The week’s news included; Global minimum corporate tax rate agreed, Natwest pleads guilty to money laundering failures, NBA 2K & GTA makers win patent dispute, Tesla ordered to pay $137m to racially abused worker.
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:
- City A.M. – Small businesses will bear the burden of climate costs and reap few rewards
- BBC News – Overseas workers only way to solve shortages, says Next boss
- Retail Gazette – What’s to blame for shortages in retail workforces – Covid or Brexit?
- City A.M. – If tax cuts worked in a crisis, why not after it, too?
1. GLOBAL MINIMUM CORPORATION TAX AGREED
136 countries have agreed a landmark deal to introduce a minimum corporation tax rate of at least 15%. The deal is designed to make large businesses pay a fair share of tax by limiting their ability to channel profits through low tax jurisdictions. Countries will also have greater powers to tax businesses operating in their jurisdiction, even if they do not have a physical presence. Where a company has profit margins over 10%, a quarter of profits above this 10% threshold will be channelled to and taxed in the locations where they were generated. Countries are expected to yield an extra $150 billion in tax annually. Estonia, Hungary, and Ireland had previously rejected the proposals initially, but have now put their support behind the plans. Kenya, Nigeria, Pakistan and Sri Lanka have not signed up to the pact.
As with all tax laws, big businesses can find loopholes, so the unintended consequences of the deal remain to be seen. For example, 15% is lower than most countries’ current corporate tax rates, so many countries may use this as an excuse to slash rates to attract businesses.
2. NEWCASTLE UNITED – SAUDI TAKEOVER
Newcastle United FC has been purchased by the Saudi Arabia led consortium in a £300 million deal. The consortium consists of Saudi Arabia’s Public Investment Fund (PIF), PCP Capital and RB Sports & Media. Together they have successfully purchased 100% of the club. This will see the exit of current owner Mike Ashley after 14 years at the helm.
The deal was initially blocked last year as the consortium failed to pass the Premier League’s owners’ and directors’ test. There was concern that the Saudi PIF was not sufficiently separated from the Saudi State itself. Saudi Arabia has now made legally binding assurances about separation between the PIF and the Saudi State, allowing the deal to pass.
Additionally in 2020, Qatari broadcaster BeIN complained to the Premier League that Saudi Arabia was responsible for piracy of its content and had blocked its service in the nation. As a Premier League broadcasting rights holder, BeIN’s complaint influenced the Premier League’s decision. Now however, Saudi Arabia has removed this ban and provided assurances that it would clamp down on piracy of BeIN content.
The response to the deal has been mixed. Newcastle United Fans were celebrating the news last week outside St James Park stadium. There is an expectation of a huge investment into the club which could ultimately see top players, coaches and managers flocking in. Human rights charity Amnesty International however, has criticised the deal and urged the Premier League to change its owners’ and directors’ test and prevent future deals. The Saudi Arabian state has a history of severe human rights abuses which Amnesty claims have been totally ignored in the process.
3. NATWEST PLEADS GUILTY TO MONEY LAUNDERING FAILURES
Natwest has pleaded guilty to failing to prevent £400 million of alleged money laundering by one customer. Formerly Royal Bank of Scotland, Natwest failed to flag deposits of £365 million in a single account between 2012 and 2016, with £264 million of this in cash. The customer was a Bradford based jeweller, Fowler Oldfield Ltd, and it was depositing as much as £1.8 million per day. Fowler Oldfield was closed in 2016 after a police raid. This is the first criminal legal action taken by the Financial Conduct Authority against a bank. Natwest is likely to face an enormous fine. Natwest is still 55% owned by the UK government after its £45 billion bailout in the financial crisis.
4. TESCO PAYS £193M OVER ACCOUNTING SCANDAL
Tesco has agreed to pay £193 million to shareholders over its 2014 accounting scandal. The supermarket had inaccurately reported its accounts leaving a huge £263 million in its books. Understandably, the company’s share price tanked, losing over £2 billion from its valuation. Shareholders have been seeking compensation ever since. Tesco has already paid out £235 million in fines to the Financial Conduct Authority and the Serious Fraud Office. It also received an additional £129 million as part of a deferred prosecution agreement (DPA). Three executives were prosecuted by the Serious Fraud Office but have since been acquitted. This latest £193 million settlement compensates investors and puts an end to legal proceedings over the matter.
5. NBA 2K AND GTA MAKER WINS PATENT DISPUTE
The US Court of Appeals for the Federal Circuit has rejected the claim by tech firm Acceleration Bay that the maker of NBA 2K and Grand Theft Auto (GTA) infringed on its patent. Acceleration Bay claimed that Take-Two Interactive, owner of Rockstar Games and 2K Sports, unlawfully used broadcast channels in multiplayer modes on NBA 2K and GTA. These channels allow hundreds of online players to interact and compete simultaneously in a single area within the game.
Take-Two argued that a patent infringement would require them to create and sell both software and hardware. Take-Two only produces the game itself, the system that facilitates the patented broadcast channels in the gaming console itself (i.e., Xbox or Playstation). The game publisher does not sell this hardware, nor does it have any control over this. The hardware and network access are key elements of the patent, and an infringement would require the provision of these by a relevant party. In this case however, individual customers must use their own personal gaming console and networks to set up the broadcast channel. The judges agreed with Take-Two’s and held that “under patent law precedent, the judge noted that “if a customer, rather than an accused infringer, performs the final step to assemble the system, then the accused infringer has not infringed.” Acceleration Bay is a tech incubator and investor based in California.
6. TWITCH DATA BREACH
Streaming platform Twitch has suffered a huge data breach as over 100GB of data was leaked last week. Hackers disclosed the earnings of top streamers and confidential company information. Much of the data appears accurate and it could be on track to be one of the largest data leaks ever. Twitch keeps earnings of streamers strictly confidential so this leak will damage trust. The leak also contained important Twitch source codes and software tools. Hackers claim they posted the data “to foster more disruption and competition” in the game streaming sector as Twitch’s platform is “a disgusting toxic cesspool”. Twitch is still working to determine the scale of the breach. The UK Information Commissioner’s Office has not yet been notified of a breach. Twitch was purchased by Amazon in 2014 for $970 million. The streaming platform turned over an estimated $2.3 billion in 2020.
7. TESLA ORDERED TO PAY $137M TO RACIALLY ABUSED WORKER
Tesla has been ordered to pay a former black employer who was racially abused at the company a whopping $137 million in damages. The carmaker was found to have failed to stop a barrage of racist abuse faced by Owen Diaz at their Fremont factory between 2015 and 2016. Diaz was a lift operator and faced daily racist slurs and abuse as well as racist graffiti in the toilets.
Tesla will face $130 million in punitive damages and $6.9 million for emotional distress. The automaker claimed the decision was unjustified but said they were “not perfect”but that they had “come a long way from five years ago”.
8. FRENCH CONNECTION
French Connection, known for its FCUK brand, has been sold for £29 million. UK-based entrepreneurs Apinder Singh Ghura and Amarjit Singh Grewal and holding company KJR Brothers formed a consortium to buy the beleaguered retailer. French Connection has been struggling for many years and last year saw its revenue plunge 40% due to the pandemic. It secured £15 million in emergency funding last July which provided some security. Even in 2019 however, French Connection posted a £7.3 million loss due to changing consumer trends. French Connection has 150 stores and concessions globally.
Auditor Mazar is, however, facing an investigation of its audit of French Connection for the year ending 31 January 2020. Mazars has said it will cooperate with the Financial Reporting Council, but no further information has been provided.
9. RENT THE RUNWAY IPO
Clothing rental firm Rent the Runway filed for an IPO last week. Like most fashion retailers 2020 was a tough year for Rent the Runway as fewer people needed fresh wardrobes. Customers can rent eight designer items per month for $99 a month. This rises to $135 per month after 2 months. Active subscribers fell over 60% last year down to 54,797 while revenue fell by nearly 50% to $157.5 million. Numbers have recovered for 2021 and management are confident that the brand is stronger than ever. Rent the Runway has been loss making for the past few years, posting losses over $150 million for both 2019 and 2020. The company will list on NASDAQ under the ticket “RENT” and is currently valued at $750 million.
10. IBM SETS VACCINATION DEADLINE
Tech giant IBM has said that all US employees must be vaccinated against COVID-19 by December 8 or they will be suspended. This applies to staff working from home too, but workers can be exempted on medical or religious grounds. Previously, IBM had only allowed fully vaccinated workers in its offices, but this latest announcement is the most far-reaching proposal. This follows similar actions by Facebook, Google and Microsoft in the US. Joe Biden has already mandated all federal workers and contractors to be vaccinated. Private employers with over 100 employers must either oblige workers to be vaccinated or undertake weekly testing. We do not see such widespread vaccination mandates in the UK due to differences in employment laws. Check our article explaining the legal difficulties around mandatory vaccinations.