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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Dear reader,
It is growing increasingly difficult to keep on top of the lawsuits that regulators and lawmakers are filing against Big Tech companies. More than 40 states are suing Meta, for example, claiming that social media harms young people’s mental health. The US Federal Trade Commission has sued Amazon, alleging that it engages in “exclusionary conduct”. This week, Google lost an antitrust case against Epic Games that focused on the 30 per cent fees it charges in its app Play Store. It could upset a lucrative business and fire up further legal action.
A San Francisco jury took just a few hours to decide that Google had been engaging in anti-competitive conduct. Now we wait to see what the judge decides should happen.
Is this the tech sector’s comeuppance? The natural conclusion of the tech-lash that has been building since the last US election? Partially, yes. But nothing will change for Google’s business immediately. It will appeal against the decision. Apple recently won a similar case. That could help Google. Note that Alphabet shares barely budged on the Epic decision.
Markets seem more interested in the possible upside of artificial intelligence than changes to app store fees. That could change if tech companies lose future cases, of course. If you want to keep score of the tech vs regulator battles, the Milken Institute has compiled a useful tracker.
Music man
Conglomerate discounts are difficult to defend. This week, French billionaire Vincent Bolloré gave up trying. News that he is considering splitting apart Vivendi prompted a 10 per cent jump in the share price.
Record label Universal Music has already been spun off. A break-up could mean market independence for broadcaster Canal+ and advertising agency Havas. Lex thinks the valuation bump for investors could start at 5 per cent.
Mates’ rates
The US, UK and Europe all opted to hold interest rates this week. Global central banks are declaring victory over inflation. The US says the pace of inflation has peaked. Europe trimmed its inflation forecast. Companies with high dividend payouts are about to get much more attractive. Lex recommends taking a look at telecoms.
One puzzle: if a soft-landing economic scenario is expected then why have valuations for European banks not improved? This suggests some stress in the system. It is possible that the European Central Bank may opt for additional balance sheet tightening. In the US, too, stability may have returned to regional banks but their reliance on brokered deposits is a continued source of anxiety.
Travel (carbon) light
Allow Lex to prick your conscience as you make your plans for the holidays. Those slipping into the comfort of a first-class seat should be aware that the extra space they take up expands their carbon footprint by a magnitude of five times compared with those squashed in economy.
Carbon emissions are likely to hit a new record this year. For all the additional focus on green alternatives, demand for oil extraction rights is still causing upset. See Venezuela’s interest in the Essequibo region of Guyana.
BP slowed its ambitious transition to renewable energy earlier this year as energy prices soared. Chief executive Bernard Looney declared in September that there would be no further scaling back. Shortly afterwards, he resigned after failing to disclose past relationships with colleagues. He will forgo up to £32.4mn of his pay packet. Lex says “up to” is key. The total forfeited is unlikely to be that high.
Measuring the pollution of projects might be simpler if there was a global pricing system for carbon. Right now, prices vary widely around the world. Coherence will focus minds on finding alternatives. In aviation, engine makers and aircraft carriers cannot agree on the best way to address emissions. Rolls-Royce has put electric and hydrogen plans to one side in favour of sustainable aviation fuel — using fat and oil. This comes with the considerable benefit of compatibility with current engines.
The problem is that SAF is twice as expensive as fossil fuels and is a long way from commercial rollout. Suggestions that it will account for a large proportion of fuel by 2030 seem wildly optimistic.
Other things I enjoyed
Tech news website The Verge has produced a package of stories describing Twitter’s terrible year under Elon Musk. I loved Sarah Jeong’s account of being cancelled. All that online fury, to basically no end.
Sam Bankman-Fried’s lawyer tells Bloomberg that the FTX founder tops the list for “worst person I’ve ever seen do a cross-examination”.
The New Yorker’s best stories of 2023 include Ted Chiang’s excellent piece on ChatGPT. Follow that up by reading his Lunch with the FT interview from this summer.
This will be the last Lex Newsletter before the new year. So on behalf of the team, I’d like to wish you a peaceful and happy festive season.
Elaine Moore
Deputy head of Lex
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