This week’s news includes; Amazon investigated by the EU, China’s economic slowdown, Netflix user growth slumps, ASOS issues profit warning
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:
- Forbes: FaceApp: Is The Russian Face-Aging App A Danger To Your Privacy?
- BBC News: How tough is an investment banker’s life?
- The Economist: How NFL contracts give players so little power.
- Tech Crunch: How Roblox avoided the gaming graveyard and grew into a $2.5 billion company
1. AMAZON’S ANTITRUST INVESTIGATION
The EU has launched an antitrust investigation into Amazon over its use of merchant data. Amazon provides a platform for merchants as well as operating as merchant itself. There is concern that it using data gained from its marketplace to shut out potential rivals, in breach of competition law. A number of traders have complained about Amazon’s practices.
The investigation will delve into Amazon’s contracts with merchants and how the company uses data gathered under these agreements. Under Amazon’s current terms Amazon have “royalty-free” rights to use merchants’ material, trademarks and product information.
Amazon has said it is fully cooperating with the investigation. If Amazon is found to have breached antitrust law, the EU Commission can fine Amazon up to 10% of global revenue, a whopping $23 billion.
2. EU FINES QUALCOMM
The EU has slapped chipmaker Qualcomm with a €242 million fine for abusing its market dominance in the production of 3G chipsets. Qualcomm held a 60% market share between 2009-2011 and sold products at substantially below market value to Huawei & ZTE to undercut its rival Icera. This conduct was in breach of antitrust law. Icera was acquired by Nvidia in 2011 but its chipset division was shut down.
This isn’t the first time Qualcomm has been hit by EU antitrust fines. In January 2018, it was fined €997 million for paying Apple to reject rival offers. The company has also faced antitrust lawsuits in the US where a court deemed it had “strangled competition”.
Despite this, Qualcomm has grown substantially and supplies many smartphone makers with key components. The tech firm has a market cap of $92 billion and posted revenue of over $19 billion in 2018.
3. CHINA’S ECONOMIC SLOWDOWN
China’s economy is growing at the slowest pace in over 20 years. This slowdown has largely been fuelled by the trade war with the US. The US has imposed tariffs on hundreds of billions of Chinese goods which is hurting economic growth. The Chinese economy grew by 6.2% in the second quarter. While this level of growth was in line with predictions, this is the lowest rate since 1992.
The Chinese economy is still growing a rate of knots compared to most developed economies. For three decades until 2010, average economic growth was 10%. Pressure from an unstable global economy is now slowing down pace, but leaders are not panicked. The Chinese government has announced that it will increase public spending and slash taxes to boost the economy. More measures are expected later this year.
This slowdown is having far reaching effects. Car manufacturers have long enjoyed rampant growth in Chinese sales as its economy boomed. Now, consumers are scaling back and in a market of nearly 370 million registered drivers this has had a significant impact on car maker profits.
4. GOOGLE PULLS VIAGOGO ADS
Viagogo’s paid-for search ads have been pulled from Google. Google found that Viagogo breached its advertising policy. This could have huge impact on the ticket resale sites business. Viagogo used to appear top of the list when customers search for event tickets until last week. Now it appears well beneath its rivals such as StubHub.
This is another headache for the Swiss company as its embroiled in legal action with the Competition and Markets Authority (CMA). The CMA claims Viagogo is breaching consumer protection laws and is in contempt of court for ignoring court order to comply with the law. Viagogo allegedly breach laws on numbers counts. These include; publishing misleading information about ticket numbers, colluding with touts and failing to inform buyers that they may be denied entry if venues ban resold tickets. The case is still ongoing.
5. RYAN AIR CUTS LOOM
The industry effects Boeing 737 Max crisis are beginning to show as RyanAir is forced to make cuts. Poorly performing bases will be closed either just over the winter or permanently.
Ryanair, among other airlines, have suggested that they will be seeking compensation from Boeing due to the crisis. Ryanair, Europe’s largest budget carrier, posted a 29% fall in annual profits. The Boeing crisis added to a cocktail of issues including steeper competition, rising fuel costs and Brexit uncertainty.
In the past year, over 350 people died in 2 crashes involving the 737 Max passenger aircraft. This led to a grounding of the model across the world in March. Boeing has revealed it will take a $4.9 billion charge to compensate airlines for the grounding of the planes. Two weeks ago Boeing unveiled a $100 million fund for families of victims and affected communities.
6. NETFLIX GROWTH SLUMPS
Netflix subscriber growth has shrunk last quarter, spooking investors. Netflix added 2.7 million new subscribers, but this was nearly 50% fewer than estimated. This created a net loss of 120,000 customers. Netflix is still by far the dominant force in the streaming sector with 151.6 million subscribers worldwide. More competitors are entering the field which is putting pressure on Netflix. ITV and BBC have unveiled their British content streaming service Britbox while Disney and Apple have both made plans to become challengers in the sector.
The net loss in subscribers has been attributed to price hikes in the UK and US turning customers off. Netflix say the price increases are necessary to fund its record spending on original content. The firm aims to spend around $8 billion on content this year, more than anyone else in Hollywood. The surprise drop in subscribers spooked investors as Netflix shares fell by as much as 12%.
7. GVC TAKES HIT FROM NEW GAMBLING REGULATION
the owner of gambling companies Ladbrokes and Coral suffered a 10% decline in
UK gaming sales following new restrictions on fixed odd betting terminals. The
government reduced the maximum stake on Fixed Odd betting terminals from £100
to £2. This has taken a huge chunk of revenue for gambling firms. Gaming
revenue at the GVC fell by 39% year on year for the first six months of 2019.
Gambling firms across the board are just beginning to feel the pinch of the regulations. William Hill recently announced the closure of 700 UK stores, with the loss of 4500 jobs. There is no doubt that firms will have to adapt significantly in order to stay profitable.
8. WAITROSE STORE CLOSURES
Waitrose has announced that it will close seven stores, putting 700 jobs at risk. Three of the seven have been sold directly to Lidl, exemplifying changing consumer trends. Lid has recently overtaken Waitrose to become the 5th largest supermarket behind the “big four” supermarkets.
Lidl is a budget supermarket but has invested heavily in improving the quality of its own brand products which has drawn in new customers. In just 3 years, Lidl and Aldi have collectively increased their market share by over 4%.
For Waitrose however, its recognised the need to reshape the business. Waitrose has already closed ten other unprofitable stores in the past year. With competition in the sector steeper than ever, Waitrose is focusing on streamlining its business and focusing on its unique products and service. There may be options for redeployment for the 677 affected Waitrose staff but a consultation is ongoing. Waitrose is also ending its delivery deal with Ocado next year after a sale to Marks and Spencer. The supermarket currently has 344 UK stores.
9. ELECTRIC CAR PRODUCTION
A new report claims the electric car market with set to boom, with a tripling of available models by 2021. There were only 60 electric and hybrid car models available at the end of 2018. European Federation for Transport and Environment suggests that by 2021 there will be 214 different models for consumers. The EU has introduced new CO2 emissions targets which are making car manufacturers explore more affordable and longer-range electric models. They believe that this will spur a widespread uptake of electric models.
Campaigners say governments need to do more to make electric vehicle uptake more accessible. This would include rolling out home and work charging points as well as improving tax incentives. They blame these issues among others for the current lack of uptake.
The government is keen to implement green initiatives and some progress is being made although enormous work is still required. In Scotland, wind farms are now generating enough energy to supply all the homes in Scotland, twice. The UK went its longest stretch since the 1800’s without using coal power earlier this year with targets to completely eliminate use of coal.
10. ASOS PROFIT WARNING
ASOS has issued a profit warning as an overhaul of its tech and warehouses had a significant impact on the books. The overhaul cost the company an estimated total of £47 million as it took longer than expected. This reduced stock quantities and in turn hit revenue. On the whole, sales were quite positive, up 12% year on year. This was largely due to a strong performance in its UK business. The costs of overhaul however, brought estimated profits to £35 million, down from £102 million last year. This news spooked investors as it’s share price sank by as much as 27%.