Commercial Awareness Update 15th March 2019

1) GLOBAL BANKS SUED OVER CHINA IPO

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Hong Kong’s securities regulator has imposed its largest ever fine on a number of international investment banks for failing in their roles as sponsors for Chinese initial public offerings.

The Securities and Futures Commission penalised UBS, Morgan Stanley, Bank of America Merrill Lynch and Standard Chartered a total of about HK$786.7m ($100m).

It also suspended for one year the Hong Kong licence of UBS Securities to advise on corporate finance, following an 18-month sponsorship ban it proposed last year.

Analysis

The record fines hint at an increased willingness by the watchdog to take on global banks after years of criticism for a lack of action on such issues.

The regulator has been criticised in recent years for a lack of action on allegations of fraud and misreporting often connected to Chinese companies, as it tried to strike a balance with attracting world-class listings to the city.

2) GOOGLE TO BE HIT WITH FINE

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Brussels is set to fine Google for hampering potential rival search advertisers, in the latest antitrust showdown between the EU and the US tech giant.

Following a high-profile investigation, Margrethe Vestager, EU competition commissioner, will announce the fine next week.

Analysis

Google has already paid €7bn in EU penalties to date for two other cases. The search giant was fined a record €4.3bn last year for abusing the dominant market position of its Android operating system for smartphones, and was hit with a €2.4bn penalty the prior summer for favouring its own shopping services over competitors. The search giant is appealing both decisions to the European courts in Luxembourg.

The latest investigation has focused on Google’s AdSense business, which places its search box on third-party websites, such as news websites. The commission can fine up to an additional $13bn — which is 10 per cent of the latest global turnover of Google’s parent company, Alphabet — but the penalty is expected to be significantly smaller than the maximum.


While next week’s fine will bring an end to the AdSense investigation, EU antitrust officials continue to scrutinise Google’s behaviour in other services — such as dedicated search for travel, jobs and local businesses — and could open fresh probes. They are also still considering if the fixes to Google’s Android operating system and shopping services are sufficient.

3) SPOTIFY WARNS OF PRICE RISES

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Spotify will raise prices if Apple continues to charge it a 30 per cent fee for using its ubiquitous App Store, the music-streaming service’s chief executive has said.

The warning from Daniel Ek comes just days after Spotify filed an antitrust complaint with the EU accusing Apple of unlawfully abusing its App Store dominance to favour its own Apple Music service.

Analysis

its EU complaint, Spotify said that Apple had required all iPhone app makers exclusively to use the Apple payment system for the past eight years.

Apple has introduced a 30 per cent fee, applied to Spotify and all other digital content providers in the first year after users download their app, for using the payment system. Other apps, such as Uber and Deliveroo, are not subject to the fee, which drops to 15 per cent after a year

While Spotify remains the global leader in music streaming by a wide margin, Apple recently overtook Spotify’s subscriber count in the US, where the iPhone dominates.

4) ZUCKERBERG PUSHES AHEAD

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Mark Zuckerberg is pushing ahead with plans to integrate Facebook’s trio of apps — even if it costs him a key member of his inner circle.

The Facebook chief executive wrote in a blog post on Thursday that two of the social network’s top bosses were leaving the company, less than a year after being promoted to their roles.

The resignations of Chris Cox, Facebook’s chief product officer, and Chris Daniels, head of WhatsApp, were widely seen as early signs of a backlash against Mr Zuckerberg’s new “privacy-focused” vision for the world’s largest social network, and sent Facebook shares down more than 4 per cent.

Mr Cox, the “number three” in command at Facebook after Mr Zuckerberg and chief operating officer Sheryl Sandberg, was well-liked within the company, having joined in 2005 as one of its first software engineers. He played an instrumental role in building the company, helping to develop the news feed feature.

Mr Daniels became vice-president of WhatsApp in May last year, having held multiple roles within Facebook, ranging from business development to partnerships, since 2011.


Analysis
The high-profile departures come just one week after Mr Zuckerberg used a 3,200-word blog post to pin Facebook’s future on products focused on privacy and control for its users.

As part of the change, the group plans to integrate the messaging services of Instagram, WhatsApp and Facebook into one encrypted system, meaning only people sending and receiving messages will be able to view them.

The move has divided analysts. Some say it is part of a push to find new sources of revenue at a time when sales growth is slowing in developed markets. But others see it as a more radical attempt to knit the three apps more closely together as antitrust regulators threaten to break them apart.

Usama Kubo,

Commercial Awareness Director