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Both Google and Apple are trying to sway members of Congress to give them preferential treatment

Apple, Inc. (AAPL) iOS versus Google Inc.'s (GOOG) Android launched with similar mindsets -- upsetting the status quo of the mobile phone industry and becoming the world's most used smartphone platform.  Both platforms have achieved that goal to a large extent, but as the company's each borrowed ideas from the other and changed their product to mimic the other's successes, bitterness grew between the pair. This bitterness eventually exploded in a worldwide patent war, a war which consumes Apple, Google, and the companies that rely on Google's operating system.

I. Dividing the Enthusiast Community

The ongoing "nuclear war" between Apple and Android deeply divides the enthusiast community.

IPhone owners tend  to defend Apple's right to litigate, arguing that Apple's iconic iPhone defined what a "smartphone" meant, a model closely followed by subsequent Android devices.  

While only the most extreme truly wish for a complete ban on Android handsets, Apple fans are swift to point that Apple was not the first smartphone giant to start internation litigation (that was Finland's Nokia Oyj. (OMX:NOK1V) in 2009, who ironically sued Apple) and that some smartphone makers followed the look and UI layout of Apple closer than others.

Steve Jobs
Steven P. Jobs' dying wish of "thermonuclear war" with Android is dividing the nation.

Android owners, meanwhile, balk at the idea of a ban on the world's best-selling smartphone platform, accusing Apple of malfeasance.  They point out that Apple didn't "invent" much of its innovations (multi-touch, Gorilla Glass, Retina displays, etc.), it bought them.  

They also point to Apple turning to copy some aspects of Android (the notifications bar, and soon -- potentially -- the larger screen size).  Lastly, they point to Apple's own history of liberally "borrowing" operating system ideas from others like Xerox Corp. (XRX) then later settling without caustic measures such as sales bans.

II. Tim Cook Goes to Washington

But for better or worse the hostility between the pair shows no signs of easing with the largest Android manufacturer Samsung Electronics Comp., Ltd. (KSC:005930) reaching an impasse in settlement talks with Apple, leading both companies' CEOs to walk out on negotiations regarding a potential cross-licensing truce.

Apple CEO Timothy Cook was in Washington this week, meeting with lawmakers in an effort to emphasize his company's importance to the American economy.  While the patent strife was not directly discussed, it's clear such discussions could steer decisions on potential product bans on a federal level.

Tim Cook
Apple CEO Tim Cook chats with Rep. Boehner(R) [Image Source: Rep. Boehner]

The visit was unusual as Apple spends only a small amount on government lobbying, despite enjoying some of the perks of typical heavy lobbiers, such as liberal tax exemptions.  Despite claims of government favoritism, Apple only spent $500,000 USD on lobbying in Q1 2012, about a tenth of what Google spent.

Apple also does not have a political action committee (PAC) to funnel larger donations to candidates via fund-raising events.  Google and others maintain large PACs.

If appearances are accurate, Apple did much with little in terms of lobbying.  In modern U.S. federal politics where money (effectively, bribes) are necessary to purchase almost any sort of bipartisan action, Apple's contributions were small and selective.  Apple also relied on its late CEO Steven P. Jobs fame and close relationships with top U.S. officials, including President Barack Obama (D).

But Apple is wising up to the fact that in order to defeat lobbying giant Google, it may need to change to more of a standard corporate lobbying footprint.  In Washington, D.C. Mr. Cook reportedly met with House Speaker John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), and Senate Minority Leader Mitch McConnell (R-Ky.), leaders on both sides of the aisle that control Congress.

The Apple leader emphasized points that hit close to home.  For example he chatted with Minority Leader McConnell about how his iPad and iPhone use glass that's produced at a Corning Inc. (GLW) plant in Kentucky (of course, so are Android phones' screens).

The talk of domestic production reminds the federal government of the pressure to avoid a U.S. International Trade Commission ban on imports of the iPhone and iPad (Samsung, new Google unit Motorola, and HTC Corp. (TPE:2498) all have pending ITC complaints against Apple, seeking injunctions).  Wit that said, Mr. Cook reportedly avoided explicitly discussing the court battle or import battle at the ITC.

Of course, such visits also could behoove Apple in terms of getting further tax favors, though the timing suggests possible ties to the Android patent dispute.  (Google's efforts have also focused heavily on greasing the wheels to lower taxes.)

And then there's Apple's troubles with the U.S. Department of Justice over alleged e-book price fixing.  The DOJ is actively suing Apple, claiming it sought an e-book monopoly.  Apple has vigorously denied these accusations.  Some friends on both sides of the aisle could encourage the DOJ to compromise and avoid punitive litigation.

III. Apple Follows in Google's Footsteps Becoming Begrudging Lobbyist

Reportedly Mr. Cook is interested in expanding Apple's lobbying efforts, something his predecessor Steve Jobs frowned upon.  A source speaking to Fortune comments, "They were quiet and focused. There was no public statement, no press conference, no hoopla, just like the company, which is focused on product design and end results.  [Cook] has a strong personal interest in policy issues and recognizes the role an engaged CEO can play in making a difference on those policy priorities."

A Congressional aide added, "It was an act of opening up a line of communication, but it was a first step in what hopefully will be a growing relationship. They didn't become best buds in one meeting."

Bribes
[Image Source: Business Ethics]

Google, like Apple, wasn't always so politically vociferous.  Both companies dodged requests to testify before the U.S. Congress in 2010 privacy hearings, leading Sen. Commerce Chairman Jay Rockefeller (D-W.Va.) to snap, "When people don't show up when we asked them to… all it does is increase our interest in what they're doing and why they don't show up… It was a stupid mistake for them not to show up, and I say shame on them."

But with powerful industry rivals backing potentially catastrophically damaging legislation like the Orwellian "Stop Online Piracy Act" (SOPA) (H.R. 3261), Google rapidly discovered that lobbying could not only lead to tax favors, but also help win it key allies in corporate battles (big media companies, for example paid 10 percent of active Senators' election costs to get the SOPA build written and moved to debate).

IV. Are Product Bans on ANY Device Good for Americans?

The issue with both Apple and Google's lobbying is not only a question of tax policy fairness, or lack thereof, or fairness in terms of antitrust policy.  

Given the company's outstanding legal war, it also becomes problematic in the sense of whether justice will truly be blind, particularly in federal organizations like the ITC who are directly run by appointees of   officials in Congress or the U.S. President -- politicians who take millions in lobbyist money (hundreds of millions in President Obama's case) to get elected.

Banning any product limits consumer choice.  Unfortunately, perhaps, the ITC and U.S. Customs and Border Control have a stranglehold on damaging product bans, given that all major manufacturers -- Motorola, Samsung, HTC, Apple, and others -- manufacture their smartphones in China.

Apple vs Samsung
Apple and Android are fighting in court and in Washingon, D.C. [Image Source: PhoneBuff]

Aside from the consumer impact, there's a secondary question of U.S. jobs.  Apple clearly is emphasizing its importance to U.S. jobs and that importance is not to be neglected.  But Motorola, one of Apple's targets is also a top U.S. tech firm employing thousands -- as is Google.  While Apple did not start the fight with Motorola, versus Asian Android giants Samsung and HTC, today Motorola is facing the same prospect of import bans.

And while Apple's efforts against the Asian Android smartphone giants may not appear to affect American jobs, they likely will given that over half of Samsung's system-on-a-chip production is sourced in Texas.  Likewise, all of the major Android manfuacturers use glass from Corning and chips from other companies like Intel Corp. (INTC) unit Infineon or Californian-based Qualcomm, Inc. (QCOM) in their smartphone.  Likewise, if handsets are banned American telecommunications companies like Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD), and AT&T, Inc. (T) will be adversely impacted.

Thus while an Android ban would hit Taiwan (HTC's home country) and South Korea (Samsung's home) first, it would create a ripple effect harming many jobs.

Jobs needed shirt
Product bans of either Apple or Android devices could cost American jobs -- but are politicians concerned? [Image Source: NPR]

Ultimately U.S. courts, in a "best case" scenario, may opt for slaps on the wrists of Apple and its rivals, as Netherlands and the other regions have done in concluded patent spats.  But given that the ITC has already doled out two product bans, hope of a tidy resolution may be misplaced.

This nuclear war may claim an unknown amount of casualties in the form of competition and American jobs.  But Apple and Google both remain resolute, firm in their efforts to lobby Congress for preferential treatment and to try to end each other's market offerings in court.

Source: Fortune



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RE: This makes me sick
By StevoLincolnite on 5/29/2012 7:01:56 PM , Rating: 3
This might sound stupid as I don't live in the US or know it's political system to well...

But can't the people lobby the government to stop corporations from lobbying? The corporations only have their own personal interests at hand, not the people, I see no good from it.


RE: This makes me sick
By Camikazi on 5/29/2012 8:51:50 PM , Rating: 5
They can but the only problem is that corporations have HUGE amounts of money while the people generally don't. Corporations can pay for the politicaisn they want while all the people can generally do is try and convince them (which isn't quite as effective when someone is stuffing your ears with money to deafen you).


RE: This makes me sick
By GPig on 5/30/2012 2:28:27 AM , Rating: 1
Which highlights why large corporations should be paying more tax. Overseas tax haven loop-holes need to be closed down. Why should we as individuals be paying so much more than profitable companies?

Tax companies more/us less. Power to the people!


RE: This makes me sick
By Solandri on 5/30/2012 3:16:10 AM , Rating: 2
No taxation without representation. If you dislike corporate lobbying, then get rid of corporate taxes. No corporate taxes, no moral obligation to allow them representation, and no impediment to banning them from lobbying.

As I've posted before, whether you tax corporations or people is irrelevant - the people end up paying for the taxes either way. Either they pay the government directly, or they pay corporations via higher prices and receiving lower wages, which the corporations then hand over to the government as corporate taxes. So let's just cut to the chase: have people bear all taxes directly, and ban corporations from influencing government.


RE: This makes me sick
By ritualm on 5/30/12, Rating: 0
RE: This makes me sick
By FITCamaro on 5/30/2012 7:56:19 AM , Rating: 4
Move to Europe if you want the kind of failure what you just said brings.


RE: This makes me sick
By dark matter on 5/31/2012 2:51:14 AM , Rating: 2
Well then enjoy living in a country run by corps for corps.


RE: This makes me sick
By BluntForceTrama on 5/30/2012 7:48:35 AM , Rating: 2
quote:
If you dislike corporate lobbying, then get rid of corporate taxes.

Actually the reverse should apply, politicians no longer represent the voters, so they should stop paying taxes. The K St whores have bought the politicians with so much money no ban is going to have much effect. Such a ban would be as effective as the DEA.

quote:
Either they pay the government directly, or they pay corporations via higher prices and receiving lower wages,

Using that logic the government would never fine them for law abuses either. It might work if CEOs went to jail on occasion, but they rarely do.

You also fail to factor in competition not allowing higher prices in a competitive market, provided of course you're not dealing with an oligarchy, and good luck with that.


RE: This makes me sick
By FITCamaro on 5/30/2012 7:58:00 AM , Rating: 2
Exactly. A fair tax gets rid of any loop holes. It taxes all equally for the same thing. No more need to lobby for tax deals.

You're never going to get rid of all lobbying though unless you get rid of all commerce since companies will always lobby for Congress to support their business over another.


RE: This makes me sick
By BluntForceTrama on 5/30/2012 8:06:29 AM , Rating: 2
quote:
You're never going to get rid of all lobbying

Then more and more loopholes will always emerge for those who can buy influence and make the system more lopsided, IE not you.


RE: This makes me sick
By jRaskell on 5/30/2012 8:40:51 AM , Rating: 3
quote:
No taxation without representation. If you dislike corporate lobbying, then get rid of corporate taxes.


The flaw in that stance is that corporations are not people, and should not be treated as such. The only representation they ever should have is through their employee base.


RE: This makes me sick
By BluntForceTrama on 5/30/2012 8:42:47 AM , Rating: 2
Corporations were first called people for the purposes of vicarious liability. The Nazi Supreme Court turned around and gave them mob rule, thanks to a couple of right wing extremists in their league. Serfdom isn't far behind.


RE: This makes me sick
By Initium on 5/31/2012 10:56:20 AM , Rating: 2
Interesting point. Corporations are treated as citizens under the legal system. Hence the common phrase "corporate citizen". In reality a company has more civil rights than a citizen in almost any situation because they command greater resources. This is a fundamental issue which needs to be addressed. Companies are not citizens and do not deserve the same rights and privileges under the law.


RE: This makes me sick
By FITCamaro on 5/30/12, Rating: -1
RE: This makes me sick
By BluntForceTrama on 5/30/2012 8:12:55 AM , Rating: 2
Where Spuke to ask for some references? Nah, that would make things "fair and balanced."

And do your assumptions cover international subsidiaries? Offshore tax havens? Corporate welfare and special tax breaks? Or do such firms higher dozens of tax accountants for no reason whatsoever?

And he's ignoring the reality of the world? Pot meet kettle.


RE: This makes me sick
By FITCamaro on 5/30/2012 1:20:37 PM , Rating: 2
I totally accept the reality of the world in that it is not fair. It never will be fair. And people like Obama or any other socialist have no desire to make it fair.

A fair tax though is the closest you'll get to fair taxation. And its what I support. But those who always talk about "fairness" do not because it doesn't let them buy votes through handouts. Their idea of "fair" chooses to punish the successful in order to buy the favor of the unsuccessful.

And my point on his personal tax rate is that most who repeat the mantra of "tax the corporations more!" typically pay absolutely no taxes.


RE: This makes me sick
By BluntForceTrama on 5/30/2012 1:35:37 PM , Rating: 2
quote:
Their idea of "fair" chooses to punish the successful in order to buy the favor of the unsuccessful.

Your version of fair leans as much as theirs, your overlook significant crimes because of the notion that they are job creators, when in fact demand creates jobs, not them.

quote:
And my point on his personal tax rate is that most who repeat the mantra of "tax the corporations more!" typically pay absolutely no taxes.


Can we dispense with the anecdotal opinions already? You certainly wouldn't accept them from anyone, so why keep dishing them out? For once in your life try living up to the standards you require from all other opinions. It's a huge step, but just once, give it a shot.

If right wing politics are so righteous why always take the low road?


RE: This makes me sick
By FITCamaro on 5/31/2012 8:15:44 AM , Rating: 2
You can spin it however you want. Pointing out the obvious is not taking the low road. Or are you going to try and say that those with a blind anti-capitalist ideology typically are the successful of the world. You just have to look at the Occupy movement to see my point.

And what crimes am I overlooking exactly? As far as Apple goes, I despise the company. But I don't seek to destroy them because "they're a big, evil corporation". I make the conscious choice not to do business with them because I disapprove of their business practices.

Taking advantage of tax loopholes though is not a crime. Giving money to a politician is not a crime. If a politician takes that money as a bribe in exchange for favors, THEY are the ones committing the crime.

We'd get rid of a lot of corruption in government if people would bother to actually read the Constitution and hold politicians accountable to it. But instead half the country is now sucking from the government teet and doesn't have the backbone to admit that it isn't sustainable. And the idea that taxing either corporations or the rich more will solve our fiscal problems is an absurd one. You could tax corporations and the rich at 90% and you still wouldn't have the money to close our current federal deficit.


RE: This makes me sick
By Initium on 5/31/2012 10:58:02 AM , Rating: 1
I'll take that action.


"When an individual makes a copy of a song for himself, I suppose we can say he stole a song." -- Sony BMG attorney Jennifer Pariser














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