The U.S. Supreme Court recently indicated that it will be taking an even more pro-business stance regarding arbitration. The Court heard arguments in two cases involving company agreements to determine whether these disputes must be handled through an arbitrator rather than a judge.

The first case, Henry Schein, Inc. v. Archer & White Sales, Inc., focuses on a Texas dental equipment distributor and seeks to clarify whether a particular dispute should be decided in arbitration, rather than at court. Currently, if both parties agreed to give the arbitrator discretion, the arbitrator decides whether the particular dispute is sufficiently related to the contract in dispute to warrant arbitration proceedings. However, citing the U.S. Court of Appeals for the Fifth Circuit, a “court will not send a case to an arbitrator to decide the question ofarbitrability” even if both parties have agreed so long as the court finds the claims “wholly groundless.” Yet, in this case, the plaintiff agreed to arbitrate claims for damages but not in the actions seeking injunctive relief. Ultimately, this is controversial since such an exception is neither covered by the Federal Arbitration Act (FAA) or the Court’s existing cases.

The second case, Lamps Plus Inc. v. Varela, regards an employee, Frank Varela, suing Lamps Plus for negligence, breach of contract, and invasion of privacy. Arising from a phishing scam on the company in 2016, Varela’s personal information was accessed, and he is now seeking a class action complaint on behalf of current and former employees. The issue here is whether the FAA precludes state-law interpretations of arbitration to allow aggregated arbitrations, such as a class action when the agreement is silent on the issue. As a result, the largest issue that has divided the Court is whether the contract’s language arguably allows aggregated arbitration.

Outside these two cases, a larger debate is ongoing. Companies prefer to arbitrate claims because it is cost effective, efficient, and carries less risk than arguing in court, which may establish an unfavorable precedent. Nevertheless, critics argue that arbitration forces individuals to fight alone and prevents them from raising public support for issues such as sexual assault, which was recently highlighted by the #MeToo movement.

Volkswagen, still recoiling from their 2015 emission scandal, faces yet another costly lawsuit. U.S. semiconductor supplier Broadcom recently filed a claim against Volkswagen for $1 billion. Broadcom’s lawsuit concerns Volkswagen’s integration of various patents into its navigation and entertainment system. Toyota and Panasonic were also hit with patent infringement lawsuits from Broadcom earlier this year.

Patent issues are not new to the auto industry and have occurred since George Seldon sued Henry Ford in 1903. However, in an age where cars can speak and drive themselves, the growing number of IP lawsuits demanding royalties threatens to raise transaction costs and impede innovation.

We’ve seen it happen before. Enforcing exclusive IP rights in the biomedical sphere led to widespread patent fragmentation. Research and development costs skyrocketed as companies were required to purchase countless licenses for basic yet requisite technology. Increased operating costs and subsequent litigation led to unaffordable products and substandard down-stream research.

However, carmakers face a more significant challenge because outside industries invent the technologies they need. Thus, the informal patent sharing system that emerged in biomedical subgroups will not materialize to provide relief in the auto industry.

Nevertheless, Volkswagen attempted to address this issue. They retained talent and provided funds to make Audi, one of their brands, a leading development center. But their efforts were not enough. In the race to make energy efficient and develop autonomous vehicles, Volkswagen spent an unsustainable $13.1 billion on research and development in 2017. Consequently, CEO Herbert Diess intends to develop a 10-year plan to slash research costs by partnering with rival companies.

An increase in IP litigation, stringent environmental regulations, and consumer pressure require other car companies to follow suit. Further, the auto-industry’s growing dependence on large-scale tech licensing necessitates industry collaboration. Without this shift, carmakers will not be able to endure nor avoid the patent prosecution and subsequent settlements that historically inhibit affordable innovation.

Volkswagen Pumps the Breaks on Rising Research and Development Costs

When the Snapchat (SNAP) app launched in 2011, it quickly became known amongst teenagers and young adults for its revolutionary new way of instantly sharing photos, videos, and disappearing messages. Now, the company is scrambling to keep users engaged with its social media platform following a disastrous application redesign in February. Analysts say that the redesign contributed to an “exodus” of 3 million daily users in the second quarter of 2018. Further, the redesign was so disliked it even led to a petition with hundreds of thousands of signatures to bring back the previous design. In addition, influencer Kylie Jenner tweeted her disappointment in the app redesign. This tweet has been widely linked to a $1.3 billion drop in Snapchat’s stock. Although Snapchat quickly modified some aspects of the app, it has yet to completely reboot the design to the previous levels of user satisfaction. Moreover, Snapchat’s struggles continue. In October, Snapchat’s stock was being traded at all-time lows.

To compound Snapchat’s recent troubles, the company faces increasing competition from Instagram, a social media platform owned by Facebook, which in the past two years has begun offering similar features. Some argue that “Instagram Stories” are a “clone” of “Snapchat Stories,” and that other Snapchat features are also being copied. In fact, Instagram Stories have not only successfully captured the company’s consumers who are frustrated with Snapchat’s redesign, but also appear to be more than twice as popular as Snapchat Stories. As such, daily users of Instagram Stories have risen to over 400 million after only two years with the feature.

In an attempt to combat these obstacles and regain users, Snapchat is continuing to implement new updates for the app. One of these updates, which was introduced in October, includes a television lineup available in the app. These “Snap Originals” include five-minute episodes of shows and docuseries in genres including drama, horror, and comedy. In the hopes of gaining traction with its target audience, mostly people 25 and under, the company is partnering with social media “stars” and television writers from shows such as Riverdale and Friday Night Lights. Another update that will distinguish Snap Originals is the integration of Snapchat’s augmented reality technology into the shows themselves. This means that Snapchat viewers can virtually “interact” with the content in a variety of ways, such as going to the beach with a reality TV star or even walking around a crime scene in a show.

Snapchat’s recent move to provide users with innovative and interactive television content is likely aimed at addressing its biggest obstacle: “capturing consumers’ attention.” This is especially true for users that currently use Instagram’s features that are similar to Snapchat’s features. Despite events of the past year, Snapchat CEO Evan Spiegel is optimistic about the company’s future, with the goal of “achieving full-year profitability in 2019.” In all, the outcome of Snapchat’s recent efforts to regain users will foreshadow whether Snapchat will be able to reach its goals.

Snapchat Rallies After a Disastrous 2018, Reveals Original TV Content

The Enforcement Division of the SEC issued its annual report of fiscal 2018 on November 2. According to the report, the total amount of disgorgement and penalties ordered over 821 enforcement actions reached $3.945 billion in fiscal 2018, which is a slight increase as compared with last year’s figure of $3.789 billion.

Among the total 821 SEC enforcement actions, 490 were “stand alone” actions while the remaining were “follow on” proceedings and delinquent filings. The 490 standalone enforcement actions cover mainly securities offerings and investment advisory issues, as well as issuer reporting, accounting and auditing.

SEC chairman Jay Clayton praised the effectiveness of the Enforcement Division’s efforts to “deter bad conduct and remedy harm to investors.”

A single case involving a bribery in Petroleo Brasileiro S.A., a Brazilian state-controlled energy company accounts for a relatively high percentage in the total amount of penalties and disgorgement. The oil company was fined $933 million in disgorgement and prejudgment and $853 million in penalty for “misleading U.S. investors by filing false financial statements.”

In the report, the guiding principle of the Enforcement Division is “individual accountability,” with 72% of all standalone actions concerning the misconduct of individuals. The rationale behind the focus is that individuals such as CEOs and directors often control the institution’s actions. More violations can be prevented by imposing individual liability for the institutional violation and fraud. One of the most high-profile case was the settlement between the SEC, Tesla and the company’s CEO over a securities fraud charge based on Elon Musk’s misleading tweets. Pursuant to the settlement, Elon Mush cannot act as Tesla’s Chairman for at least in three years. Tesla must establish “controls and procedures to oversee Musk’s communications.”

Cyber-related misconduct was also highlighted in the annual report. Twenty standalone enforcement actions involving cyber-related misconduct were brought in fiscal 2019 and more than 225 investigations are in progress. Despite the absence of rules specifically targeted at digital assets and ICOs, the SEC is showing assertiveness in regulating fraud and registration violations. Considering crypto-assets are a market innovation, the SEC is trying to find a balance between protecting retail investors and without stifling innovation.

Increase of Penalties and Disgorgement Ordered in SEC Enforcement Actions

Epic Games, the developer of the hottest online game, Fortnite, recently announced that it raised $1.25 billion in the company’s latest round of investment. Epic Games’ newest investors include the KKR private equity firm, Iconiq Capital, and the aXiomatic group.

Fortnite is an online, “battle-royale” style game in which 100 players fight for survival on a deserted island. Fortnite is free to play, but players can purchase in-game currency to access outfits and special character interactions like dances. Fortnite has reportedly raked in over $1 billion in revenue from these in-game transactions alone.

Viewership of Fortnite content on Twitch.tv, through which people broadcast themselves playing video games, averages almost 140,000 concurrent viewers. Fortnite streamers like Tyler “Ninja” Blevins have thereby rapidly transformed into online celebrities.

The recent success of online video games has facilitated the growth of competitive gaming, or “esports.” The 2017 League of Legends World Championship boasted 80 million unique viewers, surpassing both the NBA Finals and the Super Bowl of that year. Fortnite has yet to establish a robust competitive scene. However, Epic Games has pledged $100 million in prize money to Fortnite competitions over the next two years.

While Fortnite’s success has been astonishing, its future may not be all buds and roses. Fortnite’s Twitch viewership peaked in July and has been steadily dropping. Some analysts speculate that Fortnite’s popularity has hit a ceiling. Although Epic Games plans to move into the 3D technology market, investing in any video game company comes with the risk that its blockbuster title will turn out to be a withering fad. Epic Games’ newest investors could be buying into a generational phenomenon or a disappointing flop.

Epic Games

College athletics have a long history of bribery incidents, so much so that these acts have become institutionalized into the college recruitment process. This large scale issue has recently gained significant notoriety, beginning with the FBI arrest of many high profile basketball coaches and sports executives. On October 24^th,James Gatto, former head of global sports marketing for basketball at Adidas, was convicted of conspiracy to commit wire fraud by a jury in the Southern District of New York. The court found that he participated in bribing families with funds to lure students to certain universities that were sponsored by Adidas. These bribes were committed with hopes of elevating the notoriety of these institutions and, subsequently, the Adidas brand.

The case is intertwined with many long-standing critiques of the NCAA and raises the potential effects on basketball recruitment and college athletics at large.

Specifically, the judge in James Gatto’s case did not allow the defense to include in their arguments the NCAA’s rules regarding the lack of payment to amateur athletes. This is not a new issue, but it is a crucial aspect that provides a greater perspective to the interrelationship between bribes and financial need. The NCAA has been able to exploit the labor of teenagers and young adults for immense amounts of financial profit. However, players should have the ability to use their abilities and notoriety to make money despite their amateur status. By restricting the nature if its relationship with student athletes, the NCAA is ultimately perpetuating its own monopoly. This is particularly unjust because in many cases highly recruited basketball players come from lower socioeconomic households, which heightens their desire for financial stability. If these athletes had the autonomy over their abilities within collegiate athletics, they could accumulate income.

Additionally, in recent years, greater attention has been paid to the athlete recruiting process, which has translated to stricter regulations. Although there has been an increase in scrutiny, it seems as though universities have found a loophole: an institution can have a third party, such as James Gatto, do the bribery work on its behalf without suffering legal ramifications. This scenario causes us to question whether a university is actually a victim simply because it provided a scholarship to an athlete who is ineligible to play because he or she accepted a bribe. Or, are universities allowing third parties to present incentives on their behalf to attract the best talent?

Following these arrests, many wonder what the state of college basketball will be because of the increase in the monitoring of the recruitment process. Many think that nothing will change, but there is a potential to see a shift in the power dynamics of college basketball due to the possible surge of new powerhouses given the potential decline of bribes.

Exploitation Bribery and Basketball

European governments grow increasingly concerned that major tech companies are not paying enough taxes to the countries they operate in. Critics argue that because revenue for tech companies is recorded based on where those services are created rather than where they are consumed, tech companies like Amazon, Facebook, and Google benefit from the European market without paying European taxes. For example, in 2017, Amazon earned £1.98B in revenue and £72.37M in profit in the U.K., but only paid £1.7 million in taxes, a 2.35% tax rate.

In response, recently the U.K. announced a 2% tax on digital services starting April 2020. Under the new provision, tech companies will be taxed if they have global revenues of at least £500M and are profitable. The U.K. was not the first to explore a digital services tax. The European Commission and the Organization for Economic Co-operation and Development (OECD) have been working on a uniform and long-term solution. They proposed a two pronged approach, first an interim digital service tax, and second, a long-term solution of taxes based on significant digital presence in a country. However, progress has been slow so the U.K. decided to act first.

Opponents of these new taxes argue that it will result in double taxation of revenue, a slowdown of international trade and development, and hurt smaller firms. They further argue that these digital service taxes come at a bad time with increasing global trade tensions and protectionist policies. Because mostly large U.S. tech companies will be affected by the U.K. tax, the U.S. government might interpret these new taxes as tariffs on American companies, which could spark retaliation. In addition, the more a U.S. company’s profit is taxed in Europe, the smaller the taxable base in the U.S is. Ironically, these higher taxes may help U.S. tech companies establish stronger market positions in Europe by increasing the barrier to entry for competitors.

In a digital economy where borders are not a significant barrier for tech companies to operate and scale, technology is pushing governments to change what and how they tax. Therefore, it is important to revamp old assumptions such as where revenue is recognized and where a sale occurs to create effective taxation structures without driving away beneficial tech services.

U.K. Chancellor Announces New Digital Service Tax

The world’s most valuable company is once again facing allegations of exploiting Chinese laborers. According to a report published by a labor rights group, one of Apple’s suppliers illegally forced high school students to assemble Apple Watches at a factory in China.

According to the report, students aged sixteen to nineteen in the city of Chongqing were placed in mandatory school internships at the watch factory run by Quanta Computer. Further, the students were forced to work excessive and overnight shifts, with only one day off per week. In addition, the school threatened students that they would not graduate on time if they refused to work in the factory, even if the work did not relate to their major.

This is not the first time that Apple has come under fire for illegal labor practices. In 2017, students were discovered working more than eleven hours a day as part of a “voluntary” school internship program at an iPhone X plant in Shenzen run by Foxconn. In 2014, a report revealed that another supplier factory in Suqian was guilty of workplace violations including excessive hours, locked exits, and inadequate ventilation. Moreover, Apple faced global scrutiny after a spate of suicides by young workers at Foxconn in 2010.

Since the 2017 Foxconn scandal, Apple has required its suppliers to limit student interns at factories to no more than 10% of their total workforce. It enlisted the Fair Labor Association in 2012 to conduct regular audits of its suppliers. Unfortunately, these latest allegations suggest that Apple is still profiting from the exploitation of young Chinese workers.

Apple’s humanist brand has made it an icon of Silicon Valley. However, under that sleek surface, Apple has a rotten core assembled in China.

Exploiting Chinese Laborers- Apple’s Rotten Core

For many, spring is a time for elation, as long-awaited beams of sunshine slice through the smothering blanket of clouds. The grave silence of winter is disrupted by the chorus of birds, and bleak, frost-covered landscapes explode into a dazzling collage of vibrant colors. For millions of farmers across the United States, however, spring is a time of solemn calculation and meticulous statistical analysis. It is time to make a crucial choice: soybeans or corn.

Both crops are planted during the same season (April through June) and are grown in exactly the same environment. As such, they are perfect substitutes—for every acre that is devoted to corn, it means one less acre devoted to soybeans. Thus, come April, farmers must choose which crop to plant. Relying on statistical projections, farmers do their best to determine which crop will bring higher revenues. In recent years, American farmers have increasingly favored soybeans. A drought in Argentina has drastically cut the global supply of soybeans, pushing prices upward. Seeking to capitalize on the rising prices, American farmers have dedicated more and more land to soybean cultivation. The growing reliance on soybeans, however, has made farmers particularly vulnerable to China’s latest tariffs.

In the escalating U.S.-China trade war, Beijing has levied a 25% tariff on U.S. soybeans. For many farmers, this raises serious financial concerns. Roughly one third of all U.S. soybeans are exported to China. The tariffs will make U.S. soybeans more expensive for Chinese consumers; as a result, China is expected to reduce its annual imports by several million bushels. The tariff is highly strategic—China has tailored its tariffs to disproportionately impact President Trump’s voter base. Rather than trying to undermine U.S. economic stability, China is leveraging its tariffs to undermine Trump’s political stability. China is selectively targeting those sectors of the economy upon which Trump relies for electoral support. Against this backdrop, Trump’s recent decision to expand the sale of E15 fuel seems highly reactive—a desperate effort to rekindle political favor among the farmers who have been detrimentally impacted by his trade war.

E15 is a special type of fuel with a higher ethanol content—15% ethanol, compared to a nationwide mean of roughly 10%. E15 sales are currently prohibited from June through September, because the higher ethanol content makes E15 a particularly strong pollutant during hot weather. Trump has ordered the EPA to lift this summertime ban, thereby allowing sales of E15 year-round. Of course, ethanol is derived from corn. By lifting the ban on E15, Trump will increase the demand for ethanol, which in turn, will increase the demand for corn. Presumably, Trump expects this to serve as a life-line for struggling farmers—rather than despairing at the mercy of China’s tariffs, farmers can opt to produce corn instead of soybeans, thereby availing themselves of the newly expanded E15 market. In effect, Trump is hoping to stimulate corn-demand, in order to offset the reduction in Chinese demand for American soybeans. In fact, USDA Secretary Sonny Perdue practically said as much in a recent statement, declaring that “year-round sale of E15 will increase demand for corn, which is obviously good for growers…[this] is another victory for our farm and rural economies.”

While it may be a victory for American farmers, the expansion of E15 sales will hurt the oil industry. If cars become increasingly reliant on corn-based biofuels like ethanol, they become proportionately less reliant on fossil fuels. Realizing this, the oil industry has already threatened legal action if the EPA chooses to expand E15 sales. President Trump is thus forced between a rock and a hard place. China’s tariffs have forced him to make corn more profitable, in order to offset the loss in soybean demand; simultaneously, by appeasing corn farmers, Trump has ignited the rage of the oil industry. Both the agricultural voting bloc and the oil lobby are crucial players in American electoral politics; it seems that Trump will be forced to gain favor with one at the expense of the other, thus rendering him politically vulnerable.

Expanding E15 Sales – Proactive Energy Policy, or Reactive Political Move

Since its founding in 2006, Twitter has gradually integrated itself into the social fabric of American life. Today, Twitter touches the lives of many who are not even on the platform and serves as the preferred platform of the President of the United States.

Twitter has also been mired in several controversies, ranging from potential leaks of its users’ passwords to its infiltration by vast networks of bots aimed at influencing elections, during the past few years. Most of all, Twitter has often been used as a preferred tool for the dissemination of disinformation and right-wing radicalization, largely exemplified by its most famous user: @realDonaldTrump.

Nevertheless, these scandals have failed to dampen the famously unprofitable company’s revenue streak these past few quarters. Compared to last year, Twitter’s revenue has risen 29 percent, to $758 million, with a net income of $789 million according to the New York Times. The company has, remarkably, achieved its fourth straight quarter of profits, leading many investors to presume that the company has at last achieved a sustainable business model.

So why isn’t Twitter celebrating? Twitter continues to hemorrhage users. Once heralded as a possible direct competitor to Facebook, whose users number in the billions, Twitter’s user count has declined to 326 million monthly active users, from around 335 million in the previous quarter and 330 million last year. However, Twitter’s investors seem unphased by a contraction of the service’s active user base. This decline continues to trouble Twitter’s CEO Jack Dorsey even though shares have gone up 22 percent, from $26.91 to $31.27, following the recent quarterly earnings report.

Dorsey, who is also the CEO of the payment-processing company Square, has spent the last year struggling to diminish the increasing toxicity of the platform, by banning white supremacists like Alex Jones and Richard Spencer, while also trying to avoid alienating many of the platform’s vocal, virulent right-wing user base. Meanwhile, many of its users who are women, LGBT, and people of color have fled the site after suffering abuse.

Per the Washington Post, Brian Wieser, a senior analyst with Pivotal Research, believes that Twitter’s attempts to “improve the health of the platform” would likely harm its standing with investors in the short run. Yet it appears that investors are unlikely to hold Twitter accountable for its toxicity problem and declining user base as long as it continues to post a profit.

It may be up to us as citizens to step in and regulate Twitter not as a private company but as critical infrastructure. It may seem hard to believe in Dorsey’s vision of Twitter becoming a “health[y] and valuable everyday service” in light of the platform’s connections to domestic terrorists, such as the right-wing mail bomb suspect, Cesar Sayoc, and the organizers of the Charlottesville Rally. We can’t, however, deny the platform’s outsized impact on our public discourse and its role as a more transparent, public alternative to more toxic platforms like Gab and Discord. Although Twitter might finally be profitable, it may need to be saved from itself for the good of society.

Twitter Posts Profit While Sustaining Decline in Users