This week’s news includes; Facebook moves 1.5 billion users out of GDPR scope, KitKat set to lose four finger trade market case, UK economy perks up, Debenhams profits crash.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- The Independent explains Why your bank could hold the key to closing the gender pay gap.
- Business Insider looks at a new report saying 30% of millennials may never own a home.
- Bitcoin tools could make finance system safe, says International Monetary Fund boss (The Guardian)
1. KITKAT FOUR FINGER TRADEMARK CASE
Nestle is set to lose its trademark battle in the ECJ. The EU’s advocate general has stated that Kit Kat’s four finger shape is not a protected trademark under EU law. Nestle had appealed an earlier decision that agreed with this statement.
Nestle has failed to show that its four finger design was distinctive across all member states. For a trademark to be valid under EU law, it must be distinctively recognised across all 28 member states. Kit Kat was only able to prove Kit Kat’s shape was sufficiently recognised in 10 out of the 28 states. Generally, it is difficult to trademark product shapes. On this basis, the ECJ’s top legal advisor has stated that the appeal should be dismissed. While the advocate general’s advise is not legally binding, the ECJ usually follows the advice.
For more on the trademark battles in the confectionary world read The Guardian’s report.
2. FACEBOOK CUTS GDPR LIABILITY
Facebook has shifted its privacy agreement with 1.5 billion users to protect itself from the incoming GDPR. The General Data Protection Regulation is an EU law that gives consumers more control over their personal data. The laws however, are more stringent and the obligations more onerous. Personal data cannot be collected without explicit consent and users can request all data
Facebook has moved privacy responsibility in its Terms and Conditions. Now, for over 1.5 billion users, privacy responsibility has shifted from its Irish HQ to its California offices, therefore US law. Under Irish law, Facebook would have to adhere to GDPR for almost 1.9 billion of its users. By moving data privacy responsibility to the US, Facebook will now only be liable under GDPR for the data of its 370 million European users.
The penalties for breaches under GDPR are significantly harsher. Notably, fines of 20 million Euros or 4% of global turnover (whichever is higher) can be issued for breaches. In Facebook’s case, this would amount to a $1.6 billion fine.
Despite this, Mark Zuckerberg has promised to “apply the spirit of the legislation globally.” What this means in practice is remains to be seen. (The Guardian)
3. PPI SCANDAL PAYOUTS
Banks have paid out a total of £30 billion since the PPI scandal emerged. Consumers complaints over missold payment protection insurance (PPI) have flown in over the past year. Complaints rose by 40% in the last 6 months of 2017, the highest level in four years.
This flurry has been attributed to the FCA’s Arnold Scharzenegger advert, informing people of the deadline. The deadline to make a PPI claim is 29th August 2019. The financial watchdog set this deadlines as evidence for many PPI claims now dates back over 20 years so much of the evidence is stale and an ending is needed for this saga.
PPI mis-selling has been a costly mistake for banks and it appears there will be no respite for the final 14 months. (Sky News)
4. UK ECONOMY PERKS UP
The UK economy is back on the up. Unemployment is at its lowest point since 1975, the sterling is up, wages are rising and inflation is falling.
Unemployment fell to 4.2% the lowest rate in 43 years. This statistic includes the number of people who want a job but do not have one. The total number of employed people fell by 16,000 to 1.42 million. Inflation has fallen to 2.5%. This is partly due to the rise in the value of the pound. After the Brexit vote sterling fell to lows of $1.20 and has since risen to $1.42. This has eased the significant pressure on both consumers and retailers after nearly 2 years of rising costs.
The bank of England is expected to increase interest rates to 0.75% to temper inflation down to its 2% target. Inflation hit 3.1% in November last year but has been gradually falling. The Bank of England has said it wanted wage growth before raising rates and that’s exactly what’s happened. Wages grew 2.8%, faster than inflations, meaning workers wages grew in real terms. This is the first real wage rise in over a year. Governor Mark Carney has stated that hikes this year are likely but any increases will be gradual.
5. WELLS FARGO FACES $1 BILLION FINE
Wells Fargo has been hit with record fines totalling $1 billion. The fines relate to severe breaches relating to its car insurance and mortgage lending. Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency have both fined the bank. The CFPB said Wells Fargo broke the law in the way it administered a mandatory insurance programme related to car loans.
Wells Fargo has agreed to settle and reimburse customers but not has admitted any wrongdoing.
Wells Fargo has been taking a hammering recently. Last, the lender said up to 3.5 million accounts may have been created for customers without their permission. It was fined over $185 million for this misconduct. The bank is still recovering from the fall out and this will only increase the pressure. (BBC News)
6. OIL PRICES ON THE RISE
Oil is back in business as prices are booming. Brent crude, the global benchmark rose above $74 last week. These prices have not been seen since December 2014.
The boost in oil prices has been due a concerted joint effort to cut supply. OPEC agreed with non-OPEC countries like Russia to cut supplies last year. The pact is set to continue until the end of this year. Many analysts believe these supply cuts will continue beyond 2018. This is because Saudi Arabia, is OPEC’s largest member, is targeting $80-100 oil prices . With prices edging towards this target it is likely cuts will continue. Donald Trump has however, criticised OPEC on Twitter for “artificially” boosting oil prices. (Reuters)
This price hike however, could spell a period of huge relief for oil producing countries whose economies have crashed along with falling oil prices. In 2016 oil prices hit lows of under $35 a barrel. OPEC’s current members are; Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
7. HAMMERSON PULLS OUT OF INTU DEAL
Hammerson has abandoned its £3.2 billion acquisition of Intu Properties. Hammerson shareholders were not convinced the risks outweighed the potential returns. They feared a merger would only increase its exposure to a challenging retail market.
The retail sector has been struggling over the past year with retail profit warnings at almost the highest point this decade. Retail sales fell by 1.2% in March. Naturally, retailers are considering to consolidation. This deal would have created the UK’s largest mall.
In addition, Klepleirre launched its own bid for Hammerson but these talks also collapsed. The failure of these two deals has put Hammerson CEOs under significant pressure from shareholders. Intu sought a new buyer to help fund expansion and upgrades. With both potential buyers now out of the race, expansion plans must be put on hold. Intu’s share price fell by over 4% in response to the news. (Bloomberg)
8. JAGUAR LANDROVER CUTS 1000 TEMP WORKERS
Jaguar Land Rover has announced that it not renew the contracts of up to 1000 temporary workers. The company cites uncertainty about Brexit and the clampdown on diesel cars as reason for this decision. The government hopes to ban all diesel cars by 2040. Over 90% of JLR’s UK sales are diesel so this clampdown so the company will have to adapt quickly. JLR have however, launched their own electric and hybrid ranges.
JLR has however expressed its long term commitment to investment in the UK, as it reiterated the aim to hire another 5000 engineers. Despite record sales last year, Jaguar and Land Rover sales in 2018 are down by 26% and 20% respectively. JLR employs over 40,000 in the UK. (BBC News)
City A.M claims Brexit is not the driving force behind Jaguar Land Rover’s problems.
9. DEBENHAMS PROFITS CRASH
Debenhams pre-tax profits have fallen a staggering 84.6% in the last quarter. Pre-tax profits were down to £13.5 million significantly lower than the £87.8 in profits last year. The company primarily blames poor Christmas sales. Like for like sales across the quarter have fallen 2.2% Shares fell by as much as 12.6% in response to the news.
The company blames poor Christmas sales but is revamping its business to improve its faltering sales. Debenhams is cutting its longstanding lines with Jeff Banks and John Rocha. It is also now partnering with furniture retailers while phasing out its own furniture business. (City A.M)
10. WETHERSPOONS QUITS SOCIAL MEDIA
Wetherspoons has quit social media. Last week, Wetherspoons announced that it would be leaving Facebook, Twitter and Instagram with immediate effect. The pub chain attributed this decision to social media’s bad publicity including trolling and misuse of personal data. CEO Tim Martin also criticised the addictive nature of social media.
Wetherspoons had over 44,000 Twitter followers. It used social media to answer customer queries and advertise. Wetherspoons will now only advertise in magazines and on its website. In addition, they claim users with queries can visit their local pub and ask managers instead of resorting to social media. This may appear somewhat primitive in an internet age where social media is becoming increasingly prevalent, but it may be for the better. While social media can be a highly effective publicity tool, effective strategies are costly both in time and money. The question always remains, how many followers/likes turn into paying customers. Wetherspoons clearly felt not enough to warrant retaining its accounts. Over 90% of mangers surveyed at the company claimed that social media was not helping the business.
Social media does however; provide businesses with instant communication with customers. This allows them to address minor grievances in an efficient manner, boosting customer satisfaction.
Wetherspoons hopes to buck the consensus that every business needs a social media to maximize profits. Whether they can do this successfully remains to be seen. (BBC News)
City A.M asks how Wetherspoons will fare after this social media axe.