The week’s news included; Google facing £7bn UK lawsuit, New York City “bans” short term rentals, Spotify allegedly used for money laundering, Man U takeover deal may be off as Glazers seek £10bn.
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. – Friend or foe? Why short sellers are in the headlines again
- CNBC – What it’s like in Europe’s popular crypto haven Portugal as the U.S. cracks down
- City A.M. – We’re in for the biggest shake up in corporate criminal law this century
- CNBC – Here’s how Google plans to fight the DOJ
- Legal Cheek – Attention to detail most important soft skill for lawyers, research finds.
1. GOOGLE FACING £7BN UK LAWSUIT
Google is facing a huge £7 billion lawsuit in the UK over allegations of anti-competitive behaviour. Claimants allege Google is making prices more expensive for consumers by restricting competition in the mobile search space. Google reportedly uses its dominant position to increase prices of ad space for advertisers who in turn pass these costs on to consumers. Furthermore, Google bundles its products, requiring smartphone makers to install its search bar in order to access Google Play. This constitutes anti-competitive behaviour according to claimants. Consumer rights activist Nikki Stopford has filed a claim in the Competition Appeal Tribunal. She is seeking up to £7 billion in damages for UK consumers.
2. BIRMINGHAM CITY FALLS INTO BANKRUPTCY
The city council of Birmingham has effectively fallen into bankruptcy. The council has a £87 million budget shortfall for this year. A large reason for this is a huge £760 million settlement for equal pay legal claims. The council also blamed the over-budget implementation of an IT system. Their Oracle system for HR management and council payments was supposed to cost just £19 million. After three years of delays, the total cost could reach £100 million. Now, Birmingham City Council declared a Section 114 notice, a council equivalent of declaring bankruptcy. Spending on non-vital services will be halted. Only social care, waste collection and protection of vulnerable residents will be safeguarded. Libraries, parks and other council run facilities are at risk of closing.
Both Croydon and Thurrock councils have previously declared Section 114 notices. The government is now in talks with Birmingham city council to find a way out of the blackhole. A government minister said Birmingham will take primary responsibility and the government will provide “additional support”. Birmingham is Europe’s largest local authority with 1.1 million taxpayers. By contrast, London is broken up into 33 local authorities. London’s largest borough, Croydon, has a total population of 390,000.
3. NEW YORK CLAMPS DOWN ON SHORT TERM RENTALS
New York City is clamping down on short-term rentals (STRs) on sites like Airbnb amid a housing shortage. The city introduced new rules last week that ban rentals of 30 days or less except where owners have secured the city’s approval to do so. Approvals are difficult to secure as the required conditions are highly restrictive. Owners can only offer STRs for two guests or fewer. Owners must also occupy the same unit as the guests. This means buy to let property owners cannot use STRs for rental income, unless they live there.
New York’s mayor says it will help prevent illegal STRs where owners rent out properties for parties or events in unsuitable properties. As of two weeks ago, only 260 approvals had been granted by the city. This is only 8% of the 3200 applications received. The new rules have come into force but existing reservations for stays starting on or before December 1 will not be cancelled.
Airbnb called the action an “de facto ban” on STRs altogether. Airbnb and other platforms like Expedia’s platform Vrbo, had taken legal action to block the move but these actions were dismissed. Many have criticised the move as harmful to tourism and also to residents who rely on STRs for crucial income.
4. SPOTIFY ALLEGEDLY USED FOR MONEY LAUNDERING
A new report found that criminal gangs are using the streaming app Spotify as a means to launder money. Svenska Dagbladet in Sweden found evidence of the practice after speaking to multiple gang members and police. Proceeds from criminal activity are given in cash to crypto traders who convert it into Bitcoin. The Bitcoin is then used to pay people to stream artists with links to criminal gangs. Spotify pays artists per stream, so gangs have allegedly been generating millions each year from this practice. There was concern from an interviewed anonymous police unit that Spotify could become a criminal tool.
Spotify firmly rejected the allegations listed in the report. The streaming giant said the report was a “work of fiction”, particularly given that all sources cited are anonymous. According to Spotify, fewer than 1% of streams have been identified as fraudulent and Spotify’s systems are designed to detect anomalies.
5. WILKO STORES BOUGHT BUT CLOSURES STILL IMMINENT
Discount retailer B&M has agreed to buy up to 51 stores from Wilko following its collapse. B&M will pay £13 million for the stores. The rescue package pitched by HMV’s owner, Sunrise Records, has been paused due to funding problems. The deal with Sunrise would save a further 300 stores. Both deals however, still leave 52 stores without a buyer. Furthermore, B&M’s deal will not see store workers transferred and they will be made redundant. Administrators confirmed that the 52 stores have now been earmarked for closure by the end of September. 1300 jobs will be lost. The full list of closures is available here.
6. TIKTOK OPENS FIRST EU DATA CENTRE
TikTok has opened a data centre in Ireland, its first in Europe. It is hoped that this move could allay concerns about data privacy and its links to China. This is TikTok’s first European data centre and follows the opening of its first US data centre. TikTok has been under immense pressure from European and US lawmakers over the potential use of the social media app as a means of espionage by China. Furthermore, China’s data privacy laws technically could require companies such as TikTok to hand over user data to the government upon request.
TikTok has always denied all allegations. The UK, US, Australia and other countries have banned government officials from using the app. Keeping data in Europe would take the data outside of the reach of the Chinese government. Two additional data centres are being set up, one in Norway and another in Ireland. TikTok has over 150 million European users.
7. MANCHESTER UNITED TAKEOVER DEAL POTENTIALLY OFF
The sale of Manchester United could be off as current owners, the Glazer Family, hold out for a higher bid. Sheikh Jassim of Qatar and Sir Jim Ratcliffe are both in the running to buy the club. Sheikh Jassim is thought to have bid up to £6 billion. Neither bidders however, come close to the £10 billion price tag the Glazer’s have now set. They believe £6 billion substantially undervalues the club, despite Premier League rival Chelsea being sold for £2.5 billion last year. With no suitable bids, the Glazer Family are reportedly happy to take Manchester United off the market.
These reports led to the largest one-day fall of Manchester United’s share price in its history. Shares in the club tanked 19.5%, wiping $750 million off its value. The asking price of the Glazer Family for the club is now a 200% premium on the current market cap. The Glazers have owned Manchester United since 2005. Nearly £1.2 billion has been spent on player transfers since 2005 but the club has largely underperformed in recent years leaving fans disgruntled. Many had hoped a change of ownership could have changed the culture at the club. Bidders are still in talks with the Glazers but the hope of a deal is diminishing.
8. NOVO NORDISK BECOMES EUROPE’S MOST VALUABLE COMPANY
Danish weight-loss drug maker, Novo Nordisk, has become the most valuable European company, reaching a $428 billion market capitalisation. Novo Nordisk produced the popular weight-loss drug Wegovy. Wegovy has recently become available on the NHS. The drug works by tricking the mind into feeling like the stomach is already full therefore users eat less. It only needs to be taken once a week and has been proven to be effective in tackling obesity. It has also been shown to reduce the risk of strokes and heart attacks. Celebrities such as Elon Musk have endorsed the drug and the hype has contributed to its share price growth. Novo Nordisk has dethroned luxury fashion house LVMH to become Europe’s most valuable company.
9. CHINA BANS GOVERNMENT STAFF FROM USING IPHONES
China has reportedly banned government employees from using iPhones amid rising tensions with the US. Staff in China’s central government agency were reportedly told not to bring iPhones into the office or use them for work. This applies to staff both at government-backed and state-owned organisations, according to Bloomberg. China is a huge market for Apple. Sales in China accounted for 18% of Apple’s total revenue. Furthermore, iPhones are still largely produced in China despite a recent shift towards India. A more severe crackdown on iPhones in China could severely hit Apple’s bottom line. No official statement on the reports has been released by the Chinese government.
Apple share price plummeted 6% in just 2 days following the news. Over $200 billion was wiped off Apple’s market cap. Apple is the world’s most valuable company and is currently worth around $2.8 trillion.
10. ARM SEEKING $50BN VALUATION
Microchip maker Arm is seeking a $50 billion valuation from its upcoming share listing. The UK based tech firm designs and produces chips that power the vast majority of smartphones and gaming consoles. Its current owner, SoftBank, opted to float shares of Arm after a failed $40 billion sale to Nvidia. SoftBank will retain 90% of the business following the listing. Arm could raise up to $5 billion from the listing. Despite being a UK based firm, Arm snubbed a UK listing in favour of NASDAQ. The company blamed Brexit and a poor economic outlook.