Human Rights: the Price of Doing Business in China?

Internet giant Yahoo! announced today that they were settling a lawsuit brought against the company by the World Organization for Human Rights. The suit was brought on behalf of several Chinese citizens who were arrested after Yahoo turned over documents revealing their email and I.P. addresses to the Chinese authorities. The suit alleges that at least several of them were tortured in prison, as well as receiving hefty sentences for publishing pro-democracy literature online. In the settlement, Yahoo has agreed to pay the WOHR’s legal expenses, and although the other details of the settlement are to remain private, Yahoo has stated that they include helping the families of the people who were detained.

Yahoo was called before the United States Congress earlier this month and roundly criticized for handing over the documents. In their own defense, Yahoo has stated that their Chinese subsidiary had no choice but to comply with Chinese law and hand over whatever information the local authorities required of them. “Defendants cannot be expected,” their brief reads, “let alone ordered to violate another nation’s laws.”

This case is hardly the first instance of this kind of issue for an American firm operating an internet business in China. It will surely not be the last. The involvement of the Congress and the attendant publicity over this particular case, however, make now an excellent time to consider the very important issues that these types of cases raise.

One of the most upsetting elements to this case, to many Americans, is that the people jailed were convicted of doing something that any American is able to take for granted. They published information about democracy as a form of government. For this, they were charged with “incitement to subvert state power.” Both Yahoo and their rivals at Google filter the sites their search engines provide to Chinese web users. Sites deemed inappropriate by the Chinese government are excluded from the search results on the Chinese versions of the search engines’ sites.

Google has publicly stated that while they find the requirement that they censor their Chinese site in this way unpleasant, they find it preferable to be able to provide Chinese web users some information than to be able to give them none at all. A variety of companies, not just Yahoo and Google, face the very real possibility that if they do not conform to Chinese law, the Chinese government will prevent them from doing business in one of the largest and fastest growing markets in the world.

Obviously, this would be bad for American companies hoping to get in at the ground floor in a very lucrative opportunity. At the same time, it is also the argument that in the absence of these large American firms to provide things like search engines in China, the gaps they left would eventually be filled by Chinese companies, who would be based in China and have an even harder time avoiding heavy-handed control by the Chinese government. In this regard, some companies make the argument that agreeing to work within the confines of Chinese law allows them access to Chinese markets, and in the process, they are able to help move China towards a more open policy, gradually easing the restrictions they currently accept.

I am certainly able to see the merits of the business argument. China has a massive population and internet access is rapidly expanding. For an internet company, China represents a nearly irresistible opportunity. I cannot fault any business for a strong desire to carve themselves off a slice of a very large, very rich pie.

On the other hand, I struggle a lot with the argument that it is better for a company to sacrifice the principles they claim to uphold in order to get their foot in the door with the hopes that this will allow them to foster those principles gradually, and from the inside. I find the concept of a legal system that places huge legal barriers to discussing other forms of government to be repugnant. I frankly find many of the measures the Chinese government takes in their attempts to enforce these mandates (the so-called Great Firewall of China) to be utterly ridiculous and ineffective, but every time a company bows their heads and performs the censorship for themselves, it makes the task considerably easier.

I certainly agree that without Yahoo and Google to fill the need for a search engine for Chinese web users, some Chinese company much more agreeable to the authorities would soon move to fill the gap. I freely admit that no matter how troubling I find the carefully combed content available on Yahoo and Google in China, the problem would assuredly be worse with a company who’s executives lived within Chinese jurisdiction, and subject to arrest, imprisonment, and worse if they failed to adhere to the censorship standards imposed by the government. I also agree that allowing Chinese web users access to some information is more or less universally superior to allowing them access to none.

All this being said, I still don’t know that I would be able to live with myself if I were an executive in an American company and ordered my employees to comply with laws that make me livid just to read about. I sincerely hope that these companies are right, and that they prove to have important parts to play in efforts to ease the restrictions imposed by the Chinese government. I dearly hope that the optimistic outlook of companies making this trade-off to operate in China are proved correct, but my own outlook tends to be more cynical.

I also freely admit that I don’t have any insightful answers. I am at a loss as to what Yahoo or Google could do to make me more comfortable about the way they conduct business in China. They could, of course, simply refuse to comply with requests from the Chinese government of the sort that sparked this most recent lawsuit, but I suspect they’d quickly find themselves barred from operating in the country at all. How do we walk both sides of this line? How do we allow businesses to pursue important and lucrative opportunities without abandoning the principles that, to my mind, lie at the very heart of what the internet has to offer us all?

-posted by Mark

4 Responses to Human Rights: the Price of Doing Business in China?

  1. kidsilkhaze says:

    You can’t. There’s no good compromise, but I’m not entirely sure where the government gets off calling foul. When confronted with why they embargo Cuba and grant China most favored nation status, they spew all sorts of crap about how their presence will help open the country up, completely ignoring that American trade might just instead serve to legitimize a brutal regime.

  2. TheGnat says:

    You could also look at the flip side: would you like it if a foreign business, wherever it was from, did not have to conform with American law while operating in America? If the U.S. is to conduct business with another nation, it must do so on equal terms, with each nation respecting the other’s laws (otherwise, they aren’t sovereign nations in the first place…).
    Of course, what to do in the special case of Internet commerce is such a complicated question that I couldn’t begin to ponder it. One could, albeit rather simplistically, argue that a company is only obligated to operate under the laws of the nation in which its bandwidth and space are hosted. Therefore, any demands by other nations regarding compliance with their laws would be completely unsupported legally. This tends to be the way things currently operate, with some notable exceptions like China.

    I think this has far less to do with the Internet specifically, than with how the U.S. handles its relations with China (and many other nations: communist, illegitimate, authoritarian, and special cases like Taiwan and Israel).

  3. Roy Huggins says:

    I have to agree that it seems nonsensical that Congress decided to punish Yahoo for complying with the legal orders of a foreign nation when operating in that nation. There are many very good reasons why the nations of the world agree to recognize each other’s sovereignty. This is especially strange since China is recognized as an ally of sorts — at least economically. So we ostensibly recognize that China is a sovereign nation. So wouldn’t that mean that Yahoo should be reasonably expected to give in to said sovereign nation’s legal demands (even if those demands are obviously going to lead to terrible things)?

  4. Mark says:

    Thank you each for your comments. I will respond to a few points from each of you:


    You draw a reasonable parallel between China and Cuba, but there are, I think, two important differences. The first is simply one of scale. China’s economy is so huge that we as a country would have a much larger economic problem if we refused to trade with them than we do with Cuba. This may or may not be a good reason to make different choices in how we deal with each of them, but it is certainly an economic reality worth considering.

    The second difference is that China does not consider the United States to be an enemy. Cuba does. Sure, we are rivals to China, but the nation has not spent decades thinking of the United States as a potential source of assassins, invaders, and all-around ill-will. This makes the climate between the US and Cuba very different from the climate between the US and China. Again, this may or may not be a good and compelling reason to make different choices about how we deal with each of them, but it is still something to consider.

    Note, of course, that neither of these things have anything to do with the stated reason for the difference. I concede the point that Congress is either deluding itself, or misleading us. Take your pick.


    I agree that if a company wants to operate in a country, they must follow the laws of that country. I make no exception for American businesses operating in China. To be certain, Yahoo or any other company could decide not to obey the law in China, but I have every confidence that the Chinese government would soon prevent them from doing business at all in that case (as I would expect our government to do for any company that consistently violated the laws of the United States).

    There is some merit in the idea that an internet company need only comply with the laws of the nations within which its physical infrastructure and employees are located, but this doesn’t hold true for Yahoo or Google in China, because China actively blocks internet traffic from within the country from reaching servers outside the country they deem objectionable. Anybody at all can put up a website that would be entirely illegal in China, but they will soon find that nobody in China is actually able to visit the site. Thus, for Yahoo or anybody else to really do business in China, even over the internet, they need to be able to find ways to make their services and/or content acceptable to the Chinese authorities.


    To be clear, the United States Congress did not punish Yahoo at all. They asked a lot of very pointed questions of the Yahoo executives who testified before the committee, but Congress did not take any action against the company. The settlement I talked about was to resolve a civil suit. Nobody has claimed that Yahoo has violated US law, and the whole argument is that they went out of their way to not violate Chinese law. Thus, there is no criminal case. However, there is a very strong argument that their actions lead directly to tremendous suffering on the part of the plaintiffs, and under US civil statues, that entitles the plaintiffs to monetary and other damages for a tortuous (and, to make a terrible pun, torturous) action on the part of Yahoo. Yes, they are expected to comply with the law, but that doesn’t grant them immunity to lawsuits.

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