updated 03:00 am EDT, Tue August 30, 2011
Authorities reluctant to cooperate
Apple's attempt to curb the sale of counterfeit electronics and even imitation Apple Stores has met with limited success so far, despite being modelled on a successful similar program to curb illicit pharmaceuticals, according to new reports published by WikiLeaks and reported by CNN. The iPad maker was slow to recognize the extent of the problem, and has run into difficulty with local Chinese authorities, who must often balance other factors against Apple's own interests.
Once Apple began in earnest to tackle the issue, they largely recruited a team from drug manufacturer Pfizer who had done similar work in cracking down on counterfeit Viagra production in Asia. Three years later, however, a director of the Apple global security team is quoted as saying he was "afraid" of the volume of imitation Apple products on the market in China, and about how well Apple's lawyers have dealt with authorities there.
Reports of whole imitation Apple Stores outside of the large cities where Apple has actual stores made news headlines last month, but in fact authorities only close a handful of the "fake Apple Stores" for not having secured business permits; the others have been allowed to stay open because authorities say they are selling authentic Apple products, albeit without permission. Other vendors and counterfeit manufacturing facilities have also been allowed to stay open, largely because they bring jobs and revenue to the areas where they are located.
The issue of counterfeiting is seen in China as part of the cost of doing business; workers at factories such as the Foxconn facilities smuggle parts and plans out for the counterfeiters to copy, which eventually results in either replica Apple products that are similar but more poorly-made than the originals, or "versions" of the iPad that still feature an Apple-like logo but are just different enough to be easily spotted as fakes, and usually sold for dramatically less than the real thing. This is part of the "price" U.S. companies pay in exchange for inexpensive labor and super-efficient manufacturing, locals say.
The company has had its victories as well, the cables reveal. Indian officials have uncovered shipments of parts moving from China through Hong Kong. Apple has made progress in closing some -- but not all -- of the online counterfeit sellers. But street sellers and other "offline" merchants have been difficult to pursue, in large part due to disinterest from authorities. The report includes stories Chinese officials declining to investigate a facility that was making imitation Apple laptops in March 2009, and another incident of authorities scrapping a raid on a Guangdong province mall because it would have driven off shoppers.
Guangdong has emerged in the reports as a center for counterfeiting activities, mostly due to the fact that Foxconn operates several factories in the province, along with the lack of authorized Apple dealers. Demand for Apple products -- particularly authentic ones -- is extremely high in China, with the four legitimate Apple Stores in the country -- three in Beijing and one in Shanghai -- said to be the top-grossing and most-trafficked stores in the world, according to Apple CEO Tim Cook.
One of the reasons the Pfizer-recruited team was less successful when working for Apple, the cables summarize, is that Chinese officials were willing to go after fake drug manufacturers as a public health issue, but are much more willing to let electronics and software slide by, as other companies -- notably Microsoft -- have already discovered. Apple's famed concern for the quality of the entire "Apple experience" is of much less importance to authorities, since there are no repercussions to the society as a whole if someone buys a shoddy, imitation iPod. [via CNN]