Standing Firm: Doing Business in China

Companies operating overseas in States where rule of law or respect for human rights is weak or inconsistently applied often face difficult ethical questions. One of the most difficult is what to do in cases when compliance with host State domestic laws results in violations of internationally accepted human rights norms. To what extent should a company comply or seek to resist, and what form should such resistance take? I was recently interviewed for an article that appeared in the New York Times in which this issue presented itself for Apple. Apple, allegedly responding to a request by Chinese authorities, has withdrawn news apps created by the New York Times that were offered to members of the public through its app store in mainland China on the grounds that the app is in violation of local regulations. When asked by the New York Times to identify the offending local regulation in question, Apple allegedly declined to do so.

In situations of this nature a company may face no choice but to comply with a request from government officials if it wants to continue to operate in the jurisdiction. One would like to think that at the very least Apple satisfied itself that the request was being made on legitimate grounds, i.e. pursuant to a power granted under domestic law. Of course, complying with domestic laws does not mean that a company can’t in some way register its disapproval.

If the domestic laws or regulations confer a discretionary rather than absolute power, then it would be reassuring to think that Apple would have used its influence to challenge such a request. What is troubling in this case is the fact that Apple did not seek to warn, or in any way work, or cooperate with the New York Times to challenge or ultimately resist the request. Perhaps it felt it would be jeopardizing its own legal position to do so. However, what is inexplicable is why Apple, after it had complied with the request, was reluctant to thereafter identify the local regulation which formed the basis of its actions.

Apple’s actions in this instance have both commercial and human rights implications. Withdrawal of the New York Times app bears on the right to freedom of expression, a right guaranteed under Article 19(2) of the International Covenant on Civil and Political Rights (to which China is a signatory). Article 19(3) of the Covenant makes it clear that freedom of expression is not an unfettered right, but it is equally understood that blanket censorship is not a legitimate constraint of this right. It is therefore extremely problematic when companies such as Apple become censorship enforcers. It is not at all clear whether Apple were acting in accordance with a court order, or whether they chose to comply with the local authority’s request as a matter of commercial expediency. The danger with the latter approach is that it undermines both commercial certainty and commercial relationships. More significantly, it sends a clear message to the people of mainland China that the company does not value freedom of expression.

While Apple may have taken the view that it had no choice but to comply with the request, it could have in some modest way made a stand of principle. For example, it could have issued a press statement expressing its regret at having to comply with the Chinese authority’s decision, or at the very least, in more ‘neutral’ terms, issued a statement that it was withdrawing the app under the compulsion of law, and pursuant to a direct request from the government. That way it would be displaying at least some resistance, if not outright disapproval. I suspect the reason it did not do so was commercially and politically motivated. Recent news reports suggest that Apple is facing increasing pressure from local rival companies gaining market ground on smartphone sales. It is also under increasing pressure from the government, having faced the recent ban on its iTunes Movies and iBook Store services. It may have been regarded as unwise to further jeopardize relations, but this strategy does not bode well for long-term relations within China.

In a Fortune article, back in April 2016, Minxin Pei (a Professor of Government at Claremont McKenna College) warned against a short-termism approach:

“Any strategy that relies on the good will of Chinese authorities is dicey because of the arbitrary nature of the Chinese regime. A Western company that’s an “old friend” today could be a reviled “foreign devil” tomorrow if Beijing does not like what it is doing in China.”

The author went on to propose “collective action” as the best strategy against “Beijing’s opaque and arbitrary use of regulatory authority“. From both a human rights and a commercial perspective one can’t help think that Apple’s long term interests would have been better served by presenting a united front with the New York Times on this issue. Surely it will be a matter of time before they will have to meet similar requests in respect of other news outlets and services – what then? Responding appropriately in such an environment requires standing firm on core values that operate across an industry, and may require putting principle before profit. Ultimately, this may prove the only way to to resist further encroachments on the right to freedom of expression when operating in such jurisdictions, and thereby lessen the prospect of commercial uncertainty.