It has been a rough go of late for the Cupertino, Calif.-based company. Apple's lone-wolf strategy backfires

Apple Inc. is a synonym for independence, hipness and originality — but recent setbacks may finally force the icon to rethink its us vs. them mentality when it comes to big battles in Washington and Silicon Valley.

The company marches to its own iTunes, spending little on lobbying, rarely joining trade associations and, in a pattern that’s become more pronounced this summer, refusing to negotiate or settle in many lawsuits.


Experts say Apple’s tried-and-true approach is starting to backfire, as the company has already taken at least one big hit in a high-profile e-books trial. A recent landmark D.C. appearance by CEO Tim Cook may reflect a new reality for Apple: that direct engagement with lawmakers, regulators and rivals is more effective than trying to remain above it all.

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“It’s inevitable,” said a top Washington consultant who works with major tech brands. “Everybody gets a shot at being a fair-haired boy and that can keep the regulators away for a while. But nobody stays favored forever. That’s why you need friends.”

An Apple spokeswoman declined to comment on the record for this story, referring instead to past public statements by Cook and others.

In general, the company’s public remarks can be summed up with a blanket defense of its practices and an insistence that it won’t settle cases in which it considers itself in the right. Apple also rarely brings lawsuits it doesn’t intend to push all the way to trial.

But it has been a rough go of late for the Cupertino, Calif.-based company. Three weeks ago, Apple was found by a federal judge to have orchestrated an e-books price-fixing scheme. The five other book publishers involved settled with the Justice Department, but Apple refused. The company lost at trial and has vowed to appeal.

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Apple also appears headed to court in a class-action lawsuit over Silicon Valley hiring practices. Two other co-defendants recently settled.

And later this week, Apple and Samsung expect to learn who has won a patent dispute before the U.S. International Trade Commission. The outlook for Apple is uncertain, given that ITC investigators have already chastised the company for its unwillingness to negotiate a settlement with the South Korean rival.

At his May 21 testimony in the Senate — a moment necessitated by a harsh congressional report about Apple’s offshore tax-avoidance strategies — Cook acknowledged the company’s disengagement from the levers of power.

“While we have never had a large presence in Washington, we are deeply committed to our country’s welfare,” Cook told the Senate Permanent Subcommittee on Investigations in the only Hill testimony by an Apple chief executive in the company’s 37-year history. “We believe great public policy can be a catalyst for a better society and a stronger economy.”

The very notion that Cook felt he needed to do what late founder Steve Jobs never did — publicly mollify Congress and, by extension, the American public — showed that the worm may have turned for Apple.

“They were asked many times to come to the Hill and have a conversation, they were asked to testify at hearings — and they wouldn’t even return phone calls,” recalled Christal Sheppard, chief counsel for patent and trademarks for the House Judiciary Committee until 2010. “It proved to be impossible to get them to come to the Hill to testify.”

Corporate reputation consultant Jonathan Bernstein said it hurts Apple to have “the perception of being a go-it-alone, arrogant corporation.”

“They’re going to pay a price in decisions made against them, whether it’s by litigators or prosecutors or the consumer,” he said.

A more standoffish approach worked well when the company was viewed as a renegade, outsider brand determined not to be tamed or forced into conventional business practices. But now that Apple is among the world’s largest, most valuable corporations and a mainstream fixture, its allergy to all sorts of public interaction comes off badly to many.

In the e-books case, Apple stood its ground and refused to settle with the government even after every co-defendant had done so. A judge found that the company had orchestrated a plan with five publishing houses to set a floor on the price of books sold in the iBooks store created for the iPad’s debut. The judge said Apple had done so to force rival e-book seller Amazon not to undercut the market and that doing so kept prices higher for customers. A hearing on a penalty in the case has yet to be scheduled, but Apple has said it will appeal regardless.

Sheppard and others believe that if Apple had a more robust lobbying shop in Washington and had tried to explain its rationale to regulators, the government might have stood down. At least one powerful lawmaker, Sen. Chuck Schumer (D-N.Y.), had called on Justice not to pursue the case — but that was the extent of lawmaker influence.

“There are reasons why companies spend lots of money to educate Hill staffers and others about their position,” Sheppard said. “Having these conversations before you’re forced to have them more publicly is good. Apple doesn’t believe that and doesn’t care enough to do it. That seems like a conscious decision.”

Dan Crane, a University of Michigan law professor focusing on antitrust issues, agreed.

“Politics is always in the background of these big cases,” Crane said. “In theory, the Department of Justice is supposed to be the law enforcement arm and separate from the White House, but just look at the amount of money being invested in Washington by Google, Facebook, Amazon, Microsoft, Intel. There’s a game to be played there that’s important. … Maybe because of this, Apple will realize the need to revamp their lobbying strategy and be a bit more calculating in that way.”

So far, there’s little evidence of that. The company spent less than $2 million on lobbying in 2012 — less than in 2011 — despite its being an election year. By contrast, Google spent $18.2 million, Microsoft spent $8.1 million and even Facebook laid out $4 million. After the first quarter of 2013, Apple’s lobbying expenditure was $720,000, a fraction of the $4 million by Google or the $2.45 million by Facebook.

Apple also has no political action committee and, as a corporation, made no federal campaign contributions in the 2011-12 cycle.

Meanwhile, the image and fortunes of Apple have tumbled in some eyes. It remains No. 1 on Fortune’s annual list of the world’s most admired companies, but its stock price has lost almost half its value since its all-time highs in September on concerns the company, post-Jobs, has few big-idea innovations left in its quiver.

All of that plays into how Apple fares in the court of public opinion, experts say.

“You have an iconic brand, but it’s slipping away … and so investigations are going to get tougher and more frequent,” predicted corporate image consultant James Lukaszewski, author of the Crisis Guru blog. “They show a lack of respect for what happens in Washington. Being there expresses respect for the process and, as a matter of fact, for the country. If you consciously avoid it, it’s a suicide strategy. Many companies try this, and they have to come back and repair the damage.”

Perhaps the textbook case of that is Microsoft, which spent its earlier years equally obstinate about Washington, regulators and the legal system. Then it spent the 1990s dealing with antitrust probes and lawsuits, culminating in a painful 2002 settlement. Today, the Redmond, Wash.-based company has more than 90 lobbyists registered to make its cases, including 16 on its own staff. Apple has 27, including four in-house.

Apple also holds the tech industry as a whole at arm’s length: It belongs to few if any of the major trade groups that argue the industry’s desires on a wide range of legislative and regulatory topics. That’s why it was news when the company in January did become part of an initiative by the Association for Competitive Technology aimed at keeping developers of smart-phone apps aware of how new legislation affects them.

“From ACT’s perspective, we think it’s a demonstration of how Apple sees positive engagement,” ACT Executive Director Morgan Reed said. “Is that the same as hiring great lobbyists on K Street? Well, it’s not. It’s not the same beast.”

Still, experts and insiders say, something’s got to give. The company’s outreach must mature, said Matt Seeger, dean of the communications school at Wayne State University in Detroit.

“When you have a $400 billion company, it’s hard to claim you’re outside of the system,” he said. “At some point, that image becomes counterproductive. It’s the 60-year-old dean trying to be cool.”