Was Your IPod Made in a Sweatshop?

No, says an Apple subcontractor. And its lawsuit against two Chinese journalists is a stinker

Quiz: what’s the biggest lie in China?

The Great Wall can be seen from the moon.
Mao Zedong was only 30% wrong in his rule
Workers at a factory making IPods are forced to toil too hard

From a strictly legal point of view, the answer is #3. The mainland subsidiary of a very litigious Taiwanese company, Hon Hai Precision Industry Co., Ltd. (Foxconn), recently sued two journalists in Shenzhen for 30 million yuan for reporting in the China Business News that workers assembling IPods in its Shenzhen factory are forced to work overtime. It was probably the largest defamation suit ever filed in China.

(This week, however, facing unexpected flak from the Chinese media and Reporters Without Borders, Foxconn announced that it was cutting its demand for compensation to 1 yuan. )
The case has become a cause celebre, smudging the acrylic reputation of Apple, highlighting the abusive side of China’s manufacturing sector, and also showing how Chinese journalists have more to worry about than sledgehammer pressure from the Communist Party. Both the reporter who wrote the story, Wang You, and her editor, Weng Bao, had their personal assets frozen since July 15 as a result of the suit. Journalists in China know how to do their job in a way that satisfies readers and avoids angering their government. But big defamation suits quickly accepted by local courts are a whole new shifting of the goal posts.

“This is a 9/11 for the Chinese media,” said editor Weng Bao in a phone interview. Last week, Weng published an article with the title: “This is the Most Difficult Moment in my Last Ten Years in the Media.”

In support of the two journalists, Chinese media types are criticizing the Shenzhen Intermediate People’s Court. Ho Li, editor-in-chief of the Economic Observer, posted a message at the two journalists’ blog saying: “What pissed me off is the Shenzhen court … All the reports of Chinese reporters have to secure the approval of different bureaucratic levels. Basically, reporters don’t have the authority to make the decision on what to publish or not.” In other words: if the communist bureaucracy is okay with a story, what’s the court’s problem?

The IPod story was first reported in London’s The Mail on Sunday in June. Its report said that workers at Foxconn’s Shenzhen factory toil for 15 hours a day, with a salary of £27 a month, living in dormitories housing 100 people.

In response to that report, Apple initiated an investigation, interviewed over 100 employees, and eventually concluded in a report released in mid-August that the working hours exceeded its standard 60 hour-per week work time and that workers often had to work six-day weeks. Apple admitted the hours were “excessive.” Jill Tan, communication manager of Apple Asia, said: “Our investigation found that our top IPod manufacturing partner, Foxconn, complies with our Supplier Code of Conduct in most areas and is taking steps to correct the violations we found.”

Foxconn, however, defended its policies and took a dig at the British media. Spokesman Edmund Ding was quoted by Taiwan’s media as saying: “Those having some fundamental professionalism would know it is impossible for this kind of thing to happen at Foxconn. Mail on Sunday is a tabloid in Britain. Key foreign media who follows the code of professionalism didn’t publish this.”

But then Shanghai’s China Business News, one of the country’s best financial papers, followed up with a story on poor working conditions in the IPod factory. In her report, Wang You interviewed an employee who claimed he witnessed three female employees who fainted from working overtime and having to stand for 12 hours. Foxconn stated in its indictment that the report was inaccurate and defamatory. The company filed a lawsuit on July 3 and the Shenzhen Intermediate People’s Court approved its request to freeze the two reporters’ assets.

The publication and two reporters chose to remain silent until August 28. Reporters and publications around China, including state-run-media Xinhua and People’s Daily, quickly endorsed the two reporters and condemned Foxconn’s move.

“We have adequate evidence to support our report,” Weng Bao said. Prepared for a battle, Weng plans to investigate Foxconn’s tax record, and to examine the company’s contribution to Longhua’s environment and social development.

In Taiwan, Foxconn defended itself earlier this week by insisting the incident is a “pure legal case” and argued that “what we are pursuing is to protect the company’s reputation and preserve the dignity of Chinese. Any compensation is simply for appearance’s sake. We will donate the compensation to charitable institutions, no matter how much the cost.” On Wednesday, however, the company dropped its demand for damages to 1 yuan. Earlier, Reporters Without Borders sent an open letter to Apple's chief executive, Steve Jobs, urging him to persuade Foxconn to drop its case against the journalists.

“This is a victory of all Chinese media workers,” Weng was quoted by his own paper.
Foxconn, a Taiwan-based company manufacturing mobile phones for Motorola, IPods for Apple, and Sony PS2s, is well known for its litigiousness. In May 2004, Foxconn sought an order from the Taipei District Court to freeze the assets of Taiwan’s Commercial Times reporter Joyce Kung, who was accused of revealing Hon Hai’s quotes for connectors at US$7 apiece. The connectors were to be used in a yet-to-be-launched Intel computer platform. Foxconn viewed the story as detrimental to its marketing strategy. It demanded NT$ 30 million in compensation
Foxconn eventually dropped the case after the Association of Taiwan Journalists initiated a petition for the collection of 10,000 signatures and a call on international electronics vendors—including Dell, Sony, Nokia Oyj and Hewlett-Packard—to stop giving orders to Foxconn.

“I think Foxconn realized its tricky approach is not working on the Chinese Business News, as the paper didn’t act as other publications would in abandoning its reporters,” says He Qinglian, U.S-based economist who published the book Media Control in China in 2004, “However, because the Chinese government doesn’t allow journalists to form any professional association, this temperately solidarity can’t remain as a consistent social pressure to effectively rival with the government and enterprises. Therefore, there is still a long way to go in protecting journalists’ rights in China.”

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