The week’s news included; EU plans €140bn energy firm windfall tax, Microsoft’s Activision purchase facing CMA probe, Google loses €4bn antitrust fine appeal, Aldi overtakes Morrisons.
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. – If Oslo can come up with new ideas for the housing crisis, London can too
- The Fashion Law – What Should You Do If Your Fashion Brand is the Target of a Data Breach?
- BBC News – Should billboard advertising be banned?
- City A.M. – Kwarteng must pull businesses out of limbo before MPs head off to party conferences
1. EU PLANS ENERGY FIRM WINDFALL TAX
The European Union has announced plans to impose a windfall tax on energy companies to raise €140 billion. The raised funds will be provided to help businesses and households through the energy crisis. Energy firms continue to post record profits largely because of soaring wholesale prices due to the war in Ukraine. Over £50 billion in profit was generated by the five biggest oil companies in the first half of 2022 alone. The EU will now oblige fossil fuel extractors to pay an additional 33% levy on taxable surplus profits for the 2022 fiscal year. All funds will be split accordingly between EU member states to help struggling households and businesses.
This windfall tax is in conjunction with energy consumption targets. The EU Commission has called upon member states to cut electricity usage by 10% overall and 5% during peak hours using incentives and campaigns. Furthermore, the EU has set a voluntary target of cutting gas usage by 15% by spring 2023. The EU has drastically reduced its reliance on Russian gas, falling from 40% before the war down to just 9% now. The EU has clearly set its emphasis on efficient and sustainable energy usage.
In the UK, new Prime Minister Liz Truss has announced an energy price freeze for two years but has ruled out extending the £5 billion windfall tax. The energy price freeze is expected to be paid for by additional borrowing. The total cost to the taxpayer is unknown but some estimate that it could be up to £150 billion. By comparison, the COVID-19 furlough scheme cost the UK £70 billion. Many have criticised Truss for not opting to tax energy firms during this bumper period and significantly increasing national debt. Check out our article exploring the pros and con of windfall taxes.
2. MICROSOFT BLIZZARD DEAL FACES COMPETITION PROBE
The UK competition and Markets Authority (CMA) is launching an in-depth investigation into Microsoft’s $68.7 billion acquisition of Activision Blizzard. This “phase two” investigation will take a deep dive into concerns highlighted in its initial review. In the phase one investigation, Microsoft said it would not offer any proposals to address regulator concerns, triggering the phase two investigation. The CMA was concerned that Microsoft could harm rivals by limiting or cutting access to Activision Blizzard’s titles. Activision Blizzard is behind huge franchises such as Call of Duty, Candy Crush and Warcraft. Microsoft is behind the Xbox game console, raising concerns that Playstation maker, Sony, could suffer from this deal. Microsoft has said it will work with the regulator going forward to address any concerns.
3. GOOGLE LOSES APPEAL AGAINST EU FINE
Google has lost its appeal against its huge €4.125 billion antitrust fine. The tech giant was fined for abusing its market dominance regarding its search engine. In 2018, Android phone-makers were obliged to use Google search and web browser apps to gain access to Google’s Play Store. This practice ensured that its search and browser remained dominant on all Android models. Only 1% of Android users download rival search engine apps and only 10% download a different browser. The EU claims this illustrates the lack of real choice for consumers. Subsequently, a €4.125 billion fine was issued, marking the largest fine ever issued by the European Commission. Google appealed this and the European General Court reduced the fine slightly but held that the tech giant “imposed unlawful restrictions on manufacturers of Android mobile devices”. The judge held that Google deprived users of “genuine choice” over the search engine to use. Google had already changed its terms but has said it is disappointed by the decision. BBC News looks closer at the decision.
4. TWITTER GREEN LIGHTS MUSK LAWSUIT
Twitter’s shareholders have approved Elon Musk’s takeover bid which will now see the platform try to force Musk to proceed with the acquisition. Musk had agreed to buy Twitter for $44 billion back in April. He later claimed that Twitter misrepresented the number of fake accounts on the platform. Musk then decided to pull out of the deal and cited this misrepresentation as the reason. Twitter however, says that Musk cannot pull out of the deal and that accurate data was provided. Last week’s vote gives the company the ability to pursue Musk in court and force through the deal. Musk and Twitter will now appear in court in October where a judge will decide whether Musk has to buy Twitter or not.
5. UBER HACK
Uber is investigating a cyber-breach of its computer system. The firm’s internal communications, code repositories and systems had been accessed and sent to the New York Times. Uber staff received a message on messaging app Slack saying, “I announce I am a hacker and Uber has suffered a data breach”. Explicit photos were also posted on their internal information page. Uber’s Slack system was taken offline shortly after. There is no evidence that driver or customer data has been affected. While Uber’s investigation is ongoing, it appears the hacker primarily wanted publicity. The hacker is reportedly an 18 year old who had developed his cyber-security skills and hacked Uber because their defences were “weak”. Uber is in contact with the authorities regarding the breach.
6. EU THIRD PARTY LITIGATION FUNDING
The EU parliament has overwhelmingly voted to introduce new limits and conditions on third-party litigation funders. Third-party litigation funders finance lawsuits in return for an agreed percentage of the winnings. German MEP Axel Voss published a report highlighting exploitation of claimants by these funders. Funders often generate huge profits from these lawsuits, significantly reducing the returns of the claimants. In response to this situation, Voss proposed a maximum 40% cap on the payments due to funders from lawsuit winnings and greater industry transparency. He also proposed that funders should be forced to cover the costs of the defendant as well as adverse awards if the case is unsuccessful. Last week, the EU voted overwhelmingly to adopt these proposals.
This decision received backlash from a range of legal practitioners. Third-party litigation funding allows individuals to take on financially superior organisations. Group action lawsuits against giants like Apple and Mastercard all rely on third-party funding. There are concerns that these planned restrictions may limit access to justice as individuals and small companies cannot afford to sue large companies without third-party funding. These new EU proposals wont directly affect the UK but could increase the attractiveness of the UK as a jurisdiction to launch large class action lawsuits.
7. ALDI OVERTAKES MORRISONS
Aldi has overtaken Morrisons to become the UK’s fourth largest supermarket. The market share of the discount supermarket rose to 9.3%, while Morrisons’ fell to 9.1%. Aldi enjoyed a huge 18.7% rise in sales in the 4 months to September. Morrisons has enjoyed its top 4 spot since 2004, following its acquisition of Safeway. This decline isn’t great news for its new owner, Clayton, Dubilier & Rice, who bought the supermarket in October last year. The supermarket says that customers “don’t really care” about these statistics and are mainly concerned about their service and quality.
Tesco remains by far the largest supermarket in the UK with a 26.9% market share. Sainsbury’s and Asda boast 14.6% and 14.1% shares respectively. Aldi’s discount competitor, Lidl, sits just behind Morrisons at the 6th spot with a 7.1% share.
8. GOLDMAN SACHS SLASHES WORKFORCE
Goldman Sachs is reportedly planning to slash hundreds of jobs in September to cut costs. Between 1% and 5% of its lowest performing workforce will be cut, amounting to between 500 and 2500 jobs. It is anticipated however, to be at the lower end of this range. The decision is in response to a declining economic outlook and a reported 48% drop in profits. Goldman Sachs, along with many other banks, paused its annual job cut tradition due to the pandemic. This tradition has now resumed as all other COVID-19 related protocols have now been axed. In the US, staff are now working a mandatory five-day work week in the office and free taxis to the office are now only for late workers.
9. POUND STERLING HITS 37-YEAR LOW
The pound has fallen to a new low against the US dollar as the cost of living crisis hammers the UK economy. The pound fell to $1.1351 last week, the lowest level since 1985. Sterling has been gradually declining against the dollar all year and with a recession imminent, this trend will likely continue. Parity with the dollar is not far fetched as the Euro recently saw. At the start of 2022, the Euro was worth $1.1374. By August, it had fallen to $1. Many analysts believe the UK is already in recession and with rising inflation and interest rates, it’s predicted that the situation will get worse before it improves.
10. KANYE WEST ENDS GAP DEAL
Rapper and entrepreneur Kanye West is ending his deal with Gap. The deal was hoped to revive Gap’s faltering brand and bring in young shoppers with West’s own fashion label, Yeezy. When the 10 year deal was struck in 2020 it was hailed as the start of a new era for Gap. Now, barely 2 years into the deal, the parties are terminating the agreement.
The relationship turned sour for a number of reasons. Gap claims that West failed to honour the terms of the agreement. West did not open any standalone stores and the rollout of Yeezy products was slow. The first item manufactured under the deal was a $200 puffa jacket but this was not released for sale for 12 months. West also expressed his grievances with Gap. He criticised them for copying his designs, excluding him from meetings and from the board. Gap has ultimately said that their delivery of the vision “is not aligned” and the issues left them with no choice but to terminate the agreement. Yeezy was valued at a huge $2.9 billion in 2020.