GM Korea: Dispute with Temporary Workers Adds to Woes

In early February, GM Korea had announced that it would shut down one of its four plants in South Korea and incur an US $850 million impairment charge as part of its restructuring plans in Asia. The company has been making losses in all Asian countries except China. In May 2017, the company had announced that it would exit the Indian automobile market, one of the fastest growing car markets in the world, as it could not consolidate its position due to stiff competition from Indian and other international manufacturers. However, the company said that it would maintain some of its plants in India to export cars to other countries.

 

On February 13, a court ruled in favor of 45 temporary workers of GM Korea, ordering GM to recognize them as full-time employees. GM had fired over 600 employees since last December, via a mobile phone message and without any severance package, citing high labor costs and low output as the primary reasons. GM Korea has appealed against the verdict of the court. Having lost his temporary job as a mechanist twice in the past eight years, Shin Hyun-chang is one of the many workers who wishes to be reinstated. “I asked myself ‘why is my life so gloomy? Nothing is going right,’” Shin told Reuters at a protest tent set up outside the Bupyeong GM factories in the suburbs of Seoul. “I moved one step closer to achieving my goal of becoming a regular worker, but the jobs that can help me get there may disappear soon,” he stated.

 

GM sells Chevrolet and Cadillac cars in Korea. More than half the vehicles produced in South Korea are exported. The company employs over 16,000 people. This announcement by GM comes at a tough time for South Korean President Moon Jae-in, who had promised to create more jobs and provide job security as part of his new economic policy.

 

As per the latest analyst reports, GM Korea’s production is expected to fall by a quarter to just over 42 percent, thereby, further affecting the temporary, as well as, full-time employees of the company. With a slump expected in production, the company is somewhat entering a downward spiral as low production means the company will not be selling or exporting as many cars as its potential, which in turn will cause worse conditions for the company in South Korea. GM has also said that it will have no choice but to file for bankruptcy if its unions do not agree to cut labor costs. What happens to the plight of the temporary workers, and GM Korea itself, remains to be seen, but what is sure is that GM really needs a Plan B to restructure its business in Asia amidst reports of fall in production and sales.

GM Korea- Dispute with Temporary Workers Adds to Woes (PDF)

Trump Argument Absent from Brief Filed by AT&T and Time Warner

When the Department of Justice filed its lawsuit against the $85 billion AT&T and Time Warner merger, both companies claimed that the government was “selectively enforcing” an antitrust law. This argument stemmed from President Trump’s vocal animosity towards CNN, a subsidiary of Time Warner. This political background inspired AT&T to request phone logs and emails between the White House and Justice Department. Judge Richard J. Leon, overseeing the trial in the District Court for the District of Columbia, denied the request and AT&T has since dropped the political argument from its brief.

 

On the same day that both sides laid out their arguments for trial, a group organized by the Protect Democracy Project filed an amicus brief asking Judge Leon to reconsider allowing discovery regarding White House interference. Protect Democracy is a bipartisan network of former White House lawyers whom have teamed-up to investigated the  “potential erosion of democratic norms under Trump.”  The organization believes Trump’s statements in the 2016 campaign indicate his intention to block the deal in violation of the Constitution.

 

At least eleven former U.S. officials participated in filing the amicus brief, some former DOJ officials whom are also contributors on CNN. Included in this group are former U.S. attorney from the Southern District of New York, Preet Bharara, and onetime White House counsel to President Nixon John Dean. President Trump fired Bharara in the early months of his administration and Bharara remains a vocal critic of the President. John Dean was a prominent figure in Watergate and also a vocal critic of Trump.

 

Absent political rhetoric, the trial is now focused on classic antitrust issues, including how the merger will raise prices for consumers and effect competition. Time Warner and AT&T insist the merger is an attempt to compete with online streaming services such as Netflix and Amazon Prime and reject the argument that it will hurt consumers.

 

While a merger of a TV-program producer and TV-program distributor would create a corporate behemoth, AT&T argues they are still an underdog to Google and Facebook post-acquisition. Trial started March 19th and it remains to be seen whether the antitrust showdown will open the door for further telecom and media mergers or point to a new era of scrutiny towards an already wavering industry.

Trump Argument Absent from Brief Filed by AT&T and Time Warner (PDF)

Battle of the Dating Apps-Tinder Sues Bumble in Federal Court

Tinder, the app that revolutionized online dating, is going against its biggest rival in a new lawsuit filed on March 16, 2018.

 

Tinder’s parent company, Match Group, LLC (Match), is suing competitor app Bumble in Texas district court for patent infringement and stealing trade secrets. Yet this may be more than just your average patent lawsuit—some posit that it is the latest unconventional move by Match in an ongoing effort to acquire Bumble.

 

Match, which holds an impressive portfolio of several major dating services and over 23 million registered users, first made an offer to acquire Bumble in August 2017 for $450 million. Bumble turned down the offer amid reports that its actual valuation was closer to $1 billion. However, Recode recently reported that Match is still interested in acquiring Bumble, signaling that this lawsuit may really be a hostile bargaining chip in attempts to force Bumble to agree to the sale.

 

Moreover, a complicated history exists between the two dating apps. Bumble founder Whitney Wolfe Herd previously co-founded Tinder before suing the company in June 2014 for sexual harassment. In her suit, Herd alleged that her ex-boss and then-CMO at Tinder, Justin Mateen, robbed her of her co-founder title because he said that having a young female co-founder would “make the company seem like a joke.” Though the suit was eventually settled out of court for approximately $1 million, it did not include a non-compete clause. Herd soon went on to found Bumble, her own competitor dating app, geared primarily toward female users.

 

Herd’s new app immediately took off with the help of 79% shareowner Andrey Andreev, founder of Badoo, the world’s largest online dating network. Using Andreev’s expertise and Badoo’s infrastructure, Bumble launched in December 2014 with rapid success. The app garnered over 100,000 users in its first month alone. Herd then brought in two former Tinder executives, Sarah Mick and Chris Gulczynski, to design Bumble’s interface and back end.

 

Though Mick and Gulczynski have since left Bumble to launch their own agency, their involvement is another central issue to Match’s lawsuit. Match claims that the two executives stole “confidential information related to proposed Tinder features,” including the potential “undo” function that allows users to regenerate a match if they accidentally skip it. Match contends that Mick and Gulczynski were under confidentiality agreements, and therefore used trade secrets while knowing (or having reason to know) they were acquired by improper means.

In its 45-page complaint, Match requests an injunction against use of its patent rights, extensive damages, and a jury trial as to all issues. However, it is still unknown whether this suit is truly motivated by patent violations or just leverage for Match to persuade Bumble to accept its buyout offer. Only time will tell if this is the final push Bumble needs to join the Match portfolio.

Battle of the Dating Apps-Tinder Sues Bumble in Federal Court (PDF)

France Gives Companies Three Years to Erase Gender Pay Gap

Earlier this month, French Prime Minister Edouard Philippe unveiled the government’s plan to decrease gender pay gaps in the workforce. If companies fail to erase the pay gap over three years, government inspectors could fine them up to one per cent of the company’s wage bill.

 

The plan will involve companies with employees numbering greater than fifty people. How does the government intend to detect wage gaps? Companies will have to install software designed to detect for unjustified pay gaps between men and women. The software will be connected directly to the company’s payroll systems.

 

One source cites France as the second worst country in a survey for gender wage disparities. Data from a World Economic Forum’s Global Gender Gap Report reports that France scores seventeenth best in the world for gender equality and is approximately 76 percent of the way towards achieving gender equality.

 

President Emmanuel Macron pledged in the beginning of 2018 to increase the government’s efforts in waging the war against gender pay disparities. Marlene Schiappa, France’s highest-ranking women’s right’s official went on record to say that France’s numerous laws on equal pay have not achieved its objectives. Moreover, she suggested that companies should be required to release data on salaries for its employees.

 

Within the broader European Union, the U.K. reported the largest increase in the gender pay gap in 2015. Today, the EU in general has an average pay gap of 16.3 percent, down from an approximate 25 percent in 1995. In practical terms, this amounts to labor provided by women to be ceased after early November. Experts attribute this pay gap to more males dominating senior management and other higher paid positions.

 

Some employers were hesitant to provide their approval of the new plan. These employers were in attendance during the press conference and they expressed concerns about the standards for determining whether a pay gap existed. In the coming months, the government will finalize details with employers, unions, and industry-insiders and could become part of a broader labor reform policy plan.

France Gives Companies Three Years to Erase Gender Pay Gap (PDF)

Four Directors will leave Wells Fargo’s Board

Last Thursday, Wells Fargo announced that four board members, including its three longest serving directors, will soon be stepping down. Federico F. Peña, Lloyd H. Dean, Enrique Hernandez Jr, and John S. Chen will officially leave by the next company’s annual shareholder meeting this April.

 

Since 2016, the bank has been on the loop for years of misconduct.  Among other malpractices, the bank was on account for charging customers with fraudulent bank accounts they did not consent to and for forcing them to take insurance they did not need.  This gave rise to one of the most relevant fraud scandals lately.

 

The Federal Reserve firmly condemned Wells Fargos board for failing to oversee the bank and not assessing the company’s and the CEO’s performance.  Since then, the Fed announced that the bank would be banned from getting bigger until they overhauled risk and strengthened its board’s oversight.  This forceful intervention meant that one of the biggest financial institutions would be unable to keep up with its fast-growing rivals.  Wells Fargo had nearly $2 trillion in assets at the end of 2017.

 

The Fed has been penalizing banks for misconducts, but they have never reached such an imposition that limited a major bank’s growth.  Ever since, the bank has been pushing for a quick recovery, and Well’s officials expect restrictions lifted within the next year.  Therefore, the announcement that directors were stepping down came to no surprise.

 

Jerome H Powell, the fed official overseeing the negotiations with Wells Fargo, said, “Across a range of responsibilities, we simply expect much more of directors than ever before; and there is no reason to expect that to change.”  Furthermore, Powell said that they have proposed a new framework for board oversight that introduces a new principles-based approach that intends to spotlight the Feds expectations of effective boards.

 

This represents a shift in the evolving relationship between regulators and banks and suggests that the board’s role will likely grow in importance.  Furthermore, it is a clear message that directors should be extremely vigorous in their duties and failure to oversee malpractices will bring about harsh consequences.  Perhaps it signals a corporate culture of more openness and shared accountability.

Four Directors will leave Wells Fargo’s Board (PDF)

Canada and Mexico’s Exemption from Increased Tariffs Tied to NAFTA Renegotiation

In March 2018, President Trump signed his decision to impose tariffs on imports of steel and aluminum. In the wake of such a decision, international markets, longtime trading partners and members of the President’s own party are angry. The decision imposes a 25% tariff on steel imports and a 10% tariff on aluminum imports.

 

After announcing the tariffs, the President aggravated the situation by suggesting even broader tariffs for the European Union if it does not address the President’s (unspecified) concerns. On Twitter the President wrote, “The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum. If they drop their horrific barriers and tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!”

 

Unlike the European Union, Canada and Mexico are allowed an exemption, which is contingent on the three countries reaching a favorable renegotiation of NAFTA. Trump’s specific exemptions for Canada and Mexico come after what he thinks are large trade deficits with the two countries. On Twitter, he tweeted, “We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”

 

NAFTA talks have been laden with contentious issues. The President believes that the NAFTA accord is flawed, leading U.S. companies to move factories to Mexico and disenfranchising American workers. The Trump Administration’s most contentious proposal, among others, is to require “more automobile manufacturing in the U.S., seasonal barriers to farming goods, access to U.S. procurement deals, dispute resolution mechanisms, and a clause that would terminate the deal after five years.”

 

Canada and Mexico, however, have indicated their unwillingness to submit to the Trump Administration’s treatment. “Canadian Foreign Minister Chrystia Freeland called NAFTA and the tariffs ‘quite distinct issues’ and said ‘our negotiating positions are absolutely unchanged.’” Negotiations to update NAFTA are following their normal course after beginning in August 2017, missing a December 2017 target, and continuing into another soft deadline of March 2018. Despite negotiations, Trump has called out Canada and Mexico for not doing more to “stop trans-shipment of steel and aluminum through their countries and into the U.S.” His issue comes from what he believes were the previous administration’s unfair trade deals that adversely affected Americans.

 

The exemptions for Canada and Mexico are not going to last forever. The finalization of such exemptions is subject to the changes made to NAFTA that satisfy Trump. While the President will urge the renegotiations of NAFTA to be done quickly, it is likely that negotiations will continue until the year’s end, in light of Canada and Mexico’s stance against the new tariffs. What is clear, however, is that whatever the exemptions, countries and the international markets are not reacting well to the decision.

Canada and Mexico’s Exemption from Increased Tariffs Tied to NAFTA Renegotiation (PDF)

Companies Cut Ties With the NRA and Change Store-Wide Policies on Gun Sales

As protests rise against the National Rifle Association (NRA) in the aftermath of the shooting at Parkland High School, several businesses have said that they are ending their partnerships with the gun advocacy group.

 

These decisions are largely in response to tweets demanding change under the trending hashtag, #BoycottNRA. First National Bank of Omaha got the ball rolling on Thursday, February 22, when it announced via tweet that it “will not renew its contract with the National Rifle Association to issue the NRA Visa Card.” Rental car companies hopped on board the next day, with tweets coming from Alamo Rent A Car, Enterprise, National Car Rental, and Hertz, denouncing their rental car discount program with the NRA. On Saturday, February 24, Delta and United Airlines joined in, announcing via tweet that they are discontinuing their discounted rates for NRA members.

 

Companies involved in the sale of guns have also taken a stance. On February 28, just two weeks after the Parkland shooting, Edward Stack, CEO of Dick’s Sporting Goods, announced that the company is immediately ending its sales of military-style semi-automatic rifles, raising the minimum age for gun purchasers to 21, and will no longer sell high-capacity magazines.

 

After learning that the gunman behind the Parkland shootings had purchased a firearm from the retailer last November, Stack and his colleagues at Dick’s believed that action was necessary, citing that “thoughts and prayers are not enough.” In a statement issued on February 28, Stack echoed and commemorated the activism of the high school students who survived the Parkland shooting, saying “We have tremendous respect and admiration for the students organizing and making their voices heard regarding gun violence in schools and elsewhere in our country.”

 

That same day, Walmart announced that it is also raising the minimum age for purchasing firearms and ammunition from 18 to 21. With these moves, Dick’s and Walmart join a number of companies that have made policy changes in response to the Parkland shooting.

 

These actions have not been without controversy. For instance, Georgia Lt. Gov. Casey Cagle threatened to “kill any tax legislation that benefits” Delta Air Lines after the company ended its relationship with the NRA. Several other Twitter users have vowed to take their business elsewhere from companies who have cut ties with the NRA.

 

When asked about such pushback amongst gun rights advocates, Stack acknowledged that the move “isn’t going to make everyone happy,” but recognized that companies must be “brave enough” to make changes for what they believe in.

Companies Cut Ties With the NRA and Change Store-Wide Policies on Gun Sales (PDF)

UPS Sues EU Antitrust Regulator over Blocked 2012 Takeover Attempt of TNT

United Parcel Service Inc., the “world’s largest” overnight package delivery and logistics company based in Atlanta, is suing for 1.74 billion euros (2.15 billion dollars) from the European Union Commission for blocking its attempted takeover of its Dutch competitor TNT Express NV in 2012. The European Union’s second highest court, the General Court of the European Union, found in March of 2017 that the antitrust regulators’ decision to block the proposed merger was incorrect. After this decision by the General Court, UPS filed suit against the commission, claiming it was damaged because of the wrongly blocked takeover and by being inhibited from the value that it could have gained from successfully completing the attempted takeover. UPS is seeking compensation, plus interest, that UPS claims reflect what it would have gained if it were allowed to move forward with the takeover in 2012.

 

When blocking UPS’s takeover of TNT in 2012, regulators cited concerns that the merging of the two companies would result in only two companies controlling the market, consequently disadvantaging other competitors. Antitrust regulators were concerned that the acquisition would ultimately hurt consumers as a market cornered by only two major companies would leave customers few choices for package delivery needs and ultimately drive up prices. The estimated $6.8 billion acquisition would assist UPS in its effort to gain a foothold in “Europe and in emerging markets.

 

When presented with the European regulators’ concerns, UPS agreed to take measures to address those concerns, such as opening part of its airline network for access by competitors and divesting itself of certain business units. European regulators did not change their stance due to these concessions and UPS’s bid could not more forward.

 

UPS challenged the commission’s blocking of its 2012 bid for TNT in the General Court of the European Union, which led to the court’s March 2017 finding that the deal was wrongly stopped. The court invalidated the commission’s veto of UPS’s attempted takeover because the commission changed the economic model they were using to evaluate and “weigh evidence” without informing UPS of this change, effectively not allowing UPS to properly defend itself.

 

After UPS’s attempt to acquire TNT in 2012 was blocked, UPS’s direct competitor FedEx Corp. successfully acquired TNT instead in 2015 with full EU regulatory approval.

 

The European Commission is challenging the court’s 2017 decision that the commission wrongly vetoed UPS’s attempted takeover of TNT in the European Union’s highest court. The commission is also defending itself against the direct lawsuit waged by UPS.

UPS Sues EU Antitrust Regulator over Blocked 2012 Takeover Attempt of TNT (PDF)

Facebook Shares Tumble Amid Cambridge Analytica Scandal

Facebook shares continued to tumble last week, falling more than 13% and closing just under $160 per share on Friday, March 23rd. Facebook is under fire after the revelation that Cambridge Analytica, a voter-profiling company, accessed the private information of more than fifty million Facebook users without their permission. The data was used by Cambridge Analytica to help profile millions of American voters for President Trump’s 2016 presidential campaign.

Facebook had originally downplayed the data leak, but founder and CEO Mark Zuckerberg finally issued a statement on Facebook last Wednesday. Zuckerberg later apologized during an interview on CNN, calling the incident a “major breach of trust.” The scandal has spurned the hashtag #deletefacebook, with Google searches as to how to delete Facebook tripling last week. Sentiment for the movement comes from a variety of places: some users say they did not realize their data was being sold and feel their privacy has been invaded, while others do not like the fact that their profile may have been used to help elect President Trump.

There are already four lawsuits filed against Facebook in Northern California federal courts, three of which are brought by shareholders of the tech giant. The fourth lawsuit is a class action suit alleging that Facebook had “absolute disregard” for the personal data of the fifty million users whose data was taken without permission by Cambridge Analytica.

Despite losing around $75 billion in market capitalization last week, COO Sheryl Sandberg said Facebook does not look at user privacy issues as long-term damage to the company’s stock price and business model. Yet the company’s business model is built on selling its users’ data. Should the company face tighter regulations, it may need to rethink its business model, which is likely why the company is taking small, slow steps to address the scandal.  

Zuckerberg has been called to testify before both the House and Senate. He has said he would be willing to testify, and that he was not sure whether or not Facebook should be better regulated. There is talk for more regulation of social media and technology companies. Apple CEO Tim Cook said he thinks tech companies should be regulated as to how they are allowed to use customer data.

Facebook Shares Tumble Amid Cambridge Analytica Scandal

Bayer Faces U.S. Hurdles for Monsanto Antitrust Nod

The road to success is not a bed of roses. Although their deal was approved by more than thirty authorities around the globe, Bayer A.G. (“Bayer”), the German conglomerate chemical firm, still faces a legal challenge in the United States to win antitrust approval to buy American seeds supplier Monsanto Company (“Monsanto”). The U.S. government is worried that $62.5 billion deal could seriously hurt competition.

Looking back to August of last year, the decision on whether to approve the symbolic transaction has been postponed twice and suspended four other times. The deadline for the merger approval is currently scheduled to take place on April 5, 2018.

The significant proposed acquisition between Bayer and Monsanto would make the company the world’s largest integrated pesticide and seeds business. In fact, this would create a company with a market share of more than a quarter of the world’s seed and pesticides business. The transaction will constitute to the destruction of competition in at least three markets: pesticides, seeds, and traits.

In the United States, EU, and Brazil, the authorities are attempting to conduct further investigation of how combining Bayer and Monsanto will impact the price and supply of key products for farmers.

One of the effective solutions to solve potential antitrust issues is to sell a company’s assets when company seeking regulatory approval for a deal. After the CEO meetings, Bayer decided to resolve antitrust issue by selling assets to another company in order to carry out its project and achieve its $60 billion-plus takeover of St. Louis-based Monsanto. In particular, Bayer agreed to sell parts of its seed and herbicide assets to rival, BASF, for $7 billion to solve EU regulatory concerns. Moreover, Bayer agreed to divest its vegetable seeds business to BASF.

In the EU, the review of the Monsanto deal by the European Commission (“the Commission”) is set to greenlight after in-depth investigation by the Commission. The European Competition Commissioner, Margrethe Vestager, indicated that Bayer properly addressed its concern by selling its assets to competitor. She firmly stated that “Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger.” The competitors can effectively compete with each other and the number of the competitors in these relevant markets will remain the same.

However in the United States, the intense review procedure is being led by Assistant Attorney General for the Antitrust Division, Makan Delrahim, who also spearheaded the filing of the antitrust lawsuit to block AT&T Inc.’s takeover of Time Warner Inc.

From the Justice Department’s antitrust division’s view, although selling the assets to BASF, a good buyer who can compete effectively in the business, does help with some of the issues, the officials do not think it goes far enough.  The government would like Bayer to take a step further and divest more.

In its substantive standard of review of the proposed merger, the Justice Department is analyzing the economic relationship among entities on the same level of market (“horizontal restraint”) as well as the economic relationship along supply chains (“vertical restraint”)

No one knows what the future holds, but the companies still have hope after two previous deals – the combination of Dow Chemical Co. and DuPont Co. and China National Chemical Corp.’s takeover of Syngenta AG that won antitrust clearance.

Bayer Faces U.S. hurdles for Monsanto Antitrust Nod