SEC sides with activist shareholders in fight with Apple over free-speech resolution

Activist shareholders notched a win from the Securities and Exchange Commission (SEC) last week when it ruled Apple Inc. must allow a shareholder vote on a resolution holding the company accountable for alleged "censorship."

On Wednesday, the SEC told the Silicon Valley-based company that a resolution introduced by shareholders from the American Family Association must be put to a shareholder vote. 

That resolution requests that Apple's board of directors investigate and issue a report evaluating the standards and procedures the company uses to curate app content on its various platforms, and procedures by which the company manages disputes between governmental interests and user rights. 

The resolution was proposed amid concerns that Apple is "‘limiting content access within its online services’ based on viewpoint and that it does so based on vague and subjective terms of use."

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Alliance Defending Freedom, a pro-bono civil rights group, sent a letter to the SEC after Apple claimed its internal reporting policies were sufficient. Rather than allowing its shareholders to vote on the proposal at the 2024 annual meeting, Apple asked permission from the SEC to exclude the proposal from the proxy ballot. 

The SEC, however, agreed with ADF, saying the company had not "substantially implemented" the actions outlined in the proposal.

"This is a big win. This SEC ruling gets shareholders one step closer to holding Apple accountable for vague and subjective App Store policies that are causing censorship," said ADF legal counsel Jeremy Tedesco. 

"There are legitimate concerns that Apple’s policies and practices are doing serious damage to the free flow of information on critical social and political issues across the globe," he said. 

"Apple owes its shareholders an accounting of whether their resources are being used to uphold our fundamental freedoms or tear them down. That’s not too much to ask, and the SEC ruling means Apple cannot evade accountability," he said. 

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In a resource titled Our Commitment to Human Rights, Apple claimed to "believe in the critical importance of an open society in which information flows freely." 

But ADF attorneys claimed that commitment is "severely undermined by the corporation’s App Store policies." 

Apple’s App Store Review Guidelines – its terms of use – say Apple "will reject apps for any content or behavior that we believe is over the line. What line, you ask? Well, as a Supreme Court Justice once said, ‘I’ll know it when I see it,'" the terms state, quoting a famous line from Justice Potter Stewart regarding obscenity and pornography.

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The guidelines also do not allow any apps with "content that is offensive, insensitive, upsetting, intended to disgust, in exceptionally poor taste, or just plain creepy. . . . particularly if the app is likely to humiliate, intimidate, or harm a targeted individual or group," ADF’s letter to the SEC notes. 

"While protecting vulnerable groups is laudable, these kinds of terms are inherently vague and subjective and therefore easy to use for viewpoint discrimination," ADF claims.

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Shareholders will now vote on the resolution at Apple’s 2024 annual meeting of shareholders this spring.