The week’s news included; A&O – Shearman & Sterling merger, Meta fined €1.2bn for data misuse, TikTok moves to block Montana ban, Shutterstock buys Giphy for $53m.
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. – Extending ULEZ is making criminals out of the leftie middle-class
- CNBC – ‘It’s not a bubble yet’: Wharton’s Jeremy Siegel predicts Big Tech boom fueled by A.I.
- BBC News – Why is UK inflation higher than US and Germany?
- City A.M. – Analysis: Why US debt ceiling deal might not be good news for global markets
1. ALLEN & OVERY SHEARMAN & STERLING MERGER
Magic Circle law firm, Allen & Overy is set to merge with US firm Shearman & Sterling in a $3.4 billion deal. The deal will create the third largest law firm in the world boasting 3900 lawyers and a combined revenue of $3.4 billion. This also marks one of the largest transatlantic law firm mergers ever. For Allen & Overy, the deal provides a stronger presence in the coveted US market. It gives the firm greater capabilities to serve existing clients and gain new ones. Allen & Overy is the larger player in this deal, turning over £1.9 billion last year. Partners of both firms will now vote on the deal.
Shearman and Sterling has been seeking to strengthen its financial position and a merger was the most effective way to achieve this. In February, Shearman announced job cuts in the US. The firm recently tried to merge with Hogan Lovells but this fell through. Transatlantic law firm mergers are becoming increasingly common as the market consolidates.
2. META FINED FOR EU DATA BREACH
Meta has been fined €1.2 billion by Ireland’s Data Protection Commission (DPC) for mishandling user data. This is the largest fine issued due to a breach of the General Data Protection Regulation (GDPR). User data was transferred between the EU and the US under Meta’s standard contractual clauses. These clauses are designed to protect EU user data from being affected by weaker US privacy regulations. The DPC found that Meta’s clauses were inadequate and left EU user data vulnerable to the application of weaker privacy protections and even to US intelligence agencies. Many other companies use similar standard contractual clauses to cover their transfers of EU user data over to the US.
Meta has said the decision was “unjustified” and that it will appeal the ruling. They argue that they have been unfairly singled out despite the fact that countless other EU companies use similar mechanisms to transfer data. Check out our article exploring GDPR.
3. TIKTOK BITES BACK
TikTok has launched legal action to block the US state of Montana’s ban on the platform. Two weeks ago, Montana announced a ban on app stores offering TikTok for download and a $10,000 per day fine for breaches of this ban. They are the first US state to take such action. The ban comes into force in January 2024. US lawmakers are concerned about the potential security risk posed by TikTok due to its vulnerability to control by the Chinese government. TikTok is owned by Chinese tech giant ByteDance but denies that it is controlled by the government in Beijing.
TikTok is arguing the ban infringes on the First Amendment right to free speech. They also claim the ban is unjustified given the “unfounded” accusations that they are controlled by the Chinese government. Legal representatives for the state of Montana said they anticipated legal action and will defend the ban in court.
4. SHUTTERSTOCK GIPHY DEAL
Stock image company Shutterstock has agreed to buy GIF platform Giphy from Meta for $53 million. This comes after Meta was ordered to sell Giphy by the UK competition regulator last year. The Competition and Markets Authority expressed concern that Meta could restrict rival social media apps’ access to Giphy’s GIFs and distort competition in the mobile ad space. Meta subsequently agreed to offload the company. Shutterstock’s purchase price is significantly lower than the $400 million that Meta originally paid for Giphy.
Giphy is the largest animated image and GIF platform in the world boasting 15 billion daily impressions. It is integrated into most major social media platforms and chat apps such as TikTok, Instagram and Microsoft Teams.
5. UK ECONOMY LOOKING HEALTHIER
The UK economy is looking healthier than anticipated as inflation falls and outlooks improve. The IMF altered its prediction for the UK and now no longer believes the UK will enter recession this year. Furthermore, they no longer believe the UK will have the lowest economic growth of the G7. Growth is however, still expected to reach just 0.1% for the year. This came as Germany fell into recession due to high inflation. The German economy shrank by 0.3% in the first 3 months of 2023.
Inflation in the UK also fell to 8.7% last month, the steepest decline in months. This indicates that the worst of spiralling prices has come to an end. Inflation had been above 10% for the past 8 months. Energy bills are set to fall by 20% from July, easing the strain on consumers’ pockets. Around 27 million households will see their average energy price fall to roughly £2074 a year. This news could also encourage the Bank of England to reduce interest rates that have been rising consistently for the past 13 months.
6. MICROCHIP INDUSTRY
Apple has agreed a multi billion dollar microchip deal with US manufacturer Broadcom. The iPhone maker had previously announced plans to invest $430 billion in the US and this deal forms part of this investment. The US is keen to ensure that its own domestic chipmakers do not fall behind competitors in China and Taiwan. Lawmakers have been applying pressure on US tech firms to source more parts from domestic manufacturers or at least those based in politically allied countries. There is growing tension between the US and China, particularly with regards to tech supremacy. Apple recently unveiled plans to produce the iPhone 14 in India, evidencing their attempt to reduce reliance on China. This latest deal with Broadcom will no doubt be welcomed by US lawmakers.
This news comes as US chipmaker Nvidia’s share price soared, taking it to a nearly $1 trillion market cap. Nvidia has shot up to prominence due to its strength in the machine learning field. The company produces graphics processing units (GPUs) for computers designed for machine learning. For example, Open AI’s ChatGPT was trained using 10,000 of Nvidia’s (GPUs) clustered together in a Microsoft supercomputer. Nvidia also sells AI microchips. The rise in AI systems has boosted demand for Nvidia’s products and in turn its share price.
7. MUSK PULLS TWITTER OUT OF EU DISINFORMATION CODE
Twitter is pulling out of the EU’s voluntary code to fight disinformation on public platforms. The Strengthened Code of Practice on Disinformation (available here) would require social media platforms to fact check content, demonetise bot accounts and review political advertising more closely. All major social media platforms are signed up to the code, including Google, Microsoft, Meta, owner of Facebook and Instagram, TikTok, and Twitch. The EU’s internal market commissioner announced that Twitter had pulled out from adhering to the code. He highlighted however, that the Digital Services Act, which comes into force in August, still obligates platforms to fight disinformation. Thierry Breton, tweeted, “Obligations remain. You can run but you can’t hide.”
Last week, Musk also got US approval to trial his brain-chips on humans. The Neuralink brain chips aim to help restore lost vision and the use of limbs after paralysis by linking patient brains to computers. It can also help disabled people use computers and mobiles.
8. GOVERNMENT SELLS NATWEST STAKE
The UK government has sold a £1.26 billion stake in Natwest, formerly RBS. RBS was bailed out by the government during the 2008 financial crisis for £46 billion. The government bought an 84% stake but has been gradually decreasing its stake in recent years. Now, the taxpayer owns just 38.6% of Natwest. The government has set a deadline of 2026 to sell off all Natwest holdings. The sell-off of Natwest shares has taken so long due to the problems that plagued RBS for most of the 2010’s. Had the government sold the shares earlier they would have been sold for a heavier loss. Following the rebranding and new leadership, Natwest is performing well, generating £5.1 billion in operating profit for 2022.
9. JLR TO BUILD NEW UK GIGAFACTORY
Jaguar Land Rover is to build a new gigafactory in the UK, shunning Spain. The Indian owner of automaker, Tata, reportedly confirmed this to senior government officials. The deal will require nearly £500m in taxpayer subsidies but will create up to 9000 jobs. The factory is likely to be built in Somerset. This comes as a welcome boost for the post-Brexit UK car industry which has been struggling due to additional red tape. British car maker Vauxhall had even asked the government to renegotiate the Brexit deal due to the unviable trade rules for electric vehicles under the current agreement.
10. NETFLIX PASSWORD SHARING CRACKDOWN
Netflix has begun cracking down on password sharing in the UK. In a move to boost profitability, the streaming giant will restrict the free access of UK subscriber accounts used outside of the primary household. Around 4 million subscribers have already been contacted by post. The letter informed them that they grant free account access to those outside of their household and that this practice must end. Netflix confirmed that an “account is for use by one household”. Now, a paid-sharing account can be set up for £4.99, allowing access to those outside of the household. Netflix has always relied on rapidly bringing in new subscribers to pay its bills. Now that numbers have been falling, Netflix is seeking to ensure its making as much money as possible from existing users.
