The week’s news included; US sues Google over its search engine, Viagogo-StubHub merger blocked, Goldman admits paying $1 bn in bribes & settles for $3bn over 1MDB, Flybe to be resurrected
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:
- CNBC – Why tech IPOs are flourishing in the U.S. and China — but not Europe
- Business Insider – Bitcoin has ‘considerable’ upside as it better competes with gold as alternative currency, JPMorgan says –
- Economist – What Joe Biden means for Boris Johnson
- Legal Cheek – How technology will shape the legal profession over the next decade.
- The Fashion Law – The 10 New Rules for the 21st-Century Consumer Data-Driven Company.
1. NEW COVID SUPPORT PACKAGE
Chancellor Rishi Sunak has announced more financial support for workers as new coronavirus restrictions sweep the nation. Many localities entered “Tier Two” restrictions which prohibits the mixing of households in any indoor setting. This is catastrophic for the hospitality industry and the government has recognised this. From
The Job Support Scheme will now be amended, so from November 1, all workers will be paid two-thirds of regular wages as long as the employer provides 20% of their usual hours. In Tier Two scenarios where businesses remain open but face decreased demand, employers will be required to pay a minimum of 20% of hours an employee works and just 5% of those usual hours not worked. The government will pay the rest to make up two-thirds of regular wages up to £1541.75 a month. If businesses are in Tier Three areas and are forced to close, the government will pay the full two-thirds of wages up to £2,083.33 per month. This scheme will be introduced at the end of October at the end of the furlough scheme.
The Job Support Scheme has been deemed insufficient as it requires businesses to provide some work, unless they are forced to close. The rationale behind this to ensure only “viable” businesses are supported. For some businesses, however, there simply isn’t any work available due to the nature of the business for example event planners, theatres and some caterers. These types of businesses are viable in the long term, but they are simply unable to reopen in the current climate. How successful the scheme will be at saving jobs remains to be seen.
2. UK SECURES JAPAN FREE TRADE DEAL
The UK has secured its first large post-Brexit free trade deal, after it formally signed an agreement with Japan. This deal will boost the trade between the two nations by £15 billion by removing tariffs on nearly all British exports and on imported Japanese cars. The deal is positive, but many argue the deal does not go far enough. Japan is the largest investor in foreign nations in the world and the deal made no provisions to boost foreign direct investment into the UK. Furthermore, the deal will only provide a GDP boost of just 0.07%, while trade with Japan accounts for just 2% of the UK’s total trade. Deals with nations across the world will need to be struck in order to turn the ‘global Britain’ dream touted by the government into a reality.
Such trade deals may not fill the gap left by EU trade in the absence of a free trade deal with the block. EU trade accounts for 49% of the UK’s total trade. Brexit trade talks with the EU have resumed after Boris Johnson suggested that all talks were off. The EU’s chief negotiator Michel Barnier said that both sides will need to be flexible and seemed more optimistic about the chance of deal. What such a deal will look like and what concessions will be given remains to be seen.
3. US GOV SUES GOOGLE OVER ANTITRUST
Google has been sued by the US government over alleged breaches of antitrust law in its search engine and advertising business. The US Department of Justice has been investigating Google for a number of years and has deemed its practices uncompetitive. It has now filed charges in a Federal Court against Google.
Google’s search engine was the easiest target for regulators to show their teeth. Google’s dominance in the search engine market is so obvious that Google is literally a noun for searching the Internet. Google holds around 80% of the search engine market and this isn’t by accident. US regulators found Google had spent billions over years to ensure its search engine is the default option on across a range of devices.
Government’s across the world have faced increasing pressure to clamp down on big tech firms. This case will likely result in a hefty fine for Google. It may, however, also be the first domino in a chain that could see big tech firms broken up. Regulators are decades behind big tech, the laws and regulations in place simply weren’t designed to deal with internet firms. As regulators get up to speed, lawsuits and harsher forms of actions are likely to become more common.
4. PURDUE PLEADS GUILTY IN OPIOID CASE
Pharma giant Purdue has agreed to plead guilty to criminal charges and pay an $8.3 billion settlement figure over its involvement in fuelling the opioid crisis. In the US, 400,000 people have died over the past 30 years alone due to opioid abuse. Big pharmaceutical companies had been systematically downplaying risks of addiction and aggressively pushing doctors to prescribe its opioid painkillers. In Purdue’s case, it was pushing its Oxycontin painkillers.
The deal with US Department of Justice is the largest to date. Thousands of cases brought by individuals and states still remain against Purdue. It filed for Chapter 11 bankruptcy protection in September 2019 as the cases against it began to mount. Under this latest deal Purdue will plead guilty to conspiring the defraud the US and violating anti-kickback laws. Its current owners, The Sackler family, will be fined $225 million and forced to relinquish ownership. Purdue will subsequently operate as a public benefit firm.
5. STUBHUB-VIAGOGO MERGER BLOCKED
The Competition and Markets Authority has blocked the merger between StubHub and Viagogo as it stands. Viagogo sought to buy StubHub for $4 billion from eBay but the competition regulator sought to launch a deep investigation. The regulator found that the two companies were in close competition in the ticket resale market, collectively controlling 90% of the sector. Therefore, a merger would lead to fewer viable choices for consumers, poorer services and increased fees. The CMA stated that Viagogo would have to sell all or part of StubHub in order for the deal to go through. This decision is provisional, and the companies have said they will work with the regulator to address any competition concerns.
6. GOLDMAN SACHS SETTLES 1MDB
Goldman Sachs has agreed to pay a $3 billion fee to settle a probe regarding the 1MDB scandal. The investment bank was responsible for helping raise $6.5 billion for Malaysia’s 1MDB sovereign wealth fund. The fund was a scam and Goldman’s backing gave it legitimacy that financier and architect of the project Jho Low would not have had. The money was siphoned away from intended development projects and spent on luxuries by Jho Low and associates. Some of the spending included private jets, Picasso artwork and even funding for the Wolf of Wall Street film. Goldman took $600 million fees for its work. The bank had long denied its knowledge of any fraudulent activity but now admitted it had “knowingly and willingly” paid over $1 billion in bribes to foreign officials.
This brings the total cost of the scandal to Goldman has topped $5 billion. It will also help recover and return $1.4 billion of the stolen money. The bank will clawback $174million in bonuses from executives in charge of the bank at the time including ex-CEO Lloyd Blankfein.
Goldman Sachs will no doubt want to draw a line under this messy saga. For Malaysians they hope the returned money can help restart the shattered infrastructure development plans.
7. FLYBE RESURRECTED
A former FlyBe shareholder is to buy out FlyBe and resurrect the airline after its collapse in March. The new FlyBe airline will be significantly smaller and run fewer flights. Thyme Opco is buying FlyBe’s brand and website. A question remains over whether FlyBe’s operating license is still valid. It was revoked when the airline collapsed but the Civil Aviation Authority has discretion to reissue it. A hearing will likely be held to resolve the matter. This comes only a few weeks after Thomas Cook announced plans to restart operations as an online-only travel agent.
Before its collapse FlyBe ran 40% of regional flights in the UK. Its collapse saw many regional routes cancelled. The real effect will be felt post-Covid when passengers begin travelling more frequently. Domestic travel demand like all travel has collapse due to the pandemic.
In January, FlyBe came under fire as it received a £100 million government support deal to initially save it from collapse. This angered competitors who felt the deal was unfair. This lifeline was no match for Covid-19 however, which tipped FlyBe into administration.
8. PAYPAL JUMPS INTO CRYPTO
PayPal has announced it will launch a crypto service allowing users to transact and hold cryptocurrency within its systems. The digital wallet will be able to hold Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Access to the service will be granted by the end of the year but goods and services cannot be bought until early 2021. The payments sector is seeing the potential benefits of getting involved in cryptocurrency. Square bought $50 million worth of Bitcoin earlier this month. This is a huge step forward for mainstream adoption of cryptocurrency. The market appears to be maturing and achieving relative stability compared to the frenzy in 2017. Bitcoin rose 5% in response to the news.
9. KFC TO ADD 5400 JOBS
KFC has announced it will create 5400 new jobs in the UK and Ireland. Like many fast-food chains, KFC experienced a rapid growth in sales. As a result, it will seek to bolster its workforce to cope with demand, aiming for a total 10,000 strong team by December 2020.
The chain will use the government’s “Kick-start Scheme” which provides employers with subsidies for hiring young people. The £2 billion scheme was introduced to help prevent mass youth unemployment due to the pandemic. Employers will receive funding to cover national the minimum wage (dependent on age) as well as national insurance and pension contributions for up to 25 hours a week. KFC will be targeting 16-24-year olds for the new roles. The new recruits will be on full or part-time contracts for a minimum of 25 hours per week.
10. MAN U POSTS LOSS
Manchester United has posted a £23.2 million loss for the year to 30 June 2020. The coronavirus outbreak has decimated profits as matchday revenues and broadcasting revenues sank 19% and 40% respectively. With no supporters at stadiums and a rushed finish to last season, football clubs have not been immune to the bite of the coronavirus pandemic. This news comes a week after the Premier League rejected plans to give the Big Six clubs, including Manchester United, more voting power. Although now, there are talks of a European Premier League which would certainly bring in more revenue into the club. Manchester United currently has debts of £474.1 million and is listed on the New York Stock Exchange.