Quebec developer seeks provincial backing for rival Transat takeover bid - The Globe and Mail

Powell hints Federal Reserve will cut rates if needed over trade wars - CBC.ca

Chairman Jerome Powell said Tuesday that the Federal Reserve is prepared to respond to the Trump administration's trade conflicts to protect the U.S. economy, signalling that the Fed will cut interest rates if necessary.

Powell's comments gave a lift to stock markets, with the Dow Jones industrial average up over 400 points at mid-day.

Speaking at a Fed conference in Chicago, Powell said, "We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion."

Powell didn't explicitly say what the Fed would do if it concluded that the administration's trade conflicts were damaging the economy. But expectations are rising that the Fed will cut rates at least once and possibly twice before year's end, in part because of the consequences of the trade war. There is also concern that the U.S. economy faces a growing risk of a recession.

Trump has imposed far-reaching tariffs on imports on China, which has retaliated with tariffs of its own on U.S. exports. He has also threatened to impose an escalating series of tariffs against Mexico unless Mexico stops a flow of migrants from Central America into the U.S. At a news conference in London, President Donald Trump reiterated that his import taxes on goods from Mexico will start taking effect next week at a level of five per cent, rising to a peak of 25 per cent until Mexico complies with his demand to cut off Central America migration.

Powell noted that the Fed is conducting its first-ever public review of its operations and will focus on ways to improve its rate strategies, the tools it uses to achieve its objectives and the way it communicates its actions to the public.

He called persistently low inflation the "pre-eminent monetary policy challenge of our time," because it limits the Fed's ability to support the economy by cutting rates.

The current expansion next month will become the longest period of uninterrupted growth in U.S. history, surpassing the 10-year expansion of the 1990s.

The Fed manages interest rates to achieve two goals, maximum employment and low inflation. While unemployment has fallen to a 50-year low of 3.6 per cent, inflation has failed to rise to the Fed's target of two per cent. The Fed sees that target as the optimal level for annual price increases and worries if the price gains go too far above two per cent or fall below that level.

But the Fed's efforts to achieve the two per cent target have so far failed despite the fact that it kept its key policy rate at a record low near zero for seven years. It began gradually increasing its policy rate in December 2015.

After raising rates nine times, including four hikes last year, it declared in January that it would be "patient" in raising rates further. Most analysts believe that it will keep rates unchanged for the rest of the year. Some investors are even beginning to bet that the next move will be a rate cut later this year.

The policy rate at the moment is in a range of 2.25 per cent to 2.5 per cent, meaning that the Fed has less room to cut rates to stimulate growth.

What the central bank can do to manage the economy when inflation is so low and interest rates have little manoeuvring room will be a key discussion topic at the two-day conference, which features the presentation of a number of academic papers.

"Our obligation to the public we serve is to take those measures now that will put us in the best position to deal with our next encounter with the ELB," Powell said, referring to the effective lower bound for interest rates.

"With the economy growing, unemployment low and inflation low and stable, this is the right time to engage the public broadly on these topics," Powell said.

In addition to the Chicago conference, the Fed is holding a number of listening sessions around the country to get input from the public.

Powell said that after this outreach, Fed officials will begin using their regular meetings to discuss possible changes. Private economists believe that the yearlong review is likely result in only modest changes to current Fed policies.

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June 04, 2019 at 11:17PM

Tuesday's analyst upgrades and downgrades - The Globe and Mail

Inside the Market’s roundup of some of today’s key analyst actions

Following its disappointing initial public offering and subsequent share price slide, investors finally got a broad look at the Street’s view of Uber Technologies Inc. (UBER-N) on Tuesday as a large group of equity analysts initiated coverage of the ride-hailing service.

Almost two dozen Wall Street banks underwrote the company’s May 9 market debut, leading to a mandated delay in the unveiling of their ratings and target prices for its stock.

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Here’s a look at some of analysts’ views:

Canaccord Genuity’s Michael Graham gave Uber a “buy” target and US$55 target.

Mr. Graham: “Uber is perhaps the best exemplification of the modern private equity-enabled tech sector unicorn, having been supported through years of private operation, raising $24.7 billion pre-IPO, and entering the public markets with an $82 billion valuation. The stock essentially flat following an 18-per-cent decline from its IPO price of $45 as public investors have for now eschewed the long period of loss making implied in Uber’s business model, and it’s quite possible that the stock may experience an extended ‘seasoning’ period as it works through pent-up supply from early investors seeking partial liquidity. In addition, the scope of Uber’s investment and expansion framework virtually ensures delayed profitability for several years, narrowing the pool of potential buyers. All that said, we are bullish on the stock as we see the vast global transportation market as poised for disruption, and Uber as the dominant player in the revolution.”

RBC Dominion Securities’ Mark Mahaney initiated coverage with an “outperform” rating and US$62 target.

Mr. Mahaney: “Uber is the leading global player in massive ridesharing & meal delivery TAMs [total addressable markets], generating robust growth, with leading technologies, products & ops. We also see significant option value in new business units (e.g. Freight). We believe the market underappreciates UBER’s profit potential.”

Citi’s Mark May gave it a “neutral” rating with a US$45 target.

Mr. May: “The Uber app is used every month by nearly 100 million people in 63 countries to get rides, food and packages. The company has been a transformative and disruptive force like few companies before it. And despite its rapid growth and the scale achieved, the opportunity in transportation services is still significant. However, forecast uncertainty has been created from 1) a recent rise in competition (and capital) in certain markets, 2) regulatory pushback and uncertainties in some markets, 3) potential limits on penetration levels at current price points and network capacity, and 4) determining if AV represents an opportunity or risk. Despite these risks, we still forecast Uber producing $38-billion in revenue in four years (27-per-cent CAGR) and a 25-per-cent EBITDA margin in 10 years.”

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While the Street’s look at Uber was highly anticipated, several analysts took the opportunity to also initiated coverage of rival Lyft Inc. (LYFT-Q).

Touting its “attractive risk/reward in the race for networked mobility,” Citi analyst Itay Michaeli gave San Francisco-based company a “buy” rating with a US$70 target.

“Readers of Citi’s past Car of the Future body of work know that we have long-viewed the network effect as the most coveted asset in the entire mobility race, in what will likely prove to be a few-regional-winners-take-all outcome,” he said. “We’re sitting in the early-innings of a transition that we believe is likely to upend the current personal mobility value-chain —resulting in lucrative addressable markets (of various forms) for the network winners. We view Lyft to be well-positioned to participate in this LT upside proposition, and we like the company’s concentrated focus (U.S./Canada, rides) and net cash position in what can be a volatile industry.”

“Our base case ($70 target) leverages our newly introduced U.S. Rideshare TAM model, which forecasts a ~$150 billion 2030E industry revenue pool. Importantly, this base case doesn’t contemplate a major shift in car ownership or the deployment of AVs, which could unlock a far greater TAM. When contemplating such upside, we think the LT “bull” case for the stock is arguably $211. Of course, AVs also add competitive risk, which we discuss in detail in this report, but we think Lyft as aligned itself with the right partners while continuing to build its network edge. On the other hand, the “bear” case can get us to $27. But given Lyft’s current positioning & momentum, anchored by our positive LT industry view, our bias is to the upside fundamentally. And with Lyft shares pulling back post-IPO, we regard the net-net risk/reward to be attractive.”

RBC Dominion Securities analyst Mark May gave Lyft an “outperform” rating and US$72 target.

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Mr. May said: “Lyft is a strong #2 player in the growing U.S. ridesharing industry, with industry-leading growth rates. And we believe that Lyft has a reasonable path to profitability in the coming years.”

“We believe investors largely agree that Lyft (like Uber) faces a very large TAM. Controversies revolve around Lyft’s lagging competitive position vs. Uber and its path to profitability, this latter point highlighted by its expected $1B+ EBITDA loss in FY19. BUT, over the past 3 years, we have seen material leverage as each of Lyft’s four opex lines (O&S, S&M, R&D, and G&A) has declined as a percentage of Revenue (from 218 per cent in FY16 to 87 per cent in FY18). And we see 4 key paths to profitability: 1) Eventual rationalization in competitive dynamics leading to fewer Subsidies; 2) Long-term pricing power based on a compelling value proposition (as other major consumer Internet platforms have proven); 3) Insurance leverage (substantial portion of COGS) due to scale and experience curves; & 4) Expense leverage as the company scales.”

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Calling it “a gold business with high returns and organic growth opportunities,” Raymond James analyst Farooq Hamed initiated coverage of OceanaGold Corp. (OGC-T) with an “outperform” rating on Tuesday.

“Fundamentally, we believe that OGC has a strong balance sheet that can support future growth, a steady operating profile over the next few years that should generate FCF [free cash flow] at current commodity prices and an attractive suite of organic growth opportunities,” he said. “Comparing OGC to its intermediate gold producer peers, the Company has a superior track record of positive ROIC and ROE [return on invested capital and return on equity], positive NAV [net asset value] growth going forward versus a negative average for peers and a relatively strong balance sheet. On valuation, our analysis suggests OGC is trading at a slight premium to its peers however, we believe the premium could be higher given its comparatively stronger fundamentals.”

Mr. Hamed projects the Melbourne-based company to produce between 500,000 and 550,000 ounces of gold annually through 2021 while seeing both cash costs and all-in sustaining costs (AISC) decline as its Haile mine in South Carolina normalizes and capital requirements lessen.

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“Beyond 2021, we are currently modeling a production decline caused by the end of mine life at Macraes, however, we believe there is potential for the development of the Golden Point underground at Macraes that would extend mine life and push the production decline further into the future,” he said. “Further growth in the period post 2021 would come from the incorporation of the higher grade Horseshoe underground deposit at Haile and the high-grade WKP deposit at Waihi.”

“While we currently model a production decline starting in 2022 as Macraes comes to the end of its life, we expect OGC’s total NAV to continue to grow as the Company would be in a cash harvest mode. We see potential for further NAV growth if OGC moves forward with the organic growth opportunities at Waihi (WKP) and Macraes (Golden Point) and from a potential new mine plan at Haile that delineates larger pits and the Horseshoe underground. The cash flow and production profiles also highlight that OGC would be well positioned financially and in a logical position to potentially pursue an external growth asset in addition to the organic opportunities.”

Mr. Hamed set a target price of $5.50 for OceanaGold shares. The average on the Street is $4.94.

“Overall, OGC trades at a slight premium to its midtier peers on a P/NAV basis (1.0 times versus group average of 0.8 times) and a P/CF basis (6.4 times versus group average of 5.1 times),” the analyst said. “Given OGC’s superior return and annual NAV growth metrics versus peers and its relatively strong balance sheet, we believe OGC is a premium company in the gold sector and should trade above peers suggesting that the slight premium still represents good relative value.”

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Citi analyst Timm Schneider reaffirmed TC Energy Corp. (TRP-T) as his “preferred” Canadian pick in the energy infrastructure in a research note reviewing its first-quarter financial results.

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“We believe TRP’s acquisition of Columbia Pipeline along with execution of its current $30-billion backlog of projects will drive earnings grow through 2023,” he said. “We expect dividends growth to be in the middle of management guidance of 8-10 per cent. In addition, we are optimistic on the outlook for $58-billion Coastal GasLink project, given the advantages of LNG Canada – shorter shipping time, inexpensive gas, and large customer support. We also believe there is material upside from critical projects such as Keystone XL, Bruce Power, and opportunities within Mexico over the longer term despite political headwinds.”

Maintaining a “buy” rating for TC Energy shares, he hiked his target to $73 from $60. The average on the Street is $67.19.

At the same time, Mr. Schneider increased his target for TC Pipelines LP (TCP-N) to US$36 from US$32.50, which falls just short of the US$36.60 consensus.

He kept a “neutral” rating for TC Pipelines, which is managed by its general partner, TC PipeLines GP, Inc., a subsidiary of TC Energy.

“Our rating reflects our view that TCP’s asset will benefit from additional NG supply from the WCS production,” said Mr. Schneider. “However, we believe the valuation of TCP reflects the final FERC rule as it relates to TCP’s pipelines under reasonable assumptions. There remains uncertainty on the final implementation of the FERC policy.”

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Pointing to concerns stemming from the trade dispute between the United States and China and the expectation for “muted” iPhone upgrades ahead of the 5G technologies, Canaccord Genuity analyst T. Michael Walkley dropped his financial expectations and price target for shares of Apple Inc. (AAPL-Q).

“We believe Chinese consumers could slow Apple hardware purchases, leading us to trim our estimates,” he said. “We also anticipate increased input costs given the trade issues and have slightly lowered our gross margin assumptions. Further, our surveys indicate consumers are willing to hold onto iPhones longer, and we believe many could wait for new 5G technologies, leading us to lower our 2019 and 2020 iPhone estimates from 180M/190M units to 172M/185M units.

“Should the U.S. place a 25-per-cent tax on all Chinese imports to the U.S. with no exclusions, we would anticipate further cuts to our estimates. However, we believe Apple’s importance to both the China technology ecosystem through its Foxconn partnership combined with its importance as a leading U.S. company, we anticipate Apple should be able to navigate the tariff issues with potentially minimal impact.”

Maintaining a “buy” rating for Apple shares, Mr. Walkley trimmed his target to US$202 from US$245. The average on the Street is currently US$209.61.

“We believe Apple’s ecosystem approach including an install base which now exceeds 1.4 billion devices globally will drive strong long-term services revenue growth, and we expect the higher-margin services revenue growth to continue outpacing total company growth,” he said to justify a lack of a rating change.

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“Materially lower” steel prices could lead to “substantially reduced earnings and EBITDA” for United States Steel Corp. (X-N) as its cash commitments continue to grow, according to Goldman Sachs analyst Matthew Korn.

He downgraded his rating for the stock to “sell” from “neutral” with a target of US$11, falling from US$17 and below the US$15.73 average.

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In other analyst actions:

BMO Nesbitt Burns analyst Tim Casey resumed coverage of Corus Entertainment Inc. (CJR-B-T) with a “market perform” rating and $7 target. The average on the Street is $8.13.

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June 04, 2019 at 07:04PM

Posthaste June 4: Air Canada enters drone delivery business, investors lose faith in FAANGs and subsidies for Kawhi - Financial Post

Good morning!

Air Canada enters the drone delivery business after striking a deal with Drone Delivery Canada Corp. to market and sell its drone delivery services in the country.

Under the agreement, DDC will build and operate up to 150,000 drone delivery routes in Canada, and Air Canada Cargo will market it as a “premium offering,” the companies said in a statement.

“We believe drone technology has the potential to offer the cargo community cost-effective solutions to complex issues related to supply chain distribution in non-traditional markets, including remote communities in Canada,” said Tim Strauss, vice president, cargo, at Air Canada.

Investors — and the Bank of Canada — will be paying close attention to U.S. Federal Reserve Jerome Powell’s speech in Chicago today, as they try to predict the Fed’s next move. Earlier today, the Reserve Bank of Australia cuts its interest rate, suggesting that the world’s major central banks may be leaning towards looser monetary easing policy rather than the tightening that the Bank of Canada seems to favour.

Here’s what’s breaking this morning:

• Former Prime Minister Brian Mulroney delivers remarks, receives lifetime achievement award at Canadian Club ceremony in Toronto
• BMO Capital 2019 Business Innovation Conference in Montreal
• RBC Capital Market’s 27th annual Global Energy and Power Executive Conference
• U.S. Federal Reserve begins two-day conference in Chicago on monetary policy strategy, tools and communication practices
• Corporate events: Canadian National Railways Ltd. investor day, Tiffany & Co. earnings
• Notable data: U.S. factory orders

Global stocks took a beating in May, shedding almost US$4.4 trillion in value, thanks to a sharp escalation in trade tensions. That was the first month of losses since December when markets lost more than US$4.5 trillion, capping the worst year for global shares since 2008. With U.S. President Donald Trump now opening fresh trade war fronts in Mexico and India, brace for volatility in June as well.

Send your comments, and other news tips, exclusive research reports and story pitches to Yadullah Hussain at yhussain@postmedia.com, or @YAD_FPEnergy

— With files from The Canadian Press, Thomson Reuters and Bloomberg

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June 04, 2019 at 07:59PM

OSFI increases domestic stability buffer for big banks to 2% - BNNBloomberg.ca

OTTAWA -- The federal banking regulator is increasing the domestic stability buffer for the country's systemically important banks to 2.00 per cent from 1.75 per cent.

The Office of the Superintendent of Financial Institutions says on balance the systemic vulnerabilities remain elevated while economic conditions continue to be accommodative.

It noted that specific vulnerabilities covered by the buffer continue to include Canadian consumer debt, asset imbalances in the Canadian market and Canadian institutional debt.

Increases to the buffer require the large banks to increase the amount of capital they hold to protect against vulnerabilities.

The federal regulator reviews and sets the domestic stability buffer in June and December. The new buffer is effective as of Oct. 31, 2019.

The domestic systemically important banks are Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank.
 

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June 04, 2019 at 08:16PM

Powell, Eyeing Trade War, Suggests Fed Could Turn to Interest Rates if Needed - The New York Times

CHICAGO — Federal Reserve Chairman Jerome H. Powell, eyeing the potential for President Trump’s trade war to inflict damage on the United States economy, said that the central bank is prepared to act to sustain the economic expansion if needed.

“We do not know how or when these issues will be resolved,” Mr. Powell said of ongoing trade disputes between the United States, Mexico, China and other nations. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

Mr. Powell did not explicitly say that the Fed will cut interest rates but his comments send a signal that the central bank is watching Mr. Trump’s trade wars warily, ready to fend off any economic damage.

“He’s making a point to say to the markets that, ‘We can act if necessary,’” said John Briggs, a bond market strategist at NatWest Markets in Stamford, Conn. “I think the markets are taking some comfort, at least, by the idea that he’s moving in the right direction.”

While the Fed has been closely monitoring Mr. Trump’s trade dispute with China, Europe and other governments, Mr. Powell’s comments were his first since the president said that he would escalate his dispute by imposing tariffs on all Mexican goods.

Mr. Trump, speaking in London on Tuesday, said he was ready to punish Mexico with tariffs next week for failing to curb the flow of migrants across the Southern border.

“I think it’s more likely that the tariffs go on, and we’ll probably be talking during the time that the tariffs are on, and they’re going to be paid,” Mr. Trump said.

The decision to impose tariffs of up to 25 percent on Mexico — combined with growing concern over a prolonged trade war with China — has sent markets tumbling. They have gyrated as investors, bond markets and Wall Street analysts grow increasingly alarmed by the potential slowdown in growth that could result from expanded tariffs. The worsening outlook for trade over the last month has been accompanied by signs of weakness in global markets. Prices of key industrial commodities such as crude oil and iron ore have slipped.

After hitting a high on April 30, the S&P 500 was down nearly 7 percent through the close of trading on Monday. Yields on safe government bonds have tumbled worldwide, in a sign that investors see a weakening outlook for inflation and economic growth. And yields on some long-term Treasury securities are now below those of short-term bills, an unusual occurrence known as an “inversion of the yield curve,” which, in the past, has heralded recession.

Against that backdrop, investors have grown increasingly expectant that the Fed will abandon its “patient” stance and move to cut interest rates in the coming months. Fed funds futures markets are now placing a probability of more than 50 percent on the Fed reducing interest rates at its meeting at the end of July. Earlier in May, the market was putting less than 20 percent odds on such a move.

Mr. Powell’s comments on Tuesday slightly buoyed investors, who have already pinned their hopes on rate cuts this year.

Yields on short-term Treasury notes declined slightly after his comments were released. And stocks, which had been up before the speech was released, climbed further. The S&P 500 was up more than 1.5 percent by midday.

Taken with his colleagues’ recent statements, Mr. Powell’s speech signals that the Fed isn’t yet ready to lock in coming rate cuts. Federal Reserve Bank of Chicago President Charles Evans said in a CNBC interview earlier Tuesday that he’s “comfortable” with where rates are at the moment. Mary Daly, head of the Federal Reserve Bank of San Francisco, also reiterated a call for patience during an interview with CNBC.

Officials are watching trade warily, however. In a speech on Monday, the president of the Federal Reserve Bank of St. Louis, James Bullard, said that a cut in interest rates “may be warranted soon” in order to stoke inflation and “provide some insurance in case of a sharper-than-expected slowdown” in growth.

“The main story from Powell for near-term policy, in my view, is that this debate about whether the next move is a hike or a cut is effectively over,” Neil Dutta, an economist at Renaissance Macro Research, wrote in a note to clients following the speech. “They are no longer holding open the possibility of a hike.”

The president’s actions on trade have left the Fed in a tough spot. Growth remains above its longer-run trend and the job market is strong, which would argue against rate cuts. Plus, trade disputes could be resolved quickly, removing a major obstacle to continued expansion. But inflation is already low, and if a global slowdown drags on the United States economy, Fed rates are still historically low — which could argue for quick, decisive action, since the central bank’s recession-fighting ammunition is limited.

Mr. Trump himself has been pushing the Fed to cut rates, even contrasting the central bank with China’s.

“China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening,” Mr. Trump said in a tweet on April 30. He said that the economy would go up like a “rocket” if the central bank cut rates.

That also raises an optical problem for the central bank, which is independent of the White House. A move to cut rates could look political, even if it arose from a change in the economic landscape. Officials have reiterated time and again that they will make policy decisions based on the economic outlook, and that politics will not influence them in either direction.

After the Fed raised rates nine times since 2015, investors late last year began to grow concerned that monetary policy might be too tight, potentially risking the start of a recession. That helped send stock markets sharply lower, with the S&P 500 losing nearly 14 percent in the last three months of 2018.

Then, in early January, the central bank abruptly shifted its tone away from previous plans to continue lifting interest rates this year, and instead emphasized that it would remain patient, flexible and attuned to signals being sent by financial markets.

Some analysts question whether fresh Fed cuts would stimulate a similar reaction now. A decade into an economic expansion, lower interest rates might not measurably improve the outlook for corporate profits, the economy or the stock market, they say.

“This is just the reality of it,” said Michael Wilson, U.S. equity strategist for Morgan Stanley. “The Fed has done everything they can do to extend the cycle. And it might not be enough.”

Analysts have altered their forecasts for Fed policy in recent days and are now predicting as many as three rate cuts as concerns grow that the central bank will need to take drastic action to prop up the economy. JPMorgan and Evercore ISI now project a total of two interest-rate cuts starting in September, and Barclays predicts three cuts. That is up from previous estimates for either no cuts or a single rate cut for 2019.

Mr. Powell also focused on longer-run challenges facing the rate-setting Federal Open Market Committee, saying that rates near zero have “become the pre-eminent monetary policy challenge of our time.”

Against that backdrop, the Fed is concerned that inflation has been coming in below its objective for low and stable 2 percent price gains. The shortfall leaves it with even less room to cut interest rates, which include inflation, in a downturn.

“My F.O.M.C. colleagues and I must — and do — take seriously the risk that inflation shortfalls that persist even in a robust economy could precipitate a difficult-to-arrest downward drift in inflation expectations,” Mr. Powell said. He said that looking for ways to change the Fed’s policy strategy to strengthen its inflation-targeting credibility is “at the heart of the review.”

The central bank is also reviewing its approach to communication and its tool kit for combating economic downturns, and is expected to reach and report conclusions sometime in early 2020.

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https://www.nytimes.com/2019/06/04/business/economy/powell-fed-trade-wars.html

2019-06-04 16:41:15Z
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Silicon Valley in the crosshairs: Google, Facebook, Amazon and Apple face bipartisan onslaught - Fox News

Big Tech's moment of reckoning has finally arrived.

After years of expansion and disruption, while seeming to escape regulatory scrutiny relatively unscathed in the United States, the world's most powerful tech companies are suddenly staring down the barrel of a bipartisan gun that could severely curtail their growth, subject them to invasive probes, saddle them with new regulations and potentially force them to break up.

In recent days, antitrust investigators at the Federal Trade Commission and the Department of Justice have set their sights on four of the largest players in Silicon Valley: Google, Amazon, Facebook and Apple. The two U.S. agencies have reportedly decided to divide and conquer, with the Justice Department taking the lead on investigating Google, while the FTC is set to examine the practices of Amazon.

Facebook, which came to an agreement with the FTC in 2011, has been rumored to be close to a new deal with the agency that would subject it to billions in fines and new regulatory oversight around privacy. Apple would fall under the purview of the Justice Department, which has a history with the Cupertino, Calif. company. The Justice Department found in 2014 that Apple engaged in a conspiracy with five publishers to increase the price of ebooks, ultimately costing the company $450 million.

YOUTUBE ALGORITHM PUSHES VIDEOS WITH CHILDREN TO PEDOPHILES, REPORT SAYS

"This is more of a warning to the companies that they’re being carefully scrutinized and they need to be careful not to play fast and loose given their dominant positions in the digital marketplace," Gene Kimmelman, a former senior antitrust official at the Justice Department who is now president of the consumer group Public Knowledge, told The New York Times.

From left: Apple CEO Tim Cook, Amazon CEO Jeff Bezos, Google CEO Sundar Pichai and Facebook CEO Mark Zuckerberg. Big Tech is facing a regulatory reckoning.

The antitrust scrutiny comes as lawmakers on both sides of the aisle have vowed to curtail the power of Big Tech, which critics say has stifled competition and innovation while allowing the spread of misinformation and hate speech. A number of Democrats running for the 2020 presidential nomination have called for greater regulation of Silicon Valley but Sen. Elizabeth Warren, D-Mass. has put forth the most aggressive proposal to break up several tech giants on antitrust grounds.

The House Judiciary Committee on Monday announced a bipartisan investigation that will use the power of subpoenas and public testimony to focus on three key areas: documenting competition problems in digital markets; examining whether dominant firms are engaging in anti-competitive conduct; and assessing whether existing antitrust laws, competition policies and current enforcement levels are adequate to addresses the issues.

"Unwarranted, concentrated economic power in the hands of a few is dangerous to democracy – especially when digital platforms control content. The era of self-regulation is over," House Speaker Nancy Pelosi, D-Calif., said in a statement on Twitter, adding that the probe is "long overdue."

Shares of Facebook and Alphabet, which owns Google, both tumbled on Monday, pulling the Nasdaq Composite Index into correction territory.

'WHITE COLLAR SWEATSHOP': GOOGLE ASSISTANT CONTRACTORS SLAM TECH GIANT

"Technology has become a crucial part of Americans' everyday lives," said Antitrust Subcommittee Ranking Member Jim Sensenbrenner, R-WI, in a statement. "As the world becomes more dependent on a digital marketplace, we must discuss how the regulatory framework is built to ensure fairness and competition."

The tech industry poured $77.9 million into lobbying U.S. lawmakers in 2018, compared with $16.4 million a decade earlier, The Wall Street Journal reports. Both Google and Amazon have also funded more than 30 nonprofit groups, including think tanks on the left and the right, that have a voice in the public debate over antitrust, according to the Journal.

However, all of that money may not be enough to stave off regulators and investigators.

People familiar with the investigations told Reuters that neither the Justice Department nor the FTC has contacted Google or Amazon about any probes, and that company executives are unaware of what issues regulators are reviewing.

The world's largest online retailer, Amazon, has faced heat for the power it wields over third-party sellers on its platform -- in part from the sale of its private label products. The Seattle-based tech giant has also been criticized for damaging traditional retailers, although government regulators did allow its purchase of Whole Foods to proceed in 2017. Amazon has pointed out in the past that Walmart, its biggest American competitor, saw its online sales grow 40 percent last year and that 90 percent of all retail sales in the U.S. still happen in bricks-and-mortar stores.

FACEBOOK GRAPPLES WITH SLOWER GROWTH, CALLS FOR MAJOR LEADERSHIP SHAKEUP

Apple is being examined by the European Union thanks to a complaint from streaming music company Spotify that Apple has abused its power over app downloads. Although Apple has frequently touted the privacy of its hardware and taken subtle shots at Facebook, a new report suggests that a range of different iPhone apps are sending out users' information to third parties. The Tim Cook-led company recently announced that it was killing iTunes. Cook pushed back on antitrust arguments, telling CBS News on Tuesday that his company is "not a monopoly."

In April, Facebook said it expects to be fined up to $5 billion by the FTC, which has been probing the social network's role in sharing the data of 87 million of its users with the data-mining firm Cambridge Analytica. The Menlo Park, Calif. company, which also owns WhatsApp and Instagram, has been slammed by critics over the proliferation of fake news on its platform. However, Zuckerberg announced this year that Facebook would pivot to focus more on privacy and encrypted communication, and the company has dramatically increased its investments in AI and hired thousands of workers focused on health and safety.

“We’re still waiting on long overdue FTC action on Facebook’s violated consent decree,” Sarah Miller, co-chair of Freedom From Facebook, a group which has called for the social network to be broken up, said in a statement to Fox News via email. “Facebook’s violation of the consent decree already gives the FTC grounds to break up Facebook’s monopoly, and they should. But, a potential bigger-picture antitrust investigation is also long overdue."

FACEBOOK IGNORES HILLARY CLINTON, NANCY PELOSI AMID GROWING BACKLASH OVER DOCTORED VIDEO

The FTC previously settled an investigation into Google in 2013 with a reprimand, but the Sundar Pichai-led firm has been fined multiple times by European regulators in recent years for anticompetitive practices. According to ad research firm eMarketer, Google is expected to capture 37 percent of the $129 billion spent on online ads in the U.S. in 2019, compared to 22 percent for Facebook and 10 percent for Amazon.

"After four decades of weak antitrust enforcement and judicial hostility to antitrust cases, it is vital for Congress to step in to determine whether existing laws are adequate to tackle abusive conduct platform gatekeepers or if we need new legislation," said Antitrust Subcommittee Chairman David Cicilline, D-RI, in a statement.

Still, not everyone agrees that Silicon Valley's biggest tech companies should be broken up.

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“The Justice Department’s investigation of Google will come to the same conclusion as the FTC’s did in 2013 -- that there is no antitrust case,” said Carl Szabo, VP of NetChoice, an e-commerce trade association, in a statement to Fox News. "It’s illogical that the DOJ is investigating competitors in the same market for monopoly behavior. Amazon, Apple, and Google all compete with each other in a vibrant and competitive marketplace."

Google, Facebook and Amazon did not comment on the record for this story. Fox News also reached out to Apple.

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https://www.foxnews.com/tech/google-facebook-amazon-apple-bipartisan-onslaught

2019-06-04 16:57:53Z
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