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The corporate practices of Apple include Apple Inc.'s impact on the environment, relationships with governments, litigation it has been party to, its manufacturing practices, market impact, its media relations, product-related practices, and payment of taxes.

Critics have accused Apple of engaging in anti-competitive behavior, aggressive litigation,[1] tax avoidance, the use of sweatshop labor,[2][3] excessively locking down its products, playing a role in the surveillance economy, excessive compliance with governments, and of having an adverse environmental impact.

Environment

Main article: Environmental practices of Apple

Government relations

Belarus

During the 2020 Belarusian protests against president Alexander Lukashenko, Telegram founder Pavel Durov claimed that Apple demanded the blocking of three chat groups or channels of the Belarusian protest movement. Members of these groups had shared the personal information of police officers who were accused of helping to suppress the protests. Apple responded by declaring that they did not call for the channels to be removed, but instead asked him to delete personal information from these channels.[4]

China

Some Apple products can be engraved when ordered through the online Apple Store. However, the store does not allow Chinese users to use words like democracy or human rights.[5] Apple has also removed apps with Muslim religious content, like Quran apps, from the App Store.[6] In November 2022, after the start of protests about COVID-19 in China, Apple released a software update specific to Chinese users that automatically turns off AirDrop after 10 minutes. For years, AirDrop had been used by protesters in China to communicate with each other.[7][8]

Hong Kong

See also: HKmap.live § iOS app

On October 9, 2019, Apple removed HKmap.live from the App Store based on claims made by the Hong Kong Police Force that the app was being used by protesters to aid in violent attacks on police.[9] On October 10, Apple CEO Tim Cook sent a memo to employees defending his decision.[10] On October 18, U.S. lawmakers addressed a letter to Tim Cook expressing concerns regarding the removal of HKmap.live, among other apps.[11]

Russia

In 2019, Apple labelled Crimea as part of Russia in Apple Maps, specifically for users who were accessing the app with a Crimean IP address.[12] Users in the rest of the world were showed Crimea as belonging to Ukraine. The company's move was criticised by the Ukrainian government. Apple clarified that they were complying with local laws.[13]

Apple removed the Smart Voting app from the App Store before the 2021 Russian legislative election. The application, which had been created by associates of imprisoned opposition leader Alexei Navalny, offered voting advice for all voting districts in Russia. It was removed after a meeting with Russian Federation Council officials on 16 September 2021. Apple also reportedly disabled its iCloud Private Relay privacy feature which masks users' browsing activity. Russian opposition figures condemned these moves as political censorship.[14]

United States

In June 2013, in one of several global surveillance disclosures, leaked National Security Agency documents listed Apple as a member of the PRISM surveillance program, which let the U.S. government secretly access the data of non-American citizens hosted by American companies without a warrant.[15][16] Following the leak, government officials acknowledged the existence of the program.[17] According to the leaked documents, the NSA had direct access to those companies' servers, and the amount of data collected through the program had been growing in the years prior to the leak. Apple has denied having any knowledge of the program.[18]

Litigation

Main article: Litigation involving Apple Inc.

Manufacturing

See also: Apple worker organizations

Many reports allege that sweatshop conditions existed in factories in China, where the contract manufacturers, Foxconn and Inventec, operate the factories that produce the iPod. One iPod factory, as an example, employed over 200,000 workers who lived and worked in the factory, and regularly performed more than 60 hours of labor per week. The article also reported that workers made around US$100 per month and were required to live on the premises and pay for rent and food from the company. Living expenses—a requirement of keeping the job—typically required that employees spend a little over half of their earnings. The article also said that workers were given buckets to wash their clothes in.[2][3][19]

Immediately after the allegation, Apple launched an investigation and worked with their manufacturers to ensure that conditions were acceptable by its standards.[20] In 2007, Apple started yearly audits of the labor conditions of all its suppliers, slowly raising standards and severing relationships with suppliers that did not comply—yearly progress reports have also been published since 2008.[21]

In 2010, workers in China planned to sue iPhone contractors over poisoning from a cleaner used to clean LCD screens. One worker claimed that they were not informed of possible occupational illnesses.[22]

A 2014 BBC investigation found excessive hours and other problems persisted, despite Apple's promise to reform factory practice after the 2010 Foxconn suicides. The Pegatron factory was once again the subject of review, as reporters gained access to the working conditions inside through recruitment as employees. While the BBC maintained that the experiences of its reporters showed that labor violations were continuing since 2010, Apple publicly disagreed with the BBC and stated: "We are aware of no other company doing as much as Apple to ensure fair and safe working conditions".[23]

In the period following these exposures, Apple has continued to receive criticism for its labor rights record. Reports in 2015 and 2016 from the labor rights organization, China Labor Watch, noted that Apple's supplier Pegatron's wages were too low to cover living costs by themselves, forcing workers to put in excessive amounts of overtime hours in order to make ends meet.[24][25]

In February 2020, a report by the Australian Strategic Policy Institute listed Apple as a company that was "potentially directly or indirectly benefiting" from forced Uyghur labor.[26] In 2020, Apple lobbyists tried to weaken the Uyghur Forced Labor Prevention Act, a U.S. bill against forced labor in Xinjiang, China.[27]

Foxconn

See also: Foxconn and unions

Apple's considerable commercial success is partly attributable to the outsourcing of its consumer electronics production to Asia. As the principal manufacturer of products and components for Apple, Taiwanese company Foxconn employed 1.4 million China-based workers in 2013. The workers are part of China's "floating population" of 200 million migrants, at the bottom of what Taiwanese tech entrepreneur Stan Shih calls "the smiling curve". Controlling the upturned edges of the smile—brand, design, and engineering on one side, and marketing, sales, and external relations on the other—is what ensures major profit margins.[28]

Apple, Foxconn and China's workers are stakeholders in high-technology production, but relations between the three are perceived by analysts as imbalanced. Apple was able to capture 58.5 percent of the value of the iPhone, despite the fact that the manufacture of the product is entirely outsourced. Particularly notable is that labor costs in China account for the smallest share: 1.8 percent, or nearly US$10, of the US$549 retail price. While both Apple and Foxconn rely on Chinese workers to perform 12-hour working days to meet demand, the costs of Chinese labor in processing and assembly are insignificant in the overall commercial success of Apple. Other major component providers—such as Samsung and LG—captured slightly over 14 percent of the value of the iPhone, while the cost of raw materials was just over one-fifth of the total value (21.9 percent).[28]

Wages average from $1 to $2 an hour for Foxconn workers, including overtime, and are dependent upon location—such rates are attractive by China's rural standards. Foxconn workers typically complete 50-hour work weeks and 12-hour shifts; however, work weeks of up to 100 hours are not unheard of during peak production periods. Foxconn workers typically cannot afford the iPads and iPhones they assemble.[29]

In 2009 and 2010, the Foxconn factories at the Foxconn City industrial park in Longhua, Shenzhen, China,[30] were heavily criticized in the press, with one source describing conditions as a "white collar prison".[31] In 2009, Foxconn guards were videotaped beating employees.[32]

Foxconn employee suicides

Main article: Foxconn suicides

On July 16, 2009, Sun Danyong, a Chinese factory worker employed by Foxconn, committed suicide, after reporting that he lost a prototype model for a fourth generation iPhone.[32][33][34] Upon filing his report on July 13, Chinese media reported that his residence was searched by Foxconn employees, and that he was beaten and interrogated by his superiors—actions that are illegal under both Chinese and American law. The incident raised questions regarding Apple's secrecy policy and working conditions in their Chinese factories. An Apple spokesman told reporters that the company was "saddened by the tragic loss of this young employee."[35] Apple's relationship with Foxconn regarding corporate security has been a continuing subject of controversy since Sun Danyong's death.[36][37]

Apple policy on how it influences the corporate culture of its suppliers is presented in the "Supplier Responsibility Progress Reports" document.[21] Holding suppliers accountable for their errors and omissions in their relationship with Apple is an area of concern Apple takes seriously. In one report, Apple stated:

[our] procurement decisions take into account a facility's social responsibility performance, along with factors such as quality, cost, and timely delivery. When social responsibility performance consistently fails to meet Apple expectations, we terminate business.[21]

Given Apple's stated policy at the time of the death, terminating relationships with such suppliers was potentially difficult without incurring huge financial losses.[38]

Later in April 2010, four workers committed suicide in a single month in the same factory, signifying the beginning of the 2010 "Foxconn suicides" incident.[39] By May 2010, 12 workers had committed suicide at Foxconn's operations in China - although the number of suicides was lower than the general suicide rate in China.[40] Apple, HP, and others stated that they were investigating the situation.[33] A total of 18 suicide attempts were recorded at the Foxconn facility in 2010, with 14 attempts resulting in deaths.[41][42][43]

In response to the suicides, Foxconn substantially increased wages for its Shenzhen factory workforce,[44] installed suicide-prevention netting,[45] brought in Buddhist monks to conduct prayer sessions inside the factory,[46] and asked employees to sign no-suicide pledges.[47] Workers were also forced to sign a legally binding document guaranteeing that they and their descendants would not sue the company as a result of unexpected death, self-injury, or suicide. After the changes were implemented, it was not clear how employees who fail to abide by the terms of the new agreement will be sanctioned.

Labor force

Foxconn's use of students and minors is part of its pursuit of low-cost, flexible labor. When the fallout of the 2010 suicides left Foxconn with a labor shortage, the Henan provincial government assisted with the breach. The province directed 100,000 vocational students to staff the Shenzhen assembly lines as "interns" (the Chinese term shixi can also mean "trainee") after providing them with nine days' notice. Students were told that those who failed to comply would not be allowed to graduate.[48]

Interns have become a significant component of Foxconn's labor force, constituting as high as 15 percent of the workforce—or 180,000 interns company-wide—at peak times, making it the largest "internship" program in the world. Teachers have been stationed in the factory compound to monitor attendance, and some interns have been as young as 14—by the company's own admission—thereby violating Chinese laws. According to SACOM's Chan, Foxconn, and other similar manufacturers, are "covertly" using interns to avoid detection and culpability. The young people are hired through the same labor agencies that hire Foxconn's "dispatch workers", who are deprived of standard benefits and protections.[48]

US-based China Labour Watch (CLW) investigated into conditions at three factories operated by Pegatron, which makes equipment for Apple computers and iPhones, and found that Pegatron hired children under the age of 18—the child laborers worked under the same poor conditions as adult staff. In total, 10,000 employees aged between 16 and 20 worked in crowded production rooms, performing the same tasks as adults. Some of the children were paid less, and others did not have their wages paid on time.[49]

In 2020, The Information reported that Apple discovered on multiple occasions that one of its Chinese-suppliers, Suyin Electronics, relied on child labor, but took three years to fully cut ties with the company. Ten former members of Apple's supplier responsibility team said that Apple has been slow to cut ties with other suppliers that repeatedly violate Apple's labor policies when doing so would decrease profits.[50]

Working conditions

Workers who assemble iPhones, iPads, and other devices often labor under harsh conditions, according to employees inside the Foxconn plants. According to company reports and advocacy, Apple's suppliers in China have improperly disposed of hazardous waste and falsified records.[51]

Forty-nine young workers were poisoned at the Lianjian Technology factory in Suzhou Industrial Park by the toxic chemical hexane, used to wipe clean the iPad display screens and speed up efficiency. To save money, the factory did not provide proper ventilation during the cleaning process, and workers developed neurological problems, the loss of motor function, numb limbs, and complained of constantly fainting and being overcome by a debilitating fatigue. Some of these sick workers were eventually bought off with a lump payment of 8,000 or 9,000 yuan (US$1,200–$1,400), but only after signing an agreement stating they would not bring claims against Apple or its supplier companies in the future.[52]

An explosion in May 2011 at a Foxconn iPad factory in Chengdu, China, killed four people and injured 18. Employees worked excessive overtime—in some cases, seven days a week—and lived in crowded dorms. Some said they stand so long that their legs swell until they can hardly walk.[51]

Marketing

Main article: Marketing of Apple Inc.

Products

Reliability

The Danish Consumer Complaints Board reported a fault with Apple's iBook product line and criticized Apple's response to the issue, indicating customer support problems at Apple.[53] In that case, a solder joint between two components fractured after a certain number of computer restarts causing the computer to break down, with most incidents occurring outside Apple's warranty period. Websites such as AppleDefects.com were created in response to the issue and detailed quality control issues with Apple's product portfolio.[54]

Repairability

Apple has been criticized for the use of proprietary parts thereby thwarting self repair and servicing.[55][56] The company has often been accused of planned obsolescence.[57][58][59][60][61] A class action lawsuit alleging planned obsolescence in the iOS 9 update was filed in New York state in December 2015.[62][63] An online petition created by consumer group SumOfUs in July 2016 accused Apple of "sabotaging" devices with software upgrades designed to slow down older models.[64][65] Another SumOfUs petition that reached over 300,000 signees in September 2016 also accused Apple of planned obsolescence by removing the standard headphone jack in the iPhone 7.[66][67][non-primary source needed]

Upon its release, Apple stated that the iOS 10.2.1 update contained fixes to address unexpected shutdowns reported by some users, particularly on iPhone 6 and 6S models when they had 30% battery life remaining.[68] In December 2017, Apple admitted that these changes included new power management routines that throttle the CPUs on older iPhone models (beginning with the first-generation iPhone SE and iPhone 6 series, and extended to the iPhone 7 series on iOS 11) in order to preserve system stability. Apple explained that the devices' batteries "become less capable of supplying peak current demands when in cold conditions, have a low battery charge or as they age over time, which can result in the device unexpectedly shutting down to protect its electronic component", and stated that these measures were part of efforts to "deliver the best experience for customers, which includes overall performance and prolonging the life of their devices".[69]

Apple subsequently announced that through most of 2018, it would offer battery replacements at a discounted price (US$29, $50 cheaper than the normal cost for an out-of-warranty battery replacement) for existing iPhone models. The iOS 11.3 update would add a "Battery health" area to the system settings menu, allowing users to view the effective capacity of their device's battery, whether "performance management" had been enabled in order to preserve battery health and stability, and suggests when a battery replacement should be obtained.[70][71] In January 2019, Apple CEO Tim Cook stated in a shareholder letter that over 11 million battery replacements had been made under the discount program.[72]

Security

Despite the existence of a small number of known viruses and malware designed for Apple products, a 2006 report by McAfee found a 228 percent increase in the annual rate of vulnerabilities in the period 2003–5, compared to Microsoft's products, which saw only 73 percent.[73] However, the public's lack of awareness of the security vulnerabilities of Apple products has led to criticism of Apple for misleading the public which has risen over the years.[74][75][76] This criticism has also drawn attention to Apple's failure to update its products with security updates in a timely fashion. An example of this was a security flaw in Sun Microsystems's Java, which Sun fixed promptly, while Apple took more than five months to distribute the fix. That is much longer than other companies, and drew sharp criticism from experts and journalists.[76][77][78] A recent example is a malware product called MacDefender, MacProtector, MacSecurity, or MacGuard, which is an application that can be installed in OS X by the user; ZDNet's Microsoft Blogger Ed Bott estimates that it has been installed by 60,000 to 120,000 Mac customers who thought it was legitimate anti-virus software.[79]

Overall, experts admit that Apple products are less likely to be breached by a hacker or infected by a virus/malware, though they emphasize that this is mainly due to the lack of interest by hackers in attacking Apple products.[80][81] In particular they fear that Apple places its clients in danger by not taking action to inform the public of its security vulnerabilities. As David Harley, security expert from anti-virus vendor ESET said, "Any computer user who believes a system is so safe that they don't have to care about security is prime material for exploitation by social engineering."[82]

According to Secunia vulnerability rankings, Apple has led Microsoft in reported security vulnerabilities since 2007, and currently leads all other vendors in reported vulnerabilities for 2010.[83] This ranking, however, doesn't "indicate the actual security (or lack thereof) in the different vendors' products; it rather shows that vulnerabilities continue to be discovered in significant numbers in products from even the largest and most popular vendors including those who spend significant resources on improving the security of their products" according to the authors of the study.

In August 2014, it was publicized that hackers had discovered an exploit involving the Find My iPhone service, which allowed them to brute-force a user's Apple ID and access their iCloud data. The exploit was later believed to have been used as part of an August 2014 leak of a large number of private, mostly nude photos of celebrities that had been synced into their iCloud storage.[84][85][86] Apple has since denied that the iCloud service itself or the alleged exploit was responsible for the leak, asserting that the leaks were the result of a "very targeted" brute-force attack of iCloud account information.[87]

Warranty

Main article: AppleCare

Apple has been repeatedly criticized for its unwillingness to honor its warranties and its concomitant penchant for giving any reason for doing so, no matter how bizarre: in 2008, Apple repair centers began to refuse to honor warranties of its products which had been used in an environment it deemed hazardous, i.e., that had been used around someone who smokes;[88][89][90] and in 2009, Apple refused to honor its warranty and replace a defective battery on a machine that had a small amount of unrelated cosmetic damage that did not affect the machine's functionality, nor that of its battery.[91]

China

On March 15, 2013, China Central Television aired a program for the World Consumer Rights Day. The program criticized the issue associated with Apple warranty issues in China. The report said, an iPhone always gets an old back cover when being repaired in China. It also states that the warranty period for changed product is only 90 days and the warranty period for Macintosh and iPad are not according to Chinese laws to get warranty in China.[92] On April 1, 2013, Apple CEO Tim Cook apologized to Chinese consumers for the China warranty policy and changed the policy.[93]

Italy

On December 27, 2011, Apple was fined a total of €900,000 by the Italian Antitrust Authority for failing to properly inform customers of their legal right to two years of warranty service under Italy's Consumer Code. According to the Italian agency Apple only disclosed its own standard one-year warranty and offered to sell customers AppleCare for one additional year instead of abiding by the law. The agency fined Apple €400,000 for failing to disclose the legally mandated two-year warranty and €500,000 for selling overlapping AppleCare coverage.[94]

Taxes

See also: Double Irish arrangement and Leprechaun economics
Global taxes paid by ASI, 2009–2011[95]
2009 2010 2011 Total
Pre-tax earnings US$4 billion US$12 billion US$22 billion US$38 billion
Global tax US$4 million US$7 million US$10 million US$21 million
Tax rate 0.1% 0.06% 0.05% 0.06%

In the late 1980s Apple was a pioneer of an accounting technique, "Double Irish With a Dutch Sandwich", which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. In 2004,[Note 1] Ireland, a nation of less than 5 million, was home to more than one-third of Apple's worldwide revenues, according to company filings. Robert Promm, Apple's controller in the mid-1990s, called the strategy "the worst-kept secret in Europe".[96] Such strategies helped Apple keep its international taxes to 3.2 percent of foreign profits last year, to 2.2 percent in 2010, and in the single digits for the last half-decade, according to the company's corporate filings.[96]

According to a Senate report on the company's offshore tax structure concluded in May 2013, Apple has held billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government by using an unusual global tax structure.[97] The main subsidiary, a holding company that includes Apple's retail stores throughout Europe, has not paid any corporate income tax in the last five years. "Apple has exploited a difference between Irish and U.S. tax residency rules", the report said.[98]

Among the findings in the reports are:[99]

  1. Almost all of Apple's foreign operations are run through an Irish company with no employees.
  2. Apple pays 2%—or less—in corporate income tax in Ireland.[Note 2] (Ireland's standard rate of corporation tax is 12.5℅).
  3. Apple Operations International, which provided 30% of Apple's worldwide net profits from 2009 to 2011, doesn't pay taxes anywhere.[Note 3]
  4. Apple's US profits keep ending up in Ireland, too.
  5. Most of the $102 billion Apple is keeping "overseas" is in US banks.
  6. The magic of "check-the-box" makes whole companies disappear.[clarification needed]
  7. Apple is seemingly terrible at estimating its own taxes.[Note 4]

On May 21, 2013, Apple CEO Tim Cook defended his company's tax tactics at a Senate hearing.[100]

As part of the Luxembourg Leaks, Apple has been revealed to use the Luxembourg tax haven for tax avoidance.[101]

The EU Commission's diagram of Apple's "Double Irish" BEPS tool

On August 30, 2016, after two-year EU illegal State aid case against Apple in Ireland, the EU's competition commissioner, Margrethe Vestager, concluded that Apple had received "illegal state aid" from Ireland during 2004–2014 via its use of a hybrid Double Irish tax scheme on which it received private rulings by the Irish Revenue Commissioners.[102][103] The commission ordered Apple to pay 13 billion euros ($14.5 billion), plus interest, in unpaid taxes,[104] the largest corporate tax fine in history.[105][106] The Irish government "unanimously" agreed to appeal the ruling, claiming there was no departure from the applicable Irish taxation law and that the Commission's action was an intrusion into Irish sovereignty (since national taxation policy is excluded from Union treaties).[107] Apple has also announced that they will appeal the Commission's findings.[108]

On 5 November 2017, the Paradise Papers, a set of confidential electronic documents relating to offshore investment, revealed that Apple is among the corporations that "avoided billions of dollars in tax" using offshore companies.[109][110][111] In 2014, Appleby, an offshore legal service provider referred to in the papers, worked with Apple in a function similar to a general contractor to provide offshore offices on the island of Jersey in co-operation with the law firm Baker McKenzie.[112]

As part of Apple's discussion with the EU Commission regarding its illegal State Aid case, Apple agreed to close its Double Irish tax scheme, however, on 22 July 2016, the Central Statistics Office (Ireland) (CSO) announced that it was re-stating Irish GDP upwards by 26.3% (later increased to 34.4%).[113] The CSO would not release the source of the revision and restricted releases of regular data to hide the identity of the source.[114] Nobel-prize winning economist Paul Krugman called the affair Leprechaun economics. It was not until Q1 2018, that economists had enough data to show that the source of the Leprechaun Economics rise in Ireland's GDP was Apple restructuring out of their Double Irish tax scheme, and into a new Irish tax scheme, the CAIA arrangement.[115][116] Apple had on-shored almost US$300 billion of intellectual property to Ireland, the largest base erosion and profit shifting (BEPS) transaction in history, and on which the CAIA tool would enable it to avoid all future taxes on its non–U.S. revenues.[117][118]

On Saturday, December 2, 2017, activists shouting "pay your taxes" carried out public protests at Apple stores in Paris and elsewhere in France.[119] On January 17, 2018, Apple announced that it will take advantage of the new U.S. tax laws and repatriate its offshore profits, and pay $38 billion in deferred taxes.[120]

See also

Wikimedia Commons has media related to Apple supply chain.

Notes

  1. ^ Apple has not released more recent estimates
  2. ^ Global Taxes Paid by ASI, 2009–2011
  3. ^ "A.O.I.'s board minutes show that its board of directors consists of two Apple Inc. employees who live in California and one Irish employee of Apple Distribution International, an Irish company that A.O.I. itself owns," Levin said on Tuesday. "Over the last six years, from May, 2006, through the end of 2012, A.O.I. held thirty-three board meetings, thirty-two of which took place in Cupertino, California. A.O.I.'s lone Irish-resident director participated in just seven of those meetings, six by telephone, and in none of the eighteen board meetings between September, 2006, and August, 2012."
  4. ^ In annual reports between 2009 and 2011, the company told investors it was setting aside $13.7 billion to pay federal taxes—but it has actually paid only $5.3 billion. Those set-asides are only advance estimates, but it's pretty strange that each year they're off by many billions of dollars. As a result, Apple's actual US tax rate is only 20.1%, much lower than the 24% to 32% it said it was paying.

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