China Piles It On, Government Studio Sues Apple

| Analysis

The government of China continued its campaign against Apple Inc. on Friday, as a government-owned animation studio sued the company. According to South China Morning Post, Shanghai Animation Film Studio is accusing Apple of selling its movies on iTunes without the legal permission to do so and wants 3.3 Yuan (US$531,112) in damages.

The U.S., China, Apple

That's a relatively small amount of money in the Apple-scope of things, but it's the fourth action against Apple from the Chinese government or state-owned companies in the last two weeks. In addition to the reality that state-owned enterprises do as the state wishes, a spokesperson for the company took the opportunity to echo the otherwise unrelated party line in a statement about the suit.

An unnamed spokesperson said, "We want to keep tight-lipped on this case because, as we see it, it's just a litigation in which we want to get compensation [for our product]. It's a sensitive period now since Apple is a big multinational company and it is surrounded by controversies on its practices in China."

The supposed controversies the government minion referred to are accusations that Apple is in some way ripping off Chinese consumers with warranty policies that are both inferior to warranties offered elsewhere and in violation of Chinese law.

The accusation was launched by a state-owned TV show called 315, echoed by party-owned newspaper The People's Daily, acted on by a government bureaucrat who urged authorities to crack down on Apple, and now mentioned in a lawsuit by the state-owned animation studio.

Clearly, the government of China is conducting a campaign against Apple. I wrote a piece on the subject, and Jeff Gamet and I recently discussed it in episode 197 of The Apple Context Machine podcast, but a reader comment added an explanation for this orchestrated campaign I hadn't considered.

Shahid Batalvi suggested that China's actions are “Diplomacy by other means”, saying, "You make life miserable for Huawei and ZTE in USA with your recently enacted law, we will do the same for Apple in China in other ways. You back off, we back off."

He referred to legislation and regulations in the U.S. aimed at preventing network equipment made by Hauwei and ZTE from being used on U.S. networks. The stated reason is that the equipment could be used by the Chinese government to gather intelligence in the U.S.

Not surprisingly, the Chinese government has expressed outrage over this, and Shahid Batalvi's suggestion is that the government is using Apple as a pawn in this battle. Apple earns billions in China, and by exerting pressure against Apple, the government could hope to turn the tide on the network equipment issue.

This idea has legs, and it's a great reminder that Apple is a big player on a big stage these days. For those of us who followed Apple back when it was a beleaguered company supposedly on the verge of death, it's a strange turn of events,

Worse, it's not something Apple can innovate its way out of. If Apple changes its warranty practices in the face of the government's campaign, China can always find a new reason for harassing Apple and disparaging it in the state-owned media. This battle will be settled by bureaucrats and policy makers, not new products or corporate practices.

Life in the corporate fast lane can be a real bitch.

The action was filed with the Beijing No 2 Intermediate People's Court

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3 Comments

Lee Dronick

He referred to legislation and regulations in the U.S. aimed at preventing network equipment made by Hauwei and ZTE from being used on U.S. networks. The stated reason is that the equipment could be used by the Chinese government to gather intelligence in the U.S.

We have been buying components from them for quite a while. It is possible that they have already put backdoors in some of that stuff?

Anyway, I think that this situation has been brewing for sometime.

aardman

Re: apple tit for huawei tat.

Bingo!  Ding, ding, ding, ding!

Steve

Lee Dronick asks if Hauwei has already put backdoors in their stuff.  I suggest he looks at Nortel.  For the lazy, that almost certainly means yes, they have.  The U.S. Government is not doing this out of spite but out of a demonstrated danger, at least according to a talk from a local FBI Special Agent.

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