As the latest debate unfolds about Apple’s refusal to help federal investigators access the iPhones of the San Bernardino attackers, we should recall an earlier stance that seemed principled at the time — but was not.
For those who might have forgotten, Apple appealed a 2014 settlement that found it guilty of antitrust violations in relation to electronic books. The settlement amount was $450 million. Its appeal to the Supreme Court was recently denied, so the original settlement is binding.
In that case, Apple CEO Tim Cook made a passionate argument on behalf of “free enterprise” and Apple’s right to conspire with publishers to artificially inflate the price of e-books. At the time, Amazon.com, which had its own disputes with publishers, was setting the benchmark price for e-books.
Apple may argue about its right to set prices in the marketplace as much as it wants; it even can try to present itself as a martyr for free enterprise. But the truth is that it was hurting consumers to enrich itself — and that’s called profiteering.
One wonders if today’s debate about privacy isn’t a similar case where a company promotes an ideal that really is just about profit.
The real point is a marketing ploy to convince present and future customers of its protective corporate culture. Fighting “the government,” as many presidential candidates are finding out, is quite popular.
Apple’s hypocrisy need not be measured exclusively with the yardstick of its entanglements with the government, as these two cases illustrate. Instead, it seems that Apple is unabashedly pursuing maximal profits, pure and simple.
To begin with, let’s examine what set Apple on its path to American iconography. It is outrageously successful, valued at more than $750 billion (biggest in the world), profits of more than $53 billion (October 2015), and has more than $180 billion in cash. Its legendary leader, Steve Jobs, has been lionized as a design guru and creative genius (despite some less-than-flattering books and documentaries).
Apple came out of IBM’s and Microsoft’s shadows to capture our imagination and pocketbooks; we are so enamored by its products that we stand in line for hours to pay premium prices for the latest revision of its gadgets. But there is something dark about Apple, so dark that good publicity, like that now enjoyed by Apple, is needed to distract our attention from its fundamentals.
First, Apple produces its gadgets overseas, primarily by Foxconn in China. Outsourcing has become ubiquitous, but reports shed light on the awful working conditions of Apple’s subcontractors’ employees. (Nets have been set in workers’ dorms so they won’t jump to their death.) When President Barack Obama beseeched Steve Jobs to bring jobs back to America during the Great Recession, Jobs scoffed at him and said it would never happen.
Second, as Mariana Mazzucato argues in the 2011 book “The Entrepreneurial State,” Apple has licensed most — if not all — its patents and intellectual property from government sources. Apple doesn’t “invent” as many new technologies or processes as one might believe, but instead uses others’ inventions for its own designs.
Its research and development budget in 2015 came close to $8 billion, a pittance as a percentage of its sales of $234 billion (slightly more than 3 percent). By comparison, Microsoft spent more than $12 billion on research and development out of $93 billion in sales (close to 13 percent).
Third, there are some who are concerned about Apple’s legal behavior both domestically and globally, as it continues to be embroiled in patent disputes with its rivals (Samsung), fights overseas antitrust allegations and handles class-action suits at home.
Some have speculated Apple spends more money on legal fees and fines annually than on research and development. If true, how “entrepreneurial” is it?
Fourth, if you have missed it, Apple has been under scrutiny for its tax-evasion tactics, most of which fly in the face of it being a good corporate citizen. It’s not that Apple doesn’t pay taxes at all, as it does ($8 billion, as Cook told Charlie Rose on CBS’ “60 Minutes”).
Yet, between channeling some sales through offshore distribution networks and keeping more than $180 billion in offshore accounts it avoids paying much more. Shouldn’t it contribute to the infrastructure that guarantees its sales?
As we piece together the narrative about Apple’s corporate behavior, what might seem to be a principled stand against government intrusion into citizens’ privacy turns out to be a smokescreen.
Is there really no technological way to accommodate federal investigators? We see instead a legal machine with exuberant profits enjoying the American framework of markets without contributing its fare share to ensure its operation.
Just like those who came for dinner and never quite contributed their fair share.
Perhaps legal, but is it right?
Raphael Sassower is professor and chairman of the philosophy department at UCCS. He can be reached at email@example.com.