The week’s news included; Pandora Papers leak exposes tax avoidance of the rich and powerful, Google appeals €4.34 billion EU antitrust fine, Netflix sued over Squid Game, Mishcon de Reya sues Google & DeepMind over NHS data deal.
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:
Opinion articles of the week:
- Sifted – Why are startups suddenly sponsoring sports teams and festivals?
- BBC News – UK visa plan will not fix lorry driver shortage, says boss
- The Guardian – Streaming was supposed to stop piracy. Now it is easier than ever.
- Standard – Four trends that will cause a cost of living crisis.
1. PANDORA PAPERS
Last week saw one of the largest data leaks of financial documents in history. The leak saw 2.94 Terabytes of data in some 11.9 million files exposed. The Pandora Papers, as with previous leaks, exposed tax avoidance, corruption, and clandestine activity of the powerful and super rich. Over 300 public officials and 35 political leaders have been exposed. For example, the Czech Prime Minister failed to declare a £12 million purchase of villas in France. Former UK Prime Minister, Tony Blair, avoided over £300,000 in stamp duty tax when purchasing a property with his wife. The King of Jordan has purchased £70 million worth of UK and US real estate through shell corporations. Azerbaijani President Ilham Aliyev was found to be involved in £400 million of secret real estate deals, using funds allegedly stolen from his nation’s coffers. One of his London based properties was even sold to the UK Crown Estate.
In total, the ownership of over 95,000 offshore shell corporations was exposed. Most companies are conducting perfectly legal activity and use offshore companies simply to conceal ownership. Today however, those undertaking aggressive tax avoidance schemes are facing staunch criticism and such revelations can harm public relations. Also, with the politicians, there are signs of corruption and theft of public funds. Lawyers of the King of Jordan, Abdullah II bin Al-Hussein, have said however, the £70 million of real estate was purchased using his personal wealth. Furthermore, the use of offshore companies is for privacy and security reasons.
The Pandora Papers further highlight the use of the US and the UK as tax havens. In London, hundreds of high-rise luxury developments are constructed annually but many of these are permanently empty. The inflated housing market makes London and parts of the US like Miami, prime locations to buy real estate assets and store wealth. Whether this leak will result in any political action to curb tax avoidance remains to be seen.
2. GOOGLE APPEALS €4.34BN FINE
Google is appealing its €4.34 billion EU antitrust fine. The tech giant was reprimanded by the European Commission in 2018 for abusing its market dominance with regards to its Android operating system. This is the largest antitrust fine issue by the EU and forms one of three fines totalling $8 billion levied against Google. The Android system is on 80% of mobile devices in Europe. Google obliged smartphone makers to take a bundle of 11 Google apps in order to use any one of these app. They also prohibited phone makers from making alterations to the Android system. This conduct breached EU antitrust law and hence Google was slapped with a fine. South Korea also recently fined Google $177 million over this practice.
Google claims it bundles apps together as Android is free, so it includes revenue generating apps, Search and Chrome, to recover costs. The tech giant also criticised the EU for ignoring anticompetitive practices of its rival, Apple. The court case is expected to conclude in 2022.
3. MORRISONS SOLD FOR £7 BN IN AUCTION
US private equity firm Clayton, Dubilier & Rice (CD&R) has won an auction to buy Morrisons with a £7 billion bid. The UK’s fourth largest supermarket was put up for auction after a takeover battle lasting nearly four months. CD&R was rejected earlier this year after offering £5.5 billion for the business. US investment group Fortress then swooped in with a £6.7 billion bid which was accepted by the board. CD&R had then put in a £7 billion offer which saw Fortress’ bid rejected in favour of CD&R. Neither bidder declared its final offer, so the London stock market’s Takeover Panel announced that an auction would take place. The auction was held on Saturday and CD&R came out victorious. If the bid is accepted by shareholders, the deal is expected to be completed by November. Morrisons turned over £17.5 billion last year and has over 110,000 staff.
4. NETFLIX SUED OVER SQUID GAME
Netflix has been sued by a Korean internet provider over its hit new series Squid Game. SK Broadband claims Netflix’s series is causing extreme network traffic and is demanding Netflix pays usage fees. In South Korea, there is a legal debate of the responsibility of content makers to pay usage fees for internet services. Amazon, Apple and Facebook are all paying usage fees in South Korea. Understandably, Netflix claims providing internet to users is not its responsibility. Furthermore, Netflix claims it has brought $4.7 billion and 16,000 jobs to South Korea.
Squid Game has taken the world by storm. The show is Netflix’s biggest non-English series ever and insiders say it is on track to become Netflix’s biggest show of all time. The current record belongs to Bridgerton which pulled in 82 million viewers.
5. GOOGLE AND DEEPMIND SUED OVER NHS DEAL
Mishcon de Reya has filed a lawsuit against Google and its sister firm DeepMind over allegations they have processed over a million health records without consent. DeepMind secured a deal to access pseudonymised NHS data in 2016. The tech firm was developing a patient monitoring app called Streams. This deal was found to have breached UK data protection law by the Information Commissioner’s Office in 2017. Patient records were shared with inadequate safeguards and processes. Mishcon is now taking action on behalf of 1.6 million individuals whose records were obtained by DeepMind as part of the deal. The lawsuit will ascertain whether DeepMind acquired and used the information in accordance with data protection law or not. DeepMind is the artificial intelligence subsidiary of Alphabet. It was first acquired by Google in 2014 for $500 million.
6. GRANT THORNTON FINED £2.3m
Grant Thornton has been slapped with a £2.3 million fine for failures in its audits of collapsed bakery chain Patisserie Valerie. The accountancy firm had fallen below proper standards and failed to question financial information provided by the company. Grant Thornton’s audits between 2015 and 2017 “missed red flags” which ultimately could have prevented the bakery’s demise. In 2019, Patisserie Valerie discovered a £20 million black hole in its book meaning it could meet its obligations. This hole was finally valued at £94 million after further investigation. 70 Patisserie Valerie stores closed and 900 people lost their jobs.
Grant Thornton will face a £2.3 million fine, reduced from £4 million due to mitigating factors. It must report to the Financial Reporting Council annually to demonstrate improvements in its practices. The lead auditor at the firm who signed off the accounts was also fined £87,750, reduced from £150,000. He also faces a three-year ban from carrying out audits.
7. NATASHA’S LAW COMES INTO FORCE
Natasha’s Law came into force last week, obliging food retailers to display ingredients and allergens on every food item. Previously, firms could be exempted from displaying allergens on food made on site or that were pre-packed like sandwiches and salads. 15-year-old Natasha Ednan-Laperouse died in 2016 after eating an artichoke, olive and tapenade baguette from Pret a Manger. The sandwich contained sesame seeds, but this was not displayed on the packaging. She suffered a severe allergic reaction minutes after taking off on a flight to Nice. Natasha went into multiple cardiac arrests and died at a French hospital. In an inquest it was found that Natasha would not have eaten the sandwich had the allergens been displayed. This new law, dubbed Natasha’s Law, will see all foods be labelled appropriately and will hopefully prevent other tragic incidents like this occurring again.
8. CMA RELEASES GREENWASHING GUIDANCE
The Competition & Markets Authority has released its Green Claims Code. The code is designed to help firms avoid greenwashing. It applies to all businesses and covers any advertisements involving environmental claims. There are six core principles in the Code. These require green claims to; (1) be truthful and accurate, (2) be “clear and unambiguous, (3) not omit or hide important information, (4) include only “fair and meaningful comparisons, (5) consider the full life cycle of the product, (6) be substantiated. The CMA will begin a review of misleading claims in January 2022, giving firms time to review their adverts and claims. EU research found 42% of green claims made by companies were “exaggerated, false or deceptive.” See the full Green Claims Code here.
9. SOUTHEASTERN RAILWAY STRIPPED OF LICENSE
Southeastern has been stripped of its license and the railway line has been taken under government control. The railway operator had failed to declare £25 million in government funding since 2014. Southeastern could face further action including hefty fines. The Serious Fraud Office is also reportedly looking at the case. The matter was brought to light during the government’s renegotiation of franchise contracts with railway operators.
It is rare for a railway to be stripped of its license for a breach of trust. In 2020, Northern Railway was stripped of its franchise due to persistently poor service. The government has appointed SE trains to take over services from Southeastern from 17 October. Customers will not see any changes in services. Trains will operate as normal, and tickets can continue to be purchased in the usual way.
10. ROLLS ROYCE
Rolls-Royce has announced that it will stop making petrol and diesel vehicles by 2030. The automaker also revealed its first all-electric vehicle, Spectre. Spectre will be available from 2023 and signifies a landmark shift in the luxury automaker’s business. Mid to high end car models are the forerunners in the shift to electric vehicles. The average electric vehicle costs around £43,886 and prices are decreasing rapidly. Luxury and sports models are lagging behind in the shift to electric models as performance tends to be the priority. Rolls Royce vehicles range from around £200,000 up to a staggering £20 million for a bespoke model. The UK government’s ban on sales of new petrol and diesel cars from 2035 forcing manufacturers to expedite their shift towards electric vehicles. We will likely see all automakers announce their shift to all-electric fleets over the coming months and years.
While Rolls-Royce is drawing a line under its non-electric automobile business, its aerospace business will steam ahead as normal. The company has been contracted to supply parts for the US Air Force’s fleet of B-52 bombers in a £1.9 billion deal. The supply contract will operate until 2050 and will cover the US’s 76 B-52 planes.
