Recent discovery of the carcinogen asbestos in a bottle of baby powder has led Johnson & Johnson (J&J) to issue a massive recall of 33,000 bottles of its signature product.  Of the 100,000 lawsuits currently being brought against J&J, over 15,000 involve plaintiffs claiming that the baby powder and other talc-based products have caused them to develop cancer.

The allegedly contaminated bottle was discovered after a Food and Drug Administration (FDA) test showed trace amounts of chrysotile asbestos in a bottle purchased from an online retailer.  J&J maintains that the subsequent recall was only cautionary and that the results of the FDA test do not align with the results of the “thousands of tests over the past 40 years” that the company has continuously performed internally to ensure consumer safety.  The company went so far as to question the validity of the FDA test which, of course, the FDA countered by affirming the adequacy of its testing processes and the accuracy of the results.  Further, J&J attempted to underscore the test by claiming that the amount of asbestos detected was “very low.” But isn’t the concern not how much of the lethal carcinogen was present but the fact that it was present at all?

This is not a new battle for J&J, but this finding has the potential to severely weaken the company’s defensive position in current lawsuits about the alleged harm caused by its talc-based products. While it is not outrageous for the company to question the validity of expert testimony and testing procedures that have been brought forth by plaintiffs over the course these ongoing lawsuits, it is going to be far more difficult for J&J to push back against or effectively contest the findings of a federal regulatory body.

J&J’s stance remains that the mines it sources talc from exceed industry standards for safety. Further, the company has not been able to confirm that the contaminated sample came from a non-counterfeit product or that the seal was properly in-tact.

Talc and asbestos form under the same conditions in underground deposits, leaving talc vulnerable to contamination when extracted. Maybe it is tempting to sympathize with J&J’s argument that it has taken all of the possible steps to protect customers and that this one sample is not representative of the safety of its products. However, the detrimental effects of asbestos on the human body are well-known and even trace amounts should be unacceptable to consumers. Trust is the foundation of the consumer-product relationship. People purchasing these products to use on their bodies and the bodies of their children trust that Johnson & Johnson is providing a safe product, not one that’s linked to cancer. An incident like this one is a prime opportunity to raise questions about the adequacy of current testing procedures and the possible need for increased regulation of manufacturing for talc-based products.

Johnson & Johnson Recalls 33,000 Bottles of Signature Product

If you order now, by this time tomorrow, your Amazon Prime package will likely be on your doorstep.

With the move to guarantee one-day delivery for Prime Members, Amazon has faced increasing pressure to streamline and improve its supply chain operations continually. According to 2019 Q3 earnings, sales have grown 24% from last year as a result – notwithstanding a significant drop in operating income due to the increased investment in infrastructure. Prime Day is past, but with peak holiday shopping still to come, they need that infrastructure more than ever. Significant numbers of brick-and-mortar retailers closing means that there is more e-commerce market share to be had and taken.

Amazon recently let contracts with existing DSPs (delivery service providers) expire, resulting in thousands of layoffs. In place of the DSPs, there’s Amazon Logistics – the no-experience-needed, small logistics business that anyone can start. Through Amazon Logistics, area locals can manage a team of 40-100 people and provide last-mile delivery from the nearest Amazon warehouse to the doorstep, usually the most expensive part of the delivery process.

With smaller, newer DSPs for last-mile delivery, Amazon can build out a centralized, data-driven network of contractors without having to integrate pre-existing third-party systems. From the warehouse to the final destination, all package information can live in one place. An in-house logistics network is not a band-aid; it’s a whole new limb. It also doesn’t hurt that this way, Amazon gets to maintain its bargaining power versus being reliant on a giant like FedEx or UPS.

It’s not just about limiting accident liability, either. Amazon has come under fire for causing well-publicized traffic accidents and deaths, but it also wants to minimize the financial risk of last-mile delivery. When demand inevitably fluctuates, the risk is on contractors and Amazon can stay nimble. One-day shipping is already a major investment, and even more so would be incurring the startup costs of hundreds of local DSPs.

The investment thus far seems warranted. A rapidly growing percentage of Amazon deliveries are being fulfilled “in-house” versus by a third party. Amazon can maintain control over delivery, an integral piece of the famous Amazon Flywheel. They have the demand for vertical integration and in a few quarters, will have the infrastructure.

Meanwhile, Amazon’s main competitor, Walmart, also touts free one-day shipping for qualifying orders and without a $119 membership fee. Walmart has over 4,700 stores that can act as small distribution centers and a world-renowned logistics network. They have a 57-year history versus Amazon’s 25 years. Yet, Amazon boasts a market cap that is twice Walmart’s, and its growth and expansion into new areas isn’t anywhere near over.

Whether it was created for cost savings, bargaining power, data integration, efficiency, or general market take-over, Amazon Logistics can only grow.

Why Amazon Wants Its Own Web of Delivery Contractors

Haphazardly investing billions into scores of tech startups may be falling out of fashion. The struggles of SoftBank’s Vision Fund—a true titan of the venture capital world—provide a striking example. The market has not been kind to SoftBank CEO Masayoshi Son’s brain child: WeWork has failed to go public and the performance of other key SoftBank investments, such as Uber and Slack, has been lackluster. Furthermore, given that Vision Fund and related investments constitute over 10.5% of global venture capital volume, the fund’s woes may signal a wider retraction in the venture capital environment.

Since its October 2016 announcement, Vision Fund’s $100 billion entrance into the tech market has transformed the venture capital market. While start-ups raising $100 million in a single funding round were once a rarity in Silicon Valley, giant funds like the Vision Fund—which has a minimum investment of $100 million—have made money plentiful. Meanwhile, the Vision Fund has rapidly invested in scores of tech companies. Investments in Uber, the We Company, and Didi Chuxing currently account for nearly 30% of the Vision Fund portfolio by value. Other large investments, out of its 81 total, include Coupang, a South Korean e-commerce platform, Sprint, a wireless services provider, and Grab, a southeast Asian taxi-hailing company.

WeWork’s IPO debacle has been the harshest condemnation of the Vision Fund thus far. SoftBank valued the workspace provider at $47 billion this January, but it is now expected that WeWork is worth less than a third of that valuation. Further, of the six public companies that comprise the Fund’s portfolio, only two—Guardant Health and 10x Genomics—are trading above their IPO prices. Particularly damning are Uber and Slack’s performances, trading at 25% and 36% lower than their IPO prices, respectively.

Mr. Son, for his part, is nevertheless moving forward undaunted and launching a second iteration of the Vision Fund. However, CNBC reported that SoftBank may change the new fund’s investment strategy, perhaps in response to investors’ concern. The pace of investment will be slower—at least slower than the $80 billion spent in less than three years by the original Vision Fund. Further, the Fund will target companies closer to being profitable.

If such a change does materialize, Vision Fund 2’s more conservative strategy might herald a new era of venture capital. In the future, venture capital may find its way only to start-ups that are close to an IPO. Investors may no longer be willing to invest in a company that expects to burn through multiple rounds of funding with no clear goal of going public in sight. Thus, with the current bull market seemingly losing its vigor, Silicon Valley and other tech start-up hotbeds may have to come to terms with increased investor skepticism and a decreased appetite for risky bets.

Vision Fund Woes Signal Changing Environment of Tech Start-Ups and Venture Capital

As part of their election campaign, Democratic presidential candidates, Elizabeth Warren and Bernie Sanders, have proposed the introduction of wealth taxes that threaten the economic stronghold of the richest Americans. The proposal attempts to address the alarming concentration of wealth among rich Americans along with the threat it has posed to the nation’s democracy.

Warren’s tax is aimed at households worth above $50 million. In contrast, Sanders has suggested a lower threshold covering households with a net worth of over $32 million. Professors Emmanuel Saez and Gabriel Zucman from University of California, Berkeley, whom the candidates consulted in shaping their proposals, estimate that this tax would hit at least 75,000 families and raise over $2.75 trillion over a 10-year period.  Warren and Sanders both aim to use these proceeds to fund social programs such as tuition free college, universal child care and “Medicare for all.” Although the idea of wealth taxation has generated popular support from across the political spectrum, many academics and politicians have expressed concerns over its implementation and doubt whether this will ever see the light of day.

For starters, skeptics believe that taxing individuals on the basis of wealth appears punitive and is likely to undermine business confidence which would undoubtedly stunt economic growth. The proposal also ignores “trickle down” benefits of having a wealthy class in that it disregards the positive effects of having a high number of job-creating businesses.

Experts have also highlighted practical challenges associated with administering wealth tax. Given that wealth taxes would apply to accumulated assets of individuals, there are questions as to how illiquid assets such as vacation homes, art collections, and jewelry would be identified. Valuating these assets could increase administrative costs making the plan difficult to execute.  Individuals who are yet to realize gains from their assets could be forced to liquidate their belongings solely for the purpose of meeting tax obligations.

It is equally optimistic to hope that this proposal will garner considerable support in Congress and fructify into law. It also remains to be seen whether imposing direct wealth taxes, that aren’t equally distributed by state population, would pass constitutional muster. In the event it does, the wealth tax would need to be vigorously enforced to prevent the super-rich, with their armies of lawyers and accountants, from gaming the system (as they have with estate tax).

All complications aside, the arguments in favor of taxing the rich are definitely compelling. Warren and Sanders, however, have one too many hurdles to overcome in order to resolve wealth inequality and change the economic landscape of the country.

Wealth Tax- A Noble Idea Fraught with Practical Difficulties

Although corporate profits have climbed to their pre-recession peak, thousands of workers across the nation are striking for higher pay and better working conditions. In 2018, nearly 500,000 workers participated in significant strikes – the highest number since the 1980s. The picket lines show no signs of slowing in 2019. Twenty major strikes have already occurred this year, while only seven occurred in 2017. The walkouts have spanned several industries, from teachers, to auto workers, to hotel staff. The disputes largely focus on stagnant wages and meager benefits. However, the new wave of work stoppages may also be fueled by a deeper sense of inequality.

Employers claim that globalization and rapid technological advances have pressured the business to keep wages low. Employees, on the other hand, assert that the companies are hiding behind excuses to hoard profits. Workers who agreed to austerity plans during the economic crisis argue that as the economy rides a 10-year high and corporate profits soar, it is high time to reverse budget cuts. In addition, some are demanding that employers address pressing social issues such as affordable housing, protections for immigrants and refugees, and job security.

In some respects, the strikes are not surprising. Years of strong economic growth and low unemployment have emboldened workers to demand more from their employers. The movement may also be backlash to the Supreme Court’s 2018 ruling in Janus v. Afscme. The Court held that government employees who do not want to join a union cannot be forced to contribute money to the organization. Although many predicted that the decision would be a major blow to unions, labor leaders have responded with more work stoppages and expanded union recruitment efforts.

However, the demands for changes beyond just wages and benefits suggest that striking workers are also motivated by rising inequality and social and economic policies that do not align with their interests. It is possible that the recent spate of high-profile work stoppages will put workers across the country in a better bargaining position to demand more from their employers. At the very least, it is certain that this issue will be at the forefront of the 2020 Presidential election.

Striking Out- Workers Demand More as Economy Booms

Mark Zuckerberg recently gave a speech at Georgetown University defending Facebook’s policy that allows political ads with inaccurate or baseless information to remain on its site. Zuckerberg stated that the policy promotes “free expression” by giving users the “power to express themselves.” In support of this proposition, Zuckerberg referenced the First Amendment, Martin Luther King, Jr., and emphasized the corporation’s commitment to the United States’ long-standing values of free speech.

Facebook’s policy came under scrutiny when the Trump campaign circulated a “30-second video ad that falsely claimed [Joe] Biden committed corrupt acts in Ukraine” – an allegation for which Trump is being investigated. Biden’s campaign requested that Facebook take down the ad, but it refused, citing the same free speech concerns echoed by Zuckerberg.

Since Facebook adopted this policy, several high-profile individuals have stressed the dangers associated with allowing political candidates – mainly the Trump campaign – to pay for the digital dissemination of blatantly false information. For example, Marc Benioff, the CEO of Salesforce, has been vocal in his disapproval of Facebook’s policy, demanding Congress enact legislation barring false advertisements on social media.

Recently, Elizabeth Warren took more drastic measures and purchased a fake ad that claims Mark Zuckerberg endorses Donald Trump for re-election. In response to Facebook’s acceptance of the ad, Warren tweeted that “Facebook [is throwing] its hand up to battling misinformation in the public discourse, because when profit comes up against protecting democracy, Facebook chooses profit.”

Moreover, Bernice King, Martin Luther King, Jr.’s daughter, publicly addressed Zuckerberg’s reference to her father in his recent speech, tweeting that the “disinformation campaigns launched by politicians . . . created an atmosphere for [MLK’s] assassination.” She further stated that “King knew that democracy . . . requires a deep foundation of truth, or it is a house upon sand.”

Facebook has remained steadfast in its position of promoting free expression on its social platform and still refuses to remove any erroneous political ads. With that said, the widespread discontentment with Facebook’s policy may give rise to possible changes in federal legislation. Specifically, 47 U.S.C. § 230 – which limits many social platforms’ liability for unconstitutional speech because these companies are not considered “publishers” of user information – may be called into question. Perhaps Congress will respond to the barrage of false political advertisements by reducing the standard of liability for platforms that have less control over the content generated on their sites.

Facebook’s Political Ad Policy- Getting Paid for “Free” Speech

As of last week, Italian cheese, Spanish olives, Scotch whisky, and French wine, among other EU goods, have just become more expensive to import – thanks to a decision from WTO arbitrators announced earlier this month.

These tariffs are forcing American importers to pay up to 25% more for the targeted items, collectively worth about $7.5 billion. The big hit on imports is expected to severely impact sales, profit margins, and jobs.

The decision to impose these tariffs comes from a 15-year old case that has just recently concluded, where the World Trade Organization ruled that the US could attempt to recover the $7.5 billion lost from ‘unfair state subsidies’ given by the EU to Airbus, an airplane manufacturer.

Spain, the largest producer of olive oil, will be hit hardest by the tariff hike. Over half of the world’s olive oil supply is coming from Spain (2018-2019), and over a tenth of Spanish exports are currently sold into the US.

Scotland is also impacted by the tariffs, as Scotch whisky is integral to the region’s economy; exports to the US were worth nearly $1.5 billion last year. According to the WTO, the tariffs will impact Scotch and Irish whisky produced in the UK, but not whiskey from Ireland.

It signals a troubling future for post-Brexit UK, and the business and union leaders are worried. Scotland’s Secretary of the GMB Union, Gary Smith, was particularly critical of the decision, citing that it represented a “troubling glimpse into the post-Brexit future” for the UK.

That hasn’t stopped the spirits association from fighting back. Over a week ago, a group of fifteen spirits associations from the US and EU called for an end to these tariffs. In their letter to the US administration and EU Commission, they said that their industries had become collateral damage in a bitter, acrimonious trade war.

However, the EU’s chance to retaliate won’t come until next year, when the WTO prepares to rule on what tariffs the EU can impose in retaliation to separate US state aid given to Boeing, Airbus’ competitor.

EU Goods Hit Hard by US Tariffs

After markets closed on Friday October 11^th, Boeing announced the removal of Dennis Muilenburg as Chairman. While Muilenburg will retain his titles of CEO, President, and Director, Boeing has designated David L. Calhoun to take over the Elected Non-Executive Chairman role.

This change comes seven months after the Federal Aviation Administration (FAA) grounded the entire 737 Max 8 fleet in response to two deadly crashes that killed 346 passengers. Since then, Boeing has lost an estimated 30 billion dollars in market capital, in addition to the nearly 5 billion dollars it has had to dole out to compensate airlines for lost profits resulting from the grounding. The high capacity, fuel-efficient 737 Max 8 plane was Boeing’s best seller prior to the crashes.

However, Boeing asserts that the separation is not punitive but rather will enable Muilenburg to direct his focus to returning the 737 Max 8 fleet to service. In an official statement released by Boeing, Calhoun reiterated the board’s confidence in Muilenburg’s continued leadership.

While Boeing insists the 737 Max 8 fleet will be ready to return to service by the fourth quarter, many hurdles remain. The company has yet to send the necessary software fixes to the FAA for safety review. Once those fixes are regulator-approved, Boeing will need to ensure pilots are properly trained to handle the updates. Even then, the company must convince elected officials and the general public that these planes are truly safe.

An initial test of public confidence will take place on October 30^th when Muilenburg testifies before Congress about the system failures that caused the fatal crashes. There, Boeing will likely face harsh criticism of its governance for failing to provide the oversight necessary to prevent the accidents. As such, the recent shift of leadership may indicate Boeing’s attempt to exhibit responsiveness to these concerns.

Despite the change in official title, Muilenburg remains tasked with the key role of quickly and safely returning the 737 Max 8 fleet to the skies.

Boeing Removes Chairman Weeks Before Congressional Hearing

Since October 4, 2019, the NBA has unwittingly found itself in the battle ground of a geopolitical conflict after Daryl Morey, the Houston Rockets General Manager, tweeted an image with the words “Fight for freedom – stand with Hong Kong.”  The owner of the Rockets, Tilman Fertitta, engaged in damage control, tweeting that “[Morey] does NOT speak for the [Rockets]” and emphasized that the team is “NOT a political organization.”

Yet, the damage was done.  On October 6, 2019, Chinese sports media outlets retaliated by banning coverage of the Rockets.  Nets Owner, Joe Tsai, the billionaire co-founder of Alibaba, criticized Morey’s tweet for harming the NBA’s relationship with Chinese fans and characterized the Hong Kong pro-democracy protesters as separatists.

The following day, the NBA apologized for Morey’s tweet offending “friends and fans in China” as “regrettable” but claimed it will not censor because the league supports individual expression.  The NBA’s two-faced apology drew the scorn of many Americans including Democrat and Republican politicians.

Nor was China satisfied with the apology.  On October 8, 2019, China’s state television broadcaster’s sports channel banned coverage of the NBA preseason and a Chinese tech company barred two preseason games on its streaming platforms.  By the following day, all elevent Chinese companies that were official partners of the NBA severed ties.  China’s response was a strong message to the NBA that it is not immune from paying homage to the Chinese Communist Party if it desires to do business in China.

The NBA controversy is illustrative of a broader business trend of U.S. companies compromising American values to gain access to China’s market of 1.4 billion people and its growing middle class.  It’s hard to believe the NBA’s apology was not strongly influenced by the fact that an estimated 10% of the NBA’s current revenue comes from China, with that revenue potentially increasing to 20% by 2030.

Other American businesses within the past two years have caved to China’s pressure to conform to its propaganda.  For example, in an Orwellian manner, U.S. airlines, no longer refer to Taiwan by its name, “Taiwan.”  Similarly, fashion companies have not been immune from scrutiny. Luxury fashion company Coach apologized after a backlash from Chinese consumers, for making T-shirts that implied Hong Kong and Taiwan were countries, while Gap said sorry for an allegedly “incorrect map” of China, for omitting Tibet and Taiwan.  Even hotel giant Marriot apologized for disrespecting China through a customer survey listing Tibet and Taiwan as independent countries.

It is clear that China is using American businesses to legitimize its claims over disputed lands.  Unfortunately, American businesses have demonstrated little interest in standing up to China.  Since the NBA incident, tech companies have already yielded to China’s pressure.  Blizzard punished a player for openly supporting Hong Kong protesters, Apple removed the Taiwanese flag emoji in Hong Kong and an app tracking Hong Kong police, and Google removed a pro-Hong Kong game.

Numerous other incidents demonstrate the troubling trend of U.S. businesses abandoning basic values of free speech, democracy, and openness to do business in China.  China’s economic growth has provided it the power to bully foreign businesses to comply with its wishes.  Although American businesses have fortunately become more willing to advocate for social causes, they have overwhelmingly failed to take a principled stand on geopolitical issues involving China.  Despite NBA superstar Lebron James’s claim that “[not] every issue should be everybody’s problem,” injustice abroad does not make it any less of an injustice.

American businesses truly have the power to make a difference in the world.  We should hope they choose to use their power to make the right kind of a difference.  In response to the recent events in the NBA, many Chinese fans “said they would choose patriotism over their love of the game.”  One cannot help but wonder whether American businesses including the NBA may one day likewise summon the courage to unequivocally choose patriotism over their love of money.

On October 3, 2019, the European Union Court of Justice (the “ECJ”) ordered Facebook to remove illegal content worldwide. Not only does this ruling have global implications for other social media platforms, but it gives rise to freedom of speech issues.

According to the facts of the ECJ case, Ms. Eva Glawischnig-Piesczek – a member of the Nationalrat (National Council of Austria) as well as chair and federal spokesperson of the parliamentary party “die Grünen” (the “Greens”) – sued Facebook Ireland in Austria. Glawischnig-Piesczek sought an injunction to force Facebook Ireland to remove an insulting and defamatory comment published by a Facebook user.

Based on these facts, the Oberster Gerichtshof (“Supreme Court of Austria”) sought a ruling from the ECJ interpreting the EU’s Electronic Commerce Directive (“Directive”). Under the Directive, a host provider (e.g. Facebook) is not liable for digitally stored information if it has no knowledge of its illegal nature. However, this exemption does not prevent courts from ordering host providers to remove and disable access to illegal information.

Ultimately, the ECJ held that the Directive does not preclude a member state court from ordering a host provider to remove information or block access to information worldwide so long as it was “within the framework of the relevant international law.” The ECJ noted that, in this case, it was up to member states to take that law into account.

The decision by the ECJ has been heavily criticized by Facebook, primarily on the grounds that “it undermines the long standing principle that one country does not have the right to impose its laws on speech on another country.” Furthermore, “it also opens the door to obligations being imposed on internet companies to proactively monitor content and then interpret if it is ‘equivalent’ to content that has been found to be illegal.”

In the United States, §230 of the Communications and Decency Act protects internet technology companies from liability arising from content created by its users. As a result, this has allowed social media companies to grow. The protection of the Communications and Decency Act encompasses everything from product reviews to political rants. However, this law has been heavily criticized by both Democrats and Republicans.

In response to this criticism, Facebook unveiled a blueprint for an independent oversight board (“Oversight Board”) last month. The Oversight Board will be responsible for reviewing appeals of the company’s policy decisions regarding posts, photos, and videos it takes down or leaves online. The authority of the prospective Oversight Board is intentionally far reaching. For example, it will have the authority to override decisions regardless of whether or not Mark Zuckerberg agrees.

The aforementioned decision by the ECJ is just one of many recent examples of steps taken by the EU to investigate the technology industry’s data and privacy practices, and ultimately, regulate the technology sector. For example, European regulators fined Google $1.7 billion in March based on allegations that its advertising practices violated antitrust laws.

While Facebook is not allowed to appeal the ECJ ruling, individual European countries have the power to ignore the ruling. Moreover, the United States could use trade agreements to pressure the EU to adopt more expansive internet freedom laws that are similar to the Communications and Decency Act.

Nevertheless, this ECJ decision underscores an important international query: what is the best way to regulate technology giants like Facebook and Google in order to curtail online falsehoods (i.e. fake news) and protect individual users without infringing upon digital free speech? Unfortunately, the answer is far from simple. With that said, it is apparent that the ECJ decision is largely unenforceable around the globe, as international law does not provide any real enforcement mechanisms. Therefore, it is up to individual countries to create meaningful policy to address these countervailing approaches.

Facebook may be ordered to remove digital content worldwide, E.U. says