Theresa May shows another of her card on Brexit strategy - Financial Times

Theresa May occasionally provides valuable detail about the way she is approaching her Brexit negotiation. One such moment came in the House of Commons on Monday when she was asked a question by a Labour MP on whether the UK would be leaving Europe’s customs union.

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The prime minister could have batted the issue away, as she often does, by saying she will not give a running commentary on her planned negotiation. Instead, she was more revealing.

“The important point about the customs union is that the way in which you deal with the customs union is not a binary choice,” she told Chris Leslie. “There are different aspects to the customs union, which is precisely why it is important to look at the detail and get the answer right, not simply make statements.”

The prime minister’s answer confirms the direction in which she is heading on this crucial issue. Chancellor Philip Hammond has for months warned that quitting the customs union would saddle companies with form-filling, delays and frontier checks and require a new north-south border in Ireland. Liam Fox, international trade secretary, has called for the UK to leave, arguing that this is essential if Britain is to strike trade deals with third countries. There is speculation that the clash has become so fraught that it might lead to one of them resigning.

Mrs May’s rejection of the issue as a “binary” one suggests she is seeking a compromise. As the FT has reported, an idea being mooted is that the UK would leave the customs union but allow industries with complex supply chains, such as cars and aircraft manufacturing, to be given carveouts with a special regime to guarantee cross-border trade.

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Mrs May’s pursuit of this solution may explain why Carlos Ghosn, chief executive of Nissan, recently left Downing Street in an upbeat mood, saying he was “confident” the UK would provide conditions that allowed the company to invest in Britain. After all, if the idea of special carveouts were realised, there would be no tariffs on cars traded between the EU and the UK and no customs checks on cars shipped across the channel.

However, the compromise the UK is seeking is not straightforward. Britain would need to get the EU to agree to such a settlement and there are two problems.

First, many in the EU would regard this as British cherry-picking. Cars are important, but so are chemicals, pharmaceuticals, food and drink and so forth. As John Springford of the Centre for European Reform puts it: “The EU27 will not allow the UK to pick favoured sectors to stay in: they will say it’s all or nothing.”

Second, such an agreement will fall foul of the World Trade Organisation’s most-favoured nation rules. Mr Springford says: “If the EU and the UK make trade in cars tariff-free with each other, they must eliminate tariffs on cars for all countries. The only way around this is to sign a trade agreement that covers the majority of goods sectors.”

Some analysts argue that it makes little sense for the UK government to choose which industries face customs costs with its largest trade partner. Instead, it would be far more sensible if the UK just stayed in the customs union. But this is impossible for Mrs May because the UK would not be able to sign free-trade agreements with countries outside the EU — and Mr Fox would be out of a job. 

Background reading

The FT publishes the latest instalment in its Future of Britain Project, inviting readers to brainstorm ideas for the UK after Brexit. Here, Ryan Bourne of the Institute of Economic Affairs, says the UK must pursue a “hard Brexit” to create a more open economy.

Iain Martin argues that if the City of London is to thrive after Britain leaves the EU, it needs to rediscover the buccaneering spirit of the eighties (The Times). 

William Hague says that the government must go beyond Heathrow and launch a new infrastructure plan in order to calm Brexit jitters (Telegraph).

Donald Trump and Hillary Clinton Skeptical Of AT&T, Time Warner Merger - TIME Business

Donald Trump and Hillary Clinton Skeptical Of AT&T, Time Warner Merger Posted: 23 Oct 2016 06:19 PM PDT Both major party presidential campaigns expressed concerns just hours after the telecom giant AT&T announced Saturday night that it intends to buy the cable behemoth Time Warner for $85.4 billion in a deal that could result in one of the biggest media companies in the U.S. Republican presidential nominee Donald Trump decried the merger before it was even official, announcing at a campaign rally in Gettysburg, Pennsylvania Saturday afternoon that it would “destroy democracy.” His campaign later issued a statement, steeped in early Twentieth century populist rhetoric, promising that a Trump administration would “break up” and “prevent” such economic consolidation in the future. Democratic presidential nominee Hillary Clinton’s running mate, Tim Kaine, echoed the sentiment on Sunday, saying on NBC News’ Meet the Press that he was “pro-competition” and that “less concentration… is generally helpful, especially in the media.” Clinton campaign spokesman Brian Fallon also evinced skepticism about the deal, telling reporters that “marketplace competition is a good and healthy thing for consumers.” “There are a number of questions and concerns that rise in that vein about this announced deal but there is still a lot of information that needs to come out before any conclusion should be reached,” he told reporters on Sunday. “Certainly she thinks that regulators should scrutinize it closely.” Clinton herself has not yet weighed in on the merger. In an October 2015 op-ed, she promised to “beef up the antitrust enforcement arms of the Department of Justice and the Federal Trade Commission,” and in June, the Center for American Progress, a liberal think tank influential with presumptive Democratic Hillary Clinton, released a report warning of the dangers of corporate consolidation in any industry. The Trump campaign’s official response to the proposed AT&T-Time Warner merger cited President Teddy Roosevelt’s famous trust-busting efforts in the early 1900s and hit broadly populist notes. But the message was also purely Trumpian: The billionaire businessman’s reason for opposing the merger appeared to be, at least in part, related to his distrust of mainstream media, which he has blamed in recent months for “rigging” the election in his opponent’s favor. CNN, one of this longtime punching bags on the stump, is owned by Time Warner. (TIME was owned by Time Warner until 2014, when Time Inc. became an independent company.) “Donald Trump will break up the new media conglomerate oligopolies that have gained enormous control over our information, intrude into our personal lives, and in this election, are attempting to unduly influence America’s political process,” the campaign’s statement read. Both major parties’ campaigns’ decision to distance themselves from the deal is an indication of a rising and powerful populist sentiment among voters on both sides of the ideological aisle this election season. Since late 1970s, the two federal agencies primarily tasked with preventing monopoly control, the Department of Justice and the Federal Trade Commission, have systematically scaled back their anti-trust enforcement actions on the grounds that the bigger the company, the more efficient it is. Large corporations, like Walmart, for example, are able to keep consumer prices low by negotiating lower prices with suppliers. But in recent months, as economic populism has swept the American electorate on both the right and the left, Republican and Democratic lawmakers have renewed attention to the problem of monopoly. Last year was the biggest year for corporate consolidation in U.S. history, with $3.8 trillion dollars worth of mergers and acquisitions. In March, a handful of Republican lawmakers, including Tea Party hero Utah Sen. Mike Lee, argued at a Senate Judiciary subcommittee hearing on antitrust oversight, the first meeting of that committee in three years, that the FTC and Justice Department were not doing enough to even the economic playing field. In April, the White House issued an executive order reminding federal agencies to take actions that would promote competition. “Certain business practices such as unlawful collusion, illegal bid rigging, price fixing, and wage setting, as well as anticompetitive exclusionary conduct and mergers stifle competition and erode the foundation of America’s economic vitality,” the report read. The Obama administration has also scuttled proposed mergers between AT&T and T-Mobile, Sprint and T-Mobile, and Pfizer and Allergan. Federal regulators will have to approve the merger of AT&T and Time Warner before it is allowed to proceed. In a statement late Saturday night, AT&T and Time Warner announced that their union was a “perfect match” and would “bring a fresh approach to how the media and communications industry works.”

How the AT&T-Time Warner Merger Could Hurt Consumers - Fortune

How the AT&T-Time Warner Merger Could Hurt Consumers

Posted: 24 Oct 2016 04:12 AM PDT

With the AT&T-Time Warner merger officially approved by the companies, regulatory review—including confirmed Senate hearings (paywall)—will begin soon, and is expected to stretch on for much of next year. Officials and lawmakers will be looking at many ways the deal could affect customers, but a huge portion of their attention is likely to be on how it could skew or limit access to content over AT&T-owned networks.
The deal’s risk to consumers is clear. Following its acquisition of DirecTV, AT&T is the largest pay-TV operator in the US. It is also the second-largest wireless data provider and the third-largest broadband provider. That means AT&T controls a huge proportion of the bandwidth consumers use across multiple platforms. Buying a content producer like Time Warner would give it a big motive to make its own content faster or more accessible than competitors’.

Both longstanding common carrier laws and more recent net neutrality rules restrict that kind of self-dealing by network owners. But some recent market innovations have pushed against those limits, potentially making the deal look more problematic.
The prime example here is the advent of what are known as ‘zero-rating’ programs, in which mobile networks treat some data differently than others. Plans like T-Mobile’s Binge On and AT&T’s Sponsored Data allow customers to access video, music, or other content without it counting against their mobile data caps.
Critics have said the plans threaten innovation and freedom of information by making consumers more likely to access content from established, larger players. Providers have tied themselves in knots explaining why these programs don’t violate the spirit of net neutrality, but what really matters is that they’re within the letter of the law.
Though T-Mobile caught the brunt of such criticism (along with general consumer enthusiasm for the plan), it arguably applies even more to AT&T’s program. That’s because while Binge On doesn’t charge companiers like Netflix to participate, AT&T’s Sponsored Data program does. Participating content providers have included Beats Music, Netflix, and Amazon Prime Video.
Those last two compete directly with Time Warner properties like HBO, raising big questions about how the program would work in a combined AT&T-Time Warner. Would the new company zero-rate its own content by default? Or perhaps end the program, and make all non-Time Warner content more expensive for AT&T mobile customers to access? Those scenarios could ring major regulatory alarm bells.
There is no direct equivalent to zero-rating in cable television, but the complex and evolving market relationships between paid cable, online streaming, and content producers present other potential risks to consumers. Probably the closest recent parallel to the AT&T-Time Warner deal was the acquisition of NBC Universal by Comcast, completed in 2011. At the time, regulators were vocal in their concerns that such a large combined telecom and content company could stifle competition, including from then-new online streaming companies like Hulu.
Conditions imposed by the FCC included that Comcast license content to competitors, step back from a stake in Hulu, establish a low-cost broadband service, and air more local and Spanish-language programming. Comcast’s apparent failure to fully comply with many of those requirements may have contributed to the regulatory rejection of its subsequent bid to take over Time Warner Cable (a separate entity from Time Warner). FCC chairman Tom Wheeler concluded that that deal “would have posed an unacceptable risk to competition and innovation, including the ability of online video providers to reach and serve consumers.”
AT&T-Time Warner will raise similar concerns. AT&T might be tempted to give its broadband customers lower-quality streams of, say, television programs owned by Time Warner competitors. That would be illegal, but it can and has been done clandestinely. For instance, Comcast was found by the FCC in 2007 to have improperly restricted the bandwidth of users on peer-to-peer networks, which could have been considered competitive with its cable packages.
But AT&T isn’t Comcast, and their generally cleaner record with consumers should help them with regulators. They succeeded in their last go-round, winning approval last year of the acquisition of DirectTV, whose NFL Sunday Ticket programming was a major draw in the deal. But in their approval, regulators still warned the combined company not to impose “discriminatory usage-based allowances” on certain content or data.
In the coming months, AT&T will have to prove they’ve kept that promise, and can keep on keeping it, even with much more of their own content in play.
This article originally appeared on Fortune.com

Brexit creates huge demand for legal advice services - Bloomberg

In the four months since Britain voted to leave the European Union, the pound has plummeted, home prices are down, and banks have threatened to move jobs from the U.K. One business, though, is thriving and poised for a very profitable 2017: peddling advice. Extricating the U.K. from 40 years of European integration will be one of the most complex legal and regulatory exercises ever, which is why demand for legal and consulting services is surging. “The panic is starting to set in,” says Miriam Gonzalez, co-chair of the international trade and government regulation practice at law firm Dechert. “Those who have a lot of interests at stake need to do work now.”

Rules made in Brussels govern everything from the temperature for transporting livestock to international mobile roaming fees. Machinery, pharmaceuticals, steaks, and even toys are all subject to common standards. Whether the U.K. will continue to be bound by these rules is uncertain and will remain so until a final agreement is reached on the U.K.-EU relationship. That will happen in two years, or perhaps even longer, after Britain triggers Article 50, the EU’s exit clause, which Prime Minister Theresa May says she’ll do by the end of March.

Happily for lawyers, the sector with the biggest challenges also has the deepest pockets: finance. Today, banks in the U.K. can sell their products and services anywhere in the EU, thanks to the bloc’s “passport” for financial services. JPMorgan Chase, Goldman Sachs, and Citigroup have all warned they may need to move operations elsewhere if those privileges are taken away. The costs of a shift to the continent shouldn’t be underestimated, says Simon Gleeson, a partner at Clifford Chance in London. “If a regulator sees a bank wanting to move into its jurisdiction, it will say, ‘I want the management, the capital, and the systems for that business where I can see them,’ ” he says.

As the advice industry gears up to win contracts, salaries are rising. Consulting vacancies climbed 10 percent in August from a year earlier, and pay has jumped 9 percent, according to Adzuna, a jobs search engine. Consultants help “demystify the business consequences of the vote,” says Adzuna co-founder Doug Monro. KPMG in July appointed its first “head of Brexit,” to lead a team of tax, immigration, finance, and economics experts. Deloitte set up a dedicated “Brexit center” the day after the vote. And London-based law firm Simmons & Simmons unveiled a “Brexit hotline” for urgent problems. Michael Raffan, a partner who specialises in finance at Freshfields in London, says Brexit-related issues take up about 60 percent of his time and that he expects “significant demand for legal work that will last several years.”

Without details of Britain’s future relationship with the EU—the destination of almost half the country’s exports—much of what’s being done is speculative. Conflicting messages from political leaders haven’t helped, as ministers have floated a half-dozen models for the U.K.-EU relationship, from a so-called hard Brexit—a complete break—to integration similar to what Switzerland and Norway enjoy. So far most companies are only “planning for a plan,” says Steve Varley, the U.K. and Ireland chairman at consulting firm EY. Really substantive work won’t start until Article 50 has been invoked and the parameters of the negotiations become clearer, he says.

As it ramps up the just-created Department for Exiting the European Union, the U.K. government is also tapping lawyers and consultants. In its first two months, the DExEU, as the department is awkwardly referred to (pronounced DECKS-ee-you), paid £268,000 ($326,000) for legal advice, a figure that’s expected to skyrocket. The London think tank Institute for Government says the last time the U.K. needed lots of consultants, in the years following the 2008 financial crisis, it spent more than £100 million on them.

Attorneys and consultants aren’t twirling their spreadsheets and legal pads in celebration just yet. Even if Brexit work boosts billings, those businesses are just as vulnerable to the long-term economic damage as other industries. Both these industries benefit hugely from London’s status as the hub of European finance, with banking and fund management accounting for almost half of transactions work at top London law firms, according to the Law Society, the professional body for English lawyers. A Brexit settlement that leaves the U.K. poorer will ultimately mean trouble for purveyors of advice, says Gregor Irwin, chief economist at London consulting firm Global Counsel. “We’re still very early in this process, and we haven’t yet seen the real impact of Brexit on big investment decisions,” he says. “Lawyers and consultants aren’t going to be immune to a broader economic slowdown.”