Will Washington Take Down Apple—And Why?

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Is Apple being given a hint to fork over more campaign contributions?

The US Department of Justice has not only successfully sued Apple for arguably non-existent anti-trust violations in the e-book market. It has even demanded–and gotten–a court appointed “monitor” placed inside the company to supervise the company’s pricing decisions.

This is a company that went from an $18 billion market value in 2000 to a $455 billion market value in 2013. During the same period, Microsoft’s market value fell from $603 billion to $290 billion. Should anyone expect the success story to continue now that the government is meddling with all the company’s pricing?

Apple appealed the anti-trust judgement this Tuesday, but was unable to get the government “monitor’s” work suspended while the case is under appeal. Among the interesting facts that have come out about the “monitor,” Michael Bromwich: he bills for his time at $1,100 an hour and charged $138,432 for his first two weeks of “work.”

Apple has labeled Bromwich’s appointment “unprecedented and unconstitutional.” We wish it were unprecedented. This form of government price interference and intimidation has become increasingly common.

Joseph Covington, who headed the Justice Department’s Foreign Corrupt Practices Act Division in the 1980’s, told Forbes, in reference to monitors appointed to enforce that act: “This is good business for Justice Department lawyers who create the marketplace [for monitors] and then get…a job there [after they leave government].”

Nor is it limited to the Justice department. If a company gets into the sights of the Federal Trade Commission (FTC) or even the Food and Drug Administration (FDA), the terms of settlement increasingly include “monitoring” by highly paid lawyers, who are typically former FTC or FDA employees.

This is not just the small time corruption it might seem. It is tremendously damaging to the economy. The collapse of the Soviet Union should have demonstrated once and for all how important honest and unimpeded prices are for an economy.

If the government takes control of pricing, as it is doing in more and more sectors of the economy, it is guaranteeing unemployment and economic suffering. It is also guaranteeing an ever greater problem of crony capitalism, as companies respond by increasing their campaign contributions or take other steps to buy influence in Washington.

Apple is and ought to be ramping up its Washington presence. A Politico article of May 2012 wondered about the earlier naivete of the company leadership. Did they really think they could get away with lobbying expenditure of only $500,000 in the first quarter of that year compared to $5mm for Google and $1.8mm for Microsoft? Did they really think they could get away with having no company political action committee (PAC) from which to make campaign contributions?

Apple might have thought it was safe, even untouchable. Was not the company an icon of American economic leadership? Did not Apple employees overwhelmingly direct what campaign contributions they made to President Obama? Even with the lawsuit, had not Apple employees in fact given 93 percent of their contributions to Obama in 2012 and only 7% to Romney? Wasn’t that good enough?

Well no. Google employees gave 98 percent of their money to Obama and it was a whole lot more money ($727,702 versus $338,752). Apple CEO Tim Cook hadn’t even maxed out (given to the legal limit) in his own contribution.

This lack of political involvement may be contrasted with Amazon’s Jeff Bezos, who stood on the other side of the anti-trust suit, even though he had created what certainly looked like a near monopoly in e-books, the subject of the suit. Apple is not wrong to argue in its legal filing that its entry into the sector “marked the beginning, not the end, of competition.” But Bezos has bought the Washington Post, and Washington officials will think twice about tangling with him.

In thinking about Apple’s relative lack of political involvement in the past, we should also keep in mind what Politico reported last month: “President Barack Obama has a plan to save the Senate’s tenuous Democratic majority: sell a populist message…and raise lots of cash.”

In Washington doing favors for special interests is one way of raising cash. But so is intimidating them. Either way you get paid, whether from gratitude or fear.

In addition, there is another reason why Apple could now be in the crosshairs of the Justice Department. On November 5, 2013, the company issued a report containing this: “Apple has never received an order under Section 215 of the USA Patriot Act. We would expect to challenge such an order if served on us.” This made jaws drop both in Silicon Valley and Washington. It was daring, perhaps foolhardy. It was directly taking on the government.

Before leaving the besieged Apple, we might pause to consider how the company also gives the lie to one of the great economic myths of our day: that falling prices (deflation) hinder an economy. Here is a typical version of the myth from an AP story last month: “Many economists have worried that the Eurozone may be about to suffer a debilitating bout of deflation…. Falling prices can hurt an economy as consumers postpone spending in the hope of getting cheaper deals in the future while businesses fail to innovate and invest.”

This is all backward. Businesses innovate and invest in order to become more productive. Being more productive allows them to lower prices, improve quality, and get more customers. Everyone benefits from lower prices, but especially the poor and the middle class, who have the most trouble dealing with rising prices.

Apple is a good illustration of all this. Various tech experts on the internet have been discussing what an Apple Iphone would have cost if available in 1991. What would we have had to pay to get similar features and power in some form (clearly not hand held)? The estimates vary but the top one approaches $4mm.

Shouldn’t it be obvious (to anyone other than a Federal Reserve official) that falling prices, produced by innovative and productive businesses such as Apple, are exactly what we should be hoping for? If so, why is the government determined both to create inflation and to interfere with Apple’s price setting decisions?

Sohan Calebephratah
Sohan Calebephratah 5pts

This is a company that went from an $18 billion market value in 2000 to a $455 billion market value in 2013. During the same period, Microsoft’s market value fell from $603 billion to $290 billion. Has anyone noted that Bill Gates funded Common Core studies & reports and stands to make billions off the government testing? Also, this is right out of the Obama Playbook, Lewinsky style, divert the opposition's resources to meaningless obstacles. http://deutsch29.wordpress.com/2013/08/27/a-brief-audit-of-bill-gates-common-core-spending/

Mario Gutierréz
Mario Gutierréz 5pts

Seems even the PC Tech companies know they need to pay "protection money". Poetic irony or justice

Kevin Krcmarik
Kevin Krcmarik 5pts

Outrageous. Why won't the government stay out of the free market with its henchmen?

frank95054 5pts

Apple got what it deserved.  After all, they are Obama supporters.  You reap what ye sew!

Emil Merusi
Emil Merusi 5pts

Hmmm.. Apple is the best operating system in the world, Bosco can't get healthcare to work with billions, and the gov'mint is gonna shut down who? I think not!

Michael Ring
Michael Ring 5pts

This would explain why job's wife is now bending over backwards for immigration and common core.

Richard Landry
Richard Landry 5pts

I can't understand why the government was able to get an affirmative ruling in their own court. lol

tz1 5pts

Live by the sword, die by the sword.  

Have you forgotten the silly patent suit against Samsung - which they are pressing through to appeals and apparently swiping across a screen is patent-able.  Oh, and Samsung has to pay for invalidated patents.

Then there's the EULA - you know, the 55 page thing that no one has several hours to spend to read (they don't even have an audio version on iTunes), but just click OK, and you are their slave.  You can't go to court.  You must go to arbitration.  Of course if you don't click "OK", you have an expensive brick, not a phone, tablet, or computer.

And Steve Jobs is a tax cheat given how he and his board valued stock options, but the government "chose" not to enforce that law.

Tim Cook now wants every businessman to be forced to recognize "Gay Marriage" even in states that don't (Arizona).

The only innovation Apple has had recently is how to further misuse the governmental system - Judicial, legislative, executive, and bureaucratic to hurt their legitimate competitors, vendors, and customers.

Apple is no less a crony capitalist than Lockheed or Boeing.

Francesco M. DiGiovanni
Francesco M. DiGiovanni 5pts

They seem like they have a point about Justice Department lawyers creating a lucrative job in waiting for themselves after leaving their government service. Sounds corrupt to me. Will the lawyers who created the monitor job, after they quit government work, be found using their laptop to do their monitor work job from on a yacht out on the ocean that puts even John Kerry's boat to shame while drinking a snifter of the world's most expensive brandy as a half dozen models in two piece swimsuits lounge around the deck of the boat?

Kip Martin
Kip Martin 5pts

After studying the rant for as long as I could stand.. I've concluded I can get better information about Apple's success or failure by talking with a elderly farmer in Kansas.

NotJames Sweet
NotJames Sweet 5pts

they do have a monopoly on high capacity mp3 players, fawking hat itunes bleh...

John J Radford
John J Radford 5pts

USA companies must pay a bribe to the D and R parties or they will send in the DOJ after them. No one in America will stop the parties from this corruption. Many USA companies learn that the hard way.

Roberta L Franklin
Roberta L Franklin 5pts

As I sit here on my MacBook I am frustrated by yet one more example of a government that considers itself an entity separate from the people, serving only the special interests (in this case the interest of the Justice Department spurred on by our current administration and the foolish who support him/it. They are shooting themselves in the foot; and I am afraid, stabbing the rest of us in the back.

Dharken O'Dale
Dharken O'Dale 5pts

Instead of making things that bring people together and enlighten them they should make weapons to kill people, then the politicians will be falling over themselves to give Apple CEOs handjobs.

Erick Mixer
Erick Mixer 5pts

Well thats because of the head criminal of the DOJ Holder and his massa Obombo from da Congo. I meant Kenya

MatthewandAshley Gould
MatthewandAshley Gould 5pts

This is what government does, those who cannot making those who can pay a steeper price for success prostituting a once great company, nation and people reducing us to the cheap whores of the earth.

Dinah Hall
Dinah Hall 5pts

This is a crime and should be stopped

Marti Rundus
Marti Rundus 5pts

Apple has not bought into One World government like Bill Gates has.

Rodney Theodore Higginson
Rodney Theodore Higginson 5pts

Sounds like more freedom is being taken away from the American people/corporations. Damn what's next...slavery?

Jason Luther
Jason Luther 5pts

How does apple expect to get away with not buying it's share of government? This ain't the 50's. Big brother dropped their tax rates so as to get a cut of the action. Play ball or find a new game...

Scott Brown
Scott Brown 5pts

Yeah, Apple is doomed. hahahaha. You crackpot libertarians need to lay off the meth, your page has gone to absolute shit. It used to only be 50% liberpublican talking point garbage, now it's gone full retard. Apple is more of an example of the success of cutthroat corporatist slave-owning croneyism than some John Galt fairy tale. https://www.opensecrets.org/lobby/clientsum.php?id=D000021754

Laura See-Taylor
Laura See-Taylor 5pts

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Adam Smith, The Wealth of Nations

Doug Hattier
Doug Hattier 5pts

We need to weed out corruption and put in prison for a length of time deservedly so from what their antics caused instead of putting mickey mouse 7-11 robberies in jail for ten years.

Randall Hunt
Randall Hunt 5pts

Sounds like MORE corruption in this administration.

David Scott
David Scott 5pts

Conspiracy bullshit, bunch a paranoid fuckheads

Kurt Schade
Kurt Schade 5pts

Um no they just left blackberry and are using apple now.

Joseph C. Marcure
Joseph C. Marcure 5pts

If the government takes control of pricing, as it is doing in more and more sectors of the economy, it is guaranteeing unemployment and economic suffering. It is also guaranteeing an ever greater problem of crony capitalism, as companies respond by increasing their campaign contributions or take other steps to buy influence in Washington.

Matt Haag
Matt Haag 5pts

seems apple wasn't paying enough tribute.

Mark Scotch
Mark Scotch 5pts

another chapter right out of Atlas Shrugged....the fairy tale the Fascists on both the Left and Right want you to ignore.

TheRealSpark 5pts

@tz1  You ignorance regarding Apple vs Samsung patent is staggering. You really shouldn't post about topics you know so little about. A jury of citizens found Samsung guilty of ripping off Apple IP. The ongoing appeals are about the amount Samsung will have to pay Apple in damages. And you must not have read the article, because it pointed out just how little Apple spends on lobbying; next to nothing compared to most companies. 

tz1 5pts

A perjury foreman who lied about his earlier affiliation hijacked things and convince his peers that the nonsense was valid.

It was on Groklaw.net until the NSA (were they responsible for the goto fail;?), maybe it is still there.

It is irrelevant how much Apple spends on lobbying, it is relevant how much they benefit from the corrupt system.  Many people profited in Russia from the oligarch's largess.

I am for Jury Nullification (fija.org), but they cannot make up things, nor was the doctrine designed to nullify innocence.

You also avoided my other points.