By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for .
Motherboard ran an interesting piece this week, , reporting on the money Apple, Verizon, and other tech trade associations are spending to thwart right to repair legislation pending in nearly a dozen states, including New York.
I first wrote about some these initiatives in January of this year, in this post, Waste Not, Want Not: Right to Repair Laws on Agenda in Some States, which discusses New York efforts as well as other initiatives to reject the throwaway culture, not only for electronics but also for other items.
Motherboard has been following this topic closely. From the latest account:
The bill, called the “,” would require electronics companies to sell replacement parts and tools to the general public, would prohibit “” that , and in many cases would require companies to make repair guides available to the public. Apple and other tech giants have been suspected of in many of the 11 states where similar bills have been introduced, but New York’s robust lobbying disclosure laws have made information about which companies are hiring lobbyists and what bills they’re spending money on public record.
Apple’s not the only company seeking to kill the New York legislation, and a motley crew of others seek the same general objective, as Motherboard reports:
According to New York State’s, Apple, Verizon, Toyota, the printer company Lexmark, heavy machinery company Caterpillar, phone insurance company Asurion, and medical device company Medtronic have spent money lobbying against the Fair Repair Act this year. The Consumer Technology Association, which represents thousands of electronics manufacturers, is also lobbying against the bill.
BoingBoing last week in spelled out details of the nub of company objections:
The companies are especially opposed to rules that ban using [Digital Rights Management] to prevent the use of third-party parts and spares — it’s become common practice to embed just enough software handshaking in replacement parts to invoke section 1201 of the [Digital Millennium Copyright Act], which makes it a felony to bypass “effective means of access control” for copyrighted works. A manufacturer who designs their device to use (copyrighted) software to validate spare parts — something John Deere — can then invoke the DMCA to make it a felony, punishable by a five-year prison sentence and a $500,000 fine, to make compatible components.
The BoingBoing article highlights a further irony:
Every company lobbying against competitors making compatible products has benefited greatly from their own competitive compatibility products: for example, Apple ran a high-profile, extremely successful marketing campaign (the ) that advised potential customers on how to use Apple products to access files created with Microsoft products.
Classic Collective Action Problem
What popped out from the Motherboard account was the discrepancy between the resources being spent by Apple and other anti-right-to-repair forces, compared to those in favor of a right to repair. Again, from Motherboard:
The records show that companies and organizations lobbying against right to repair legislation spent $366,634 to retain lobbyists in the state between January and April of this year. Thus far, the Digital Right to Repair Coalition—which is generally made up of independent repair shops with several employees—is the only organization publicly lobbying for the legislation. It has spent $5,042 on the effort, according to the records.
Now, just to be clear– and to reinforce a point made in the Motherboard article– thwarting right to repair laws is only one of many issues that Apple et al’s lobbyists are no doubt acting on, so to make a straight up comparison of total resources spent by concerned companies no doubt overstates the magnitude of the discrepancy with respect to this single issue.
Still, this seems to provide an example of the classic collective action problem, as adumbrated in economist Mancur Olson’s 1965 classic, , about the big gap between what small groups can and are willing to spend to achieve a policy objective that benefits them significantly and what larger groups– up to the size of the total electorate– can and will spend in money and time that harms them overall, but in a more diffuse way. Put another way, small concentrated groups with a common objective find it easier to organise to secure large benefits. Although the larger public may very well benefit from a completely different policy, large groups find it difficult to organize effectively to fund and pursue their policy goals.
Olson’s work is by no means the first or only on the topic, and the basic idea has been extended in many other works on how money shapes political outcomes, perhaps most significantly in Thomas Ferguson’s . (I want to note in passing that Ferguson, Paul Jorgenson, and Jie Chen earlier this month published an important paper on how political money shapes Congressional votes, , which I intend to discuss at length if a future post).
Apple Loses its Innovation Mojo
It’s been quite some time– about a decade– since Apple launched the iPhone, its last major product innovation. Since then, the company has instead crapified some of its previous innovations– for instance scuppering the MagSafe that prevents clumsy MacBook users such as myself from damaging our laptops when we inevitably trip over the power cord (and which had once caused me to have to pay out heavily for a new motherboard for a Sony Vaio, which wasn’t so protected). Others have written on this site and elsewhere about other changes Apple has made to Macs that reduced their attractiveness to more savvy computer users.
So, given its recent record and with its foreknowledge of exactly what types of products are on the drawing board and in its pipeline, I suppose Apple thinks it makes sense to double down on strategies such as tied repairs to try and squeeze out revenue from its customers.
Apple India Update
As for another potential source of revenues, in December of 2016, I posted another piece, Apple Chases Indian Smartphone Market By Asking Modi Government for Manufacturing Deal, discussing the financial incentives the company was seeking to penetrate the world’s second largest smartphone market: India. Although by volume, India is the second largest such market, as I discussed in that post, smartphones only account for about 30% of the total India mobile ‘phone market.
As this WSJ account noted this week, , the Indian market looms particularly large, as Apple has seen the slowing of its Chinese sales– which previously were a big component of the company’s overall growth.
This week we saw rah-rah reports– such as this one in TechCrunch, , as well as the WSJ count mentioned above– heralding Apple’s foray into smartphone production in India.
Local accounts, such as this one in Livemint, , have been much more skeptical about what the company has actually achieved to date– especially in light of the fanfare with which Tim Cook in December announced its demands. Over to Livemint:
Earlier, Karnataka IT minister Priyank Kharge said that the making of iPhones in India would help Apple lower prices and gain a foothold in the Indian market. He had also expressed hope that it would bring in much needed taxes to the state as well. Apple wants to bring its component manufacturers to India to make parts and export finished phones and is seeking tax concessions on import of key components.
Yet notably, Prime Minister Narendra Modi’s government has failed to cave on key points, according to LiveMint– contrary to what many had expected would be its response when Apple requested financial incentives to expand its Indian market presence. As I noted in my piece cited above, Apple currently has less than a 5% Indian market share. Now, I’m just speculating wildly here– so please indulge me– but it seems that the relevant decision makers may have decided that Apple needs more sales in India more than India needs more iPhones, especially if to secure more of those would require significant state support or concessions:
However, the central government has rejected most of the demands of the US company. Kharge also had said if the centre was keen on taking on China, it should not give special treatment to Apple alone, but to other players like Samsung and Lenovo also if they are desirous of opening manufacturing units in India. Kharge had said the government should also give companies, including Apple, certain timelines, subsidies and incentives to create a level-playing field.
And, if my speculation above regarding actions taken– or equally likely, inaction allowed, that being a time-honored bureaucratic response to an uncomfortable request– is indeed correct, all I can say is: Jai Hind!