Taking the shine off Apple’s China prospects?

Apple in the crosshairs, and the shadow of Google’s misadventures in China

On March 15 — World Consumer Rights Day — China Central Television (CCTV) broadcast its annual investigative program that seeks to expose companies that harm or mistreat Chinese consumers. Several companies, both foreign and domestic came under the spotlight, and the program rehashed familiar accusations of Chinese consumers being treated unfairly by multinationals. Specifically, CCTV accused Apple of discriminating against Chinese customers by offering lower levels of service and charging fees for replacing back covers of faulty iPhones, which is done for free in other countries.

There also seems to have been an organised campaign on Sina Weibo in which celebrities criticised Apple for the problems exposed by the CCTV report. The campaign backfired when the aptly named Peter Ho tweeted his message criticizing Apple, but forgot to delete the instructions it came with telling him to post it at 8:20 pm, just after the CCTV report aired. The word on the street in Beijing is that this campaign was organized on behalf of one of Apple’s competitors. Samsung is the name most often cited, but this is only hearsay. (See China Media Project’s posting for more on what has become known as the 8:20 affair: Did CCTV conspire to smear Apple?.)

The CCTV broadcast was not the first time Apple has been accused of treating its Chinese customers differently from those in other regions. On 15 February 2012, Beijing Business Today (北京商报) a weekday business newspaper published by the Beijing Daily Group, ran a report critical of the high support fees and mandatory replacements for damaged iPhones at Apple stores in China. The focus of the article was on Apple repair staff purportedly pressuring consumers into paying high prices for comprehensive replacement of iPhone parts rather than lower-price part repairs. Rather than simply fixing the broken screen, it cost up to RMB 1,598 to replace a broken screen, main board, and battery with factory refurbished parts on a water-damaged iPhone. The article also quoted from Chinese consumer protection laws governing fair treatment of customers, and concluded by asking how long Apple can expect to survive if it exhibited such disregard for its customers. (“Who is hurt by Apple’s sky-high service fees?” 苹果天价售后服务伤了谁)

Most of the information contained in the CCTV report was in the Beijing Business Today article — the phone back enclosure that isn’t replaced, the 90-day warranty that might violate regulations — with one key difference: the Beijing Business Today article compares the prices Apple charges for replacement parts to the much lower service fees that other shops charge for basic repairs to suggest that Apple’s high prices demonstrate an arrogant disregard for consumers, but it does not mention Apple’s behavior in other countries. CCTV’s report, on the other hand, emphasizes this “double standard” of customer service, and it was the allegations of discrimination against Chinese consumers that appeared in the astroturfed celebrity microblog posts after the program segment was aired. The sense that Chinese consumers are being treated worse than consumers in other countries has cropped up in the way the media reported on Apple in the past (e.g. delayed product launches, handling of scalping) and may be the reason that this turn of the news cycle received more attention than the complaints in 2012.

Although the attempt to drive online public opinion through celebrity microblog posts was exposed and is now the butt of online mockery, it’s instructive to compare CCTV’s report on Apple’s misdeeds to its June 2009 report on the “pornographic content” of Google’s predictive search technology. In that incident, CCTV was roundly mocked when it was revealed to have used one of its own interns as key evidence of public disgust with Google. Additionally, evidence pointed to the possibility that it might have generated the list of obscene predictive searches in the week leading up to its national broadcast (see links to Danwei stories below for more). But the online backlash to CCTV did nothing to help Google, and the TV segment, however flawed and manipulative it may have been, was merely the public prelude to a government-ordered cleanup and overhaul of the Internet search market in China.

In a move possibly related to Apple’s run-in with CCTV, Google’s mobile operating system Android was recently singled out for criticism by a government report in China. A white paper (PDF) by the Ministry of Industry and Information Technology’s China Academy of Telecommunication Research warned of excessive dependence on the Android mobile operating system in China, where 80% of smart phones apparently use Google’s operating system. The report accused Google of discriminating against Chinese companies.

The signs are clear that regulators and establishment media would both be happy for foreign mobile phone handsets and operating systems to lose market share. This should be remembered by anyone betting on Apple as a China play, including CEO Tim Cook who earlier this year told Xinhua News Agency that he believes China will become Apple’s largest market.

Links and sources
China Media Project: Did CCTV conspire to smear Apple?
Beijing Business Today (北京商报): 苹果天价售后服务伤了谁
China Digital Times: Chinese Report Warns of Android Invasion
Danwei: State media blames Google for porn, Google says “Gao Ye” is a sensitive word in any form
CNN: Tim Cook: China will be Apple’s top market
Xinhua: Interview: Apple CEO expects China to become biggest market

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