Opinion: How Microsoft beat Apple in the war on warranties

Given the opaque nature of government action in China, it is improbable that any of these theories will be proven in the near future. Regardless, the 2013 war on warranties was not devoid of teachable moments.

Why did Apple seem to have a much rougher time than Microsoft? This was mostly due to Apple's being the first target; by the time sights were trained on Microsoft, the media, consumer groups and the public had already expended a great deal of energy. In addition to having this fortunate position, Microsoft also benefitted from a fast response to the allegations, which prevented the critics from building up an organised campaign. In contrast, Apple issued the Cook apology two weeks after the initial CCTV broadcast.

But PR does not trump compliance in China, does it? Surely a foreign company that keeps its legal house in order has little to worry from the occasional media witch hunt? Given the experiences of other notable foreign investors in China, including KFC, Carrefour, McDonald's and Wal-Mart, the answer must be a hesitant “sort of”.

Even the best compliance record will not save a foreign investor if it becomes a target of China's government and state-run media, and once the red flag is waved, journalists in the PRC do seem to go after foreign multinationals with relish. Moreover, if the allegations charge that the foreign company is treating Chinese consumers shabbily as compared to foreign customers, the double standard rhetoric can become heated, as both Apple and Nike have recently experienced.

As intense as these public campaigns can become, however, one should not view China legal compliance with a wink and a shrug. On the contrary, without compliance, even the best PR campaign does little more than blow smoke, all the while desperately hoping no one turns on a fan and clears the air.

A good analogy that every China IP lawyer will appreciate is the decision to file trademarks. Many critics of China's IP record downplay the value of filing marks, arguing that enforcement is infamously difficult and by no means certain. But however tough it is to protect IP in China, it is downright impossible, with a few exceptions, to fight infringers if marks are never filed in the first place.

Similarly, foreign companies that maintain the highest standards when it comes to complying with local law put themselves in the best position to fight back against criticism. Microsoft's response to the warranty allegations was a confident statement that began with the words “Consistent with Chinese law . . .” and referenced consumer law and statutory obligations. In contrast, the Cook apology was all about policy and customer relations, with no comment about whether Apple was or was not in compliance with China law.

What have we learned from the war on warranties? Some will say that the episode simply reinforces the notion that foreign companies are treated unfairly in China, targeted by media campaigns and heightened regulatory attention. But this is not actionable intelligence, however valid the point may be. A better lesson for foreign companies is that even under optimal conditions, China is a tough place to do business; those that maintain squeaky clean compliance programmes are in the best position to respond when the pitchforks and torches come out.

Stan Abrams, Bentley Systems, Beijing