MULTINATIONALS: Foreign Techs Escape Annual Consumer Day Assault

By newsdoug on March 20, 2015

Bottom line: The exclusion of foreign tech giants from criticism in a prominent annual consumer rights show is unrelated to the broader bias they are facing from Beijing, and they will continue to come under fire for the next 1-2 years.

Foreign techs not targeted on annual consumer rights show

Top China officials at global tech giants like Apple (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN) are probably breathing a sigh of relief today, after their companies weren’t targeted for attacks in an annual consumer rights show that has become a famous for creating public relations nightmares for its victims. Instead, this year’s edition of the investigative Consumer Rights Day program on China Central Television (CCTV), broadcast on March 15 each year, singled out China’s 3 major telcos for criticism in the tech sector.

Multinationals weren’t completely spared from attack, with a number of car makers including Vokswagen (Frankfurt: VOWG), Nissan (Tokyo: 7201) and Daimler (Frankfurt: DAIGn) coming under fire for things like abusive after-sales practices. (English article) But for now at least, China’s central media seem to be backing away from new attacks on foreign tech companies, following recent criticism that Beijing has unfairly targeted such firms for everything from monopolistic practices to posing national security risks over the last year.

March 15, known as annual Consumer Rights Day, has become a feared date for both domestic and international consumer goods makers who worry that their products and brands will be featured and criticized on the annual CCTV program. Apple took a huge hit when it was featured on the show 2 years ago for shortcomings in some of its after-sales services, even though the actual problems were relatively minor and only affected a small number of people.

But the reality of the situation didn’t matter much, since China’s state-run media machine often takes its cues from CCTV and many other outlets followed with their own similar critical reports. The firestorm culminated with a criticism of Apple for its arrogance by the People’s Daily, the official newspaper of the Communist Party, and Apple ultimately issued a rare apology to the Chinese people for its after-sales shortcomings. Last year Japan’s Nikon (Tokyo: 7731) also came under fire after CCTV exposed the company for resisting refunds for customers who bought faulty cameras.

This year the foreign tech companies got a break, with no major names appearing in the annual show broadcast over the weekend. Instead, it was China’s 3 major telcos that got singled out for criticism in the tech realm, accused of abusive practices like harassing sales calls and marketing products outside of their core telecoms business. (Chinese article) This kind of sales practice is quite common among China’s telcos, which are scrambling for business as the market for their traditional telecoms services becomes saturated after years of breakneck growth.

The sparing of foreign tech firms from this year’s list of victims comes after a nonstop assault on some of the biggest names over the past year. Cellphone chip giant Qualcomm (Nasdaq: QCOM) was under investigation for more than year for anti-competitive practices, resulting in a recent fine of nearly $1 billion. (previous post) Software leader Microsoft (Nasdaq: MSFT) is also currently under another antitrust investigation.

Another group of hardware makers, led by networking equipment giant Cisco (Nasdaq: CSCO) and IT services provider IBM (NYSE: IBM), may also be forced to reveal confidential information like source codes and user data, under a new national security law being vetted by Beijing. The sudden rash of actions against them has led many of the tech firms to complain that China is unfairly attacking foreign companies for simply being too successful.

Against that backdrop, it’s fair to ask if the exclusion of foreign tech names from the latest Consumer Rights Day show could perhaps indicate a change in stance from Beijing, since big media like CCTV often take their cues from the central government. My answer would be that CCTV’s decision is mostly unrelated to the central government’s other moves, since most of the firms targeted on antitrust and national security grounds aren’t really big consumer names. At the end of the day the foreign tech firms must certainly be happy at finally getting even this small respite, though the various central government campaigns against them aren’t likely to ease for at least the next year or two.