In Brief: CLO Edition
2018 Mar 23
Today's Top Story
White House to Impose Tariffs on Chinese Imports, Restrict Tech Deals
U.S. President Donald Trump sought to rewrite the rules of global trade on 22 March with a long-pledged trade offensive against China. The administration's actions, including a threat of tariffs on US$60 billion of imports and tighter restrictions on acquisitions and technology transfers, came in response to what it said were Chinese efforts to obtain U.S. technology through intimidation, state-financed acquisition, and subterfuge. The move followed previously announced tariffs on global imports of steel and aluminum, which will take effect on 23 March, although the administration is negotiating exemptions on those duties for many of its closest allies. In a warning shot, China recently unveiled plans for tariffs against US$3 billion in U.S. imports, from fruit to pork and recycled aluminum and steel pipes, reports the Wall Street Journal (22 March, Davis).
Mergers and Acquisitions
U.S. Urges Judge to Block AT&T-Time Warner Merger
The U.S. Justice Department squared off with AT&T Inc. in a long anticipated trial, as the two sides disputed whether AT&T's US$85 billion purchase of Time Warner Inc. would be good for consumers or an expensive drag on innovation. Justice Department lawyer Craig Conrath asked for the deal to be blocked, saying it would hike prices for consumers by more than US$400 million annually by making rival pay TV companies pay more for Time Warner content, reports Reuters (22 March, Shepardson, Bartz). Daniel Petrocelli, speaking for AT&T and Time Warner, ridiculed the Justice Department's case and suggested the government was "fundamentally stuck in the past" with arguments that were "divorced from reality." Petrocelli said the deal would actually lead to a 50-cent decrease in prices for pay TV subscribers, citing what he said were errors in a government expert's model of how the transaction would impact future prices.
Future U.K. Corporate Governance Reforms to Target Irresponsible Directors
Out-Law.com (22 March) reports that the U.K. government is consulting on further reforms to the corporate governance and corporate insolvency frameworks, designed to target irresponsible behavior by companies and their directors when a business is in or is approaching financial difficulty. Such measures could include the power to claw back money for creditors or to disqualify directors who recklessly sell a company or subsidiary knowing it would fail. The consultation, which closes on 11 June, asks whether any related reforms may be needed to the pre-insolvency corporate governance framework, including possible reforms to the legal and technical framework within which decisions are made about paying out quarterly dividends.
Jailed Lotte Chairman Reappointed to Boards of Affiliates
The jailed chairman of Lotte Group, South Korea's fifth-largest conglomerate, has been reappointed as a board member of the retail group's key affiliates, despite his conviction for bribery. Shareholders of Lotte Shopping and Lotte Confectionery approved Shin Dong-bin's reappointment as a board director at their annual meetings on 23 March, sparking criticism that the country's family-run conglomerates, known as chaebol, trail global governance standards. The appointments came about a month after Shin was sentenced to two and a half years in prison for offering 7 billion Won (US$6.5 million) in bribes to foundations run by a long-time confidante of former president Park Geun-hye in return for business favors, reports the Financial Times (23 March, Jung-a).
Merck Names New General Counsel
Merck has named a new general counsel to handle global legal and other affairs. Jennifer Zachary, a partner at Covington & Burling, will succeed Michael J. Holston, effective 16 April, the Kenilworth-based pharmaceutical giant said. Zachary will handle Merck's global legal, security and aviation, and environmental, health and safety organizations, as well as serve on the executive committee, reports ROI (22 March, Strauss).
Labor and Employment
U.S. Supreme Court's Employment Contract Case Will Have Broad Reach
The more than 150 cases pending at the National Labor Relations Board and federal appeals courts reveal just how far a U.S. Supreme Court case could reach after the justices this term decide whether employment contracts can ban class actions. In October, the Supreme Court heard arguments in a trio of cases that confront the lawfulness of class action waivers. The action in the high court put hundreds of cases on hold at the labor board and in federal appeals courts, including employee actions against major financial institutions, health care and tech giants, and household-name retailers. Agreements that force employees to use arbitration for work-related disputes interfere with employees' rights to engage in concerted activities under the National Labor Relations Act, the board determined in a case that is at the Supreme Court now. The board said that when such an agreement violates the act, the Federal Arbitration Act does not require its enforcement, reports the National Law Journal (22 March, Mulvaney). Big-name companies with employment contract cases pending in federal appeals courts include AT&T, American Express, Dominos Pizza, Hobby Lobby, and CVS Pharmacy.
More Companies Teach Workers What Colleges Don't
Major employers are hiring workers because of what they can do, or what the company thinks they can teach them, instead of the degrees they hold, reports the Wall Street Journal (22 March, Belkin). States as well as the federal government are seeking alternative routes from high school to employment, taking students who might otherwise go to a four-year college, worsening a process that is dividing colleges into winners and losers. Manufacturing, technology, and healthcare sectors are moving fastest to concentrate on skills over degrees because they are the industries struggling the most to fill jobs. Some employers have encouraged dependence on bachelor's degrees as a proxy for skills, says Harvard Business School Professor Joseph Fuller. However, such degree requirements are limiting the number of job applicants and hiking costs for companies and employees. They also frustrate for workers, since fewer than 50 percent who go to college end up graduating and getting a job that utilizes their degree. Employees at Schweitzer Engineering Laboratories take classes in algebra, physics, and writing in the factory complex and can borrow books from a company library. Company founder Ed Schweitzer prioritizes education at the firm, fostering an atmosphere where assemblers regularly are promoted to technicians and work alongside engineers.
EU Leaders Tell Social Network Companies to Guarantee Users' Privacy
EU leaders have urged social networks to guarantee transparent practices and fully protect personal information as pressure piled on Facebook after allegations that data from 50 million of its users was mishandled. More than US$50 billion has been wiped off Facebook's market value on reports that British political consultancy Cambridge Analytica improperly accessed data to build profiles on American voters and influence the 2016 presidential election, reports Reuters (22 March, Fioretti). The harvesting of user data happened before a new EU data protection law comes into force under which companies could be fined up to 4 percent of global turnover for violating it. Facebook's Chief Executive Mark Zuckerberg recently apologized for mistakes his company made and promised to restrict developers' access to user information as part of a plan to improve privacy protection.
Facebook Scandal Could Push Other Tech Companies to Examine Data Sharing Policies
Big internet companies and small software developers alike are likely to face scrutiny over how they share customer information in the wake of the scandal involving Facebook and British election consulting firm Cambridge Analytica, reports Reuters (22 March, Paresh). Lawmakers have called for investigations into how Facebook permitted Cambridge Analytica to access data on 50 million users and use it to help President Trump's election campaign. The scrutiny and the risk of regulatory action could affect Google, Twitter, LinkedIn, and the many others that make their user data available to outside developers. The Facebook case has turned the application programming interfaces that enable such data sharing into a new front in the escalating battle between lawmakers and tech companies over the monitoring and securing of their vast platforms.
U.S. to Shield Allies from Steel Tariffs
The United States will initially shield some allies—including the European Union, Australia, South Korea, Argentina, and Brazil—from steel and aluminum tariffs that take effect on 23 March, said U.S. Trade Representative Robert Lighthizer. It was unclear from Lighthizer's remarks to the Senate Finance Committee whether those nations would not have to pay the tariffs while negotiating a solution or if they are getting more permanent relief, reports Bloomberg (22 March, Hagan). Lighthizer said on 21 March that the U.S. wanted to wrap up the discussion over which countries will get firm exemptions by the end of April. Earlier this month, President Donald Trump announced he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum but exempted Canada and Mexico as long as they agreed to an updated North American Free Trade Agreement.
Tech Companies Back Measure to Clarify U.S. Access to Data
A measure tucked into the massive spending bill passed by the House on 22 March lays out new rules for international data requests by law enforcement, giving tech companies an easier way to navigate conflicts between government demands and customer privacy expectations. Microsoft Corp. and trade groups representing companies such as Google and Apple Inc. applauded the inclusion of the provision in the US$1.3 trillion spending bill that is headed toward a final vote in the Senate. The Clarifying Lawful Overseas Use of Data Act, or CLOUD Act, which was tacked on at the end of the 2,232-page spending bill, makes clear that U.S. warrants apply around the world and clarifies what data the government can access. The measure sets up a new process for providers to challenge U.S. warrants and notify foreign governments so they can object, reports Bloomberg (22 March, Stohr, Brody).
Weather Channel Sold
U.S. News and World Report (22 March, Elber) reports that The Weather Channel is now under new ownership. Entertainment Studios Inc., an independent television and motion picture producer and distributor, announced Thursday that it has acquired the channel's parent company, Weather Group. The total purchase price was reportedly US$300 million. The sellers were the Blackstone Group, Bain Capital, and Comcast-NBCUniversal.