7 reasons why Apple is lobbying more

Tim Cook recently traveled to an unfamiliar destination for an Apple chief executive officer: The US Capitol.

During the trip last month, Cook posed for a photo with Senator Orrin Hatch, the Utah Republican taking over the Senate Finance Committee this year. It was one of the meetings Cook had while in town, which also included a stop at Apple’s store in the Georgetown area.

Apple, which has come under increasing scrutiny as the world’s most valuable company, is becoming more of a regular around Washington.

While co-founder Steve Jobs shunned the nation’s capital, Apple lobbied the White House, Congress and 13 departments and agencies from the Food and Drug Administration to the Federal Trade Commission in 2014 through the third quarter, according to OpenSecrets.org. In 2009, Apple lobbied only Congress and six agencies.

It’s all part of a broader push by Cook, who took the reins in 2011, to make the Cupertino, California-based company more open while laying the groundwork for new products that naturally attract more government scrutiny. That includes Apple Watch, the smartwatch arriving in stores this year, which has applications that track user health data.

“They’ve learned what others before them have learned -- that Washington can have a great effect on their business,” said Larry Noble, senior counsel at the Campaign Legal Center, a Washington-based non-profit that scrutinizes money in politics.

Kristin Huguet, a spokeswoman at Apple, declined to comment for this story.

1. Way less than Microsoft, Google

Apple’s spending in Washington remains small compared with other technology companies. Microsoft Corp., which faced an antitrust trial in the late 1990s, spent $6 million last year through the third quarter in Washington, according to OpenSecrets.org, a website that tracks spending. Google Inc. is the biggest technology spender after grappling with its own antitrust scrutiny, with $13.7 million in US lobbying costs in 2014 through the end of September. In that same period, Apple spent $2.9 million.

2. Staffing up in Washington

As the company’s Washington spending has risen, Apple has staffed up in the capital. Cook last year hired Amber Cottle, former chief of staff for the Senate Finance Committee, to head Apple’s lobbying office. She replaced Catherine Novelli, who joined the State Department.

In 2013, Cook hired Lisa Jackson, former head of the US Environmental Protection Agency, to oversee the company’s environmental initiatives. While Apple had been making efforts in that area under Jobs, it wasn’t vocal about what it was doing.

“We understand that we need to talk about it,” Jackson said this month during an appearance at the Commonwealth Club in San Francisco. “We need to say to people, ‘Stop saying it can’t be done, here it is.’”

Apple also added law firm Wilmer Cutler Pickering Hale and Dorr LLP to its growing list of outside lobbying firms in October, according to a Senate filing. WilmerHale, which represented Apple in its patent fight with Samsung Electronics Co., was hired to lobby on issues of competition, intellectual property and technology, according to the filing. The firm joins five others listed as lobbying for Apple this year, totaling 23 people, according to OpenSecrets.

3. Legal setbacks

The increased activity follows several setbacks for Apple in Washington. The US Justice Department won a case against Apple in 2013, in which the department sued the company for conspiring with publishers to fix e-book prices. 

The FTC last year accused Apple of unfairly billing parents for charges that they never consented to that were incurred by kids using apps, with the company agreeing to refund a minimum of $32.5 million to consumers to settle the complaint.

Cook himself testified for nearly two hours before Congress in May 2013 over Apple’s use of offshore tax shelters, using the occasion to call for a simplified US tax code.

“We have never had a large presence in this town,” he told senators, before they peppered him with questions about the company’s tax strategies that had left billions of dollars overseas.

4. Window to product pipeline

Apple’s increasing activities in Washington now offer a window into some of the company’s plans. In December 2013, four Apple vice presidents -- including Jeff Williams, of operations, and Bud Tribble, of software technology -- met with FDA Commissioner Margaret Hamburg and her staff about mobile medical applications. FDA officials told the Apple executives that they regulate based on the intended use of a device.

A glucometer, which measures glucose levels, may be unregulated if used to measure blood sugar to promote better nutrition. Yet if it’s marketed for diabetics it’ll likely be regulated, Apple executives were told, according to an FDA memorandum of the meeting that Bloomberg News obtained through a Freedom of Information Act request.

“It’s not unusual for a company that’s a device company to go meet with FDA and I think Apple is becoming a device company,” Jeffrey Gibbs, a lawyer at the Washington-based firm Hyman, Phelps & McNamara, said in an interview. “The FDA doesn’t want to be surprised, especially if you’re a very prominent company like Apple.”

Jennifer Haliski, a spokeswoman for the FDA, declined to comment on the meeting.

5. Privacy 'compulsions'

Last fall, Apple executives also met with at least two FTC commissioners and chairwoman Edith Ramirez to demonstrate the Apple Watch and Health app, according to people familiar with the matter.

Among the issues discussed was how Apple’s products collect and use consumer health data, the people said. The company expressed a commitment to protecting consumer data and explained that under its terms of service, data collected by the watch and health apps can’t be shared with third-party data brokers, one of the people said. Cottle, Tribble and Apple’s director of privacy, Jane Horvath, met with agency officials on September 17, according to visitor logs.

Apple officials rarely visited the FTC in recent years, unlike those from companies such as Facebook Inc., which had more frequent meetings, according to a former agency official.

Justin Cole, a spokesman at the FTC, said the agency regularly meets with a range of industry representatives and consumer advocates to “help deepen agency understanding on a wide spectrum of issues.” 

The proactive approach may be working. Ramirez, in an October speech, praised Apple for touting “as a selling point that they don’t share certain data from connected devices.” She added that “steps like this are, I believe, critical to fostering consumer trust. And they are good business too.”

6. iCloud scandal

Apple is trying to be more proactive to quell concerns. After the company unveiled Apple Watch and a digital payment system called Apple Pay in September, Senator Claire McCaskill, a Democrat from Missouri, and now-retired senator Jay Rockefeller, a Democrat from West Virginia, sent a letter to Cook seeking more information about how Apple would keep users’ data safe.

It was one of several inquiries that the company got at the time, following nude pictures of celebrities such as model Kate Upton being released online that were stolen from Apple’s iCloud accounts.

“The recent data security incidents that have affected major corporations, including Apple, demonstrate the need for such federal legislation,” the senators’ letter said.

7. Proactive briefings

Apple sent executives to brief staff members of the House Energy and Commerce Committee, which is led by Fred Upton, Kate’s uncle, in September about its new products and included a discussion about Apple’s smartwatch, mobile payment system and health care initiatives, according to a person familiar with the briefing.

Upton’s committee didn’t respond last week to a request for comment.

“The big question is: Is Apple finally getting it?” said Chris Jones, founder of CapitolWorks, a lobbyist recruiting firm. “Yes, they are. They’re understanding there needs to be a proactive outreach on Capitol Hill and a proactive outreach to the administration."

Apple accused of 'bait-and-switch' by bankrupt supplier

Apple Inc pulled a "bait and switch" move to force GT Advanced Technologies into a money-losing deal to supply the iPhone maker with sapphire, according to an affidavit by a senior executive at the company. 

In documents unsealed on Friday by a US Bankruptcy Court in Springfield, Massachusetts, GT Advanced chief operating officer Daniel Squiller says Apple offered what would have been GT Advanced's largest sale ever and then changed the terms of the agreement after it was too late for the smaller company to pursue other opportunities. 

GT Advanced, a maker of sapphire furnaces that supplied sapphire material to Apple for its smartphone screens, filed for Chapter 11 protection on October 6 and refused to publicly explain why it had imploded, citing confidentiality clauses in its Apple contracts. 

The two companies later reached a deal to part ways and allow GT Advanced to proceed with its bankruptcy, but Judge Henry Boroff denied requests by the companies to keep some of the documents in the case under seal. 

In a deal struck last year, GT Advanced outfitted a plant owned by Apple in Mesa, Arizona with furnaces that it would use to make scratch-resistant sapphire exclusively for Apple. 

"With a classic bait-and-switch strategy, Apple presented GTAT with an onerous and massively one-sided deal in the fall of 2013," Squiller wrote.

In another document unsealed on Friday, Apple called GT Advanced's accusations "scandalous and defamatory". 

At the start of negotiations, Apple offered to buy 2,600 sapphire growing furnaces from GT Advanced, which GT Advanced would operate on behalf of Apple, the "ultimate technology client to land," according to Squiller.

"In hindsight, it is unclear whether Apple even intended to purchase any sapphire furnaces from GTAT," he wrote. 

But after months of hard negotiating, Apple offered a deal under which it would shift away economic risk by lending GT Advanced the money to build the furnaces and grow the sapphire, and then sell it exclusively to Apple for less than market value, Squiller wrote. 

GT Advanced was effectively forced to accept the unfair deal in October 2013 because its intense negotiations with Apple had left it unable to pursue deals with other smartphone makers, he said. 

"These statements are intended to vilify Apple and portray Apple as a coercive bully," Apple said in its separate filing. 

It said GT Advanced was eager to make a deal, and pointed to a jump of over 20% in the shares of GT Advanced after it was unveiled. 

In November of last year, GT Advanced chief executive officer Tom Gutierrez told analysts on a quarterly conference call that the company was "very pleased" to have made the agreement to supply sapphire to Apple.

Apple CEO Tim Cook's open letter to users

In the wake of the recent iCloud celebrity 'hacking' scandal, tech giant Apple is putting greater emphasis on user privacy and data security. The company has published an open letter from CEO Tim Cook on its website explaining Apple's privacy policy. 

The letter while dwelling on Apple's deep commitment to privacy and the steps the company takes to secure it also takes a dig at the business models of internet giants like Google and Facebook. 

Below is the text of the letter as it appeared on Apple's website. 

At Apple, your trust means everything to us. That's why we respect your privacy and protect it with strong encryption, plus strict policies that govern how all data is handled. 

Security and privacy are fundamental to the design of all our hardware, software, and services, including iCloud and new services like Apple Pay. And we continue to make improvements. Two-step verification, which we encourage all our customers to use, in addition to protecting your Apple ID account information, now also protects all of the data you store and keep up to date with iCloud. 

We believe in telling you up front exactly what's going to happen to your personal information and asking for your permission before you share it with us. And if you change your mind later, we make it easy to stop sharing with us. Every Apple product is designed around those principles. When we do ask to use your data, it's to provide you with a better user experience. 

We're publishing this website to explain how we handle your personal information, what we do and don't collect, and why. We're going to make sure you get updates here about privacy at Apple at least once a year and whenever there are significant changes to our policies. 

A few years ago, users of Internet services began to realize that when an online service is free, you're not the customer. You're the product. But at Apple, we believe a great customer experience shouldn't come at the expense of your privacy. 

Our business model is very straightforward: We sell great products. We don't build a profile based on your email content or web browsing habits to sell to advertisers. We don't "monetize" the information you store on your iPhone or in iCloud. And we don't read your email or your messages to get information to market to you. Our software and services are designed to make our devices better. Plain and simple. 

One very small part of our business does serve advertisers, and that's iAd. We built an advertising network because some app developers depend on that business model, and we want to support them as well as a free iTunes Radio service. iAd sticks to the same privacy policy that applies to every other Apple product. It doesn't get data from Health and HomeKit, Maps, Siri, iMessage, your call history, or any iCloud service like Contacts or Mail, and you can always just opt out altogether. 

Finally, I want to be absolutely clear that we have never worked with any government agency from any country to create a backdoor in any of our products or services. We have also never allowed access to our servers. And we never will. 

Our commitment to protecting your privacy comes from a deep respect for our customers. We know that your trust doesn't come easy. That's why we have and always will work as hard as we can to earn and keep it. 

Tim

Apple is back, better than ever

Four times before in its history, at media events planned with military precision, Apple introduced a new invention that radically altered how the technology industry conceived of its future. The company hopes it did that again for a fifth time on Tuesday by unveiling the Apple Watch, a stylish smartwatch that is the company's first advance into a new product category since it created the iPad in 2010. 

Yet in some ways, the most consequential headline at the event went unannounced. The biggest news was about the old Apple: It's back, and it's more capable than ever. 

Any question about how well Tim Cook, Apple's chief executive, is managing the reins of the world's most valuable company will most likely be put to rest after Tuesday's profusion of product announcements at the Flint Center in Cupertino, California, where Steve Jobs first showed off the Macintosh in 1984. 

The announcements included two large-screen iPhones and a new electronic payment system that allows users to make purchases at stores through their phones. 

Apple, under Cook, looks every bit as daunting to rivals as it did under its iconic co-founder, Jobs. 

Both the new watch and the payment system, Apple Pay, appear to be of a level of polish that suggests the company still possesses the capacity to invent new products and services that can define an entire industry. And the two iPhones will most likely prove that Cook can still do what has long been Apple's bread and butter: Incrementally improving its top-performing products in ways that keep them just ahead of rivals. 

But more important is that Apple, under Cook, is operating at a scale it never achieved under Jobs. It is creating more new hardware and software, and tying all of its products together more seamlessly than most of its rivals. In responding to customer demand to offer bigger phones, and in granting outside developers deeper access to its mobile operating system, Cook has also signaled a slightly more open philosophy at Apple. The firm is not as ideologically rigid about how people use its products as it once was. 

It remains to be seen whether Apple can make good on all of the promises it made on Tuesday. Its new phones will be out this month, and its payment system will be operational in October. The Apple Watch will not be in stores until next year. 

After a hack last month that resulted in the leak of several celebrities' private photos from their online Apple accounts, the company's push to persuade people to use its devices to engage in commerce and to track their health may face skepticism. 

Price is also a persistent question: From its phones to its new watch, which starts at $349, Apple is selling a digital lifestyle at a cost that exceeds that of many of its rivals. 

Yet many users won't balk at paying for the convenience and prestige of using Apple's products.





Apple set out to solve two problems with its media event, the importance of one of which Cook had been telegraphing in earnings calls for years. 

First, it needed to make something — anything — new. One persistent criticism of Cook is that while he has been an able steward of Apple's finances, he lacks the capacity to bring forth the kind of industry-defining new products for which Jobs was famous. Cook is "a master of spreadsheets, not innovation," as Yukari Iwatani Kane, a former reporter for The Wall Street Journal, put it earlier this year in a book that became the high-water mark for Apple criticism. 

Never mind that this assessment of Cook often rang hollow, and seemed to deeply misunderstand how Apple operates. Though it has cultivated a reputation for frequently reinventing everything, what's most remarkable about Apple's history isn't how many totally novel devices it has released, but how few. 

Since the 1980s, Apple has invented four new computing platforms — the Mac, the iPod, the iPhone, and the iPad — that have been revolutionary. But in each of the intervening periods between new platforms, Apple looked remarkably similar to the company under Cook. Each year it put out slight, useful updates to existing products, features that were cheered by customers while roundly jeered by the tech press as yet more unimpressive incrementalism. 

The ultimate success of Apple's smartwatch, and its lasting utility to users, won't be known for months or years to come. But its introduction ought to squash the charge that the company - and Cook - can't invent anything new. 

At first blush, the devices look to be following in the footsteps of the original iPhone or iPad, which were not brand-new ideas but were just superior versions of what other products already did. 

As Cook described it, the smartwatch will perform functions similar to those of the many wrist devices that Apple's competitors, including Samsung, have released over the last few years.



At its most basic, the Apple Watch is a quick interface to your phone, allowing you to respond to messages or look up directions at a glance. It also tracks your activity, allowing you to monitor your workouts and daily level of activity.

Still — at least as Apple demonstrated it — what the watch does, it does better than its competitors, with more impressive hardware and a software interface that looks easier to use. The device is stunning to look at, with a variety of faces and watchbands that bear more in common with luxury jewelry than with gadgets. That's far more than can be said of many ungainly watches and fitness bands that many other companies have put out. 

Left unstated was any word on battery life, which has been a major shortcoming for other smartwatches. If it needs to be charged daily, or worse, in the middle of a day, users may resist. 

Apple's second aim at its media event was to shore up a persistent weakness in its iPhone lineup. While it commands the vast majority of the profits in the smartphone industry, Apple, in the last few years, has been losing some high-end business to rivals with bigger devices, especially its main competitor, Samsung, which has long been the leading purveyor of giant phones. 

Apple had historically held out against the wave of giant phones. Jobs called them "Hummers," referring to the large sport utility vehicle, and insisted that "you can't get your hand around" large phones. 

Now, though humanity has not been granted a new set of monster paws, Apple has relented. Its new phones are both wider and taller than any previous iPhones. The larger 5.5-inch model is positively gigantic, a device on which one would look fairly foolish trying to make a phone call. 

You can call this Apple's capitulation to market demand. You can also call it savvy. In one stroke, Apple has undercut one of the main reasons for Samsung's ascendance at the high end of the smartphone market. That's not a bad outcome for a device that was almost an afterthought at its launch event.