The week’s news included; US cancels Microsoft’s JEDI contract, EU fines German automakers €875 million for breaching antitrust laws, Hackers demand $70m in ransomware attack affecting 1500 businesses, John Lewis to build & rent residential properties.
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:
- City A.M – Post-Brexit, London’s financial services sector will have a competitive edge over its European counterparts if it can expand into Asia and encourage foreign investment.
- BBC News – Will England’s success boost the UK economy?
- CNBC – What McDonald’s minimum wage raise says about fast-food franchise future.
- City A.M – Buy now pay later schemes need light-tough regulation to protect consumers and nurture economic growth.
1. US DOD CANCELS JEDI CONTRACT
The US Department of Defence has cancelled the $10 billion JEDI contract awarded to Microsoft. The Joint Enterprise Defence Infrastructure (JEDI) contract was designed to bring the most comprehensive overhaul of DOD internal IT systems in recent times. It quickly, however, became the source of a legal spat between Microsoft and Amazon. Amazon claimed the contract was awarded unfairly to Microsoft in 2019 due to President Trump’s personal issues with former Amazon CEO Jeff Bezos. Amazon then filed a lawsuit, appealing the decision. Although the Pentagon found no evidence of personal bias against Amazon in the decision-making process, a lack of White House cooperation meant its assessment was not conclusive.
Now, the DOD has said it will cancel the contract due to “evolving requirements…and industry advances”. Instead, a new contract will be drafted and both tech giants are likely to be hired for certain elements. Only Amazon and Microsoft currently have the cloud service capabilities required by the DOD.
2. BIDEN CRACKS DOWN ON BIG TECH
President Joe Biden has signed an executive order designed to promote competition and introduce tougher scrutiny on Big Tech firms. There are 72 actions and recommendations within the order aimed at tackling the dominance of Big Tech.
The measures will see greater scrutiny on the mergers of tech firms and new restrictions on data collection and unfair market practices. Big Tech firms are notorious for buying up smaller competitors or undercutting them if they refuse to be bought. Big Tech’s use of personal and business data has also come under scrutiny. The order also affects the healthcare, travel and agricultural sectors where monopolies and unfair market practices are common. The use of non-compete clauses by employers will also be restricted.
This is a very comprehensive plan looking to provide a better deal for average Americans. Not all of the recommendations will come into force swiftly, as the ten different agencies mentioned in the order will be required to implement the plans. Whether the plans will achieve their intended goals in practice remains to be seen.
3. EU FINES GERMAN AUTOMAKERS
The EU Commission has fined VW Group and BMW €875 million for breaching antitrust laws by forming an emissions cleaning cartel. Mercedes-Benz owner, Daimler, narrowly avoided a fine because despite its involvement, it blew the whistle on the unlawful activity.
All three companies colluded to ensure that none of them implements standards higher than the EU’s basic standards. We must note, this is not in relation to the emissions cheating scandal, but rather discussions about legitimate attempts to reduce emissions. The companies worked together to develop ‘AdBlue’, a liquid additive that converts harmful nitrogen oxide to harmless water and nitrogen. They then agreed to only use AdBlue to the extent that emissions met the basic legal standards. This was achieved by colluding on AdBlue tank sizes and consumption.
Such collusion, however, is unlawful as it undermines competitiveness between brands. This is the first antitrust fine issued by the EU over technical collusion. VW has said it may appeal the fine. They claim the automakers did in fact exceed basic legal standards and the agreement was not upheld.
4. ASTRAZENECA ACQUISITION APPROVED
The EU has approved AstraZeneca’s £28 billion acquisition of rival Alexion Pharmaceuticals. Alexion, a US based pharmaceutical firm is a specialist in immunology and rare disease medication. Alexion has five patented drugs which AstraZeneca will gain access to and has a strong pipeline of 12 new drugs. AstraZeneca will create a dedicated business unit called “Alexion, The AstraZeneca Rare Disease Unit” headquartered in Boston. The deal was first announced in December 2020 and has since received overwhelming approval from both sets of shareholders. The deal has also secured regulatory approval from the US, Japan and Canada. It now just requires approval from UK regulators.
5. PURDUE SETTLEMENT
Pharmaceutical giant Purdue has agreed to settle with 15 US states over its role in fuelling the opioid crisis. The company will pay out $4.3 billion to settle the lawsuits and as the states drop their opposition to Purdue’s bankruptcy plans. 10 other states are still in opposition to the proposals.
Purdue had already filed for bankruptcy two years ago and pled guilty to criminal charges over its conduct. Purdue aggressively promoted its Oxycontin drug, downplaying its addictiveness. They also made illegal payments to doctors to encourage them to promote Oxycontin.
6. US RANSOMWARE ATTACK
A severe ransomware attack in the US has affected up to 1500 companies. IT firm, Kaseya, provides software tools to IT outsourcing companies. These tools are then used on systems of third-party customers who hire the outsourcing companies.
There was a vulnerability in one of these tools, so hackers breached it and shut down systems. This has paralysed small businesses across the globe. Small accountancy firms and dentists have been without access to files. Hundreds of supermarkets in Sweden were forced to close as their checkout systems were shut down. Computers at 11 schools in New Zealand were also shut down. The hackers are demanding $70 million in return for restoring the systems.
The White House is reviewing the situation and has called on Putin to clamp down on cyberhackers. Although analysts are suggesting that the sophistication of the attack signifies high-level government actors, rather than criminal hackers.
7. JOHN LEWIS STEPS INTO REAL ESTATE
Retailer John Lewis has side-stepped into real estate and will build 10,000 homes for rental over this decade. The demise of the high street is forcing retailers to rethink their strategies. John Lewis will be converting existing sites in its portfolio to build 7,000 homes while the remaining 3,000 will be on newly purchased land. Both houses and flats will be constructed.
John Lewis will also offer properties fully furnished with John Lewis products. All housing developments will have a concierge service and a local Waitrose. The high street retailer says this venture will create thousands of jobs and help tackle the national housing crisis. For the company, home rental will provide a stable and long-term source of income. John Lewis has closed over 15 sites since last year. The group posted a pre-tax loss of £517 million in 2020.
8. WISE LISTING
Fintech company Wise went public via a direct listing and was valued at £8 billion. Wise listed on the London Stock Exchange and saw its share price rise 10% on the opening day. Wise opted for a direct listing instead of an IPO and analysts say this is consistent with their brand. A direct listing sees a company’s outstanding shares put on the market without the fanfare that comes with an IPO. It also, however, comes without the help of expert underwriters to facilitate sales of shares. An IPO would see new shares created and sold to the public, with the help of underwriters. Direct listings are cheaper and allow current owners to retain their current share of the business.
Wise is a money transfer firm and generates income from cross-border transaction fees. The company also created a new scheme that allows customers to receive bonus shares in the company after 12 months. In the year to April 2021, Wise posted revenues of £421 million and profits of £30.9 million.
9. FCA FINES LLOYDS INSURANCE
The Financial Conduct Authority (FCA) has fined Lloyds Banking Group’s insurance business £90 million for misleading nine million customers. Lloyds had claimed those renewing their home insurance were offered a “competitive price”, yet the prices were likely to be higher than the price offered to comparable new customers or customers who switched insurance providers.
The FCA deemed that Lloyds had failed to check the veracity of the claims and ultimately misled customers. Lloyds had used this wording from 2009 until 2017. Furthermore, 500,000 were promised a loyalty discount for renewing but this was never received. Over the past 3 years the FCA has clamped down on the insurance sector and is working to ensure customers are getting a fairer deal.
10. TECH FIRMS THREATEN HONG KONG WITHDRAWAL
Facebook, Google and Twitter have all threatened to pull out of Hong Kong due to new data laws proposed by the government. Under the proposals, platforms would be liable for any “doxing” that takes place. Doxing is the public sharing of another person or company’s private information. All tech giants have ardently fought against attempts across the globe to make them liable for content on their platforms. This case is particularly important given the risk of criminal sanctions for the firms due to the actions of individuals on their platforms. In response, Facebook, Twitter and Google are considering suspending all services in Hong Kong.
The Hong Kong government is under increasing pressure from Beijing to crackdown on dissent. Last year, China imposed new draconian security laws on Hong Kong forcing US firms to stop responding to requests from Hong Kong law enforcement.