The week’s news included; TikTok saga summarised, Brexit bill passes first stage, Medicinal cannabis firms approved to list on London Stock Exchange, Mercedes-Benz owner pays $1.5bn over emissions scandal
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:
- BBC News – Why Biden’s intervention on Brexit matters
- FT – Property law: Does our daughter’s boyfriend have a claim to our house?
- City A.M – Brexit: Chances of Brexit trade deal ‘fading’, says EU chief
- Forbes – Covid-19 Is Transforming The Legal Industry: Macro And Micro Evidence.
- The Verge – Oracle’s TikTok deal accomplishes nothing.
1. TIKTOK SAGA
Trump has approved TikTok’s new deal with US tech firm Oracle in concept and has pushed back the proposed ban until Sunday 27 September. After this date, US persons cannot download TikTok and US companies cannot do business with them. This ban is due to security concerns and fears that TikTok could be used as a tool for Chinese espionage. TikTok has always denied all allegations over its security. Trump gave TikTok until 20 September to secure a takeover for its American arm by a US company. Microsoft was the front runner with a consortium of US firms including Walmart, launched an estimated $30 billion bid for TikTok. TikTok owner Byte Dance however, rejected this bid on 13 September.
This rejection saw Oracle leap to the front of the queue. Byte Dance announced it would be seeking a partnership with the firm to secure its future in the US. The deal will see Oracle become TikTok’s cloud provider and obtain a 12.5% stake. Walmart has agreed in principle to buy 7.5% while Byte Dance will retain 80%. Although this isn’t a full takeover deal but this agreement, along with other measures, has satisfied the Trump administration. TikTok will create 25,000 US jobs and expand its US headquarters. It will also contribute $5 billion toward a US education fund, alongside Walmart. It is clear TikTok will try and do whatever it takes to keep its US operations running. There are 100 million US TikTok users, accounting for nearly one tenth of all its users. CNBC explores Trump’s ban further.
2. BREXIT BILL PASSES FIRST STAGE
Last week, MPs voted to progress with the controversial Internal Market Bill which could see the UK unlawfully renege on the Brexit Withdrawal Agreement. Parliamentarians voted in favour of proceeding to the second hearing 340 to 263. This was widely expected given the enormous majority of 80 that Boris Johnson holds in Parliament. Last week only marked the first stage, so now the Bill will be subject to line-by-line scrutiny at the second hearing. There are deep concerns about the provisions on Northern Ireland as the government has openly admitted that it breaks the law.
In short, the Brexit withdrawal deal ties Northern Ireland’s standards to the EU to prevent tariffs and a hard border between Ireland and Northern Ireland. This maintains the Good Friday Agreement that ensures no division between the two. The Internal Market Bill would give the UK the (domestic) legal right to ‘disapply’ any tariffs or restrictions that would create a border between Northern Ireland and the rest of the UK. Such a move breaches the legally binding withdrawal agreement and international law. The UK government claim the bill is essential to maintain the integrity of the United Kingdom. This however, begs the question, why did Johnson sign and hail the Withdrawal Agreement in the first place if it posed such an existential risk to the integrity of the UK? Undoubtedly, the government will face intense scrutiny over the next few weeks.
3. THOMAS COOK RELAUNCHES
Thomas Cook has officially relaunched as an online only business after its dramatic collapse last year. 9,000 jobs were lost in September 2019 when the airline went under and 150,000 customers were left stranded. Chinese owners Fosun recently took full control and decided an online-only business would be viable long term.
Thomas Cook has begun offering holiday packages, but its website is now ‘Covid-friendly’. The new service will be flexible to the ever-changing Covid situation. Only destinations on the UK government’s travel corridor list will be available to book. Customers can currently only book single destinations so multi-stop trips will not be available. Where government guidance changes, customers can change their bookings free of charge. This model has already proved successful in China where Fosun has already relaunched Thomas Cook. The company has already secured 170,000 customers and it expects continued growth as global tourism recovers.
It appears wise to launch now just as the tourism sector begins to pick up. If Thomas Cook can re-establish itself as a main player and boost its publicity now, post-pandemic business could be buoyant. Thomas Cook is seeking to hit 50,000 passengers per year. City AM questions how long will the digital travel company last.
4. MEDICINAL CANNABIS FIRMS ALLOWED TO LIST
The UK Financial Conduct Authority has decided to allow medicinal cannabis companies to list on the London Stock Exchange. This follows the 2018 legalisation of medicinal cannabis in the UK in specific cases. Those with a need for medicinal cannabis must have a prescription to import it or Home Office approval to grow it. Both UK and Overseas firms will now be permitted to list on the London Stock Exchange. Overseas producers do face additional hurdles though. Such producers would need to demonstrate their operations would be legally permitted in the UK regardless of whether they are licensed in their country of origin.
All firms involved with producing and selling recreational cannabis, however, still remain banned from listing. The Proceeds of Crime Act prohibits dealings with income generated through conduct abroad that would constitute a crime in the UK. Since the possession and sale of recreational cannabis is illegal, such companies are blocked from the UK’s capital markets.
Despite this, the law and business surrounding cannabis is growing fast. In Canada, over $1 billion was spent on legal cannabis in 2018 alone. In the UK, a number of law firms have opened cannabis medicinal cannabis departments.
5. MERCEDES BENZ OWNER SETTLES FOR $1.5 BILLION
Daimler, the owner of Mercedes-Benz, will pay $1.5 billion to settle a US government lawsuit over emission test cheating. Like Volkswagen, Mercedes had allegedly installed cheat devices in 250,000 diesel vehicles allowing them to produce artificially lower emissions in test conditions. On the roads, vehicles were emitting as much as 40 times more than advertised. As part of the $1.5bn settlement, $700m will go to owners who filed a class action lawsuit against the firm. Daimler will also repair the affected vehicles free of charge. This settlement pales in comparison to Volkswagen who paid out $20 billion in the US over the same cheat devices. Volkswagen has paid €30bn in fines globally and compensation claims over the scandal and faces a number of ongoing cases.
6. DELOITTE RECEIVES RECORD FINE
Big Four auditor Deloitte has been fined £15 million by the accounting regulator over poor auditing. Deloitte performed the audit of software firm Autonomy between 2009 and 2011. Autonomy was acquired by HP in 2011 for £8.4 billion but later wrote down £6.7 billion regarding the purchase over alleged “accounting irregularities”. Legal cases against Autonomy and its management are still ongoing but many issues should have been picked up by the auditor. The Financial Reporting Council (FRC) deemed Deloitte’s audit fell well beneath required standards. This is the largest fine ever issued by the FRC. Audit standards have been falling significantly and the FRC has been forced to take action. All Big Four accountancy firms are now required to segregate their audit and consultancy business by 2024. Two weeks ago, Deloitte became the first to take action by appointing a governance board.
7. JP MORGAN MOVES LONDON STAFF AHEAD OF BREXIT
JP Morgan has revealed plans to move 200 staff out of London as the chance of a Brexit trade deal diminishes. Financial services firms have been waiting tentatively in the hope of Brexit provisions for financial services, allowing firms to continue operating seamlessly. Without such an agreement, UK firms will be unable to provide investment services in the EU. As talks are deteriorating, companies will have to begin implementing contingency plans.
The 200 JP Morgan staff will be expected to relocate by 1 January 2021. They will move to other European destinations such as Paris, Frankfurt and Milan. Boris Johnson has set a deadline of 15 October to walk away from Brexit talks if no deal is reached. The transition period ends at the end of 2020, after which the UK will no longer be tied to EU law. There is a significant risk of thousands of roles throughout the City of London being shifted to mainland Europe over the next few months.
8. AMAZON ADDS PODCASTS TO MUSIC SERVICE
Amazon Music has introduced podcasts into its service for US, UK, German and Japanese users. Podcasting has become increasingly lucrative with the market expected to surpass $1 billion this year. Spotify landed one of the largest ever contracts this year with Joe Rogan, securing exclusive rights for his show in a $100 million. Amazon now looks to get a piece of the pie and enter the market. All users of Amazon Music, paid or free, will have access to the service. Also, as with music tracks, podcasts will be available to be requested via Amazon Echo. Spotify shares sank 1.2% in response to the news.
9. NEW LOOK CVA
New Look has secured its future after creditors approved its company voluntary arrangement (CVA). The fashion retailer was on the brink of collapse last week and desperately needed to restructure its model. This CVA will see landlords receive a percentage of revenue as opposed to a fixed rental fee. Landlords will receive between 2 and 12% of revenue generated at the 402 stores operating under this model. The CVA will keep all these open, saving 11,000 jobs.
This rental model could become increasingly common as countless restaurants and retailers shut up shop. The coronavirus outbreak has acutely affected the retail sector and consequently, landlords are quickly losing tenants. Rather than facing the prospect of hundreds of empty sites, flexible rental model such as this may be the solution to protect the ailing high street.
10. MESSI WINS TRADEMARK BATTLE
Lionel Messi has won a decade long legal battle to trademark his surname. In 2011, Messi filed to register his name as a trademarked sportswear brand with the EUIPO. Spanish cycling company Massi had filed an objection to the trademark, claiming that customers would get confused based on the similarities of the logos. The case went to the EU General Court in 2018 where it was held that Messi was so well known that customers would not get confused. Massi appealed to the EU Court of Justice but the court upheld the previous ruling. It also found Messi’s reputation to be so well known that the chance of confusion between brands was slim.
This comes as a win for Messi after Barcelona FC poured cold water on his demanded transfer away from the Spanish giant. Barcelona had set a €700 million price tag and even the likes of Manchester City were unwilling to pay this. Messi had hoped to trigger a clause in his contract that would allow him to leave for free. Regardless, the 33-year-old will still earn €600,000 a week in salary until his contract expires in summer 2021. Messi has topped the world athletes rich list and has earned $126 million in 2020 so far.