The week’s news included; Mastercard & Visa multi-billion pound lawsuit, Wirecard auditors find €1.9 billion blackhole in its books, Boohoo buys Oasis & Warehouse online business, Amazon fends off largest DDoS cyber attack in history
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram 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:
- Sky News – It’s a big moment in the history of Big Oil
- Legal Cheek – The legal practice areas most (and least) impacted by coronavirus.
- City A.M – Is now really the time to be focusing on tariff-free trade with Australia?
1. US SUPREME COURT LGBT RULING
The US Supreme Court has ruled workers cannot be fired for being gay or transgender. Under the Civil Rights Act of 1964 workers cannot be discriminated against on the basis of their ‘sex’. A legal question arose as to whether gay and transgender people are covered by this legislation. The US Department of Justice claimed the Civil Rights Act did not cover gay and transgender people as the legislation was not drafted broadly enough to include such persons.
The Supreme Court however, voted 6-3 in favour of the decision to hold that employers firing someone because they are gay or transgender is prohibited under the Civil aright Act. This ruling stemmed from three employment discrimination lawsuits where people were fired due to their sexual identity.
2. MASTERCARD AND VISA LAWSUIT
The UK Supreme Court has ruled against Visa and Mastercard in a landmark lawsuit which could cost them billions. In 2016, Sainsbury’s, Morrisons, Asda and other UK retailers sued the payment processers over excessive credit and debit card MIFs or interchange fees. They alleged these fees breached competition laws. Courts initially ruled that the payment companies did restrict competition and the Supreme Court has now upheld this. This ruling paves the way for compensation claims which is likely to run into billions of pounds. In 2012, Visa and Mastercard already paid out $7.25 billion to US retailers over a similar issue.
3. WIRECARD BLACKHOLE
German payments company Wirecard has revealed a €1.9 billion blackhole in its books. Auditors EY uncovered the hole and stated they could not account for the money. This figure accounts for nearly 25% of its entire balance sheet. As a result, it has postponed its 2019 accounts and will lose out on €2 billion in loans contingent upon the timely release of the accounts. The company will now seek to find a new financing strategy. Wirecard’s CEO resigned with immediate effect on Friday last week as the scandal broke.
Shares in the company crashed over 66% in response to the news. Credit rating agency Moody’s has downgraded Wirecard’s rating to junk. This latest drop marks a 70% decline in its company value from its €24 billion valuation in 2018.
4. US CONCESSIONS FOR HUAWEI
The US Department of Commerce has amended its blanket ban on Huawei, allowing US companies to work with the company on 5G standards. The move is designed to help US companies develop their own standards. This does not represent a warming of the icy relationship between the US and Huawei. Last year, the US banned all companies from working with or buying telecommunications equipment from Huawei or other tech firms deemed a national security threat.
5G technology has become a huge political issue as it is expected to power most of the world’s futuristic technology such as self-driving vehicles. Huawei is a world leader in 5G technology, but Western powers remain concerned over the influence of the Chinese state over the entity. Western governments are seeking to achieve a balance between protecting national interests while remaining at the forefront of global technological advancements.
5. APPLE ANTITRUST INVESTIGATION
The European Commission has launched an antitrust investigation into Apple Pay. Apple does not provide other payment apps with NFC functionality on iOS devices. Only Apple Pay has access to the functionality and the EU is considering whether this is uncompetitive. This practice allegedly stifle innovation and reduces choice for consumers. Apple’s terms and conditions will be reviewed and the commission will see if it complies with competition law. If the practice does breach EU competition law this could shakeup the mobile banking landscape for IoS.
6. BOOHOO BUYS OASIS AND WAREHOUSE
Boohoo has purchased Oasis and Warehouse’s online businesses for £5.25 million. Last month, Oasis and Warehouse fell into administration after the coronavirus outbreak tipped the ailing businesses over the edge. 1800 workers lost their jobs as 90 stores and hundreds of concessions shut down. No buyers could be found for its high street stores but the stock and online business has now been sold to Boohoo. Whether Boohoo’s management can reignite Oasis and Warehouse remains to be seen.
Boohoo recently engaged in a funding round raising nearly £200 million for the purpose of engaging in M&A opportunities. It is clear to see the spending spree has begun. Boohoo also posted a 45% spike in online sales while total UK sales rose 30% during the quarter to May. The retailer gives credit to its flexible supply chain as to why it was able to perform well during the lockdown unlike many other competitors.
7. AMAZON CYBER ATTACK
Amazon has warded off the largest DDoS cyber-attack in history. The attack was launched on Amazon Web Services (AWS) in February. Attackers had sent 2.3Tbps of data at Amazon’s network. To put this in perspective, BT’s entire UK network receives 5Tbps in traffic on a typical working day. This latest attack was 0.6Tbps larger than the previous largest attack. A Distributed denial of Service attack (DDoS) crashes a system by inundating it with an enormous amount of data requests. Once the website is crashed, hackers typically request large sums as ransom. As of 2020, over 20,000 DDoS attacks take every single day.
8. HSBC CUTS 35000 JOBS
HSBC has announced that it will continue with plans to slash over 10% of its workforce. The move to cut 35,000 jobs was put on hold in April due to the coronavirus outbreak. Over $4.5 billion in savings are expected to be made due to cutting less profitable areas and merging roles. The cuts will affect all parts of the business. Even the global bonus pool is down 4% to a cool £3.3 billion. The management had long been under pressure to cut jobs and reduce its bloated global workforce of 235,000. Although plans were announced earlier in the year the bank did not want workers to be unable to find new jobs due to Covid-19 so halted plans temporarily. Now, as economies are reopening the bank is ready to press ahead.
9. BANK OF ENGLAND QE PROGRAMME
The Bank of England has expanded its Quantitative Easing programme to £300 billion as public debt soars. This scheme is designed to stimulate the economy through purchasing government and corporate bonds providing much needed capital for these entities. The Bank of England’s latest expansion will see an extra £100 billion in bond purchases. Some were anticipating an announcement of negative interest rates but the bank decided against this. Interest rates are currently at 0.1%, the lowest rate in history.
This comes across a backdrop of an uncertain economy future. The only certainty is that there will be a deep recession. There is growing concern for the economy as thousands of jobs could be lost once the furlough scheme ends later this year. Furthermore, UK public debt has now exceeded GDP for the first time since 1963. The government’s various covid-19 support schemes has increased public debt by £173 billion to a staggering £1.95 trillion. This figure exceeds the UK GDP by 0.9%.
10. FACEBOOK LAUNCHES WHATSAPP PAY
Facebook has launched WhatsApp Pay in Brazil, a digital payment system for WhatsApp. Users can send money or purchase goods and services from small businesses. It is beginning its launch in emerging markets such including India and Indonesia. In India, WhatsApp has 400m users while Brazil comes in second with 120 million. Facebook bought WhatsApp in 2014 for $20 billion.
WhatsApp Pay forms part of Facebook’s wider move into digital payments. Libra, Facebook’s own cryptocurrency is still under development despite backlash from regulators globally.