least one occasion,
attendees at the training session never physically signed the attendance sheet. In
addition, in Section IX.D.8 we discuss specific discrepancies in recent training
records provided by Apple.
We recommend that Apple take steps to improve the accuracy of its
training attendance records. For example, Apple could invest in technology to
electronically track training attendance. By doing so, the process would become
automated and records would be searchable for future reference and auditing,
much like the electronic completion records we received for the online training
course. We believe that a more automated process could allow Ms. Said to focus
on more substantive components of the Program, and electronic records would
be more accessible, especially as the volume of records increases. If such an
automated process is not feasible, Apple can adopt a different method of
ensuring more accurate record keeping.
Record keeping will become even more important as Apple’s Antitrust
Compliance Program grows and evolves, and the need for accurate record
keeping will extend to new areas. For example, feedback received regarding the
antitrust live and online training and the compliance policies should be
documented and accessible.
Detection, Investigation, and Reporting of Violations
Section V.G of the Final Judgment requires Apple, within three business
days of discovering or receiving credible information concerning an actual or
potential violation of the Final Judgment, to terminate or modify Apple’s
conduct to assure compliance, and to provide to the Plaintiffs, within seven
business days of discovering such information, a description of the actual or
potential violation of the Final Judgment and corrective actions taken. Section
V.H of the Final Judgment requires Apple to provide to the Plaintiffs on a
quarterly basis any non-privileged communications regarding allegations of
Apple’s noncompliance with any provisions of the Final Judgment or violations
of the antitrust laws. Ms. Said has agreed that a process should be in place with
respect to Apple’s obligations under both Sections V.G and Section V.H of the
Separate from the Final Judgment requirements, a comprehensive and
effective compliance program must include procedures for detecting,
investigating, and reporting potential violations. The Department of Justice
considers such procedures to be part of a “proactive compliance program.” 158
The U.S. Sentencing Guidelines contain several provisions highlighting the
importance of the detection and investigation of potential violations. The
Guidelines state that an organization must “exercise due diligence to prevent
and detect criminal conduct,”159 “establish standards and procedures to prevent
and detect criminal conduct,”160 and “take reasonable steps to respond
appropriately to the criminal conduct and to prevent further similar criminal
conduct, including making any necessary modifications to the organization’s
compliance and ethics program.”161
The Final Judgment specifies that Apple’s Program must be “reasonably
designed to detect and prevent violations of the antitrust laws,”162 and therefore a
set of procedures to accomplish these goals must be a core element of Apple’s
Antitrust Compliance Program. These procedures will, of course, include
reporting mechanisms, like the Helpline, incentives, and disciplinary procedures
(as discussed in Section IX.D.6); audits (as discussed in Section IX.D.10); and
other general procedures discussed in this Section. However, additional
procedures can be specifically incorporated with respect to specific risks, such as
those created by certain hiring practices, multiple board memberships, or other
operations that expose the company to particular or heightened antitrust risks.
Snyder, supra note 133.
U.S. Sentencing Commission, Organizational Compliance Guidelines § 8B2.1(a)(1).
Id. § 8B2.1(b)(1).
Id. § 8B2.1(b)(7).
Final Judgment § VI.C (emphasis added).
Apple’s Antitrust Compliance Program currently lacks a set of procedures
aimed specifically at detecting potential violations associated with risky
operations. We have had limited discussions with Apple regarding procedures
for some high-risk areas, such as the process for legal review of publisher
agreement modifications, as discussed in Section IX.D.9. Apple also provided us
with a 2009 document entitled, “Guidelines Regarding Director Conflicts of
Interest.”163 However, we recommend that Apple adopt formal procedures for
addressing those areas identified in its internal risk assessments as posing a
moderate or high level of antitrust risk.164 These procedures, to be undertaken
by some combination of the Risk Oversight Committee and the Audit and
Finance Committee, will reassure senior management and the Board that areas
with the most risk exposure have an extra level of review and attention. 165
Formal procedures will provide consistency in the application of Apple’s
antitrust standards to day-to-day operations. Finally, procedures aimed at
detecting and preventing potential violations in areas of the company with
moderate or high antitrust risk will facilitate audits of those high-risk operations.
Apple’s Antitrust Compliance Program also currently lacks procedures
aimed at investigating and reporting (if necessary) potential and actual antitrust
violations. To “respond appropriately” to potential violations, and to comply
with the company’s reporting obligations under the Final Judgment, Apple
should incorporate formal procedures for investigating and reporting potential
and actual violations into its Program.
On August 21 we briefly discussed with Ms. Said Apple’s plans to adopt
procedures for investigating and reporting potential and actual antitrust
violations. Ms. Said informed us that she had prepared a draft set of procedures
for investigating potential violations that would satisfy Apple’s obligations
under Section V.G and V.H of the Final Judgment. The document sets out
Apple’s definition of a violation and sets forth the process for investigating
allegations of an antitrust violation. Ms. Said told us that she would share the
document with us after it had been reviewed and revised by Mr. Andeer and
other members of the legal team. We look forward to further discussions with
We intend to discuss the content of this document and provide comments to Apple in
the weeks following issuance of this Report.
164 For example, some companies have experimented with computer-based screening for
potential red flags regarding cartel activity. Other companies provide “dos and don’ts” lists that
apply to certain workflows, such as “The Dos and Don’ts at Trade Association Meetings.”
It is possible that the Risk Oversight Committee has already implemented such
procedures. The few documents provided to us that relate to the activities of the Committee have
been so heavily redacted that we have no way of determining if they incorporate procedures of
the type we are recommending, although we have seen no evidence that they do.
Ms. Said about Apple’s investigation and reporting procedures, as well as an
opportunity to review Ms. Said’s proposed procedures for Apple.
Incentives and Disciplinary Procedures
Incentives and disciplinary procedures are an integral part of any antitrust
compliance program. While training will help to educate employees about legal
boundaries, a compliance program must also provide incentives for law-abiding
behavior and sanctions for violations. The concept of tying rewards and
consequences to conduct is supported by the U.S. Sentencing Guidelines,166 but
also strongly endorsed by the compliance community. In addition to influencing
conduct with concrete rewards and consequences, senior management can use
incentives and disciplinary procedures to effectively communicate company
expectations and compliance standards. There are many ways that a company
can incorporate incentives into normal business operations, including through
personnel evaluations, promotions, compensation, and communications from
senior leaders.167 Disciplinary procedures should be formal, clear, and
In the First Report, we discussed the need for more information from
Apple regarding the company’s plans to develop incentives and disciplinary
procedures aimed at encouraging compliance with the antitrust laws and the
Antitrust Compliance Program. At that time, we were unaware whether Apple’s
compliance incentives and disciplinary procedures existed.
On August 26, 2014, Mr. Moyer provided information about Apple’s
efforts to develop incentives for employees to perform in accordance with its
ethics program. Mr. Moyer described the following three ways that Apple has
implemented compliance incentives:
The company takes into account compliance and ethics in its
annual employee performance reviews. According to Mr. Moyer,
the company reviews honesty, compliance with ethical standards
and company policy, and collaboration and teamwork, among
166 The Guidelines require “appropriate incentives to perform in accordance with the
compliance and ethics program” and “appropriate disciplinary measures for engaging in
criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.”
U.S. Sentencing Commission, Organizational Compliance Guidelines § 8B2.1(b)(6).
“The board of directors and senior officers must set the tone for compliance to ensure
that the company’s entire managerial workforce not only understands the compliance program
but also has the incentive to actively participate in its enforcement.” Bill Baer, Assistant Attorney
General, Antitrust Division, U.S. Dep’t of Justice, Prosecuting Antitrust Crimes, Remarks as
Prepared for the Georgetown University Law Center Global Antitrust Enforcement Symposium
(Sept. 10, 2014), available at http://www.justice.gov/atr/public/speeches/308499.pdf.
other factors. Mr. Moyer said that an important component of this
evaluation process is whether an employee has met the highest
standards of ethical behavior.
The company also considers ethics as a significant factor in
identifying candidates for promotion. According to Mr. Moyer, the
company views ethical conduct as a critical trait of all Apple
leaders and therefore evaluates elements including representing
Apple with integrity, demonstration of the willingness to voice
concerns regardless of title or position, and providing complete
information even when it includes bad news or negative data.
The company rewards and recognizes its Business Conduct &
Compliance staff with compensation and promotions,
demonstrating that the department is important and a path to
advancement within the company. For example, Apple said that it
promoted several compliance employees this year alone and
allocated additional funds for raises and bonuses. Mr. Moyer
represented that these measures have helped contribute to an
environment in which compliance is widely respected within
Apple. We understand from Apple that the company receives a
number of qualified applicants for any open compliance-related
In addition to the items mentioned by Mr. Moyer, Apple’s Antitrust Law
and Competition Policy lists employee termination, legal liability, fines, and
imprisonment as potential consequences of violating the antitrust laws or the
Antirust Compliance Program, although only termination is a sanction
determined by Apple.
Apple’s efforts to incorporate appropriate incentives will strengthen the
Antitrust Compliance Program. In addition to the incentives listed above, we
believe Apple can do more to encourage awareness and compliance of the
Program, and to communicate compliance expectations from senior leaders to
lower-level employees. For example, Apple can more openly communicate the
policies Mr. Moyer conveyed to us that link acts of positive conduct with
rewards (such as promotions) and negative acts with specific and appropriate
Formal Feedback Procedures
In the First Report, we recommended that Apple implement procedures to
obtain formal feedback from employees regarding enhancements to the Antitrust
Compliance Program. We concluded that feedback regarding the Helpline,
training sessions, and other components of the Program would help Apple gauge
the effectiveness of these elements of its compliance Program and determine how
best to communicate with employees about antitrust compliance issues and
improve antitrust compliance.
On August 21, Apple provided us with the text of survey questions that
were used to assess the effectiveness of live antitrust sessions held in September
and December 2013. The survey contained a list of questions aimed at
determining the audience’s assessment of whether the training was effective, the
atmosphere was “open” for learning and discussion, there was an opportunity to
ask questions, and they could report a violation without fear of reprisal. The
survey also polled audience members regarding the appropriate action if they
become aware of a violation and requested feedback for improving the training.
The survey was distributed in April 2014.
In general, the survey used to evaluate the 2013 live training sessions is a
positive step toward gathering feedback that will help improve the Antitrust
Compliance Program. However, we believe that surveys and similar tools are
most effective when issued immediately, or as soon as possible, after the activity
underlying the survey. The online training survey was issued more than four
months after the December training and almost seven months after the
September training. Although the survey served an additional purpose –
tracking attendance that was not previously recorded – the results are less
valuable than if they had been collected directly after the training.
We recommend that Apple adopt a procedure to collect feedback
immediately after every live and online training session. Feedback should be
stored in a way that can be easily accessed and should be used to update and
improve training sessions. Similar to training attendance records, as discussed in
Section IX.D.4, Apple should consider tracking electronically feedback from the
training sessions. Ms. Said should distribute surveys to employees that
participated in the live training sessions that took place from May through
August as soon as possible.
We recommend that Apple identify other components of the Antitrust
Compliance Program that could be enhanced through employee feedback. We
look forward to receiving more information from Apple on formal procedures to
elicit employee feedback on other Program components.
Ms. Said advised us that, in an effort to gather additional feedback, she
informally interviewed six employees following the 2013 live training sessions.
She told us that she asked the employees questions to gauge their
comprehension after they had participated in the live training. We understand
that Ms. Said plans to conduct additional interviews as part of the antitrust
compliance audit required by the Final Judgment.
We agree that interviews and “spot quizzes” regarding the live training
can provide helpful feedback and agree that Ms. Said should include employee
interviews as part of the antitrust compliance audit she will be conducting in
September and October 2014. However, we also recommend that Ms. Said
interview employees immediately or very soon after live training sessions
regarding ways to potentially improve the training. Like feedback gathered
through employee surveys, capturing employee impressions while they are still
fresh will yield valuable input for enhancements to the Program. In addition, we
recommend that Ms. Said use employee interviews to collect feedback regarding
other elements of the Program components, as opportunities to do so arise.
Identification of Critical Employees
Section V Employees
An important element of Apple’s Antitrust Compliance Program is the
identification, maintenance, and audit of the list of employees covered by
Sections V.A – V.C of the Final Judgment (“Section V Employees”).
Three important provisions of the Final Judgment apply to Section V
Employees.168 First, Section V.A requires that Apple’s Board of Directors, its
Chief Executive Officer, each of its Senior Vice-Presidents, and each of its
employees who, in whole or in part, engage in activities “relating to Apple’s
iBook Store” (“V.A Employees”) receive a copy of the Final Judgment. Section
V.B requires that any officer, director, or other employee who succeeds to any
V.A Employee position (“V.B Employees”) also receive a copy of the Final
Judgment. Section V.C of the Final Judgment requires specific training for all
V.A and V.B Employees, as well as “appropriate employees in the Apple iTunes
and App Store businesses” (“V.C Employees”).
We do not discuss the fourth main requirement that applies to V.A and V.B
Employees, which is imposed by Section V.I of the Final Judgment. Section V.I requires the ACO
to log certain communications between V.A and V.B Employees and (1) persons employed by
other ebook retailers or (2) multiple ebook publishers.
As of the date of our First Report, Apple had provided little transparency
regarding the process for identifying Section V Employees or tracking their
fulfillment of Final Judgment requirements. Ms. Said’s February 19, 2014
Memorandum to the Antitrust File (provided to us on February 26) explained
that the iTunes organizations are “fluid” and that, for this reason, identifying
employees covered by Final Judgment requirements requires a “hands on
approach.” According to Apple, its corporate structure and business operations
do not lend themselves to bright line business unit divisions or job titles. At the
time of our First Report, Apple had not yet provided complete employee lists for
relevant business units or organization charts, and it had not explained to us
how the company identified Section V Employees or validated the accuracy of
the process for tracking completion of Final Judgment requirements.
In particular, Apple’s process for identifying employees “engaged, in
whole or in part, in activities relating to Apple’s iBook Store” and “appropriate
employees in Apple iTunes and App Store businesses” was vague. Ms. Said
explained that Apple business attorneys169 had “worked with their clients to
ensure that Apple captured all relevant employees.” Yet, beyond naming the
attorneys consulted and providing final lists, Apple provided no further details
regarding the identification of these employees. Apple eventually provided us
with job titles for identified employees and organization charts displaying a
reporting hierarchy. Our review determined that certain employees who
appeared to fall within the Section V Employee group were not included on
Apple’s lists of employees to be trained. We later learned that the discrepancies
were due to inaccurate job titles contained in the organization charts Apple had
provided. We requested that Apple provide more information regarding the
Section V Employee identification process.
Although Apple has provided additional detail regarding the list of
identified Section V employees, it needs to supply more information. As part of
the August 29 Submission, Apple provided us with a chart (“Live Training
List”)170 with the names of employees that received live antitrust training, a
corresponding entry for each employee’s Executive Team manager, the training
session each employee was scheduled to attend, and the actual session he or she
attended. This information advances our understanding of which business units
include employees that Apple believes would benefit from training. However, to
understand and fully evaluate Apple’s process for identifying these employees,
we need more detailed information regarding the functions of each employee
169 These attorneys included Mr. Andeer; Mr. Robert Windom, Senior Counsel for iTunes;
Ms. Persampieri, Counsel for the iBooks Store; Emily Blumsack, Counsel for the App Store; and
others within the iTunes Legal Team.
and a reason for identifying each employee as a Section V Employee.
Specifically, we must be able to understand how Apple identified employees
“engaged, in whole or in part, in activities relating to Apple’s iBook Store” and
“appropriate employees in Apple iTunes and App Store businesses.”
Our comparison of the Live Training List with other information provided
by Apple revealed apparent discrepancies. For example, some employees that
were listed in the Live Training List as having completed live training do not
correspond with the live attendance lists provided by Apple for each live session.
In addition, employees who we were advised had received training were not
listed on the Live Training List. These discrepancies highlight the need for
improved record keeping procedures.171
As part of the August 29 Submission, Apple provided us with a set of
procedures regarding the process for identifying newly hired employees as
Section V Employees. The procedures outline a process whereby Ms. Said will
receive quarterly updates regarding new hires for specific managers who have
been identified to have direct and indirect reports identified as Section V
Employees. In addition, the procedures include steps to verify identification of
employees through discussions between Ms. Said and specific managers. These
procedures are an important step toward establishing a transparent process
regarding Section V Employees. The procedures will also ensure that new
employees who should receive training and other compliance attention are not
Other Critical Employees
We believe other Apple personnel not specifically named in the Final
Judgment may require the same level of treatment as Section V Employees in
order to comply with the Final Judgment’s mandate that Apple implement an
antitrust compliance program that is reasonably designed to detect and prevent
violations of the antitrust laws. Through our interviews and review of
information provided by Apple, we have identified employees that may not be
covered by Section V but that engage in activities that could well expose the
company to antitrust risk (e.g., marketing and sales employees). Unrelated to
our conclusion regarding other critical employees, Apple has also identified a
small subset of non-Section V employees that are required to receive live
antitrust training. We believe that identifying other critical employees and
addressing their needs through live and/or online training, and potentially other
steps, are necessary to achieve an effective and comprehensive Antitrust
After reviewing the draft report, Apple checked and attempted to resolve the
discrepancies we pointed out. Based on the information Apple provided to us, our conclusion is
that the discrepancies resulted from inaccuracies in the Live Training List.
Compliance Program. As discussed in Section IX, identification of other critical
employees should be informed by an antitrust risk assessment.
We recommend that Apple incorporate the identification of other critical
employees into its antitrust risk assessment and take steps to treat these
employees appropriately under the training and other components of the
Antitrust Compliance Program. As part of the risk assessment for employees,
Apple should analyze and rank the level of risk associated with each category of
employee. Ranking of risk among employees is important because the
distinction will determine the appropriate level of training. As we noted in the
When determining what level and type of training is appropriate
for a given employee, Apple should consider the risks associated
with that employee’s specific functions and responsibilities. . . .
This determination should be made as part of the company’s
antitrust risk assessment. Based on this process, Apple should
tailor the type of training to be provided to employees . . .
Live training should be provided to employees at the highest risk
levels. Online training may be reserved for those employees that
present minimal antitrust risk. At a minimum, Section V
Employees should receive live training.172
We recommended that all employees who Apple determined could
expose the company to moderate to high antitrust risk receive live antitrust
training. Live training is likely to be more effective than online training because
it is teaching employees face-to-face – where employees have the ability to ask
questions in real-time, to test the concepts being communicated, and to become
familiar with the trainer and other antitrust experts at the company who can
provide future assistance. Employees whom Apple identifies as posing a lower
risk of antitrust exposure should be required, at a minimum, to take the antitrust
online training course.
Review of Agreements
In the First Report, we recommended that a member of the CLPG be
involved in the review of any proposed publisher agreement modifications. At
the time, we understood from Apple that review of contractual modifications
related to the defendant publishers had been a joint effort between Ms. Said and
Apple’s legal team, although Apple had not described the precise process for
contract review. We concluded that the personnel charged with reviewing
First Report 65 & n.162.
contract modifications should have antitrust expertise to identify contractual
modifications that might raise antitrust concerns. We agreed that Ms. Said
should play an important role in monitoring contractual changes, but we
recommended that a member of the CLPG should immediately and directly
review contractual modifications Ms. Said identified as potentially problematic.
In our meeting with Ms. Said on August 21, we were advised that Annie
Persampieri, a lawyer who supports Internet Software and Services, is
substantially involved in the contract review process. Ms. Persampieri or Ms.
Said review all contract modifications, and both elevate any questions or
potential issues for review by the CLPG. We believe that this approach is an
appropriate structure for reviewing publisher agreement modifications.
In this section of the Report, we discuss two kinds of audits. First, we
discuss the antitrust audit required by Section V.E of the Final Judgment.
Second, we discuss regular compliance audits that we recommend Apple
undertake in its effort to develop and maintain an effective and comprehensive
Final Judgment–Required Audit
Section V.E of the Final Judgment requires the Antitrust Compliance
Officer, in consultation with the Monitor, to conduct an annual antirust
compliance audit (“Section V.E Audit”) covering each person identified in
Sections V.A and V.B of the Final Judgment, and to maintain all records
pertaining to such audit. When we issued the First Report, we had agreed with
Apple that Ms. Said would propose a plan for the annual antitrust compliance
audit to the monitoring team around July 2014.
In a memorandum to the Monitor, dated July 1, 2014, Ms. Said described
her proposed plan for conducting the Section V.E Audit. Ms. Said’s proposed
audit plan included the review of various documents to ensure that the
requirements for V.A and V.B Employees are being satisfied. These documents
included various employee lists identifying V.A and V.B Employees, Final
Judgment certifications in satisfaction of Section V.D of the Final Judgment,
communication certifications in satisfaction of Section V.I of the Final Judgment,
and training attendance logs. We believe these proposals are a good first step for
the Section V.E Audit, but, as we have already communicated to Ms. Said, we
believe they should be supplemented with a more substantive review of various
components of Apple’s Antitrust Compliance Program.
We met with Ms. Said on August 21, 2014 to discuss her proposed audit.
We suggested that Ms. Said interview a representative sample of V.A and V.B
Employees after they completed live and/or online training. We specifically
suggested that the interviews focus on:
Employees’ evaluation of the relevance and value of the training
they had received;
Specific antitrust risks to which the training either introduced or
Ways in which the training may have affected how they would
handle business situations;
Instances in which they had consulted their business lawyers on
antitrust-related issues and whether they were satisfied with those
Whether they understand their right to report activity they believe
violates the antitrust laws;
Familiarity with the Helpline;
Familiarity with Apple’s anti-reprisal policy; and
Familiarity with antitrust resources that Apple has made available
(including written antitrust policies and the Antitrust Intraweb
Site), as well as whether they believe those materials could be
These interviews of V.A and V.B employees could be conducted
simultaneously with the interviews Ms. Said has planned as part of her formal
feedback procedures for the live training sessions.
We also suggested that Ms. Said develop a survey to poll a group of V.A
and V.B Employees that was broader than the universe of people she would
interview. Ms. Said told us she had circulated a survey soon after the training
sessions that had taken place before the First Report.173 We recommended that
Ms. Said expand the initial survey to cover V.A. and V.B Employees trained
during the sessions that took place after the First Report and that she incorporate
the responses into the results of the antitrust compliance audit.
In addition, we suggested that Ms. Said speak with a sample of personnel
who had consulted with members of the CLPG to gauge whether those
personnel found the group to have been helpful and responsive in addressing
antitrust issues. Finally, we suggested that Ms. Said review and make
recommendations for enhancing New Employee Orientation training materials
that discussed antitrust compliance.
This is the same survey discussed in Section IX.D.7(a).
Antitrust Compliance Program Audits
In addition to the antitrust compliance audit required by Section V.E of
the Final Judgment, we recommend that Apple incorporate auditing procedures
as a regular component of its Antitrust Compliance Program. In contrast to the
monitoring activities that Ms. Said has undertaken since her hire, auditing
procedures would involve a more specific review of particular components of the
program in order to evaluate the effectiveness of Apple’s policies, procedures,
and training. The purpose of the audits, which we recommend Ms. Said conduct
annually, perhaps in conjunction with Apple’s Internal Audit group, would be to
identify weaknesses in the Program. The results of the audits would be shared
with the Audit and Finance Committee.174
Apple’s Revised Antitrust Compliance Training Program
As described above, Apple is required to provide training to each member
of its Board of Directors, its Chief Executive Officer, and its Senior VicePresidents; each of its employees engaged, in whole or in part, in activities
relating to the iBook Store; and the successors of all of the individuals in these
categories.175 In addition, Apple must extend its training program to cover
“appropriate employees in [the] Apple iTunes and App Store businesses.” 176
However, as Apple has recognized, employees outside the categories listed
above may also expose the company to antitrust risk, and should therefore also
receive antitrust training. Section IX.D.8 of this Report discusses the company’s
identification of employees to receive antitrust training and the appropriate
format (live or online) for each employee. This section of the Report considers
the substantive aspects of the training.
Training is a fundamental component of any comprehensive and effective
antitrust compliance program. As we explained in the First Report, we believe
that Apple can achieve two central purposes through its training program, both
of which will contribute significantly to the company’s improved antitrust
compliance: an increased ability of employees to comply with the antitrust laws,
In responding to the draft report, Apple claimed that this proposal exceeds the scope
of Section V.E of the Final Judgment. We never claimed that Section V.E was the basis for this
recommendation. The authority is Section VI.B, which authorizes the Monitor to recommend to
Apple changes to address any perceived deficiencies in Apple’s antitrust compliance policies,
procedures, and training.
See Final Judgment §§ V.A-V.C.
and an increased willingness of employees to comply with the antitrust laws. In
addition, employees must have sufficient information to know when they should
report questionable conduct and when to seek guidance.
Recognizing the importance of training as a tool to improve Apple’s
compliance with the antitrust laws, this Court made specific reference to training
in the Final Judgment. The Court noted during the August 27 Hearing that
training sessions should be “tailored to each employee’s position and the
situations that employee is likely to encounter.”177 Consistent with the Court’s
conclusions, Apple must continue to develop its training schedule, identify
employees whose positions require antitrust education, classify employees by the
level and type of training that is appropriate for them based on their
responsibilities, and tailor training sessions appropriately.
Recommendations from the First Report
As of the First Report, Apple had provided four live antitrust trainings to
Apple personnel regarding the Final Judgment and the antitrust laws – two on
the meaning of the Final Judgment (one to U.S. iBooks Store employees and the
other to employees involved in the global iBooks Store), one on fundamental
antitrust issues to global iBooks Store personnel, and an antitrust training course
on “Deals 101” to New Global Sales Managers. Apple provided us with the
PowerPoint presentations that were displayed during each of these sessions, and
for some sessions Apple provided speaker’s notes. Because we lacked significant
information regarding the sessions provided prior to the First Report,178 we were
unable to fully assess or make specific recommendations regarding those
Live Training – Further Assessment and Recommendations
Since the First Report, Apple has provided a series of live antitrust
training sessions to various employees in the Internet Software and Services
business unit, as well as to the Executive Team and to the Board of Directors.
The specific content of these training sessions is described in greater detail in
Section VIII.E above. Apple provided us with video recordings of live training
8/27/13 Tr. 18-19.
Apple provided us with copies of the presentation slides that Mr. Andeer used during
his training on the Final Judgment (September and December 2013) and his general training on
the antitrust laws (February 2014) (attached as Exhibit A - redacted). We noted in the March 4
Meeting that the slides provided little information with respect to the substantive material
covered in the training sessions. The antitrust law overview slides had minimal written material
and largely contained pictures and other symbols, which Mr. Andeer used for his presentation of
substantive concepts. The slides did not contain enough information for us to assess the
comprehensiveness of the training that took place.
sessions that were given to personnel affiliated with iTunes, the App Store, the
Productivity Group, and the Executive Team. In addition, members of the
monitoring team live-monitored one training session for the App Store and a
second session for the Productivity Group. We know substantially less about the
live sessions which we did not live-monitor and for which we did not receive a
video recording. Accordingly, our assessment of Apple’s live antirust trainings
is focused on the sessions provided to iTunes, the App Store, the Productivity
Group, and the Executive Team.
We expected the live antitrust training sessions after the First Report to be
specifically tailored to the business activities of each business audience. Rather
than create separate antitrust compliance policies for each of its business units,
Apple opted to tailor its antitrust training sessions to particular business unit
employees. We agreed that tailoring live sessions to Apple’s businesses would
be an effective way to train Apple employees regarding antitrust compliance.
Accordingly, we expected that the iTunes, App Store, Productivity Group, and
Executive Team live sessions would reflect some differences based on the
activities of these groups, as well as the potential antitrust issues faced by
individuals in each of these groups.
We did not observe meaningful differences between any of the live
antitrust sessions that we monitored live or by video-recording, with the
exception of the training session provided to the Executive Team. The Executive
Team training session focused on antitrust issues at a higher level, and also
targeted topics that would apply specifically to senior executives. However, the
sessions provided to iTunes, App Store, and Productivity Group employees were
almost identical. We shared our impressions with Mr. Andeer, who had led all
but one of the non-executive live sessions. He acknowledged that the training
sessions for employees in iTunes, the App Store, and the Productivity Group
were essentially the same, and he said that he had never intended for there to be
distinctions in these sessions because he believed that the antitrust issues faced
by iTunes overlapped considerably, if not completely, with the App Store and
the other content businesses, because all involve the acquisition of content to be
sold through a digital marketplace and negotiations with content suppliers. Mr.
Andeer also explained that the Productivity Group, as an “adjunct” to the App
Store, also faced similar antitrust issues to those faced by the other content
Although Apple’s representations after we issued the First Report led us
to believe that each content business would receive a more narrowly tailored
training session, we now understand that such customization may not be
necessary given the specific activities and responsibilities of employees in those
businesses. Based on our understanding of the operations and structure of
Apple’s content businesses, we have no basis for disagreeing with Mr. Andeer’s
conclusion that the antitrust risks faced by iTunes, the App Store, and the
Productivity Engineers significantly overlap, although it would have been
helpful for that conclusion, which at a minimum was at odds with Apple’s initial
representations regarding the tailoring of training, to have been shared at some
point before the end of August.
We believe that the training sessions for iTunes, the App Store, and the
Productivity Group by and large contained adequate coverage of general
antitrust concepts179 but lacked adequate application to the specific activities and
risky scenarios that employees in these groups are likely to face. Although we
agree that distinctions between the sessions for content business employees are
not necessarily appropriate, we do see a need for more specific tailoring of these
sessions to the day-to-day experiences of specific groups of employees. In other
words, we recommend that the live training sessions for all of the content
businesses contain more examples and discussion that relate to the specific
activities and antitrust risks of the content businesses, including specific
examples that may have arisen within the content businesses, addressed either to
the embedded lawyers or to members of the CLPG. We make this
recommendation in light of many employees’ inability to identify the specific
relevance of the training sessions they attended, even if they appreciated the
substance of the training as a general matter. Not every aspect of the training
will apply equally to every employee in the content businesses, but employees
must understand the relevance of the training as it applies to Apple generally,
and more specifically to their own work, and to be able to identify potentially
risky scenarios within their business units.
As mentioned above, the Executive Team live training session David Boies
provided was different than the sessions we observed for the content businesses.
The training session adequately covered the antitrust concerns that are most
relevant to senior executives, and provided a high-level overview of a broad set
of general antitrust issues that appropriately matched the audience. Mr. Boies
also provided a summary of the Final Judgment and its requirements.
Like the sessions for iTunes, the App Store, and the Productivity Group,
we recommend that future sessions for the Executive Team contain examples
that are more specific to Apple and to the businesses for which the members of
the Executive Team are responsible. Examples that relate specifically to Apple’s
businesses will help make more concrete the antitrust concepts as they apply to
Apple and its businesses, and also will help executives anticipate and respond
A full description of the content covered in the non-executive live antitrust sessions
can be found at Section VIII.E.1(a).
when potential issues arise. We base our recommendation on our own
observations of the training session, as well as on a specific request from a
member of the Executive Team, who said that providing examples that were
“closer to home” would improve the training.
We also recommend that Apple make constructive use of its own past
encounters with alleged antitrust violations, using them as “real-life” 180 examples
for both executive and non-executive training sessions. Understanding that the
company will not always agree with the allegations that formed the basis of
settlements or findings of liability, we believe the underlying facts that give rise
to the allegations can nonetheless serve as important tools for educating
employees and executives. At least one Executive Team member noted that the
ebooks Litigation and the recent poaching case involving Apple could be helpful
examples from which to draw lessons. In addition to the more generic case
studies invoked in the training sessions, we recommend that the trainers
acknowledge, dissect, and discuss past cases in which Apple was involved. If
necessary, that can be done without making any concessions on fault or liability.
We understand from Apple that additional training sessions have been, or
will be, scheduled for other employee groups at the company. For example, Mr.
Andeer told us that he conducted a training session for the direct reports to Luca
Maestri, Apple’s Chief Financial Officer. We understand that Mr. Maestri invited
Mr. Andeer to conduct the training at least in part as a result of Mr. Maestri’s
interview with the Monitor. Mr. Andeer told us that this training session was
tailored to the activities of, and the potential antitrust risks faced by, Mr.
Maestri’s organization and was therefore substantially different than the training
sessions given to the content businesses. Apple has offered to provide the
materials from this session, but as of the date of this Report, we have not
received them. These materials will help us evaluate how the training session
was tailored to the antitrust risks faced by Mr. Maestri’s organization.
In addition, in the weeks leading up to the issuance of this report, Apple
held two makeup sessions for the remaining employees required to receive
annual antitrust training under the Final Judgment. Regrettably, we were not
provided an opportunity to monitor these sessions, either in-person or through
Kyle Andeer stated that he uses “real-life” examples to make the training more
Interaction during Training Sessions
With the exception of the Executive Team training session,181 we observed
a low level of interaction between the trainer and audience during the training
sessions, despite having been told repeatedly that the sessions that took place
before videotaping began were lively and interactive. During some sessions, we
observed no interaction at all. We understand Apple’s position to be that the
presence of the Monitor at the live sessions caused the lack of interaction.
Although we cannot discount the possibility that the Monitor’s presence could
create some apprehension among audience members, we are not persuaded that
the Monitor’s presence was the sole or even the main cause for the passivity of
the personnel attending these training sessions. It is just as likely that the lack of
substantial interaction resulted from the relatively low degree of tailoring of the
nonexecutive training sessions to the day-to-day activities of trainees. We
believe that, if the training were more closely tailored to specific situations that
might arise in the employees’ daily work, the employees would be more likely to
That point aside, for multiple reasons, we are skeptical of Apple’s claim
that our presence at the training sessions decreased employee participation.
First, the presence of members of the monitoring team was not always directly
correlated with whether or not the audience engaged with the trainer. For
example, although the Monitor attended the June 23 training for the Productivity
Group, we observed some engagement between the trainer and audience.
However, although no one from the monitoring team attended the July 23
session for iTunes personnel, we observed no interaction between the trainer and
the audience when we reviewed the video recording.182
Second, we believe that any impact on interactivity from the Monitor’s
presence at the training sessions could be effectively remedied by providing
appropriate guidance to the training session audience. Although Apple did not
allow us to be present for the introductory comments regarding the Monitor’s
presence at the training, or include the introduction as part of the recorded
sessions, we subsequently heard from Apple that its representatives advised the
audience, out of the presence of the member of the monitoring team, that they
disagreed with the decision to allow the monitoring team to attend the session.
181 The Executive Team training session was relatively interactive. Several Executive
Team members asked questions and commented throughout the training session.
In addition, having cameras present to create a video recording of the training session
did not seem to affect the level of interactivity at training sessions. The audience at the June 10
training session for iTunes engaged with the trainer and the Executive Team asked several
questions, despite a video camera rolling in both sessions.
That, together with the way the member of the monitoring team was brought in
to the classroom separately, after everyone else was seated, contributed to the
suggestion of an unwanted alien presence.183
Rather than turn the Monitor’s presence into a cause of fear and suspicion,
which may have had a chilling effect on the session, an appropriate instruction to
be given by the trainer at the beginning of the session, in the presence of the
monitoring team representative, would have been as follows:
As you probably know, the Court appointed an External
Compliance Monitor in the ebooks case after it found that the
company had violated the antitrust laws. The Monitor’s
responsibility is to assess and evaluate the company’s antitrust
compliance program, including all aspects of its antitrust training
program. That includes this kind of live antitrust training being
provided to you today.
The monitor [or a member of his team] is here today and will be
sitting in on the training session. He is here to listen, not to
participate – and he is certainly not here to grade or evaluate you.
His presence should not affect the discussion, and there really is
only one way that things should be a little different than if he were
not here at all. And that is, if you have a question on a specific
issue you are currently facing, we have an understanding with the
Monitor that he should not be present to hear that type of question
and answer. If you have that type of question, save it until the end
of the session, when we will ask him to step out of the room so I
can answer any such questions. Other questions that are about
general principles of antitrust and competition law, and how they
may apply to your business, can and should be covered in the
training session with the Monitor present. And we genuinely
encourage you to ask questions, both about general principles
during the session, and about specific pending issues that you save
until the end.
This treatment of the Monitor’s presence at the training session was certainly
inconsistent with the spirit of the agreement the Monitor had made with Mr. Sewell. Mr. Sewell
told the Monitor in advance of the recorded training sessions that “Apple [would] provide a brief
instruction at the beginning of any session attended by a member of [the monitoring] team
informing our employees of the presence of an external monitor, and cautioning them regarding
questions that would reveal trade secrets or solicit advice of counsel for active matters.” He at no
time suggested that members of his legal team would say they were opposed to the monitoring
team’s presence, or that they would handle the presence of its members in such a hostile,
adversarial fashion. In response to the draft report, Apple said it disagrees with this assessment
and “believes that it in no way demeaned the monitor.”
We hope that the presence of monitoring team members at future training
sessions will be handled in a way that encourages interaction with the trainer
during the session.
The training sessions we monitored were held in auditorium-style rooms.
The trainer stood at a podium at the center of the stage, and the training
presentation was projected on a large, overhead screen. In our discussions with
him in August, Mr. Andeer reflected on the setting of the training sessions as an
area for potential improvement. He said that he thought the sessions would
encourage more interaction if they were held in a more intimate, ordinary
meeting setting—such as a conference room—rather than the auditorium-style
setting, which gives the feel of a classroom. We agree with Mr. Andeer that
setting matters when it comes to encouraging interaction, and we recommend
that Apple find a more informal setting that encourages greater interaction for
future live training sessions.
In addition, we understand from Apple that employees located outside of
the Santa Clara Valley who were identified to receive live training generally did
not attend the session in person. Instead, they were permitted to stream a video
of the session. Apple told us that employees that attended the training remotely
were required to send Ms. Said screenshots to verify attendance.
While we understand Apple’s desire to include geographically distant
employees in live training sessions, allowing remote attendance defeats the
purpose of the live sessions. First, although screenshots verify that an employee
at least began the training session, Ms. Said has no way to confirm that an
employee viewed some or all of the session. Employees could easily continue to
work, take calls, or leave the room while the session is streaming in the
background. This concern does not exist when personnel attend the training in
person, in part because Ms. Said and others monitor the session to ensure no
audience member is using their smartphone or other devices of any kind during
a session. Our live monitoring of two training sessions confirmed that the
participants were not using computers or smartphones during the training
sessions and appeared to be paying attention. Second, Ms. Said has no way of
monitoring whether remote participants commit their full attention to the
training session. Third, we know of no way that remote participants are able to
ask questions during the session.184
In response to the draft report, Apple has stated it is willing to explore the use of
technology to make that possible.
We agree that remote participation is better than no training at all, but it is
not equivalent to physical attendance. Thirteen people participated remotely in
the June 10 and July 23 sessions. We do not have sufficient information about
their specific roles to evaluate whether it was appropriate to permit them to do
so. If these people hold positions with a moderate or high level of antitrust risk,
then Apple should make accommodations to train them in person. However, if
Apple determined that these employees present little or no exposure to antitrust
risk, remote attendance would pose less of an issue.
We recommend that Apple develop and provide live antitrust training
sessions for other business groups. In the First Report we identified the
Marketing and Sales organizations as important groups to target for antitrust
training, and we continue to believe, based on the information we have obtained
during this reporting period, that both groups merit live antitrust training.185 In
addition, personnel involved in certain procurement functions, at a minimum,
should also receive live antitrust training. Depending on the results of Apple’s
risk assessment efforts, other groups of employees, as discussed in Section
IX.D.8(b), may also benefit from live or online training. As we obtain more
information from Apple, we may determine that other groups of personnel
should receive antitrust training.
We also recommend that Apple provide a specialized antitrust training
session for Apple legal personnel. Since the Monitor’s appointment in October
2013, Apple has emphasized the important role played by legal personnel
embedded into each of the businesses.186 A significant number of interviewees
told us that they consult with their business group’s assigned lawyer very
frequently and consider that lawyer to be their first resource when they
encounter a legal question, including antitrust legal questions. Our interviews
with legal personnel that support the businesses also made clear that business
lawyers have intimate knowledge of the activities of their respective businesses.
Against this background, we believe that the business-embedded legal personnel
must be attuned to the first signs of a potential antitrust issue. Although we do
not believe that a fundamental antitrust course like the one required for Apple
business personnel is necessarily appropriate for Apple’s legal team, a
specifically tailored program for lawyers who support the Apple businesses
185 We understand that some employees that ultimately report to Phil Schiller, Senior Vice
President for Worldwide Marketing, have received live antitrust training. However, we have no
way to confirm that all relevant Marketing employees have been trained. Based on the
Marketing employees listed on the Live Training List provided by Apple, we have no reason to
believe that the entire Marketing group has received live training.
We discuss the structure for legal support of the business units in Section VII.A.1.
would empower those lawyers in their role as the equivalent of first responders
for antitrust compliance.
Online Training – Further Assessment and
Apple’s online antitrust course, introduced as part of the June 30 Rollout,
meets the need for broad-based antitrust training that can be offered to large
numbers of Apple employees. Apple intended the online antitrust compliance
course not only to provide additional education for those identified for live
antitrust training, but also to provide a high-level and general introduction to
antitrust compliance to employees who present a lower level of antitrust risk
exposure. The course adequately addresses antitrust risks at a high level and
provides a means to instruct and test user comprehension. Details regarding the
course content and navigation are discussed in greater detail in Section VIII.B.
We understand that identified employees will be required to undergo online
As of the date of this Report, 5,331 Apple employees have been assigned
the online training course, including employees in the United States and Canada
that work in Internet Software and Services, Direct Procurement (within
Operations), Sales, and Legal. Apple’s identification of these employee groups
for online antitrust training is reasonable and appropriate. We understand that
the completion rate for the online training course, as of the date of this Report, is
98 percent. We also understand that Apple continues to consider whether other
parts of the company, including Marketing, should be required to take the online
We have received some feedback from five Apple employees that have
taken the online training course since the June 30 Rollout. Most of the feedback
we have received has been very positive. We look forward to interviewing
additional Apple personnel in the coming months and obtaining their reactions
to the online training course.
Senior Commitment to Compliance
In our First Report, we emphasized the central role played by senior
company personnel in an effective compliance program, and specifically the
impact of their demonstrated commitment to compliance on a program’s success.
We reported on Apple’s senior leaders’ commitment to compliance in the context
of the company’s communications regarding the revised Antitrust Compliance
Program.187 However, we noted that a commitment to compliance from Apple’s
senior leadership must be demonstrated in ways that extend beyond email
communications and video excerpts. We noted that these types of
communications were positive signals of the importance attached to compliance
but, by themselves, did not support any conclusion about the commitment to
antitrust compliance of Apple’s senior executives.
We cannot stress enough the importance of a visible and continuing
commitment to compliance from Apple’s senior leadership. As emphasized in
the First Report, we believe that a culture of compliance starts with Apple’s
senior leadership, and that such a commitment is critical to Apple’s efforts to
revise and upgrade its Antitrust Compliance Program. This is a widely shared
belief in the compliance community,188 has been endorsed by this Court,189 and
187 As of the First Report, Apple had provided an introductory letter from Mr. Sewell to
the Antitrust and Competition Law Policy. Apple cited the letter as an example of the
commitment of Apple’s senior executives to antitrust compliance. Apple also provided an email
from Mr. Sewell, which was sent to all employees in connection with the Business Conduct
Policy. The email from Mr. Sewell urged employees to “set aside a little time to review Apple’s
Business Conduct Policy” and announced a new version of the Policy available to employees in
“iBooks format.” Apple has also provided a brief (less than a minute) video presentation
featuring Mr. Cook that focuses generally on compliance (not specifically on antitrust
Wayne Brody, a member of LRN’s Ethics and Compliance Advisory Services Practice,
one of Apple’s compliance partners and a contributor to its Antitrust Compliance Program,
recently addressed the importance of senior management’s commitment to compliance. The
following excerpt describes Mr. Brody’s reflections on this topic:
Brody stressed that executive tone-setting should not be limited to occasional memos or
scripted speeches. Programs excel when CEOs drive culture . . . ‘Not surprisingly, there
are only about 20 percent of companies where that is true, but they have hugely more
effective compliance programs on average than the 80 percent where that isn’t true.’ …
Important differentiators, Brody says, are when top-level executives address ethics and
compliance issues in staff meetings and operational reviews and are visibly among the
first to complete training. Sitting front–and-center at workshops is just one way to send
the message that ‘this matters to me, so it should matter to you.’
Joe Mont, Identifying Top Indicators of an Effective Ethics and Compliance Program, Compliance Week
(May 2014), available at http://www.complianceweek.com/news/news-bulletin/identifying-topindicators-of-an-effective-ethics-and-compliance-program-0.
In addition, the U.S. Sentencing Guidelines contain a provision requiring that “high-level
personnel of the organization … ensure that the organization has an effective compliance and
ethics program, as described in this guideline.” U.S. Sentencing Commission, Organizational
Compliance Guidelines § 8B2.1(b)(2)(B), available at http://www.ussc.gov/guidelinesmanual/2011/2011-8b21. The Guidelines also require “high-level personnel and substantial
authority personnel of the organization [to] be knowledgeable about the content and operation of
the compliance and ethics program, [and to] perform their assigned duties consistent with the
exercise of due diligence, and [to] promote an organizational culture that encourages ethical
conduct and a commitment to compliance with the law.” Id. cmt. § 8B2.1(b)(2).
has been recently highlighted by the Department of Justice’s Antitrust Division.
As recently as September 10, 2014, Assistant Attorney General Bill Baer
Companies should be fostering a corporate culture that encourages ethical
conduct and a commitment to compliance with the law. As Deputy
Attorney General Cole has said, corporate compliance starts at the top.
The board of directors and senior officers must set the tone for compliance
to ensure that the company’s entire managerial workforce not only
understands the compliance program but also has the incentive to actively
participate in its enforcement.190
Likewise, Deputy Assistant Attorney General Brent Snyder recently made
clear that the commitment made to compliance by a company’s senior leaders
must be “real.”191 If this commitment is lacking, then a company’s program is
truly just a “paper program,” and the other program components, no matter how
comprehensive, may be rendered meaningless.192 We share the view of the
Department of Justice and compliance experts regarding the important role that
senior executives and board members play in an effective compliance program.
What senior leaders say and do – and what they do not say and do – affects the
importance employees attach to the Antitrust Compliance Program and
ultimately may affect their actions in day-to-day operations.
Against this background, we have attempted to evaluate Apple’s
compliance culture and the specific contributions made by senior leaders to
create and promote a compliance culture. We have attempted to gather
information on the commitment to compliance primarily through interviews of
personnel of various levels of seniority. We asked Apple employees whether
they could recall any specific instances when a member of senior management
addressed the importance of compliance generally or did something specific that
reflected his or her commitment to compliance. Many people we interviewed
strongly endorsed the culture at Apple, as well as the company’s emphasis on
“doing the right thing,” but we were struck by the inability of most employees
189 At the August 27 Hearing, the Court explained that the conduct underlying the ebooks
Litigation “demonstrated a blatant and aggressive disregard at Apple for the requirements of the
law,” including among “Apple lawyers and its highest-level executives.” 8/27/13 Tr. 17. This
Court also found that “Apple executives used their considerable skills to orchestrate a pricefixing scheme.” Id. The Court stated that Apple needed to make a “sincere commitment to
reform its culture . . . to one that includes a commitment to understand and abide by the
requirements of the law.” Id.
Baer, supra note 167.
Snyder, supra note 133.
we interviewed to point to specific acts or statements that went beyond the
general concept of “doing the right thing,” specific instances when senior
leadership in the company explicitly addressed compliance issues, or specific
events that supported the view that senior management is strongly committed to
compliance.193 Undeniably, “doing the right thing” is an important and
appropriate starting point for creating a culture of compliance in the company,
but we believe Apple’s senior management can and should do more to reinforce
the importance of a culture of compliance by devoting more time and attention
to compliance matters and addressing compliance issues more directly and more
In addition, we also explored the ability of senior and mid-level managers
to foster a culture of antitrust compliance and to enhance awareness of and
respect for the Antitrust Compliance Program among their staff members.
Needless to say, senior and mid-level managers also can have a powerful impact
on maintaining antitrust compliance throughout the company. They have a
more intimate knowledge of specific operations and have the ability to make an
impact on a day-to-day basis.
We report below on our views regarding the commitment to antitrust
compliance among members of Apple’s Executive Team and several senior and
mid-level managers. We have addressed the need for an equal commitment by
Apple’s Board of Directors in Section IX.G.3 regarding Board oversight.
The Executive Team and Compliance
Through our interviews of various Executive Team members, we have
gained insight into the function of the Executive Team and its involvement in
compliance. The Executive Team holds regular meetings every Monday, which
focus on discussions of products, investment, milestones, and updates from
Apple’s various business units. Issues to be discussed at the meeting are
outlined in a formal agenda that Mr. Cook circulates to the Executive Team on
Sunday evenings in advance of the Monday weekly meeting. From time to time,
In response to the draft report, Apple took strong exception to this assessment. Apple
requested that we modify this passage to read as follows: “Many people we interviewed strongly
endorsed the culture at Apple, as well as the company’s emphasis on ‘doing the right thing,’ and
gave specific examples of engagement by members of the Executive Team, including Mr. Cook,
on matters of compliance and ethics. For example, videos of Mr. Cook addressing compliance,
communications from Mr. Sewell on ethics and compliance during all-hands meetings, and Mr.
Cook’s direct involvement on issues regarding Chinese workers were all mentioned in interviews
we conducted.” In the interests of fairness, we think it is appropriate to present Apple’s view,
but we do not think it is an accurate account of the information we obtained during our
interviews. We stand by our assessment.
the Executive Team discusses pending legal issues, but our understanding is that
legal issues are presented in the form of status updates on pending litigation.
Based on the information available to us, our view is that the Executive
Team, as a unit, traditionally has had little direct involvement in compliance
issues or oversight. We are unable to confirm the frequency with which the
Executive Team addresses compliance issues, and specifically antitrust
compliance issues. We heard a range of views from Executive Team members
about the frequency of compliance discussions at weekly Executive Team
meetings – some members told us that compliance issues are not the focus of
Executive Team meetings, while at least one other estimated that compliance
discussions come up once every other meeting. We requested that Apple
provide us with agendas created since the start of the ebooks Litigation that
referred to or reflected discussion of antitrust compliance, including but not
limited to antitrust policies, procedures, and training, or other compliance issues.
Apple was unwilling to provide these agendas, even in redacted form.194
Our view is that the members of the Executive Team rarely explicitly and
specifically discuss the importance of compliance with Apple employees. It
seems to be assumed that Apple employees understand the principle that it is
important to behave ethically and lawfully, but we saw little evidence of its
reinforcement by senior leaders. Apple told us that the Executive Team has sent
only two communications regarding antitrust compliance to Apple employees
during this reporting period. These are (i) the letter from Bruce Sewell at the
beginning of the Antitrust and Competition Law Policy (sent on June 30, 2014),
and (ii) an email Eddy Cue sent to employees in his organization who were
identified for online training announcing the mandatory course. During the first
reporting period, Apple also provided us with a short (less than one minute)
video presentation featuring Mr. Cook that was distributed to employees in
November 2013, asking them to review the company’s Business Conduct Policy.
The video focused generally on compliance (not specifically on antitrust
compliance). Although these communications were necessary and appropriate,
we would have expected more from Apple’s Executive Team since the Final
Judgment – more communications from other members of the Executive Team,
and more communications outside of the Policy and training announcements.
We believe the Executive Team has an important role to play in shaping
Apple’s Antitrust Compliance Program and facilitating company compliance
with the antitrust laws. Based on our work to date, the Executive Team appears
to have been relatively detached from compliance issues, and its members, to our
In the weeks leading up to the issuance of this Report, Apple communicated
willingness to meet and confer on the Monitor’s request for Executive Team agendas. As of the
date of this Report, no such meet-and-confer has occurred.
knowledge, have made little effort in the past to specifically emphasize the
importance of compliance issues in their communications with Apple personnel.
However, we have been encouraged to hear members of the Executive Team,
following the June 30 Rollout, talk about ways to heighten awareness of their
personnel to issues surrounding antitrust compliance. Although day-to-day
oversight and maintenance of the Antitrust Compliance Program has been
entrusted to Deena Said, the Antitrust Compliance Officer, the Executive Team
has an obligation to actively monitor the program and to use its members’
positions to communicate about compliance in general and antitrust compliance
in particular. The Executive Team must set an example for employees to follow
and must also communicate important compliance messages that convey
information about conduct expectations, incentives, accountability, and
consequences. We look forward to learning about Apple’s plans to strengthen
the role played by the Executive Team in antitrust compliance at the company.
We note that members of Apple’s Executive Team—and in particular Mr.
Sewell—have made strong verbal commitments to support and promote the
Antitrust Compliance Program. As early as the first month of the monitorship,
Mr. Sewell told us that he looked forward to helping to ensure that Apple’s
antitrust policies and training programs were comprehensive and effective and
that he intended to participate actively in Apple’s efforts to comply with the
Final Judgment. He has reiterated that intention in all of our subsequent
interactions with him. Given Mr. Sewell’s eagerness to support Apple’s antitrust
compliance efforts, we are hopeful that Apple’s senior leaders will begin to more
effectively demonstrate to their employees that antitrust compliance is
Managers and Compliance
At the beginning of the Executive Team antitrust live training session
provided on June 30, 2014, Mr. Sewell encouraged the Executive Team members
to “waterfall” information about the revised Antitrust Compliance Program to
their staff and to the rest of the company. We were pleased to hear this support
and encouragement for dissemination of the Program coming from senior
We asked Executive Team members about their plans to satisfy
Mr. Sewell’s request to waterfall information about the Antitrust Compliance
Program throughout their respective organizations. While some Executive Team
members told us that they had not yet developed plans to carry out Mr. Sewell’s
request, other Executive Team members had either already taken action to fulfill
the request, or had planned activities in the near future to do so. Mr. Riccio told
us that he had scheduled Mr. Moyer to come to his staff meeting in October or
November 2014 to educate his direct reports about antitrust. He said that he also
planned to invite the appropriate personnel (including Mr. Andeer or Mr.
Moyer) to speak about antitrust at the next quarterly Executive Speakers Series195
that he holds for his organization. Mr. Federighi told us about his plans to share
relevant antitrust concepts at staff meetings and to request that his reports share
the message with their respective teams. Other senior managers also told us of
their requests that Mr. Andeer provide training to their direct reports and teams.
We heard from a number of Apple personnel regarding the hands-on
management style of Apple’s senior and mid-level managers. Mr. Riccio
explained that Apple’s culture requires managers to balance strategic planning
with hands-on management, which includes frequent meetings with both direct
reports and indirect staff. Mr. Federighi described weekly one-on-one meetings
with each of his individual reports, as well as weekly full staff meetings.196 Many
other senior executives and mid-level managers described frequent meetings
with direct reports, and even the staff of direct reports.
The hands-on management style described by Apple’s senior and midlevel managers provides opportunities to foster a culture of antitrust compliance
at high-levels in the management chain. Managers can use staff meetings and
other forums197 to convey information about the new Antitrust Compliance
Program, Apple’s commitment to fostering a culture of compliance, and their
own expectations for strict compliance with Apple’s policies and procedures
within their organization. In the coming months, we hope to learn more about
the plans of other senior and mid-level managers to accept Mr. Sewell’s
challenge and to contribute to an increased sensitivity to antitrust issues, as well
as a broader awareness of the Antitrust Compliance Program.
Oversight of the Antitrust Compliance Program
As noted in our First Report, oversight of the Antitrust Compliance
Program is shared among three levels of authority. First, Ms. Said, with overall
compliance support from Mr. Moyer, is responsible for the day-to-day operations
of the program and is directly accountable to the Board of Directors, through the
Mr. Riccio explained that he holds a quarterly Executive Speakers Series for the
Hardware Engineering business, during which executives from throughout the company speak
about their business lines.
196 We were pleased to hear that Mr. Federighi also made use of “bad” compliance
examples in staff meetings as teaching models.
As discussed above, while we have asked to monitor New Employee Orientation and
Apple town hall meetings to observe how senior leaders communicate the compliance message to
employees, Apple is unwilling to provide us access to these events because it claims the NEO
sessions relate only tangentially to business conduct issues (not antitrust specifically), while it
represents that the town hall meetings do not touch on compliance or ethics issues at all.
Audit and Finance Committee. Second, the CLPG is responsible for reviewing
and advising on business issues that have antitrust implications, as well as the
substantive content of Apple’s written antitrust policies and training program.
Third, the Audit and Finance Committee is responsible for ultimate oversight of
the Antitrust Compliance Program, with the Risk Oversight Committee
providing information and analysis in a regular and systematic manner.
Role of the Antitrust Compliance Officer
As discussed in greater detail in Section VII.B.2, the Final Judgment
requires Ms. Said to fulfill important and specific responsibilities. She is also
charged with day-to-day operational responsibility for the Antitrust Compliance
Program at Apple. Ms. Said must be able to manage her obligations with
independence and authority and must have access to appropriate financial and
human resources. In addition, Ms. Said must have full access and a complete
understanding of the company’s business and the markets in which it operates.
Although we believe Ms. Said has access to the financial and human
resources needed to fulfill her duties, her role is different and more limited than
provided for in the Final Judgment. Ms. Said’s role has become that of an
antitrust compliance program manager, rather than the type of Antitrust
Compliance Officer described in Section V, responsible for “supervising Apple’s
antitrust compliance efforts.” Ms. Said coordinates with outside vendors
regarding training, the ebook, and other technical projects that have been
completed; manages training attendance and maintains related records; collects
information related to the communications log and antitrust violation reporting
requirements under the Final Judgment; and periodically provides status
updates to the Audit and Finance Committee. Not insignificantly, she has been
introduced to Apple personnel as a key participant in Apple’s Antitrust
However, we have seen no evidence that Ms. Said is “supervising Apple’s
antitrust compliance efforts” in any meaningful sense of that phrase. She has not
been vested with substantial authority or decision-making ability. She is not
directing Apple’s Antitrust Compliance Program or designing key elements. She
has also not been “disclosed” on confidential Apple products and offerings.
While we understand that Ms. Said comes with applicable compliance
experience from her previous position at Hitachi Data Systems, we have not
received any information from Apple to conclude that Ms. Said is called upon to
provide substantive antitrust input into the Program. We thus have concerns
about the extent to which she is fulfilling her responsibilities under the Final
Judgment, beyond fulfilling certain important administrative tasks.
While the role that we have observed does not match our original
expectations, or the responsibilities set forth in Section V of the Final Judgment,
we will reserve judgment on whether Ms. Said’s more limited responsibilities
make sense within the context of Apple’s overall Antitrust Compliance
Program.198 We plan to monitor the development of Ms. Said’s role as it relates
to the Antitrust Compliance Program and to recommend enhancements to Apple
Role of the CLPG
At the time of the First Report, we had little information regarding the
specific role played by the CLPG in Apple’s Antitrust Compliance Program. We
have learned substantially more since the First Report. This information is
discussed in greater detail in Section VII.A.2.
While the CLPG appears to be playing an increasingly significant role
within the company, business people still tend to initially direct their antitrust
questions and concerns to their primary legal contact. While some questions
come directly from the businesses to the CLPG, most are elevated through the
legal personnel that support the businesses. The CLPG’s most direct contact
with the businesses tends to be at higher levels of the company, on significant
transactions and issues. We understand that contact between lawyers embedded
in business units and the CLPG is frequent, with the CLPG playing the role of
expert substantive advisors on antitrust issues. We believe this role for the CPLG
is consistent with Apple’s business structure and is appropriate. It is unrealistic
to expect that the CLPG be a first point of contact for every antitrust question
from the businesses.
We view the CLPG as a specialized resource that plays an important role
in Apple’s Antitrust Compliance Program. Clearly, the group plays a key role
with respect to specialized live training sessions. In addition, the group will
continue to advise on antitrust questions as they arise within the businesses. The
CLPG members are also in the best position to conduct the company’s antitrust
198 We understand that, in October, Ms. Said will take a course entitled “Antitrust
Counseling and Compliance.” The course targets in-house lawyers who want a “refresher on
antitrust principles, would like to sharpen their skills, and want to learn about important recent
developments and trends in antitrust law.” We think this course is a good fit for Ms. Said and
commend her for taking it.
In response to the draft report, Apple contended that Ms. Said provides substantive
antitrust input and performs all the responsibilities called for in the Final Judgment. We note
that in his introduction of Ms. Said to the Board at its August 27 antitrust training session, Mr.
Sewell described her as the company’s “antitrust compliance manager,” which we believe is
congruent with our description above.
Recommendations from the First Report
In the First Report we stressed the importance of meaningful Board
oversight of the Antitrust Compliance Program. Among other factors, our
comments were guided by the U.S. Sentencing Guidelines, which require
personnel with operational responsibility for the compliance program to report
directly to the Board, or an appropriate committee of the Board.200 In addition,
the Guidelines state,
The organization's governing authority shall be knowledgeable about the
content and operation of the compliance and ethics program and shall
exercise reasonable oversight with respect to the implementation and
effectiveness of the compliance and ethics program.201
In addition to the valuable oversight role a company’s Board plays with
respect to compliance risks, the involvement of the Board is especially critical for
managing antitrust risks because senior managers are frequently the perpetrators
of antitrust violations, and the Board can therefore serve as an additional level of
protection for the company.
“Individual(s) with operational responsibility shall report periodically to high-level
personnel and, as appropriate, to the governing authority, or an appropriate subgroup of the
governing authority.” U.S. Sentencing Commission, Organizational Compliance Guidelines
201 Id. § 8B2.1.(b)(2)(A). The importance of board oversight of compliance is well
recognized across a range of contexts and among members of the compliance community. See,
e.g., Zachary W. Carter & E. Scott Gilbert, Board of Directors’ Oversight of Compliance: The
Compliance Committee Option, Corporate Compliance Practice Guide: The Next Generation of
Compliance (MB) ch. 46 (discussing various sources of directors’ responsibilities for compliance,
such as the Sentencing Guidelines and case law, including that based on the principles of In re
Caremark International Inc. Derivative Litigation, 698 A.2d 959, 970 (Del. Ch. 1996)); Michael D.
Greenberg, RAND Corp., Conference Proceedings: Directors as Guardians of Compliance and
Ethics Within the Corporate Citadel (2010), available at
(describing approaches to Board oversight, as well as potential sources of that responsibility);
Joseph E. Murphy & Daniel R. Roach, Compliance Officer on Board: What Your Audit Committee Is
Missing, Ethikos, Nov./Dec. 2006 (discussing the importance of Board oversight and common
issues directors confront in overseeing compliance); Brent Snyder, supra note 133 (“For senior
management, supporting compliance efforts means being fully knowledgeable about those
efforts, providing the necessary resources, and assigning the right people to oversee them. This
includes making sure the compliance program is implemented successfully. This means not just
receiving regular reports but actively monitoring the program. Executives and board members
cannot simply go through the motions and hope that the company’s compliance program
In our First Report, we highlighted the need for a strong and direct
reporting relationship between the Antitrust Compliance Officer and the Audit
and Finance Committee. This is a critical factor in achieving a successful
Antitrust Compliance Program. We noted that the reporting relationship
between the Antitrust Compliance Officer and the Audit and Finance Committee
must be genuine and that Ms. Said’s quarterly reports to the Audit and Finance
Committee should be more than perfunctory. The First Report emphasized that
Ms. Said should include detail and substance in her reports to the AFC, and that
the AFC should have an opportunity to question Ms. Said on anything and
everything relating to her role as the Antitrust Compliance Officer. Ms. Said’s
ability to perform her role, and her ability to present candid reports to the Audit
and Finance Committee, can be ensured only through support and resources
provided by the Committee.
Finally, the First Report underscored our focus on the provision of
adequate support and resources to Ms. Said specifically by Dr. Sugar, the
Chairman of the Committee,202 as she works to implement enhancements to
Apple’s Antitrust Compliance Program. We learned that Ms. Said has been
“authorized to contact the [Audit and Finance Committee] directly with any
questions or issues.”203 However, we concluded that authorization alone is
hardly a guarantee of a direct and meaningful relationship between Ms. Said and
Dr. Sugar and his Audit and Finance Committee colleagues. We specifically
underscored the importance we attached to the relationship between Dr. Sugar
and Ms. Said.
We expected Dr. Sugar and other members of the Audit and Finance
Committee to work directly with Ms. Said to fulfill her responsibilities to the
Board and under the Final Judgment, including through regular and substantive
meetings. We recommended that Ms. Said and Dr. Sugar participate in a regular
monthly call or meeting regarding Ms. Said’s work, as well as the status of the
activities under the Final Judgment and the Antitrust Compliance Program
generally.204 We understood from information provided by Apple that both Mr.
Dr. Sugar has substantial compliance expertise and experience. In our December 5,
2013 interview of Dr. Sugar, he described to us his extensive compliance background in the
highly regulated defense industry. This background makes Dr. Sugar a particularly important
resource to Ms. Said. In response to our draft report, Apple noted that Dr. Sugar provided
assurances that Ms. Said would have any resources she needed, including the ability to speak
with him about antitrust compliance issues on a regular basis.
203 February 19, 2014 Memorandum to the Antitrust File from Thomas Moyer, Chief
We noted our expectation that Dr. Sugar be fully informed of the work being done on
the Antitrust Compliance Program and that he contribute his experience and feedback as Chair of
the Audit and Finance Committee.
Moyer and Mr. Keller, Vice President for Internal Audit, have regular interaction
with Dr. Sugar, and we therefore expected that the Antitrust Compliance Officer
would as well, especially because she reports directly to the Audit and Finance
Committee and is responsible for supervising Apple’s antitrust compliance
efforts under the Final Judgment.
Further Assessment and Recommendations
From the beginning of our work in October 2013, we have sought
information from Apple in an effort to determine the extent of Board
involvement and oversight over the Antitrust Compliance Program. We have
interviewed individuals on the compliance and legal teams, Dr. Sugar, and
former Director William Campbell about the role of the Audit and Finance
Committee generally with respect to compliance and specifically with respect to
antitrust compliance and the company’s obligations under the Final Judgment,
including the revised Antitrust Compliance Program. We have also met on
several occasions with Ms. Said to discuss her role as it has evolved since she was
hired in November 2013, her relationship with the Audit and Finance Committee
(and specifically Dr. Sugar), and her view of the resources she has been provided
to fulfill her obligations under the Final Judgment. Finally, we have requested
documents, including minutes and agendas, from the Audit and Finance
Committee, documents demonstrating communication between Ms. Said and the
Audit and Finance Committee or Board, and documentation of transmission of
the First Report to the Board, Executive Team, or other Apple personnel.
To date, we have not seen evidence that the Audit and Finance Committee
has taken an active oversight role in connection with the Antitrust Compliance
Program.205 Nor have we seen evidence that the results of the CLPG’s risk
assessment efforts have been presented to the Audit and Finance Committee.
Board oversight of the Antitrust Compliance Program is absolutely critical and,
based on our current knowledge, significantly absent. As the Board’s designated
committee for overseeing risk oversight, the Audit and Finance Committee
should take a more active role with respect to the Antitrust Compliance Program.
The Committee should be fully informed regarding high-risk areas, the
effectiveness of reporting mechanisms, protocols for detecting violations and
investigating complaints, and other important aspects of the Program. In
In response to the draft report, Apple requested that we add the following language as
our own: “We understand that Ms. Said and Mr. Moyer have made two detailed presentations to
the Committee; that Ms. Said and Dr. Sugar have had multiple substantive conversations
regarding the rollout of Apple’s revised antitrust training compliance program; and that Apple
has produced extensive agendas and minutes of the Committee relating to antitrust issues.” We
are unable to accommodate Apple’s request because we do not have such an understanding
based on the evidence that Apple has provided thus far. We look forward to obtaining further
information on these points in future discussions with Dr. Sugar, Mr. Moyer, and Ms. Said.
addition, the Audit and Finance Committee should review the effectiveness of
the Executive Team’s management of antitrust risk and its promotion of Apple’s
Antitrust Compliance Program.206 Finally, the Audit and Finance Committee
should actively participate in defining the reporting threshold for when the
Board should receive updates regarding the Antitrust Compliance Program and
potential antitrust risks.207
Despite our best efforts, we have learned very little about the Board’s
knowledge of the Antitrust Compliance Program. We understand that Ms. Said
has provided two written reports to the Audit and Finance Committee since the
First Report. The report she provided in May 2014 contained bullet points
summarizing the status of the Final Judgment communication certification
requirement and training, as well as a list of items planned for the revised
Antitrust Compliance Program to be released in June. We understand that Ms.
Said and Mr. Moyer met with the Audit and Finance Committee on August 26 to
provide an update on the June 30 Rollout, and that Ms. Said also met with Dr.
Sugar that same day. We have been advised that the Board received live
antitrust training on August 27.208
Because of our limited access to Board members, we have no information
about the Board’s view of the Antitrust Compliance Program or whether the
Board is aware of the Monitor’s assessment and recommendations from the First
Report. In response to our request for information about the distribution of our
First Report, Apple provided two entries in a privilege log with the description,
“Confidential Communication Reflecting Advice of Counsel re: ECM Report.”
No Board member was listed as a recipient, and the entry included no evidence
suggesting that the First Report was sent as an attachment. Our understanding
from Apple is that the First Report was never transmitted to the Board of
Directors, the Audit and Finance Committee, the Executive Team, or any Apple
“The Board believes that evaluating how the executive team manages the various risks
confronting the Company is one of its most important areas of oversight.” Apple’s Definitive
Proxy Statement (Jan. 10, 2014), available at
http://investor.apple.com/secfiling.cfm?filingid=1193125-14-8074&cik=320193. “Directors are
encouraged to talk directly with any officer or employee of the Corporation. Senior officers are
invited to attend Board meetings from time to time to provide additional insight into the items
being discussed.” Apple Inc., Corporate Governance Guidelines.
207 If the Board is to be appropriately informed regarding antitrust risk, the Audit and
Finance Committee should establish a threshold to determine the level of risks requiring
elevation to the full Board.
On September 23, 2014, Apple provided a redacted video recording of the Board live
antitrust training session, which took place on August 27. Because these materials were provided
late in our drafting of this Report, our evaluation and assessment of the training session based on
these materials is not included in this Report. We will provide our assessment of the session
based on the materials provided in our next report.
personnel. Given the Board’s oversight role, it is surprising and disappointing
that Apple did not provide its members with a copy of the Report as something
relevant to consider in the discharge of its oversight responsibilities.209 Although
the Audit and Finance Committee is the Board’s designated committee for risk
oversight, the full Board has a significant stake in the success or failure of
Apple’s Antitrust Compliance Program.
We do not have enough information to draw definitive conclusions about
the Board’s oversight of the Antitrust Compliance Program and Ms. Said’s
reporting relationship with the Board. Because the information made available
to us has been limited, as has our access to Board members, we are unable to
determine whether Ms. Said’s updates to the Audit and Finance Committee have
been “more than perfunctory,” as we recommended in the First Report. For the
same reason, we cannot assess the level of interest and engagement by the Audit
and Finance Committee. Whether the Audit and Finance Committee is
“knowledgeable about the content and operation” of the Antitrust Compliance
Program remains to be seen.
Ms. Said informed us multiple times that she believes she has been
provided the resources she needs to succeed in her role, and she has not been
able to identify additional resources that could help her to improve the Program.
Although we accept Ms. Said’s representations regarding Apple’s allocation of
financial resources and support personnel, we define “resources” broadly to
include engagement with senior managers and the Board. We have not yet seen
substantial engagement. As a result, we recommend, as we did in our First
Report, that Ms. Said and Dr. Sugar have more regular, meaningful discussions
regarding the development, implementation, and effectiveness of Apple’s
Antitrust Compliance Program. It is not enough, in our opinion, for Ms. Said to
speak once per quarter with Dr. Sugar. Ms. Said’s communications with Dr.
Sugar should be at least as frequent as Mr. Moyer’s communications with Dr.
Sugar, and they should result in a closer connection between the Audit and
Finance Committee (representing the full Board) and the Antitrust Compliance
In addition to our recommendation for strong and active Board oversight,
we extend our recommendation regarding increased senior commitment to
compliance to include the Board of Directors. The Board has an important role
to play in overseeing and supporting a strong culture of compliance. We have
not yet seen evidence of such oversight.
In response to our draft report, Apple contended that “it was not required to [circulate
a copy of the First Report], and there is no dispute that all relevant members of Apple’s in-house
and outside legal teams reviewed and substantially incorporated the recommendations contained
in that [R]eport.” This completely misses the point.
As this Report makes clear, Apple has made significant progress during
this reporting period in revising its antitrust compliance policies, procedures,
and training. Among other things, it developed an improved Antitrust and
Competition Law Policy, created a new online training course that has been
taken by close to 5,000 Apple employees, and provided live training to groups of
personnel engaged in activities that create potential antitrust risk, including
personnel in Apple’s content businesses, and its senior Executive Team. Just
before the end of this reporting period, it also provided live training to its Board
Because Apple’s cooperation improved during this period, we were in a
better position to assess aspects of the company’s program than during the First
Reporting period when our progress was impeded. Unfortunately, we continue
to encounter needless delays in access to documents and key witnesses, and have
had reasonable requests rejected or ignored by Apple. Even so, it is undeniable
that our relationship has improved and we have been able to take meaningful
steps forward in carrying out our assignment. Our assessment is that the
company has made significant substantive progress toward enhancing its
Antitrust Compliance Program, especially with respect to its policies and
However, our review has also revealed weaknesses and deficiencies that
we have described in this Report, especially with respect to the procedures
necessary to implement Apple’s Program. We have provided numerous
recommendations that, if implemented, would help address those weaknesses
and deficiencies. In addition, there remain significant gaps in our knowledge:
we have little information about Apple’s Marketing business, which is a source
of potential antitrust risk; we have only just begun to receive information about
Apple’s antitrust risk assessment process; and we have questions about the
extent to which the company’s Board is discharging its compliance oversight
In short, our work confirms that Apple has made significant progress
towards the goal of developing and implementing an Antitrust Compliance
Program that is comprehensive and effective. It is undeniably an improvement
on what existed before the Final Judgment and reflects the investment of
substantial time, effort, and resources. As suggested in this Report, much
progress has been made, but much remains to be done. We look forward to
working with Apple as it continues to advance, extend, and improve its Antitrust
The way we do business
The way we do business worldwide
Apple conducts business ethically, honestly, and in full
compliance with all laws and regulations. This applies to every
business decision in every area of the company worldwide.
Apple’s Principles of Business Conduct
Apple’s success is based on creating innovative, high-quality products and services and
on demonstrating integrity in every business interaction. Apple’s principles of business
conduct define the way we do business worldwide. These principles are:
• Honesty. Demonstrate honesty and high ethical standards in all business dealings.
• Respect. Treat customers, suppliers, employees, and others with respect and courtesy.
• Confidentiality. Protect the confidentiality of Apple’s information and the information
of our customers, suppliers, and employees.
• Compliance. Ensure that business decisions comply with all applicable laws
Apple’s Business Conduct Policy and principles apply to employees, independent
contractors, consultants, and others who do business with Apple. You are expected to:
• Follow the policy. Comply with Apple’s Business Conduct Policy, principles, and all
applicable legal requirements.
• Speak up. If you have knowledge of a possible violation of Apple’s Business
Conduct Policy or principles, other Apple policies, or legal or regulatory requirements,
you must notify either your manager (provided your manager is not involved
in the violation), Human Resources, Legal, Internal Audit, Finance, or the Business
• Use good judgment. Apply Apple’s principles of business conduct, review our
policies, review legal requirements, and then decide what to do.
• Ask questions. When in doubt about how to proceed, discuss it with your manager,
your Human Resources representative, or the Business Conduct Group. If you need
more support, contact the Business Conduct Helpline.
Failure to comply with the Apple’s Business Conduct Policy, or failure to report a
violation, may result in disciplinary action up to and including termination of
employment or the end of your working relationship with Apple.
Retaliation Is Not Tolerated
Apple will not retaliate—and will not tolerate retaliation—against any individual for
filing a good-faith complaint with management, HR, Legal, Internal Audit, Finance, or the
Business Conduct Helpline, or for participating in the investigation of any such complaint.
The way we do business worldwide
Conflicts of Interest
Outside Employment and Inventions
Buying and Selling Stock
Harassment and Discrimination
Confidential Employee Information
Public Speaking and Press Inquiries
Protecting Apple’s Assets and
Confidential Apple Information
The Apple Identity and Trademarks
Apple Inventions, Patents, and
Activities Related to Technical
Accuracy of Records and Reports
Establishing Bank Accounts
Loans, Advances, and Guarantees
Document Retention and Legal Hold
Responsibilities to Apple
Customer and Business Relationships
Customer and Third-Party Information
Obtaining and Using Business
Third-Party Intellectual Property
Giving and Receiving Business Gifts
Side Deals or Side Letters
Competition and Trade Practices
Open Source Software
Governments as Customers
Gifts to U.S. Officials
Gifts to Non-U.S. Officials
No Bribery or Corruption
Hiring Government Employees
Trade Restrictions and Export Controls
Environment, Health, and Safety (EHS)
Governments and Communities
15 Your Obligation to Take Action
15 Business Conduct Helpline
16 Policies and References
The way we do business worldwide
Can you give an example of conflicts of
interest or potential divided loyalty?
Your niece needs a summer internship and
you decide to hire her into your organization,
or, your brother-in-law owns a business that is
being considered as a vendor for Apple, and
you are one of the decision makers.
The way we do business worldwide
Conflicts of Interest
A conflict of interest is any activity that is inconsistent with or opposed to Apple’s best
interests, or that gives the appearance of impropriety or divided loyalty. Avoid any
situation that creates a real or perceived conflict of interest. Use good judgment, and if
you are unsure about a potential conflict, talk to your manager, contact Human Resources,
or contact the Business Conduct Helpline.
Do not conduct Apple business with family members or others with whom you have a
significant personal relationship. In rare cases where exceptions may be appropriate,
written approval from the senior vice president of your organization is required.
You shouldn’t use your position at Apple to obtain favored treatment for yourself, family
members, or others with whom you have a significant relationship. This applies to product
purchases or sales, investment opportunities, hiring, promoting, selecting contractors or
suppliers, and any other business matter. This does not apply to special purchase plans
offered by Apple like the employee discount. If you believe you have a potential conflict
involving a family member or other individual, disclose it to your manager.
Am I allowed to develop outside iPhone or
iPad apps on my own time?
No. Employees are not permitted to have any
involvement in the development of outside
iPhone or iPad apps, either alone or jointly
Outside Employment and Inventions
May I occasionally use my Apple email
address for my outside business?
No. Although limited personal use of your
Apple email is permitted for personal activities,
you may never use your Apple email for an
Can my outside music, videos or books be
offered through iTunes or the iBookstore?
Generally, yes, as long as the content isn’t
related to Apple’s business or products. Do not
use your position at Apple to get favored
treatment for your content.
May I serve on the board of directors of an
outside enterprise or organization?
If you plan to serve on a board, you must
obtain approval from your manager and the
senior vice president for your organization. In
addition, vice presidents and executive team
members must obtain the approval of their
manager and the CEO before they can accept
a position on the board of directors of a
private or publicly traded company (other
than nonprofit entities).
Full-time Apple employees must notify their manager before taking any other
employment. In addition, any employee (full-time or part-time) who obtains additional
outside employment, has an outside business, or is working on an invention must
comply with the following rules.
• Use any time at work or any Apple assets for your other job, outside business, or
invention. This includes using Apple workspace, phones, computers, Internet access,
copy machines, and any other Apple assets or services.
• Use your position at Apple to solicit work for your outside business or other employer,
to obtain favored treatment, or to pressure others to assist you in working on your
• Participate in an outside employment activity that could have an adverse effect on
your ability to perform your duties at Apple.
• Use confidential Apple information to benefit your other employer, outside business,
Before participating in inventions or businesses that are in the same area as your work
for Apple or that compete with or relate to Apple’s present or reasonably anticipated
business, products, or services, you must have written permission from your manager,
an Apple product law attorney, and the senior vice president of your organization.
The way we do business worldwide
Many Apple employees have investments in publicly traded stock or privately held
businesses. In general, these are fine, but investments may give rise to a conflict of
interest if you are involved in or attempt to influence transactions between Apple and
a business in which you are invested. If a real or apparent conflict arises, disclose the
conflict to your manager. Your manager will help determine whether a conflict exists
and, if appropriate, the best approach to eliminate the conflict. If you still need help,
contact the Business Conduct Group.
Personal relationships in the workplace may present an actual or perceived conflict of
interest when one individual in the relationship is in a position to make or influence
employment decisions regarding the other. If you find yourself in such a relationship,
you must notify Human Resources so they may assist you in resolving any potential
conflicts. Employees should not allow their relationships to disrupt the workplace or
interfere with their work or judgment. For additional information, see Apple’s policy on
I have stock in companies that do business
with Apple. Is this a problem?
Probably not. However, it could be a concern if
(1) you’re influencing a transaction between
Apple and the company, or (2) the transaction
is significant enough to potentially affect the
value of your investment.
How do I know whether information is
Determining what constitutes material
information is a matter of judgment. In
general, information is material if it would
likely be considered important by an investor
buying or selling the particular stock.
Does Apple’s policy apply to buying or
selling stock in other companies?
Yes. For example, say you learn about a
customer’s nonpublic expansion plans through
discussions about hardware purchases. If you
purchase stock in the customer’s company or
advise others to do so, it could be viewed as
Buying and Selling Stock
Never buy or sell stock while you are in possession of information obtained through
your employment at Apple that has not been publicly announced and could have a
material effect on the value of the stock. This applies to decisions to buy or sell Apple
securities and to investments in other companies. It is also against Apple policy and may
be illegal to give others, such as friends and family, tips on when to buy or sell stock
while you are in possession of material, nonpublic information concerning that stock.
In addition, employees are prohibited from investing in derivatives of Apple securities.
This includes, but is not limited to, trading in put or call options related to securities of
Members of Apple’s board of directors, executive officers, and certain other individuals
are subject to blackout periods during which they are prohibited from trading in Apple
stock. If you are subject to these restrictions, you will be notified by the legal department.
Even if you are not subject to blackout periods, you may never buy or sell stock while
you are in possession of material, nonpublic information.
Review Apple’s Insider Trading policy. Specific questions on buying and selling stock
should be referred to the legal department.
Harassment and Discrimination
What is harassment?
Harassment can be verbal, visual, or physical
in nature. Specific examples of prohibited
harassing conduct include, but are not
limited to, slurs, jokes, statements, notes,
letters, electronic communication, pictures,
drawings, posters, cartoons, gestures, and
unwelcome physical contact that are based
on an individual’s protected class.
Apple encourages a creative, culturally diverse, and supportive work environment. Apple
does not tolerate harassment or discrimination based on factors such as race, color, sex,
sexual orientation, gender identity characteristics or expression, religion, national origin,
age, marital status, disability, medical condition, veteran status, or pregnancy. Additional
restrictions may apply based on regional laws and regulations.
Need more information?
In the U.S., refer to Apple's Harassment policy.
Outside the U.S., contact Human Resources.
If you feel that you have been harassed or discriminated against or have witnessed
such behavior, report the situation to a manager or Human Resources. You may also
contact the Business Conduct Helpline.
These requirements apply to interactions with employees, customers, suppliers, and
applicants for employment and any other interactions where you represent Apple.
The way we do business worldwide
Where can I learn more about policies on
confidential employee information?
Confidential Employee Information
Is personal information on my computer
No. Limited personal use of Apple equipment
and systems is allowed. However Apple may
monitor equipment and systems. You should
not have any expectation about the privacy of
content or personal information.
If I make a presentation on my own time,
may I accept a payment?
That depends. If you are representing Apple,
you may not accept payment. If you are on
your own time and are not representing Apple,
you may be allowed to accept payment. Before
accepting this type of opportunity, check with
your manager, Human Resources, or the
Business Conduct Helpline.
Public Speaking and Press Inquiries
As part of your job, you may have access to personal information regarding other Apple
employees or applicants, including information regarding their employment history,
personal contact information, compensation, health information, or performance and
disciplinary matters. This information is confidential and should be shared only with
those who have a business need to know. It should not be shared outside Apple unless
there is a legal or business reason to share the information and you have approval from
Subject to rules or regulations affecting an employee’s rights, Apple may monitor or
search its work environments, including equipment, networks, mail, and electronic
systems, without notice. Apple monitors facilities and equipment to promote safety,
prevent unlawful activity, investigate misconduct, manage information systems, comply
with legal guidelines, and for other business purposes.
All public speaking engagements that relate to Apple’s business or products must be
pre-approved by your manager and Corporate Communications. If you receive approval
to make a public presentation at a business meeting or conference, you may not
request or accept any form of personal compensation from the organization that
requested the presentation. This does not prohibit accepting reimbursement for
expenses, if approved by your manager.
All inquiries from the press or the financial analyst community must be referred to
Corporate Communications or Investor Relations.
If you author an article or other publication, do not identify yourself in the publication
as an Apple employee without prior approval from Corporate Communications. In
addition, all publications that relate to your job, or to Apple’s present or reasonably
anticipated future products, business, or services, must be pre-approved by Corporate
What if I have a substance abuse issue?
Help yourself and Apple by taking action. Talk
to your Human Resources representative or, in
the U.S., view information on the Employee
Employees are prohibited from manufacturing, distributing, dispensing, possessing,
using, or being under the influence of illegal drugs in the workplace. Use of alcohol
or medications on the job or before work can cause safety issues, damage customer
relations, and hurt productivity and innovation. Use good judgment and keep in mind
that you are expected to perform to your full ability when working for Apple. View
Apple’s policy on Drugs in the Workplace.
Responsibilities to Apple
What are assets?
Assets include Apple’s proprietary information
(such as intellectual property, confidential
business plans, unannounced product plans,
sales and marketing strategies, and other trade
secrets), as well as physical assets like cash,
equipment, supplies, and product inventory.
Can I give an Apple-owned iPhone to my
family member for use?
No. You are responsible for protecting Apple’s
assets at all times. You must follow all security
procedures regarding Apple’s property.
If I believe that it is appropriate to disclose
confidential proprietary information to a
vendor or other third party, what should I do?
The way we do business worldwide
Protecting Apple’s Assets and Information
At Apple, we all have an obligation to protect Apple’s property and to abide by the
• Care for the company. Apple remains an amazing company because of its people.
Apple employees care deeply about the company. Protect our physical assets like
equipment, supplies, cash, and charge cards. Be on the lookout for any instances you
believe could lead to loss, misuse, waste, or theft of Apple property and tell someone
about it. Speaking up shows you care.
• Keep the mystery alive. Apple is secretive because we know it adds to our customers’
delight. Surprise is Apple’s hallmark. Help keep it that way. Use extreme care to
protect Apple’s proprietary information from falling into the wrong hands, especially
information about current and future products and services.
• Be upstanding. Follow our procurement procedures when acquiring goods or
services, and use Apple’s assets only for legal and ethical purposes.
• Keep it clean. Trash is inevitable. Waste is not. Before disposing of Apple assets,
discuss your plans with your manager, get approval, and follow applicable policies.
Confidential Apple Information
First, verify that there is a business need for the
disclosure. Second, obtain your manager’s
approval for the disclosure. Third, be sure that
a nondisclosure agreement is in place with the
vendor or third party, and that you forward
the original copy of the agreement to the
legal department. If you are still unsure, check
with the legal department before making
How do I identify confidential Apple
information in documents?
Mark these documents “Apple Confidential.”
What if I have a specific question on the
use of the Apple name, names of products
or services, or the Apple logo?
Please direct questions about the Apple
corporate identity to corpID@apple.com.
How can I find out more about patents?
Visit Apple’s Patent Information site.
One of Apple’s greatest assets is information about our products and services, including
future product offerings. Never disclose confidential, operational, financial, trade secret,
or other business information without verifying with your manager that such disclosure is
appropriate. Typically, disclosure of this information is very limited, and the information
may be shared with vendors, suppliers, or other third parties only after a nondisclosure
agreement is in place. Even within Apple, confidential information should be shared
only on a need-to-know basis. The Intellectual Property Agreement you signed when
you joined Apple defines your duty to protect information.
The Apple Identity and Trademarks
The Apple name, names of products (such as iPhone), names of services (such as
AppleCare), taglines (such as ”Don’t steal music”), and logos (such as the familiar Apple
logo) collectively create the Apple identity. Before publicly using the Apple name,
product names, service names, taglines, or the Apple logo, review Apple’s corporate
identity guidelines on how names and logos can be used and presented (for example,
the size of the Apple logo and the amount of white space surrounding it). Before using
the product names, service names, taglines, or logos of third parties, check with the
Apple Inventions, Patents, and Copyrights
Apple’s practice is to consider for patenting the inventions of its employees, regardless
of whether the inventions are implemented in actual products. If you are involved
in product development, you should contact the legal department regarding the
patentability of your work. Be alert to possible infringement of Apple’s patents and
bring any possible infringements directly to the legal department.
If you create original material for Apple that requires copyright protection, such as software,
place Apple’s copyright notice on the work and submit a copyright disclosure form to the
legal department. For more information, visit the Apple Copyright Information site.
Responsibilities to Apple
The way we do business worldwide
Activities Related to Technical Standards
There are numerous organizations that develop or promote technical standards (such
as W3C, OASIS, INCITS, IEEE, ETSI). Before engaging in activities related to technical
standards, including, for example, joining a standards organization or working group,
contributing technology to a standard, or using a standard in the development of an
Apple product, employees must receive management and Legal approval. For additional
information, see Apple’s Standards Legal Policy.
Accuracy of Records and Reports
Accurate records are critical to meeting Apple’s legal, financial, and management
obligations. Ensure that all records and reports, including timecards, customer
information, technical and product information, correspondence, and public
communications, are full, fair, accurate, timely, and understandable.
Never misstate facts, omit critical information, or modify records or reports in any way to
mislead others, and never assist others in doing so.
How can I learn more about procedures
for meals and travel?
See Apple’s Travel Policy or talk to your
All employees must observe policies and procedures regarding business expenses, such
as meal and travel expenses, and submit accurate expense reimbursement requests.
Guidelines on daily meal expenses vary worldwide.
Establishing Bank Accounts
All Apple bank accounts must be approved and established by Apple’s Treasury
department. All payments must be made by recordable and traceable methods.
For more information, contact the treasury department.
Loans, Advances, and Guarantees
Other than through established corporate programs, such as programs for employee
relocation and the cashless exercise of stock options, Apple does not provide loans or
advances of corporate funds to its employees, officers, board members, or their families
and does not guarantee their obligations.
If I suspect money laundering, what should
Advise your manager or contact the Apple
Money laundering is the process by which individuals or organizations try to conceal
illicit funds or make these funds look legitimate. If you deal directly with customers or
vendors, the following examples may be indications of potential money laundering:
• Attempts to make large payments in cash
• Payments by someone who is not a party to the contract
• Requests to pay more than provided for in the contract
• Payments made in currencies other than those specified in the contract
• Payments from an unusual, nonbusiness account
Responsibilities to Apple
Tell me more about legal holds.
In a litigation case or other legal matter, Apple
may be required to produce documents. In
these cases the legal department may put a
legal hold on certain documents to prevent
the documents from being destroyed, altered,
or modified. If it is found that Apple has failed
to retain or produce required documents,
penalties or adverse rulings may result.
Adverse rulings in major litigation cases can
cost Apple a significant amount of money.
Failure of employees to retain and preserve
documents placed on legal hold may result in
discipline or discharge.
The way we do business worldwide
Document Retention and Legal Hold
As an Apple employee, you have a responsibility to manage documents and make
decisions on document retention. The definition of “document” is extremely broad. For
example, every email or other electronic file, every customer record, and every transaction
involves the creation of a document. Different documents have different retention
periods. Check with your manager or contact Records Management to determine the
appropriate retention period for documents in your area.
At times, Apple may need to retain documents beyond the period they would normally
be retained. The most common reasons are litigation or other legal matters.
In these situations, retention and preservation of documents is critical. If you have
documents that may be required for litigation or other legal matters, the legal
department will place those documents on a legal hold, meaning the documents
cannot be altered, destroyed, deleted, or modified in any manner. Legal will notify the
individuals most closely identified with the documents about the legal hold and will
provide instructions for retaining the documents. Recipients of a legal hold must ensure
that these instructions are followed. A legal hold remains in effect until you are notified
by the legal department in writing.
Customer and Business
The way we do business worldwide
Every product we make and every service we provide is for our customers. Focus on
providing innovative, high-quality products and services and demonstrating integrity in
every business interaction. Always apply Apple’s principles of business conduct.
To what extent may I use an existing
customer list to market other Apple
products or services?
Before using a customer list for marketing,
sales, or other activities, talk to your manager
or the legal department. Using an existing
customer list may or may not be appropriate.
Customer and Third-Party Information
Where can I learn more about information
protection and nondisclosure agreements?
See frequently asked questions about
nondisclosures and confidentiality
agreements at Apple.
Where can I get a nondisclosure agreement?
Apple provides nondisclosure agreements for
the U.S. and other locations outside the US.
As long as the information helps Apple,
why is the source of business intelligence
Obtaining information illegally or unethically
could damage Apple’s reputation and in some
cases could subject you and Apple to legal
liability. For example, using illegally or
unethically obtained information in a bid to
the government could result in disqualification
from future bidding and in criminal charges.
Customers, suppliers, and others disclose confidential information to Apple for business
purposes. It is the responsibility of every Apple employee to protect and maintain the
confidentiality of this information. Failure to protect customer and third-party information
may damage relations with customers, suppliers, or others and may result in legal
When dealing with a supplier, vendor, or other third party, never share confidential
information without your manager’s approval. Also, never share confidential information
outside Apple (for example, with vendors, suppliers, or others) unless a nondisclosure
agreement is in place. These agreements document the need to maintain the confidentiality
of the information. Original copies of nondisclosure agreements must be forwarded to
the legal department. Always limit the amount of confidential information shared to the
minimum necessary to address the business need.
Obtaining and Using Business Intelligence
Apple legitimately collects information on customers and markets in which we operate.
Apple does not seek business intelligence by illegal or unethical means, and competitors
may not be contacted for the purpose of obtaining business intelligence. Sometimes
information is obtained accidentally or is provided to Apple by unknown sources. In
such cases, it may be unethical to use the information, and you should immediately
contact your manager, the legal department, or the Business Conduct Helpline to
determine how to proceed.
Third-Party Intellectual Property
It is Apple’s policy not to knowingly use the intellectual property of any third party
without permission or legal right. If you are told or suspect that Apple may be infringing
an intellectual property right, including patents, copyrights, trademarks, or trade secrets
owned by a third party, you should contact the legal department.
May I keep my personal music on my
computer at work?
If you are authorized to make copies of the
music for personal use (for example, you
purchased the music on iTunes), you may
keep the music on your computer.
Never use or copy software, music, videos, publications, or other copyright-protected
content at work or for business purposes unless you or Apple are legally permitted to
use or make copies of the protected content. Never use Apple facilities or equipment to
make or store unauthorized copies.
Customer and Business
Are business meals, travel, and entertainment considered gifts?
Yes. Anything of value is considered a gift.
Can I avoid these rules if I pay for gifts to
customers or business associates myself?
No. If the gift is given for business reasons and
you are representing Apple, the gift rules apply.
The way we do business worldwide
Giving and Receiving Business Gifts
Employees may not give or receive gifts or entertainment to or from current or potential
vendors, suppliers, customers, or other business associates unless all of the following
conditions are met:
• Nominal value. The value of the gift is less than US$150. Exceptions must be approved
by your vice president (for vice president–level employees, exceptions must be
approved by your manager).
• Customary. The item is a customary business gift and would not embarrass Apple if
publicly disclosed. Cash is never an acceptable gift. Giving or receiving cash is viewed
as a bribe or kickback and is always against Apple policy.
• No favored treatment. The purpose of the gift is not to obtain special or favored
• Legal. Giving or accepting the gift is legal in the location and under the circumstances
• Recipient is not a government official. Never provide a gift, including meals,
entertainment, or other items of value, to a U.S. or foreign government official without checking with Government Affairs in advance. See page 13 for more information
on gifts to government officials.
This policy does not preclude Apple as an organization from receiving and evaluating
complimentary products or services. It is not intended to preclude Apple from giving
equipment to a company or organization, provided the gift is openly given, consistent
with legal requirements, and in Apple’s business interests. The policy also does not
preclude the attendance of Apple employees at business-related social functions, if
attendance is approved by management and does not create a conflict of interest.
Zero Gift Rule: Certain departments, including Operations, Retail, AppleCare, Hardware,
Industrial Design, Finance, Facilities, FileMaker, IS&T, and the Business Conduct Group
have more restrictive gift policies that prohibit giving or receiving gifts altogether.
Employees in these departments must adhere to the stricter policies. For additional
information, see the Operations, Hardware Engineering and Industrial Design Code of
Conduct Policy and the Facilities, Filemaker, Finance, and IS&T No Gift Policy.
What is an example of a side deal?
In a sales environment, a side deal may
involve a guarantee to accept back unsold
products or other special agreements to
encourage certain customers to place larger
orders. Such a side deal, whether written or
oral, can have an impact on Apple’s potential
liability with respect to that transaction and
may make it inappropriate for Apple to
recognize revenue on the products sold,
affecting the accuracy of Apple’s books and
records. Side deals or side letters made outside
of Apple’s formal contracting and approvals
process are strictly prohibited.
Side Deals or Side Letters
All the terms and conditions of agreements entered into by Apple must be formally
documented. Contract terms and conditions define the key attributes of Apple’s rights,
obligations, and liabilities and can also dictate the accounting treatment given to a
transaction. Making business commitments outside of the formal contracting process,
through side deals, side letters, or otherwise, is unacceptable. You should not make any
oral or written commitments that create a new agreement or modify an existing
agreement without approval through the formal contracting process.
Customer and Business
What can I do if a reseller complains to me
about low prices at another reseller?
Advise the reseller that you can’t discuss or
attempt to influence pricing of other parties,
since this could violate antitrust laws.
The way we do business worldwide
Competition and Trade Practices
Agreements with competitors are subject to rigorous scrutiny in all countries.
Competitors are expected to compete, and compete aggressively on all terms.
Agreements with our resellers, distributors and suppliers can also give rise to scrutiny,
particularly if Apple has a leading position in the market.
You should not:
• Agree with competitors or exchange information with competitors on price, policies,
contract terms, costs, inventories, marketing plans, capacity plans or other
competitively significant terms.
• Agree with competitors to divide sales territories, products or assign customers.
• Agree with resellers on the resale pricing of Apple products without legal approval.
Resellers must be free to determine their own resale prices.
• Violate fair bidding practices, including bidding quiet periods, or provide information
to benefit one vendor over other vendors.
• Engage in any pricing or other practices that could defraud a supplier or others.
• Violate fair bidding practices, including bidding quiet periods, or provide information
to benefit one vendor over other vendors.
What is an example of an endorsement?
A friend writes a great book on software
design and asks you to endorse the book by
making a statement on the back cover. If you
make such an endorsement, don’t include
your job title or affiliation with Apple.
Remember: Always consult the Competition Law Team whenever you have a question.
For more detail, please see the Antitrust and Competition Law Policy.
When representing Apple, never endorse a product or service of another business or an
individual unless the endorsement has been approved by your manager and Corporate
Communications. This does not apply to statements you may make in the normal course
of business about third-party products that are sold by Apple.
Open Source Software
Open source software is software for which the source code is available without charge
under a free software or open source license. Before using, modifying, or distributing
any open source software for Apple infrastructure or as part of an Apple product or
service development effort, you must review Apple’s Open Source Software policy and
contact the legal department for approval using the forms referenced in that policy.
The way we do business worldwide
Tell me more about pricing products that
are sold to governments.
Governments shouldn’t be charged more for
our products or services than Apple charges
other customers for the same products or
services. There are laws that make it a crime to
overcharge the U.S. government. Some other
countries have similar laws.
Governments as Customers
Can I avoid a gift limitation by paying for
a gift, such as lunch or golf, myself?
No. If you are representing Apple, any gift
to a government employee would be viewed
as coming from Apple.
It may be illegal to give a gift, even an inexpensive meal or a T-shirt, to a government
employee. The rules vary depending on the location and job position of the government
employee (for example, rules may vary by state, school district, and city, and there may
be different rules for various elected and non-elected officials).
Governments are unique customers for Apple. Governments often place special bidding,
pricing, disclosure, and certification requirements on firms with which they do business.
Discuss these requirements with Government Affairs or your local Apple Legal
representative before bidding for government business.
Gifts to U.S. Officials
To prevent violations, review all gifts to government officials with Government Affairs
before giving a gift.
What is considered a gift to a U.S. or
In most cases, anything of value that is given
is considered a gift. This includes items such
as meals, golf, entertainment, and product
samples. Cash is never an acceptable gift.
Typically, giving cash is viewed as a bribe or
kickback and is against Apple policy.
Who is a “foreign official”?
A foreign official is any official or employee of
a foreign government or public international
organization (including departments or agencies
of those governments or organizations), or
any person acting in an official capacity. Also
included are employees of a state-run or stateowned business, such as a public utility, and
employees of a public/government-run school
Gifts to Non-U.S. Officials
In many countries it is considered common courtesy to provide token/ceremonial gifts
to government officials on certain occasions to help build relationships. Check local
requirements and review any such gifts exceeding US$25 in advance with the legal
department. For meals, the US$25 limit does not necessarily apply. Check here for value
limits by country on meals to public officials and employees. Meals of any value should
be avoided with officials from government agencies where Apple has a pending
application, proposal, or other business.
No Bribery or Corruption
At Apple, we do not offer or accept bribes or kickbacks in any form, and we do not
tolerate corruption in connection with any of our business dealings. You may not
offer or receive bribes or kickbacks to or from any individual, whether that individual
is a government official or a private party. For additional information, see Apple’s AntiCorruption Policy.
Apple does not make political contributions to individual candidates. All corporate
political contributions, whether monetary or in-kind (such as the donation/lending
of equipment or technical services to a campaign), must be approved in advance by
Apple Government Affairs. Employees may not use Apple assets (including employee
work time, or use Apple premises, equipment, or funds) to personally support
candidates and campaigns. It is illegal for Apple to reimburse an employee for a
contribution. For more information, see the Apple Corporate Political Compliance Policy
and the Political Contributions and Expenditures Policy.
What should I do if I’m interested in hiring
a current or recent government employee?
Contact Government Affairs before beginning
any negotiations to hire a current or recent
government, military, or other public sector
employee as an Apple employee or consultant.
The way we do business worldwide
Hiring Government Employees
Laws often limit the duties and types of services that former government, military, or
other public sector employees may perform as employees or consultants of Apple.
Employment negotiations with government employees are prohibited while the
employees are participating in a matter involving Apple’s interests.
Trade Restrictions and Export Controls
Many countries periodically impose restrictions on exports and other dealings with certain
other countries, persons, or groups. Export laws may control trading of commodities or
technologies that are considered to be strategically important because they have the
potential to be used for military purposes. Laws may cover travel to or from a sanctioned
country, imports or exports, new investments, and other related topics. Certain laws
also prohibit support of boycott activities. See Apple’s Export Control policy for more
If your work involves the sale or shipment of products, technologies, or services across
international borders, check with the export department to ensure compliance with any
laws or restrictions that apply.
How do I get more information regarding
Apple’s environmental, health, and safety
Visit the Environment+Safety site.
Environment, Health, and Safety (EHS)
Apple operates in a manner that conserves the environment and protects the safety
and health of our employees. Conduct your job safely and consistently with applicable
EHS requirements. Use good judgment and always put the environment, health, and
safety first. Be proactive in anticipating and dealing with EHS risks.
In keeping with our commitment to the safety of our people, Apple will not tolerate
workplace violence. For additional information, review Apple’s Workplace Violence policy.
Employees are encouraged to support charitable causes of their choice, as long as that
support is provided without the use or furnishing of Apple assets (including employee
work time, or use of Apple premises, equipment, or funds). Any charitable donations
involving Apple assets require the approval of the Chief Executive Officer or Chief
Financial Officer. For additional information, see Finance Policy 1.10.
This policy does not preclude Apple employees from using the Apple Matching Gifts
Program to contribute to the nonprofit organization of their choice.
What if I want to get more involved in
Contact Community Affairs. This group
promotes, supports, and facilitates employee
involvement in community volunteer activities.
Outside the U.S., check with your local Public
Relations team or Human Resources.
Community Activities and Public Positions
At Apple, we comply with all laws and regulations and operate in ways that benefit
the communities in which we conduct business. Apple encourages you to uphold this
commitment to the community in all your activities.
If you hold an elected or appointed public office while employed at Apple, advise
Government Affairs. Excuse yourself from involvement in any decisions that might
create or appear to create a conflict of interest.
The way we do business worldwide
Your Obligation to Take Action
Always apply Apple’s principles of business conduct, follow Apple policies, and comply
with laws and regulations. When you are unsure, take the initiative to investigate the
right course of action. Check with your manager, Human Resources, Legal, Internal Audit,
or Finance, and review our policies on AppleWeb. If you would like to talk with someone
outside your immediate area, consider contacting the Business Conduct Helpline.
If you know of a possible violation of Apple’s Business Conduct Policy or legal or
regulatory requirements, you are required to notify your manager (provided your
manager is not involved in the violation), Human Resources, Legal, Internal Audit, Finance,
or the Business Conduct Helpline. Failure to do so may result in disciplinary action.
Employees must cooperate fully in any Apple investigation and keep their knowledge
and participation confidential to help safeguard the integrity of the investigation.
Business Conduct Helpline
The Business Conduct Helpline is available 24/7 to all employees worldwide to help
answer your questions on business conduct issues, policies, regulations, and compliance
with legal requirements. It also allows you to advise Apple of situations that may require
investigation or management attention.
The Business Conduct Helpline is committed to keeping your issues and identity
confidential. If you would be more comfortable doing so, you may contact the Helpline
anonymously. Your information will be shared only with those who have a need to
know, such as those involved in answering your questions or investigating and
correcting issues you raise. Note that if your information involves accounting, finance,
or auditing, the law may require that necessary information be shared with the Audit
and Finance Committee of the Apple Board of Directors.
Due to legal restrictions, anonymous use of the Business Conduct Helpline is not
encouraged in certain countries (for example, France).
Apple will not retaliate—and will not tolerate retaliation—against any individual for
good-faith use of the Business Conduct Helpline.
Information on contacting the Business Conduct Helpline—including via email, toll-free
telephone, and web access—is available on the Business Conduct website.
The way we do business worldwide
Policies and References
Alcohol in the Workplace
Business Conduct Helpline
Buying and Selling Stock: Blackout Periods
Buying and Selling Stock: Insider Trading
Corporate Identity Guidelines
Drugs in the Workplace
Employee Assistance Program (U.S. only)
Equal Employment Opportunity
Finance Policy 1.10
The way we do business worldwide
Policies and References (continued)
Legal Department Contacts
Mail and Electronic Communications
Matching Gifts Program
Name and Logo Use Questions: corpID@apple.com
Nondisclosure and Confidentiality Agreements
Open Source Software
Political Contributions and Expenditures
Standards Legal Policy
© 2014 Apple Inc. All rights reserved. Apple, the Apple logo, iPhone, iPad, and iTunes are trademarks of Apple Inc.,
registered in the U.S. and other countries. AppleCare is a service mark of Apple Inc., registered in the U.S. and
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?