Apple and Ireland begin appealing €14.3bn tax bill

Lawyers representing Apple and the Irish Government has begun their arguments in the EU’s lower General Court in an attempt to protect the suspect corporate tax environment.

In 2016, the European Commission ordered the Irish Government to collect back-taxes off Apple to the tune of €14.3 billion, including interest. Apple does not want to pay tax. Ireland does not want to collect it. Europe wants a level playing field. The lawyers are looking forward to nuance to bolster their bank accounts.

During the opening arguments, Apple’s lawyers suggested the European Commission decision “defies reality and common sense,” according to Reuters. Both the iPhone manufacturer and the Irish Government will argue against the decision to tax environment contravenes state aid rules.

Let’s be clear. Ireland is a tax haven. It is facilitating corporate tax avoidance. It is helping corporates collect greater profits without rewarding the societies they strain. Irish Government officials should be embarrassed they are helping technology giants abuse its European partners, the very same European partners which bailed it out of financial doomsday a decade ago.

This is a selfish position, and just at the time when the country is looking to Europe to protect it as Brexit looms large on the horizon.

Some might argue the Irish Government is entitled to charge whatever tax it wants. However, a modern society works because the general public and corporations pay taxes. It pays for roads, schools, hospitals, police officers and postal workers. There are technology giants out there who are asking consumers to strain their wallets further each year and care less about their right to privacy, but they are not willing to contribute to the societies which are fuelling the monstrous profits reported every three months.

With international borders being broken down, much to the distaste of some, irregular taxation policies can be taken advantage of. This is what is happening here. It beggars belief that Ireland can argue the benefits of the single economy, and still maintain this position, weakening the position of partners, depriving them of much needed taxes.

This is not the position the European Commission has taken, but it is the one each of Ireland’s partners in Europe should. Why should Ireland be able to collect all the benefits of Apple’s assaults on the European digital economy when it is citizens of every other nation which is fuelling the iLeader’s growth?

For some, it might sound bizarre that the Irish Government doesn’t want to collect €14.3 billion off Apple, but there are two reasons for this.

Firstly, if the Irish lawyers were not to fight back against the enforced tax run, it is effectively conceded to the assertion that it is a corporate tax haven. The last thing the Irish Government wants to do is admit that it is helping the already richly rewarded residents of Silicon Valley rip-off neighbouring governments further with creative tax strategies.

Secondly, Ireland needs to ensure it is viewed as a friendly corporate-tax environment moving forward if it is to continue to attract corporations to its borders. Ireland doesn’t necessarily have the best talent, it doesn’t have the largest economy and it doesn’t have a local supply chain for manufacturing. It needs a plug to interest the likes of Apple, Facebook, IBM, Intel, Twitter, Pinterest, PayPal and Amazon to house their European HQ in the country.

The value of the technology industry to both the Irish Government and society should not be undervalued. The Irish economy entered severe recession in 2008, and then an economic depression in 2009. The country was in tatters, though it was saved by the technology industry.

Over the last decade, technology giants thrived in the tax haven, creating new jobs directly and indirectly, and continues to be one of the biggest drivers today. Silicon Docks is as important to Dublin as Silicon Valley is to California.

That said, the European Commission does not agree this dynamic should be allowed to continue.

Should the Irish Government continue this favourable tax regime for certain companies, a competitive advantage is offered. The Commission, ably led by Margrethe Vestager, has been tackling anti-competitive business practises for years. If such a monstrous company like Apple is given a competitive advantage, state aid to run riot, start-ups will always be on the back-foot. Competition will likely never emerge, and the consumer will be in a precarious position.

Over the next couple of days, lawyers representing Apple and the Irish Government will argue against the opinion of the European Commission, attempting to overturn an order to collect back-taxes and create a more reasonable tax environment. It will argue that it is perfectly reasonable for it to help Apple bleed the consumer dry and then hide profits from governments who are asking for a fair contribution back to society to pay nurses.

Ireland should be embarrassed.

AT&T sued for massaging DirecTV figures

If there is a headache in the shape of activist investor Elliott Management already, AT&T executives will be reaching for the aspirin once again as investors sue over suspect figures.

Filed in the US District Court for Southern New York, Melvin Gross is the man leading a coalition of investors to sue AT&T, suggesting the management team misled investors over the performance of its DirecTV video products. The massaged figures might be viewed as an attempt to save face (as well as jobs), though the lawsuit also suggests executives were attempting to justify the incredibly expensive acquisition of Time Warner through nefarious means.

“Moreover, several of the Executive Defendants had strong personal interests in promoting the success of DirecTV Now in order to persuade the market of the logic behind the Time Warner Acquisition,” the filing states.

“The failure of DirecTV Now, prior to the closing of the Acquisition, could have jeopardized the transaction, a result that would have been disastrous for the Defendants.”

Through a combination of fake email addresses and additional charges for customers without consent, practises which were allegedly encouraged by managers, AT&T is effectively accused of fraud. Investors are also suggesting the executive team presented misleading numbers down the omission of promotional numbers. 500,000 net adds disappeared once a three month for $10 deal disappeared, though this risk was apparently not appropriately communicated.

By hyping the performance of DirecTV Now, investors might be encouraged to double-down on momentum in the content unit, funding another monstrous acquisition. However, as the lawsuit states, investors might not be buoyed to spend $108.7 billion (including debt) should the 2014, $67.1 billion DirecTV purchase be viewed as a failure.

This is somewhat of a conspiracy theory, though the DirecTV Now numbers were not anywhere near as attractive during the financial earnings call once AT&T was committed to the Time Warner transaction. As you can see from the table below, the timing is a bit suspicious:

Period Net adds (loss in brackets)
Q2 2019 (168,000)
Q1 2019 (83,000)
Q4 2018 (267,000)
Q3 2018 49,000
Q2 2018 342,000
Q1 2018 312,000
Q4 2017 368,000
Q3 2017 296,000

The Time Warner acquisition was first announced in October 2016 and closed in June 2018. In the financial earnings call following the closure of the transaction (Q3 2018), the DirecTV gains started to crumble away.

With the aggressive expansion and success the AT&T executive team was suggesting up-to Q2 2018, investors will of course have been enthusiastic about adding to the momentum. On the other side, you can see why some are reasonably irked by the reality of the situation. It does appear the fact many of these gains were either irresponsibly attributed or unlikely to be anything more than short-term gain.

Although DirecTV is the focal point of the lawsuit, the Time Warner acquisition is the central cog which the saga flows around.

The content strategy from AT&T is relatively simple. The DirecTV acquisition offered a mobile-friendly content delivery model, and the Time Warner purchase offered a horde of content allowing the telco to compound gains. Both, theoretically, work independently, but the combination is more attractive if you have a bank account big enough to fund the expansion.

However, as the lawsuit suggests, investors might be a bit sheepish in giving the greenlight to a $108 billion acquisition if the ROI from the $67 billion purchase are not living up to the original promise. The AT&T theory and business model is theoretically sound, though if the lawsuit is successful, heads may roll due to the route the management team took to get to the finish line.

The content bet from AT&T is already looking suspect, and this lawsuit will not help the situation.

Alongside this filing, the management team is also under attack from Elliott Management, the vulture fund which specialises in restructuring businesses, promoting a shift towards a utilitised business model and realising short/mid-term gains through increased dividends and share price increases.

The activist investor has taken a $3.2 billion stake in AT&T and has recently sent a letter to shareholders attacking the AT&T strategy and competency of the management team. The content business has come under-fire, with Elliott Management pushing for divestments and a more stringent focus on traditional connectivity products. It’s a strategy which could force the telco down the utilitisation path, something which is unlikely to benefit the business in the long-term.

The emergence of this lawsuit certainly aids the Elliott Management case, however we think the timing is more coincidental. Some might suggest the vulture fund is behind the lawsuit, but we think it is more a case of pleasant timing.

For the AT&T management team, this is a potential disaster. Not only do these executives have an aggressive activist investor calling for their heads, they have now been named in the lawsuit, with the complainants suggesting they encouraged under-handed tactics to directly mislead the market. This is turning into a very uncomfortable month for the AT&T management team.

Huawei hits back, claiming US is threatening its employees

Perhaps this is the first hint of a new media strategy from the under-fire vendor as Huawei suggests the US Government is encouraging threats and menace to turns its employees against it.

Although this is only a single act, it is a very different approach to how Huawei has been managing the drama through the last 12 months. This is maybe the position it has been forced into by White House aggression; it might have to start fighting fire with fire.

In a statement, Huawei has suggested the US Government has been “instructing law enforcement to threaten, menace, coerce, entice, and incite both current and former Huawei employees to turn against the company and work for them.”

In shining a light on the bullying tactics of the US Government, perhaps the executive team is looking for sympathy from friendlier nations or for someone to step-in and suggest the actions are not proper. The US Government certainly won’t be shifted from its current course through social embarrassment but calling attention to the strategy it might sour the relationship between the US and other nations around the world.

Aside from encouraging government agencies to act through ‘unscrupulous means’, Huawei is also suggesting the US is:

  • Unlawfully searching, detaining, and even arresting Huawei employees
  • Launching cyber-attacks against the firm
  • Coercing other companies to bring unsubstantiated accusations against the company
  • Attempting entrapment
  • Obstructing normal business activities and technical communications through intimidation, denying visas and detaining shipment

Although it isn’t entirely clear what the desired outcome of this statement actually is, it is a new approach. To date, Huawei has sat back and absorbed the abuse. Its messages have focused on proving its own innocence, as opposed to tackling its opponent. Perhaps this is about to change.

With this statement, Huawei is calling attention to the less attractive traits of the US. It might consider itself as the front-line of defence, the world police in some people’s eyes, however it can also be viewed as a bully. Not only would many deem this inappropriate, if some of the claims above prove to be true, the White House might well be acting illegally.

President Trump’s administration certainly does things differently from those who have previously inhabited the White House, though the jury is still out on what this actually means. Some like the fact Trump is shaking up politics, some suggest he is an embarrassment to a privileged position of responsibility, a shambolic disaster who stumbles from one inappropriate statement to the next calamitous action.

It does seem there is an element of the ‘straw which broke the camel’s back’ here.

This chapter of the on-going saga is focused on a patent dispute with Rui Pedro Oliveira which has now being going on for two years. Circling around the development of a camera design included in Huawei smartphones, the Department of Justice has launched an investigation as a result. Huawei believes Oliveira is taking advantage of the geopolitical climate and the US Government is jumping on another opportunity to swing the stick at the firm.

Perhaps this will be the beginning of a new media strategy, drawing the attention to the US’ ugly traits. This Presidential administration has certainly taken a more combative, bullying approach to international relations, though we suspect it will not be too bothered by the Huawei statements. That said, other governments might take notice and start getting irked by the continued campaign of hate and ‘unpresidential’ actions.

Oregon joins the anti-merger brigade to dampen T-Mobile/Sprint party

Oregon Attorney General Ellen Rosenblum has is the latest recruit for the coalition of lawyers aiming to block the merger between T-Mobile US and Sprint.

Almost immediately after FCC Chairman Ajit Pai offered his blessing for the union, Rosenblum hit back with the announcement. T-Mobile US and Sprint might be collecting the approvals from government agencies, but unless they can figure out how to appease the Attorney Generals, another headache looms large on the horizon.

“It’s important that Oregon join other states in opposing the Sprint-T-Mobile merger,” said Rosenblum. “If left unchallenged, the current plan will result in reduced access to affordable wireless service in Oregon — and higher prices. Neither is acceptable.

“Oregon’s addition to our lawsuit keeps our momentum going and ensures that there isn’t a single region of this country that doesn’t oppose this anticompetitive megamerger,” said New York Attorney General Letitia James. “We welcome Attorney General Rosenblum to our 16-member coalition that now includes states representing almost half of the U.S. population. We remain committed to blocking the merger of T-Mobile and Sprint because it would be bad for consumers, bad for workers, and bad for innovation.”

James is of course the ring-leader when it comes to this legal saga, though we suspect in crafting the position of consumer champion, the Attorney General of New York has higher political ambitions. Irrelevant to the end-game, James has proven to be very effective in collecting support for this lawsuit.

Rosenblum will now become the 16th member of an increasingly dangerous opponent for T-Mobile US and Sprint. One lawyer as an opponent is a daunting prospect, but 16 Attorney Generals and 16 antitrust department working against the progress of the merger is the stuff corporate nightmares are made of.

The full list of States now opposing the merger include: New York, California, Texas, Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, Oregon, Virginia, Wisconsin, and the District of Columbia.

Having been filed with the District Court for New York on June 11, we suspect this might be somewhat of a prolonged battle. First, judges in New York will have to decide on the appropriateness of the merger, though you can almost guarantee whatever outcome will be appealed by the losing party. We suspect this is a see-sawing legal conflict which will carry on for months.

T-Mobile US and Sprint are nearing the finish line, but it is still well out of reach for the moment.

Facebook faces yet another monstrous privacy headache in Illinois

Just as the Cambridge Analytica scandal re-emerged to heighten Facebook frustrations, the social media giant is contemplating a class-action lawsuit regarding facial-recognition.

It has been a tough couple of weeks for Facebook. With the ink still wet on a $5 billion FTC fine, the UK Government questioning discrepancies in evidence presented to Parliamentary Committees and a Netflix documentary reopening the wounds of the Cambridge Analytica scandal, the last thing needed was another headache. This is exactly what has been handed across to Mountain View from Illinois.

In a 3-0 ruling, the Court of Appeals for the Ninth District has ruled against Facebook, allowing for a class-action lawsuit following the implementation of facial-recognition technologies without consultation or the creation of public policy.

“Plaintiffs’ complaint alleges that Facebook subjected them to facial-recognition technology without complying with an Illinois statute intended to safeguard their privacy,” the court opinion states.

“Because a violation of the Illinois statute injures an individual’s concrete right to privacy, we reject Facebook’s claim that the plaintiffs have failed to allege a concrete injury-in-fact for purposes of Article III standing. Additionally, we conclude that the district court did not abuse its discretion in certifying the class.”

After introducing facial recognition technologies to the platform to offer tag suggestions on uploaded photos and video content in 2010, Facebook was the subject to a lawsuit under the Illinois Biometric Information Privacy Act. This law compels companies to create public policy before implementing facial-recognition technologies and analysing biometric data, a means to protect the privacy rights of consumers.

Facebook appealed against the lawsuit, suggesting the plaintiffs had not demonstrated material damage, therefore the lower courts in California were exceeding granted responsibilities. However, the appeals court has dismissed this opinion. The lawsuit will proceed as planned.

The law in question was enacted in 2008, with the intention of protecting consumer privacy. As biometric data can be seen as unique as a social security number, legislators feared the risk of identity theft, as well as the numerous unknowns as to how this technology could be implemented in the future. This was a protectionary piece of legislation and does look years ahead of its time when you consider the inability of legislators to create relevant rules today.

As part of this legislation, private companies are compelled to establish a “retention

schedule and guidelines for permanently destroying biometric identifiers and biometric information”. The statute also forces companies to obtain permission before applying biometric technologies used to identify individuals or analyse and retain data.

Facebook is not arguing it was compliant with the requirements but suggested as there have been no material damages to individuals or their right to privacy, the lawsuit should have been dismissed by the lower courts in California. The senior judges clearly disagree.

But what could this lawsuit actually mean?

Firstly, you have the reputational damage. Facebook’s credibility is dented at best and shattered at worst, depending on who you talk to of course. The emergence of the Netflix documentary ‘The Great Hack’, detailing the Cambridge Analytica scandal, is dragging the brand through the mud once again, while questions are also being asked whether the management team directly misread the UK Government.

Secondly, you have to look at the financial impact. Facebook is a profit-machine, but few will be happy with another fine. It was only three weeks ago the FTC issued a $5 billion fine for various privacy inadequacies over the last decade, while this is a lawsuit which could become very expensive, very quickly.

Not only will Facebook have to hire another battalion of lawyers to combat the threat posed by the likes of the American Civil Liberties Union, the Electronic Frontier Foundation, the Center for Democracy &Technology and the Illinois PIRG Education Fund, the pay-out could be significant.

Depending on the severity of the violation, users could be entitled to a single sum between $1000-$5000. Should Facebook lose this legal foray, the financial damage could be in the 100s of millions or even billions.

From a reputational and financial perspective, this lawsuit could be very damaging to Facebook.

Age-discrimination lawsuit rumbles on as IBM accused of ‘trendy’ objectives

In an on-going age-discrimination lawsuit, a former Big Blue executive has suggested the firm fired old-timers in pursuit of a ‘trendy’ and ‘cool’ image, so it could compete with the likes of Google and Amazon.

This saga has been quietly building in the background for quite some time. The first complaints were presented to the courts in 2018 by Shannon Liss-Riordan, with the ex-IBM employees suggesting they were culled for no reason aside from the fact they were too old. This is of course a big no-no.

The latest revelation from the courts is from Alan Wild, the former-VP for Human Resources, Employee Relations and Engagement. According to Bloomberg, Wild is suggesting Big Blue has fired between 50,000 and 100,000 employees over the last five years in the pursuit of creating an image which will attract the younger generations.

This is where IBM has suffered over the last couple of years. It might have been one of the most successful technology companies of the 20th century, but it certainly doesn’t maintain this perception in the 21st. When graduates leave MIT or Stanford, first port-of-call is likely to be firms like Google, Facebook, Tesla, Twitter, Amazon, or a host of other forward-looking technology giants who have dominated headlines.

Big Blue might be on the rise currently, but this was only after 23 consecutive quarters of year-on-year revenue decline. This company went through a very painful process of realigning attention from the unpopular, unprofitable and declining legacy operations, through to its future-proof ‘Strategic Imperatives’ unit.

In Wild’s evidence presented to the courts, which are currently sealed documents, IBM began to correct its ‘seniority mix’ in 2014, firing older employees and hiring millennials. Perhaps part of this was to ensure its employees were suitably tooled to tackle the new challenges presented by the digital economy, but if you believe Wild’s alleged comments, the purpose was to have a compounding effect on attracting more fresh graduates into the midst.

According to an extensive investigation launched by Pro Publica last March, IBM had culled 20,000 US employees aged at least 40. This number represents 60% of the total number of total cuts across the period. Although the claims are unconfirmed to date, IBM allegedly told some staff their skills were no-longer needed, before hiring them back as contractors for less cash, and encouraging the older employees to apply for new roles internally, while secretly telling hiring managers not to hire them.

These are very serios accusations from both Pro Publica and Wild, though there are plenty of other testimonies which back up the claims.

In January, Catherine Rodgers presented her own evidence to a court in New York. Rodgers was previously a VP in the Global Engagement Office, while also serving as the most senior executive in Nevada. Rodgers was dismissed from IBM, after almost 30 years of service, in 2017 aged 62.

In Rodgers affidavit, she claimed she raised concerns to Steve Welsh, IBMs GM of Global Technology Services, that the firm was ‘engaging in systematic age discrimination by utilizing several methods to eliminate thousands of its employees’. As part of her role, Rodgers had access to lists of individuals who were being cut as part of ‘Resource Action’ initiatives in her business group, noting that all were over the age of 50 while the younger employees were not impacted whatsoever.

Having spoken to managers in other groups, many of whom had workforces made up of employees from younger generations, the layoffs were not as serious. Considering Rodgers’ division was exceeding targets and running under budget, the request from more senior executives caught her by surprise.

“IBM’s upper management encouraged us to inform the employees who were being laid off that they should use IBM’s internal hiring platform to apply for other jobs within the company, but at the same time, IBM implemented barriers to those employees actually being hired for openings,” Rodgers said in her affidavit.

“For example, if a manager wanted to hire someone who had been laid off, there was a multi-layer approval process. (This multi-layer approval process would not apply if a manager wanted to hire someone who had applied from outside IBM.) Even as Vice President, I could not make such a hire without approval by the Global Resource Board and IBM’s upper management.”

IBM has consistently denied reports it targeted older employees for lay-offs, pointing towards the number of people it hires each year. This statement does not prove innocence by any stretch of the imagination, it simply confirms the firm has been hiring new employees to replace the culled ones. In fairness to IBM, it is not proven the firm has targeted older employees and embarked on a campaign of age-discrimination.

What is worth noting is that the number of IBM employees globally has been decreasing steadily over the last few years. Statista estimates IBM had 350,600 employees at the end of 2018, down from 366,600 in 2017, 380,300 in 2016 and 377,700 in 2015. In 2012, IBM employed 434,250 people across the world. These numbers do not prove or disprove the allegations but are good to bear in mind.

IBM has managed a significant turnaround over the last few years. From irrelevance to a cloud business which is almost dining at the top table. It is threatening to compete with the likes of Amazon, Microsoft, Google and Alibaba, though it still has a lot of work to do. That said, it is in a much more comfortable position than previous years. The question is whether it has managed the process legitimately.

Four more States stand in the way of Sprint/T-Mobile merger

With each week that passes, it seems to be getting more and more difficult for Sprint and T-Mobile US. Now, four State Attorney Generals have attempted to block the move.

Officially, the 180-day stop-clock which the FCC gives itself to approve any industry transactions has hit 202, and that doesn’t include the ‘pause’ it gave itself. And while the FCC might be taking things at a leisurely pace, it seems the Attorney General Offices around the US are building up a head-of-steam.

Two weeks ago, New York Attorney General Letitia James launched her campaign against the merger, questioning the logic and evidence used to promote the promises of increased competition, a faster 5G rollout or cheaper tariffs across the country. And she seems to have stuck a chord with counterparts in numerous other states.

Initially, James had the support of nine states, but with Hawaii, Massachusetts, Minnesota, and Nevada adding themselves to the suit, the total number of states as plaintiffs is now fourteen.

“The merger of T-Mobile and Sprint would stifle competition, cut jobs, and harm vulnerable consumers from across the country, so unity among the states will be key in defending our citizens against this power-hungry corporate union,” James said.

“We welcome the support from these four additional states, which should serve as a reminder that, all throughout the nation, we have much to lose if we do not take action to protect our people from this megamerger.”

And while this might look bad enough for Sprint and T-Mobile executives, it could get a lot worse. Over the last couple of weeks, letters have been submitted from an additional six Attorney Generals, telling the FCC investigations have begun to check the legality of the merger. Those states yet to declare are Pennsylvania (letter submitted June 5), Arizona (June 5), Delaware (June 18), Nebraska (June 18), Indiana (June 20) and Texas (June 21).

What is worth noting is that there does seem to be somewhat of a political split in in terms of objections here. All of the 14 Attorney Generals who have joined the suit so far are sitting in the Democrat camp. Of the six who are currently conducting investigations, two more are Democrat (Delaware and Pennsylvania) while four sit in the opposing Republican party (Texas, Indiana, Nebraska and Arizona).

Massachusetts Attorney General Maura Healey is objecting on the grounds of reduced competition, Minnesota AG Keith Ellison is attempting to protect jobs and lower prices, Hawaii’s AG Clare Connors didn’t say anything, and Nevada AG Aaron Ford simply said nothing of genuine value.

The most common theme with these objections seems to be focused on the idea of competition. Although T-Mobile and Sprint argue there is a need for more competition in the market, the AGs don’t seem to think so, or at least this isn’t the way to go about it. T-Mobile CEO John Legere might condemn the ‘duopoly’ which has formed at the head of the telco rankings, however the numbers do not lie.

Coverage is increasing, ARPU is coming down and the US should have all four of the major MNOs in the 5G world before the vast majority of other nations around the world. Things could be better in this market of course, but the trends seem to be heading in the right direction. This is a point which has been raised by the AGs; if it isn’t broken, don’t try and fix it.

Unfortunately for Sprint and T-Mobile, the argument of decreasing the number of telcos to increase competition flies in the face of logic, especially when you are removing the two cheapest options from the market. Of course, telecommunications is a capital-intensive segment to operate in, scale is very important, as is access to more valuable spectrum. But, the general consensus in the telco world is more providers is a better approach not less.

There will of course be incredibly loud voices on both sides of the argument, but logic lies with the AGs here. This is not to say the FCC will agree, but overarching trends argue against the need for Sprint and T-Mobile to merge.

New York rages against T-Mobile/Sprint merger

Things are already looking dicey for the proposed merger between T-Mobile US and Sprint, and then New York’s Attorney General wades into the saga with scathing opinions.

“This is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent,” said Attorney General Letitia James.

Support for the merger is pretty rare nowadays, though James and California Attorney General Xavier Becerra have filed a multi-State lawsuit to add more fuel to the flames. In total, ten States have been included in the lawsuit, compounding the headaches induced by an already prolonged approval process.

The omens are not looking particularly positive for T-Mobile US and Sprint.

“When it comes to corporate power, bigger isn’t always better,” said James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country.

“That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

T-Mobile US and Sprint are promising a cheaper and faster service, as well as a challenge to the dominance of AT&T and Verizon, but this isn’t enough to convince the legal heavyweights. It’s the same argument which is evident throughout the world of mergers and acquisitions; four to three does not encourage optimism.

Perhaps the most damning argument against the merger is market trends over the last decade. According to the US Labor Department, the average cost of mobile service has fallen by roughly 28% over the last decade, while mobile data consumption has grown rapidly. T-Mobile US and Sprint might argue a merger is better in the long-run for competition, but there is an old saying; if it isn’t broken, don’t fix it.

With four telcos competing for valuable post-paid subscriptions, the consumer does appear to be winning. Tariffs are expensive in the US, though they are becoming cheaper. Another interesting aspect to the lawsuit points to some skulduggery from the duo.

The Attorneys General’s investigation into the merger found that many of the claimed benefits were unverifiable and could only be delivered years into the future, if ever. Specifically, the AG’s are referring to the lightening speeds promised and the ease at which the duo believes a 5G network can be rolled out nationwide. This isn’t necessarily stating it is not possible, just that the claim is not supported by evidence.

For a decision which is likely going to be based on evidence provided, this is a very simple, but powerful argument for blocking the merger.

Supreme Court opens the legal floodgates on Apple

Apple is potentially on the verge of facing a tidal wave of lawsuits as the Supreme Court agrees the iLeader is allowed to be challenged on a potential abuse of power in the app economy.

The pivotal case the Supreme Court has been ruling on is Apple vs. Pepper. Robert Pepper and other plaintiffs, various iPhone owners, filed an antitrust lawsuit against Apple claiming the firm monopolised the app market through the App Store, with developer licence fees and the 30% commission ultimately driving the price up for consumers.

One the other side of the argument, Apple suggested iPhone owners were actually customers of the developers, while the developers were customers of Apple. This nuanced argument leans on legal precedent set in doctrine known as Illinois Brick where ‘indirect purchasers’ of a product don’t have the power to file antitrust cases. In distancing itself from the end-user in the app economy, Apple was hoping to protect itself.

In the first instance, the district court ruled in favour of Apple, dismissing the case, while the Ninth Circuit Court reversed the decision, ruling that consumers are purchasing from Apple not the developers. The fight was then escalated up to the Supreme Court, with the highest legal battleground in the US ruling 5-4 in favour of the iPhone owners.

What is worth noting is this is not a ruling which states Apple’s App Store is a monopoly, but a decision which allows users to file antitrust lawsuits against the iLeader. It’s a step towards another legal headache but is by no means a sign of guilt.

For Apple, this will come as an unwanted distraction as it attempts to scale it software and services business, in which the App Store is a key cog. The last few years have seen the Apple team attempt to create a more balanced business, with less of a reliance on the staggering hardware segment and reaping the rewards of the blossoming software world.

This decision from the Supreme Court might not assign guilt to Apple, but it certainly creates a monumental migraine. Such is the lawsuit culture in the US it won’t be long before miffed customers just on the bandwagon in pursuit of compensation.

Facebook faces hyper-targeted advertising lawsuit

The US Department of Housing and Urban Development (HUD) has lodged a lawsuit against Facebook, challenging the hyper-targeted big data model which has made OTTs billions over the years.

Quoting the Fair Housing Act, the HUD has claimed Facebook is breaking the law by encouraging, enabling, and causing housing discrimination. The Fair Housing Act prohibits discrimination in housing and housing-related services, including online advertisements. Facebook’s advertising platform is said to discriminate individuals based on race, colour, national origin, religion, sex, disability and familial status, violating the Act.

“Even as we confront new technologies, the fair housing laws enacted over half a century ago remain clear – discrimination in housing-related advertising is against the law,” said General Counsel Paul Compton.

“Just because a process to deliver advertising is opaque and complex doesn’t mean that it’s exempts Facebook and others from our scrutiny and the law of the land. Fashioning appropriate remedies and the rules of the road for today’s technology as it impacts housing are a priority for HUD.”

Complaints were originally raised by the HUD last summer, though the two parties have been in discussions to come to some sort of settlement to avoid legal action. Reading between the lines, talks have broken down or the HUD leadership team wants to give the impression it is taking a more hardened stance against the social media segment.

Although it should come as little surprise Facebook is facing a lawsuit considering the ability for Mark Zuckerberg to stumble from one blunder to the next, this one effectively challenges the foundations of the business model. Hyper-targeted advertising is the core not only of Facebook’s business, but numerous other companies which have emerged as the dawn breaks on the blossoming data-sharing economy.

What is worth noting is this is not the first time Facebook has faced such criticisms. The American Civil Liberties Union (ACLU) has also challenged the social media giant, and earlier this month Facebook stating it was changing the way its advertising platform was set up to prevent abuses with the targeting features.

“One of our top priorities is protecting people from discrimination on Facebook,” said Facebook COO Sheryl Sandberg. “Today, we’re announcing changes in how we manage housing, employment and credit ads on our platform. These changes are the result of historic settlement agreements with leading civil rights organizations and ongoing input from civil rights experts.”

As a result of the clash with the ACLU and other parties, Facebook agreed to remove any gender, age and race-based targeting from housing and employment adverts, creating a one-stop portal instead.

According to the HUD, Facebook allows advertisers to exclude individuals from messaging based on where they live and their societal status. For example, whether someone is a parent or non-American, these categories have been deemed discriminatory. Facebook also allows advertisers to effectively zone off neighbourhoods for campaigns, which is also deemed a violation of the Act. By bringing together data from the digital platform and other insight from non-digital means, HUD is effectively challenging the legitimacy of digital and targeted advertising.

As with other similar cases, the HUD is bringing attention to the light-touch regulatory landscape for the internet economy. While traditional advertising is held accountable by strict rules, the internet operates with relative freedom. This is partly down to the age of mass market media online, it is still comparatively new, and the fact few bureaucrats understand how the data machines work.

What is worth noting is that this is an incredibly narrow focus for the HUD, though should it be successful the same concepts could be applied, and other elements of the Facebook hyper-targeted advertising model could be challenged.

Facebook might be the target here, though many companies will be watching this case with intrigue. Precedent is a powerful tool in the legal and regulatory world, and should the HUD win, the same business model which is being applied elsewhere would be compromised also.