Apple products are everywhere in Brussels. Now try to find an Apple lobbyist in the European capital.
Company executives rarely visit the European Parliament or Commission. Apple spends a fraction of what its biggest rivals do on lobbying. It doesn’t throws parties for politicians and Eurocrats; its biggest event in Brussels was this summer’s opening of a flagship retail store. It only recently hired a top lawyer and got swankier digs.
At all signs of political trouble in the last few years, Apple caved and changed its ways, shunning the confrontational approach with European regulators taken by Microsoft, Uber and Google, all three with limited success.
Soon Apple will find out if its different political strokes work any better.
By Christmas, the Commission is expected to weigh in on the company’s sweetheart tax deal from Ireland, where it located its European headquarters. If it rules that Apple’s 2 percent effective tax rate amounted to illegal state aid, the company could get hit with a maximum bill for back taxes as high as €17 billion.
Antitrust fines issued by Brussels — such as the €116 million slapped on eight suppliers of CD and DVD optical disk drives last month for participating in a worldwide cartel — are “chicken feed compared to the numbers we hear,” said a lawyer involved in one of the Commission’s tax probes. (The Commission is also investigating Amazon’s tax deal with Luxembourg, and recently sent back tax bills of between €20 and €30 million each to Starbucks and Fiat.)
The tax case is the biggest political test to date for a Silicon Valley icon that has kept at a safe distance from politics in both the EU and the U.S..
“In terms of reputation, this is obviously very damaging to Apple,” said Tove Ryding, tax justice coordinator at the European Network on Debt and Development. “They have become one of the most commonly used examples of a corporate tax dodger, and with growing public anger towards tax dodgers, this could cost them.”
No ‘phalanx of lawyers’
So far, the company’s political strategy has worked in Brussels. Apple escaped at least half a dozen scrapes with the Commission. Each investigation ended either without adverse findings or in settlements.
Apple employs the full-time equivalent of just 2.2 lobbyists in Brussels and spent a mere €770,000 for the 12 months to September 2014, the most recent figures available. By contrast Microsoft, the EU tech scene’s biggest spender, shelled out €4.5 million and had 7.2 full-time staff.
“Apple’s really focused on their new products and services, they’re the stars and nothing else shall be more prominent,” said James Waterworth, the European vice president of tech industry lobbying outfit CCIA, of which Apple is not a member.
“Apple has a culture of finding the best way it can do things in compliance with whatever law happens to come its way,” said a person with close knowledge of Apple’s government relations, who asked to remain anonymous as he is still involved with the company. “They’ll say: ‘Tell us what the law is, and we’ll work out the best way to build the business model to comply with the law.’ They won’t say: ‘Let’s change the law so we can have this model.’”
Apple declined to comment on the record for this story.
When the Commission took issue with the company’s iTunes U.K. pricing in 2007, it changed its practices. When the Commission objected to its warranty clauses in 2010, Apple changed them. They also settled a case on e-book pricing after the Commission sent a charge sheet in 2011 to Apple and a group of publishers alleging they may have colluded to limit retail price competition for e-books. They changed their rules for app developers when the Commission slammed them in 2010.
“They didn’t send in a phalanx of lawyers and go to war with the European Commission,” said an Apple insider. “Apple is not trying to change the world in its image.”
Andreas Schwab, a German MEP from the European People’s Party, agrees.
“The people from Apple give the message that they are ready and able to solve problems, if there are some of them,” he said.
“Compare the visits of the CEOs of Apple and Google to Europe in recent times. The CEO of Apple said he wants to protect privacy and data and that he can easily live with the EU data protection approach. The Google CEO was much more, how shall I say, outspoken, with politicians.”
Yet Apple is tweaking its political strategy, looking for ways to protect itself.
Take the hiring of Per Hellstrom. Before he joined Apple last year, the Swedish lawyer was head of the unit that oversees energy and environment mergers at the Commission. Before that, as head of its antitrust unit dealing with the tech industry, he was pivotal in the Commission’s antitrust case against Microsoft.
His current title: Apple senior director for competition law and policy and government and regulatory affairs.
His move to Apple was controversial. Some questioned the Commission’s decision to allow him to work at Apple while on sabbatical, before he made the job change permanent. He joined Apple while the Commission was in the midst of its investigation into Apple’s tax arrangements in Ireland. That raised eyebrows too.
Although Hellstrom pledged not to engage in any lobbying that could lead to a possible conflict of interest with the Commission, he brings an intimate knowledge of its catacombs.
Soft lobbying power
While Facebook and Google tout initiatives to get broader Internet access for the third world, environmental issues are Apple’s feel-good, soft power push. Its sustainability program is one of the only non-core business programs Apple discusses publicly.
Lisa Jackson is Apple’s high-profile vice president of environment, policy and social initiatives, hired in 2013. Before taking on that role, she was hand picked by President Barack Obama to head the U.S. Environmental Protection Agency. In September, Jackson met with Karmenu Vella, the European commissioner for the environment, and Ann Mettler, head of the European Political Strategy Center, to talk sustainable and social initiatives.
For everything else, the grubbier stuff of political influence, there are industry associations.
Tech companies have a long history of lobbying-by-proxy, and Apple is no exception. It is a board member of EDiMA, the trade association representing online platforms, an active member of BSA, the software alliance, and DigitalEurope, among others.
“They believe it’s more productive working with trade associations,” said Siada El Ramly, the director-general of EDiMA. “They think there’s strength working through trade representatives as opposed to just putting the company’s perspective, which could be a narrow positioning.”
Apple may not come up on commissioners’ meeting calendars as often as rivals, but that doesn’t mean it isn’t in the room.
“They always try to take part when there are trade association delegations to institutions, so they do have the contacts,” said El Ramly.
And while many say Apple is discreet in its lobbying, that’s not always the case.
Despite his disdain for regulators, Apple co-founder Steve Jobs was not above courting the EU. He was close with Neelie Kroes during her terms as first a competition commissioner and later a digital one. Kroes notably hob-nobbed with Jobs and rock star Mick Jagger at an online commerce roundtable in 2008, sought Jobs’ council on the EU’s digital agenda in 2011, and was friendly with him until his death later that year, attending his memorial service.
From Washington to Brussels
Apple is built on the co-cults of Steve Jobs and California. While Jobs has now been gone for almost half a decade, California is still king.
The company has no European CEO. Its EU operations are structured functionally, with sales, marketing and government affairs teams taking orders direct from Silicon Valley.
“Apple employees here aren’t given the freedom employees from other companies are,” said a tech lobbyist who asked to remain anonymous as he is still in the industry. “Their approach has always been if there’s anything you need, go to HQ.”
Under new CEO Tim Cook, the reins on Apple’s government relations are loosening, and that’s slowly happening in Brussels too.
“There’s a ‘sorry, we can only talk about our products’ legacy of the Steve Jobs years, but I think that it has started to change,” said Jacques Lafitte, founder of Avisa, a consultancy. “This is why they hire people the caliber of Per Hellstrom. Like all other discreet companies, the transition will probably get a boost if and when they receive a negative competition decision or if an EU regulation hits them particularly hard.”
Earlier this year, the company moved from a far-flung office in the Buro & Design Center, near the Brussels Atomium, to the heart of the European quarter, on Rue de la Science.
“Their last office was more like a research office. It could have been any industry, any company, you wouldn’t know the difference,” said EDiMA’s El Ramly. “Now you can see it is an Apple office. They have photos of devices and products. It has a more open outlook.”
Nicholas Hirst contributed to this story.