In March 2008, Apple discovered that it was falling behind in the fight against counterfeiters, so it assembled what amounts to the Seal Team Six of global manufacturing: the men who had protected Viagra.
Apple hired John Theriault, who had led the war against bogus Viagra when he was Pfizer’s security chief (after leaving the F.B.I.). He brought with him Don Shruhan, who had also spent five years on the Viagra beat at Pfizer and is now a director on Apple’s security team in Hong Kong. They quickly discovered that “factories in Guangdong province are exporting enough counterfeits to single-handedly supply the world with fake Apple products,” according to a U.S. embassy memo about his work. When Shruhan arrived, he discovered that Apple had taken a hands-off approach: the company had not even registered its trademarks in China or Hong Kong and it avoided pursuing criminal prosecutions because, as the embassy cable put it, the company “wants to stay away from too much publicity surrounding this issue.” Business was good enough that it could live with bogus iPods and iPhones making their way to India and Mauritius, not to mention markets in Beijing in which the fakes were so good that exteriors “appear flawless on the surface” but have only 1GB hard drives instead of 80GB.
But Shruhan was also impressed with the forces Apple could muster: the company had “internal controls at subcontracted facilities” and independent audits “good enough” to guard against workers making knock-offs in their spare time. Moreover, “Apple’s system for tracking each product’s unique serial number appears very effective, and more sophisticated than Pfizer’s,” the embassy wrote. Moreover, once Apple realized it faced a real threat to its business, it was prepared to marshal “not only a team of investigators, which Shruhan has subcontracted, but also tools like a laboratory to begin accurately tracing the source of counterfeit goods. A lab that can perform forensic analysis on individual parts like batteries, for example, can help to locate high-volume manufacturers of such component parts.” As he put it, his team “does 95 percent of the investigative work,” then turns its files over to Chinese authorities, and “gives the [local authorities] 100 percent of the credit.”
All of that—which came out in a Wikileaks cable this week—is good news. The not-so-good news is that one of China’s most respected environmental groups is accusing Apple, for the second time in eight months, of overlooking pollution at its subcontractors. In a report released Wednesday, the Institute of Public & Environmental Affairs said Apple’s “stubbornly evasive” posture toward the accusations “can only be seen as a deliberate refusal of responsibility” for environmental issues.
Let’s be clear: The N.G.Os are investigating complaints about polluted water and hazardous-gas emissions from people living near factories suspected of being Apple suppliers. As any investigator can tell you, that’s not easy to do, and it may yet turn out that some of the companies in the report aren’t doing anything illegal—or might not be Apple suppliers. (The company, like many foreign brands in China, does not disclose the names of its suppliers.) But Apple should also be able to figure out pretty quickly that I.P.E. and its chief, Ma Jun, are not cranks. They are worth listening to.
So far, Ma says, Apple has only sent him an e-mail “saying that several of the suppliers listed by the IPE aren’t in Apple’s supply chain and requesting to discuss the matter,” according to the Wall Street Journal. Many people will be eager to hear what comes out of that discussion. If Apple can marshal as much energy and creativity against pollution as did against counterfeiters, then it will live up to the fragile reputation it is building among China’s many new fans.
The Apple Store in Beijing. Photograph by IvanWalsh, Flickr CC.
