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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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This article is over a month old, voting and posting comments is disabled

RE: This makes me sick
By JasonMick (blog) on 5/29/2012 11:27:45 PM , Rating: 2
quote:
My beef with attempting to limit lobbying is that the devil's in the details. If 5 of us band together and call, write, tweet to our Congressman should that be illegal? What if that number is 500? 5,000? 500,000? I contend the answer to all of those is no, as that would be a limit on our freedom.

So what if we want to pool our resources and buy a radio ad or maybe a spot on a billboard to endorse a candidate? Or even a position on a particular issue? I see no reason to limit your and my right to express our views to our fellow citizens. If we do limit, where's the line? I think we'd all agree that my group of 5,000 like-minded citizens has the right to assemble at the steps of the Capitol to wave signs, hoot/holler, and voice our opinions. What's the fundamental difference between speaking and buying airtime? Or space in a newspaper, etc.
I agree with your assessment that the devil is in the details, however, if you read carefully I never suggested any number of INDIVIDUAL contributions should be disallowed. I merely suggested that any trade union or company should not be allowed to contribute or form PACs. If citizens want to band together and give individual contributions, that's fine.

To an extent such contributions could have a similar effect to traditional lobbying, but they're actually true free speech (one's individual opinion) versus someone else telling you what to say (the union, the company).
quote:
And if a group of like minded citizens can do that, why can't a corporation? A corporation is, by definition a group of like-minded individuals. Before someone jumps down my throat on this point, I will clarify that the only criteria I'm using is that they all have a vested interest in the company growing and making money. After all, that's a corporation's sole purpose for existence. And so limiting a corporation's ability to fight for itself is nothing more than limiting individuals' right to fight for themselves.
An interesting debate, but I feel that voting and political funding should require individual participation versus group decision making.

It's a similar argument to whether "right to work" laws are unfair. Many union leaders will tell you that they are because everyone would quit the union if they didn't have to pay their dues. Well that basically tells you something about the union or the intelligence of its members. If the union is really offering such wondrous benefits, members would pay the dues even if they were not required if they had half a brain.

Likewise, there's no need for "like-minded individuals" within a corporation to pool funding to advertise for a candidate. If these individuals really believed in what the company says they do, they would simply individually contribute.

Individual contributions are terribly simple... just pull your credit card out, spend one minute choosing your amount, print the form to take to your tax person. It's not rocket science and to claim that pooling is necessary to get people to contribute is silly in my opinion.
quote:
If you want to decrease corruption (you'll never eliminate it), vote out the people who keep abusing the power we've given them. Vote out the people who keep providing handouts to others with your money. Vote out people who continually expand the size/scope of government.
Kind of hard when corruption breeds profits, corporations are designed to maximize profits and corporations are controlling federal policy via lobbying. That's a closed loop.

Federal officials are elected, in most cases, by the amount of ad-time/media-coverage they receive, which in turn is a reflection on the amount of pork they give out.

It is possible to break such a grip, but the issue is that when both candidates from the two "ruling parties" are accepting cash for pork, it's very hard to organize grassroots support for an honest third party candidate (trust me, I've tried).


RE: This makes me sick
By Reclaimer77 on 5/29/12, Rating: 0
RE: This makes me sick
By ritualm on 5/30/2012 4:06:15 AM , Rating: 1
Because corporations and trade unions are currently treated as "people" even though they are not. As soon as you let them do any kind of lobbying, all bets are off.

Corporations have more power than the government, does that not make you worry? They are the main reason we keep trying to fend off SOPA every year.

Your lopsided illogical idiocy is showing in flying colors.


RE: This makes me sick
By ebakke on 5/30/2012 9:55:26 AM , Rating: 2
quote:
Corporations have more power than the government

quote:
Your lopsided illogical idiocy is showing in flying colors.

So are you the pot, or the kettle?


RE: This makes me sick
By BluntForceTrama on 5/30/2012 1:39:09 PM , Rating: 2
Apparently you live on a different planet then the rest of us, because his evaluation is correct.


RE: This makes me sick
By Initium on 5/31/2012 11:35:28 AM , Rating: 2
Case in point. Samsung brings in 40% of Korea's foreign income. The government of Korea cannot afford to let Samsung fail. A perfect example of "too big to fail". Do you really think there is a single courageous politician in Korea who would dare to challenge Samsung? Do you think the President of Korea would keep the Chairman of Samsung waiting on the phone? Lee Kun Hee is not somebody to be trifled with. Despite walking out on talks to end the patent war not even Tim Cooke would dare to keep Lee Kun Hee waiting on the line.


RE: This makes me sick
By ebakke on 5/30/2012 10:13:43 AM , Rating: 2
quote:
[...]I never suggested any number of INDIVIDUAL contributions should be disallowed. I merely suggested that any trade union or company should not be allowed to contribute or form PACs. If citizens want to band together and give individual contributions, that's fine.
I was making the point (though it took me a while to get there) that corporations and unions are nothing more than groups of individuals, and thus I see no reason to place limits on them.

quote:
An interesting debate, but I feel that voting and political funding should require individual participation versus group decision making.
But they do require individual participation. Individuals walk into the voting booths and cast their ballots. Individuals purchase stocks, or start companies. Individuals choose when to sell those stocks. And individuals cast ballots in shareholder votes.

quote:
Likewise, there's no need for "like-minded individuals" within a corporation to pool funding to advertise for a candidate. If these individuals really believed in what the company says they do, they would simply individually contribute. [...] to claim that pooling is necessary to get people to contribute is silly in my opinion.
I never claimed there was a "need" for them to pool funding. I just don't see the distinction between a group of people that own a company, and a group of people that don't. It's still a group of people. And limiting the expression of either group is just that, limiting their freedom of expression.

quote:
Kind of hard when corruption breeds profits, corporations are designed to maximize profits and corporations are controlling federal policy via lobbying. That's a closed loop.
Corporations do not control federal policy. The influence it, sure. But WalMart doesn't get to cast a ballot worth 5M "peon" votes. The people still pick, and so far, the people keep voting for politicians who will use the power of force to take from some and give to others. We need to demand something else.

quote:
Federal officials are elected, in most cases, by the amount of ad-time/media-coverage they receive, which in turn is a reflection on the amount of pork they give out.
I'm starting to feel like I'm beating a dead horse here. What you describe may have some correlation, but ultimately the responsibility falls on the voters.

quote:
It is possible to break such a grip, but the issue is that when both candidates from the two "ruling parties" are accepting cash for pork, it's very hard to organize grassroots support for an honest third party candidate (trust me, I've tried).
Hey man, I'm right there with you. This two party system is atrocious. And it'll take a while to actually change that (short of some catastrophe like US gov't default, or a total collapse of our economy, or the collapse of the US dollar). So we have a long hard fight ahead, but that doesn't mean we should stifle others' freedom to achieve our goals.


"I modded down, down, down, and the flames went higher." -- Sven Olsen














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