Last December, Apple opened a massive new retail store in Manhattan's historic Grand Central Terminal, adding a high-profile presence to the busy commuting, tourist, and shopping hub. Apple's lease agreement with the Metropolitan Transportation Authority (MTA) was quickly questioned by government officials, who were concerned that Apple had received favorable treatment during the negotiations and was paying significant lower rent than would otherwise have been expected for the location.

The MTA countered those claims with its own statements outlining how Apple is paying four times as much rent as the restaurant it replaced while also paying $5 million to the restaurant to vacate its lease and investing in building upgrades for the new store. The agency also argued that Apple's presence would indirectly boost terminal revenue through increased traffic at other merchants that, unlike Apple, pay a portion of their revenue to the terminal.

apple store grand central front view
But the New York Post now reports that a state audit of those lease negotiations has determined that Apple did indeed receive an "unfair" edge in what was supposed to be an open competition for the space.

A fresh audit by state Comptroller Thomas DiNapoli says the MTA last May allowed the California-based tech giant to set a daunting hurdle for rival bidders to clear in a tight, 30-day window — namely, that they be willing to front $5 million in cash.

“The competitive process followed by MTA . . . was at a minimum severely slanted toward Apple,” reads the report, submitted to MTA officials Friday and expected to be made public today.

The state comptroller's office has announced the release of the audit report, revealing that Apple and the MTA had been in negotiations for the space for over two years and that Apple had already made payments to the vacating restaurant before the space was publicly opened for proposals.

"While Apple may turn out to be a good tenant, the MTA set a troubling precedent when it played favorites and gave Apple a competitive edge over others for the Grand Central space," DiNapoli said. "Apple was directly involved in setting the terms of the lease and given exclusive access to information more than a year before any other vendor knew the Grand Central location was available. The company even signed a $2 million agreement with the current tenant to vacate its space five days before the MTA issued the RFP.

In response to the audit, the state is proposing increased oversight on competitive public authority contracts, a move which give the comptroller's office more authority to examine such agreements before they are finalized.

In a statement responding to the audit, MTA Chairman and CEO Joseph Lhota called the results "not fact-based" and "worthless", also accusing the comptroller's basis of "overt bias" against both the MTA and Apple in declaring that the process was not open and transparent.

Top Rated Comments

JBunkers Avatar
121 months ago
Who's slanted here?

So the state comptroller conducts an audit which finds that the state comptroller should have more power?

I think the audit is "at a minimum severely slanted toward the Comptroller". :rolleyes:
Score: 13 Votes (Like | Disagree)
shartypants Avatar
121 months ago
What a waste of taxpayer money doing the audit, sometimes I think government people just look for ways to justify their jobs instead of doing something useful.
Score: 11 Votes (Like | Disagree)
ConCat Avatar
121 months ago
Looks like the free market is dead. Apple got favorable treatment because having an Apple store in you station increases revenue from all of your shops due to increased foot traffic. I don't see how this is any of their concern. Clearly, people have been enjoying the Apple store.

Really, the free market is a beautiful thing. It works well, and both sides are happy. You give me a product or service I want, and I give you money so you can buy a product or service you want. Really, that's all there is to it. We have not lived in a true free market for almost a century now.
Score: 9 Votes (Like | Disagree)
Slovak Avatar
121 months ago
the state is proposing increased oversight on competitive public authority contracts, a move which give the comptroller's office more authority to examine such agreements before they are finalized.

Translation: Nobody asked us, nobody greased our pockets.
Score: 5 Votes (Like | Disagree)
Mad-B-One Avatar
121 months ago
Looks like the free market is dead. Apple got favorable treatment because having an Apple store in you station increases revenue from all of your shops due to increased foot traffic. I don't see how this is any of their concern. Clearly, people have been enjoying the Apple store.

Really, the free market is a beautiful thing. It works well, and both sides are happy. You give me a product or service I want, and I give you money so you can buy a product or service you want. Really, that's all there is to it. We have not lived in a true free market for almost a century now.

I agree with you but I also think that a free market is not needed for Pareto efficiency. To be honest, this was a mutual goal of MTA and Apple to get the store there. The reason why the bidding wasn't "open" is quite simple: No one would be able to outbid the benefits an Apple Store gets to Central Station simply because of the traffic effect. MTA was looking for a magnet, Apple for a location. Now, find one business (other than a casino) that would have the same effect and would pay the renovation needed and can (and is willing to) pay the rent on top of it.

PS: The auditor should also read up on the Nash equilibrium... that would help and point towards the flaws in his arguments.
Score: 5 Votes (Like | Disagree)
Swift Avatar
121 months ago
Politics. If somebody couldn't put up $5 million, how on earth could they lease the space? Who exactly was cut out? Look no further than the Murdoch filth, the NY Post. Is some different series of regulations necessary? Maybe so. Note: this is a great business deal for Grand Central. Any businessman would see that. But apparently, the Post never saw a public bureaucracy they liked. Gee, was Bain Capital thinking of buying Grand Central and moving it to Mexico?
Score: 5 Votes (Like | Disagree)

Related Stories

General Apps Messages

Android iMessage Competitor Puts Pressure on Apple

Friday July 30, 2021 3:15 am PDT by
Google and the three major U.S. carriers, including Verizon, AT&T, and T-Mobile, will all support a new communications protocol on Android smartphones starting in 2022, a move that puts pressure on Apple to adopt a new cross-platform messaging standard and may present a challenge to iMessage. Verizon recently announced that it is planning to adopt Messages by Google as its default messaging...
iphone 13 teal with text

Apple Begins Preparation for iPhone 13 Production Ahead of Fall Launch

Monday June 28, 2021 3:29 am PDT by
We're just a few months away from when Apple is expected to reveal the 2021 iPhone, dubbed the "iPhone 13." In preparation for its launch, it has been pulling in shipments of different components needed to produce the new iPhones, according to a report from DigiTimes. In years past, Apple released its latest iPhone lineup, alongside a new Apple Watch, during a September event at Apple Park....
studio buds family

Beats Studio Buds Debuting Today With Active Noise Cancellation, Stemless Design, and More for $150

Monday June 14, 2021 8:00 am PDT by
We've seen a lot of teasers about the Beats Studio Buds over the past month since they first showed up in Apple's beta software updates, and today they're finally official. The Beats Studio Buds are available to order today in red, white, and black ahead of a June 24 ship date, and they're priced at $149.99. The Studio Buds are the first Beats-branded earbuds to truly compete with AirPods...
bluetti eb70 main

MacRumors Giveaway: Win a Bluetti EB70 Portable Power Station and 200W Solar Panel

Friday September 3, 2021 11:13 am PDT by
For this week's giveaway, we've teamed up with MAXOAK to offer MacRumors readers a chance to win a Bluetti portable power station and an accompanying solar panel. Bluetti makes a range of portable power station options that are useful for camping, emergencies, power outages, off-grid living, and similar situations. The Bluetti EB70 is a solid middle of the road option that offers 716Wh and...
apple privacy

Apple Publishes FAQ to Address Concerns About CSAM Detection and Messages Scanning

Monday August 9, 2021 1:50 am PDT by
Apple has published a FAQ titled "Expanded Protections for Children" which aims to allay users' privacy concerns about the new CSAM detection in iCloud Photos and communication safety for Messages features that the company announced last week. "Since we announced these features, many stakeholders including privacy organizations and child safety organizations have expressed their support of...
macos catalina legacy system extension alert

Apple Begins Warning Users That 'Legacy System Extensions' Won't Work With a Future Version of macOS

Wednesday March 25, 2020 9:53 am PDT by
Apple has shared a new support document that indicates kernel extensions — which it calls "legacy system extensions" — will not be compatible with a future version of macOS because they "aren't as secure or reliable as modern alternatives."System extensions are a category of software that works in the background to extend the functionality of your Mac. Some apps install kernel extensions, which...
General Spotify Feature

Spotify Pauses Plans to Add AirPlay 2 Support to iOS App [Update: Spotify Clarifies]

Friday August 6, 2021 9:07 am PDT by
See update at bottom of article Spotify this week confirmed that its plans to add AirPlay 2 support to its iOS app have been placed on indefinite hiatus. In an online discussion forum post, a Spotify representative said the streaming music service had been working on supporting AirPlay 2, but the company has paused the efforts "for now" due to "audio driver compatibility issues." The...
youtube apple tv

YouTube Discontinuing 3rd-Generation Apple TV App, AirPlay Still Available

Wednesday February 3, 2021 3:09 pm PST by
YouTube is planning to stop supporting its YouTube app on the third-generation Apple TV models, where YouTube has long been available as a channel option. A 9to5Mac reader received a message about the upcoming app discontinuation, which is set to take place in March.Starting early March, the YouTube app will no longer be available on Apple TV (3rd generation). You can still watch YouTube on...
os x mountain lion macs 16x9 2

Apple Makes OS X Lion and Mountain Lion Free to Download

Wednesday June 30, 2021 12:19 pm PDT by
Apple recently dropped the $19.99 fee for OS X Lion and Mountain Lion, making the older Mac updates free to download, reports Macworld. Apple has kept OS X 10.7 Lion and OS X 10.8 Mountain Lion available for customers who have machines limited to the older software, but until recently, Apple was charging $19.99 to get download codes for the updates. As of last week, these updates no...
Pixel Stand 23W 668x445

Google Pixel 6 Rumored to Support 23W Wireless Charging, Beating iPhone 12's MagSafe

Wednesday September 1, 2021 1:54 am PDT by
Google is rumored to be working on a new wireless charging stand that could deliver 23W of charging power to its upcoming Pixel 6 and Pixel 6 Pro phones, according to a leaked inventory image published by Android Police. Image via Android Police. If true, that would beat the iPhone 12's maximum 15W wireless charging speed (or 12W on ‌iPhone 12 mini‌) using Apple's MagSafe charger, and...