August 30, 2006
Yet another defamation lawsuit against the media by offended businesses
Businesses in China have discovered that defamation litigation can be an effective way to retaliate against critical media coverage and (they hope) deter future bad press. (For an informed discussion that is the product of extensive research, see pp. 68-72 of Benjamin Liebman, Innovation Through Intimidation: An Empirical Account of Defamation Litigation in China, Harv. Int'l Law Journal, vol. 47, no. 1 (2006): 33-109.) The latest example is Hongfujin Precision Industry, the Shenzhen subsidiary of Taiwan-based Foxconn, which has sued two Chinese journalists (not their newspaper) for unfavorable reporting about labor rights violations. (See also the China Labour Bulletin story here.) The scandal in this case is not that Hongfujin has sued - for all I know, it may have a case - but that the Shenzhen Intermediate Court, apparently without notice to the defendants, has frozen all their assets, including residences, automobiles, and bank accounts. (I suspect they still have use of the residence and probably of the autos.)
The Shenzhen courts have already established for themselves a reputation for being sympathetic to local businesses in this kind of case - in the Shenzhen Fountain case, the plaintiff, Shenzhen Fountain Corporation, successfully sued Caijing magazine after the latter published a report questioning its accounting practices. (For details, see pp. 20-22 of Zhiwu Chen, Press Freedom and Economic Development (2005).) Shenzhen Fountain, by the way, was at the time and perhaps still is owned by Deng Xiaoping's niece; she and the company are discussed in this press report.
Because the plaintiff firm makes iPods for the US and other markets, Apple Corp. is in an awkward position and is "working behind the scenes to help resolve the issue", according to its spokeswoman as quoted in the South China Morning Post. The latest news on this is an unconfirmed report that the plaintiff, which had already promised to donate any proceeds to charity, has just modified its compensation request to a symbolic one yuan.
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This is turning into a massive PR disaster and it really makes one wonder if the attorneys involved did not at least raise the possibility of this occuring.
Posted by: China Law Blog | Aug 31, 2006 9:01:31 AM
I don't doubt that if Apple's attorneys had been consulted, they would have advised against the suit. But Apple does not control the plaintiff. Instead, the plaintiff and its parent likely looked to other similar lawsuits in China - for example, the ones brought by Shenzhen Fountain and Haier against their critics - and concluded, not unreasonably, that they probably were reasonably effective in intimidating critics with a very modest PR cost.
Posted by: Don Clarke | Aug 31, 2006 3:07:42 PM
I think you are right on all counts. Poor Apple. I could not understand why Apple did not just start manufacturing directly in China, but I met someone on an airplane who knows the industry far better than I do and he insists that FoxConn (and maybe a few other Taiwanese companies) are so much better at this that it would not even be economicall.
Posted by: China Law Blog | Sep 2, 2006 10:50:28 AM