Apple Computer Rescinds Price Hike
By David E. Kalish
AP Business Writer
Friday, Oct. 15, 1999; 7:31 p.m. EDT NEW YORK Bowing to a surge of customer complaints, Apple Computer Inc. backed off Friday from a decision to retroactively raise prices on some computers that customers already had ordered and paid for.
The controversy had threatened to blemish Apple's public image, which has greatly improved over the past year as the company delivered a string of popular new computers and strong financial results.
"This will probably go down in the record books as the most customer-unfriendly act this year, if not the last few years," said Rob Enderle, an analyst at the Giga Information Group, a consulting firm in San Jose, Calif.
"It should be No. 1 on the list of how to send people to other companies."
It's not the first time Apple has faced criticism for its selling practices. On two occasions in the past two years, the computer company has reached settlements with the Federal Trade Commission over charges that it misled customers.
The controversy over computer pricing erupted on Wednesday when the company said it would delay the launch of its fastest G4 model, which sports a 500 megahertz microprocessor, until early next year due to a shortage of the computer chips from Motorola.
Apple also said it would cancel orders from customers who prior to Wednesday had ordered slower models of the G4, but hadn't yet received their machines.
When customers tried to reorder the machines, they learned that the same units would cost up to $350 more. And those who had ordered 500 megahertz machines were offered slower units for the same price.
Web sites quickly filled up with protests from angry customers, and Apple fielded complaints as well.
One customer, Jon-Paul Kelly, a video editor and graphic animator based in San Francisco, had ordered a 500-megahertz machine for $4,750, and was told he could get a 450-megahertz machine instead.
"I was a bit disappointed to find out I had to pay the same price for basically a lesser machine," he said.
By Friday morning, Apple formally reversed its decision. A memo from The Apple Store, Apple's Web site for online sales, informed customers Apple decided to honor the original price "after a good night's sleep and digesting emails from many upset customers." Apple also said it would offer discounts on slower machines to people who had ordered the top model.
"If you ordered a Power Mac G4 configured with a 400 MHz or 450 MHz processor prior to October 13, we will honor the original price quoted for your order," the memo said.
"We apologize for any inconvenience we may have caused you," it added.
Rhona Hamilton, a spokeswoman with Cupertino, Calif.-based Apple, said the pricing reversal also affected retail stores and other online distributors of Apple products.
Apple tried to downplay the impact of the tiff. Mitch Mandich, head of worldwide sales for Apple, said that only a "very small percentage of customers" were demanding the same price.
Customers "are not really pleased with the decision but for the most part they understand," Mandich said. "We're trying to do the best job we can do under the best circumstances."
The incident isn't Apple's first brush with controversial selling behavior. Early this year, Apple, in a settlement with the Federal Trade Commission, agreed to reimburse customers for a $35 fee it charged them for a technical support package that it had said would be free. And in 1997, Apple settled FTC allegations that it overcharged for upgrading some computers.
Lee Peeler, the FTC's associate director for advertising practices, would not comment on whether the FTC was taking a look at this week's incident. Mandich of Apple declined to comment on legal matters.
While many customers were upset by Apple's move to raise prices, some Apple loyalists were not overly fazed by the turn of events.
"If they charged $300 more, I would have absolutely no problems paying that," said Sanjay Sakhuja, president of Digital Pre-Press International. a printing company based in San Francisco.
His company ordered 10 G4s prior to Wednesday, and looked forward to the speedier performance of the new machines.
"The machines we are replacing with these new machines are 2-3 years old," he added. "To pay 10 percent or 15 percent more, for us it's worth it."
© Copyright 1999 The Associated Press