Apple has had a challenging year struggling to keep its underdog, nice-guy image. Earlier this summer Chinese reporters offered up pictures to the world and reports that painted Apple’s manufacturing partners practices in a less than favorable light. Concerns over sweat shop like conditions spread around the internet like wild fire.

However this noise did not truthfully create an uproar. Apple announced that it would charge an independent body to perform an investigation into the reports and allegations. The report returned some few findings that confirmed that a problem existed, however critics argued that the investigation did not reach out to enough workers at the manufacturing facility.

Apple might have written the entire episode off to the rumor mill or to urban legend. Unfortunately, its partner, manufacturer and Taiwanese subcontractor Foxconn displayed a heavy handed approach in dealing with the bad press. Hongfujin Precision Instrument Company sued China Business News for defamation of character. Foxconn is a trade name for Hongfujin Precision Company.

This practice in China ultimately leads to some severe court actions. The courts accepted the lawsuit on July 10 approximately 25 days after the original story and prior to Apple’s internal investigation of the matter. The courts froze the assets of the writer and editor of China Business News on the same day, July 10, 2006. Their assets included their apartments, bank accounts and cars. The lawsuit sought $2.5 million from the journalist Wang You and $1.3 million from editor, Weng Bao. This is not the first lawsuit Foxconn has sanctioned against a journalist. In 2004 the company sued a Taiwan reporter for over $900,000 in Taiwan dollars. Later it withdrew the suit under pressure from the Taiwanese press.

US Perspective
If you put that in perspective, consider if a reporter in the United States working for The New York Times had publicized pictures of an actual Apple plant in the US and consider if that reporter had written that the plant was not adhering to the Apple Code of Conduct which limited the length of days of the work week and the amount of overtime required of employees. Can you imagine Apple filing a lawsuit against the individual reporter and editor of the article and can you imagine the US courts freezing their personal assets until the claims were sorted out?

This is the type of environment that Chinese reporters and journalists must work in everyday. This is not even the most severe sanctions that often come up. Many journalists are bribed, threatened, arrested or kidnapped or just disappear.

The group, Reporters without Borders sent and published an open letter to Steve Jobs and Apple requesting Job’s intercession in these sanctions, which were initiated by Apple’s partner and subcontractor. Hongfujin is one of China’s largest exporters, exporting almost $15 billion dollars worth of merchandise in 2005.

Today, it was announced that the lawsuit has been dropped. Both sides offered a mutual apology for any hardships that the other parties may have endured. The result however is that Foxconn has bullied the journalists. The journalists know that they have been in a fight and the practices used to discuss the issues raised by the journalists have resulted in burying the truth and creating the potential for alleged wrongs to continue. This is not how a nice guy and an underdog engages in transparent business practices. Apple has a tough road ahead to navigate this situation, make amends and maintain the image that has guided them through the worst of times. Might the best of times become the recipe for their disaster?

BTW
Apple has announced today that they will make an announcement on September 12, 2006. It is highly anticipated that Apple will announce plans for a new iPod smart phone or a new movie download plan. Fortunate for Apple that this lawsuit and bad press ended a week before their upcoming announcement.


Technorati Tags: apple, foxconn, chinese press, sweat shops, corporate transparency

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