Business

By Andrew Beatty 
Agence France-Presse

SYDNEY — Facebook said on Tuesday it will lift a ban on Australian news and pay local media companies for content, after a last-gasp deal on pending landmark legislation.

Australia's Treasurer Josh Frydenberg announced a face-saving compromise that will see Google and Facebook plunge tens of millions of dollars into the struggling local news sector.

In return the US digital firms will, for now, avoid being subjected to mandatory payments that could cost them vastly more and create what they see as an alarming global precedent.

Just hours after the compromise was unveiled, Facebook announced its first proposed deal with an Australian media company, Seven West, and was said to be pursuing commercial deals with other local news organisations.

The company is expected to use the content to launch a dedicated news product in Australia later this year.

"As a result of these changes, we can now work to further our investment in public interest journalism, and restore news on Facebook for Australians in the coming days," said Will Easton, managing director of Facebook Australia.

The social media firm sparked global outrage last week by blacking out news for its Australian users in protest at the proposed legislation, and inadvertently blocking a series of non-news Facebook pages linked to everything from cancer charities to emergency response services.

Prime Minister Scott Morrison had angrily accused Facebook of making a decision to "unfriend" Australia.

Google has already brokered deals worth millions of dollars with local media companies, including the two largest: Rupert Murdoch's News Corp. and Nine Entertainment.

Commentators described the eleventh-hour amendments — which came as parliament looks set to pass the law this week — as "a reasonable compromise".

"Everybody can walk away saying, well we got what we wanted," University of New South Wales business professor Rob Nicholls said

Both companies now have an additional two months to reach further agreements that would stave off binding arbitration.

Precedent-setting 

The tech firms had fiercely opposed the legislation from the get-go, fearing it would threaten their business models.

In particular, the companies objected to rules that made negotiations with media companies mandatory and gave an independent Australian arbiter the right to impose a monetary settlement.

That process will now be avoided if companies are deemed to have made a "significant contribution" to the Australian news industry through unspecified "commercial agreements".

"We now face the strange possibility that the news media mandatory code could be passed by parliament and it applies to precisely no one," said Marcus Strom, head of the Media Entertainment and Arts Alliance, a union.

"It will just sit in the Treasurer's [drawer] as a threat to misbehaving digital companies."

Google was also keen to avoid creating a precedent that platforms should pay anyone for links, something that could make their flagship search engine unworkable.

Facebook — which is much less reliant on news content — had initially said being forced to pay for news was simply not worth it and shut down content.

"There is no doubt that Australia has been a proxy battle for the world," said Frydenberg.

Critics of the law say it punishes innovative companies and amounts to a money grab by struggling but politically connected traditional media.

Thousands of journalism jobs and scores of news outlets have been lost in Australia alone over the past decade as the sector watched advertising revenue flow to the digital players. 

For every $100 spent by Australian advertisers today, $49 goes to Google and $24 to Facebook, according to the country's competition watchdog.

Tech insiders see the legislation as driven, in particular, by Rupert Murdoch's News Corp., which dominates the local media landscape and has close ties with Australia's conservative government.

A new provision in the law gives Facebook and Google more discretion over who they do deals with, and what the sums involved would be.

"We have come to an agreement that will allow us to support the publishers we choose to, including small and local publishers," said Facebook Vice President for Global News Partnerships Campbell Brown.

Facebook and Google could still face the prospect of having to replicate deals with media worldwide, as the European Union, Canada and other jurisdictions move to regulate the sector.

Since their emergence around the turn of the century, Google and Facebook have been largely unregulated and have grown into two of the world's largest and most profitable companies.

But a string of scandals about misinformation, privacy violations, data harvesting and their virtual monopoly on online advertising has triggered the attention of watchdogs.

SAN FRANCISCO — Facebook knew that its estimates of user numbers were unreliable and artificially high, but ignored the problem in order to generate more advertising revenue, companies said in legal documents unveiled on Thursday.

The social networking company has been facing a class action lawsuit since 2018. The plaintiffs claim that the platform's managers knew that its so-called "Potential Reach" measure was inflated, but did not seek to rectify the situation so as not to lose revenue. 

The California company derives the overwhelming majority of its revenue from the sale of targeted advertising. Prices vary according to many criteria, starting with the number of users likely to see the campaign.

"Facebook knew for years its Potential Reach was inflated and misleading," lawyers in the class action suit contended in the filing.

The suit argued that Facebook made a deliberate decision not to remove duplicate or fake accounts from the Potential Reach tool metrics.

The legal documents cited a Potential Reach product manager who wrote in an internal e-mail: "It's revenue we should have never made given the fact it's based on wrong data."

The Internet giant contended that a Potential Reach estimate feature at issue in the suit was merely a "free tool" advertisers had the option of looking at and did not affect delivery of ads, according to court documents.

The Potential Reach tool lets advertisers put in budget and other criteria into a software program and be given an estimate of how many people they could reach on the Facebook platform.

"Facebook did not merely 'drag its feet' in providing inaccurate and misleading Potential Reach. Rather, Facebook knew for years its Potential Reach was misleading, and concealed that fact to preserve its own bottom line," plaintiffs' attorneys argued in a February 10 filing.

Facebook did not reply to a request for comment. The suit was filed about two years ago, and Facebook has since modified the Potential Reach tool.

Lawyers representing plaintiffs in the case called on a federal court in San Francisco to reject a request by Facebook that the two-year-old litigation be dismissed.

WASHINGTON — Boeing confirmed on Monday that dozens of its 777 aircraft were grounded globally after the engine of a United Airlines plane caught fire and scattered debris over a suburb of Denver, Colorado. 

It is a fresh blow for the US aviation giant that was forced to ground another fleet of planes after a series of deadly crashes.

Boeing said on Monday that 128 of it 777 planes with Pratt & Whitney engines will stop flying after the fire on Saturday that forced the United Airlines plane to make an emergency landing. 

"I have just had confirmation that all the 777s equipped with this engine have been grounded," a spokeswoman for the planemaker said in a text message. 

Flight UA328 had been headed from Denver to Honolulu when it experienced engine failure shortly after departure. 

A video shot from inside the plane — which had 231 passengers and 10 crew on board — showed the right engine ablaze and wobbling on the wing of the Boeing 777-200.

Residents in the Denver suburb of Broomfield found large pieces of the plane scattered around their community.

Its front cowling, which landed in the front yard of a house, was entirely missing as the aircraft returned to Denver airport.

There were no injuries on the aircraft or on the ground, authorities said.

Stepped-up inspections 

The US Federal Aviation Administration (FAA) had ordered extra inspections of some passenger jets after the incident. 

Steve Dickson, the head of the regulator, said he had consulted with experts, signalling the planes would likely be removed from the air. 

"I have directed them to issue an Emergency Airworthiness Directive that would require immediate or stepped-up inspections of Boeing 777 airplanes equipped with certain Pratt & Whitney PW4000 engines," he said in a statement.

Dickson added that a preliminary safety data review pointed to a need for additional checks of the jet engine's fan blades, which were unique to the engine model and only used on 777 planes. 

Officials from the FAA met with Pratt & Whitney and Boeing representatives on Sunday evening, he added.

The US National Transportation and Safety Board also said it is investigating the incident, while United Airlines, Asiana, Japan Airlines and All Nippon Airways grounded their planes earlier. 

Japan's transport ministry had earlier said it had ordered stricter inspections of the engine after a Japan Airlines 777 plane flying from Haneda to Naha experienced trouble with "an engine in the same family" in December.

Asiana Airlines, South Korea's second-largest carrier, had also said it would not fly any of its seven currently operational 777s. 

Fresh blow for Boeing 

The engine failure is unwelcome news for Boeing following several high-profile accidents.

The manufacturer's 737 MAX was grounded worldwide in March 2019 after 346 people died in two crashes — the 2019 Lion Air disaster in Indonesia and an Ethiopian Airlines crash the following year.

Investigators said a main cause of both crashes was a faulty flight handling system known as the Maneuvering Characteristics Augmentation System, or MCAS.

Boeing was forced to revamp the system and implement new pilot training protocols.

This month the aircraft made its first commercial flight in Europe since the grounding, after the continent's air safety regulator EASA approved the return of the 737 MAX.

The FAA and Britain's Civil Aviation Authority have also cleared the aircraft for flying again. 

The 737 MAX was a big hit with airlines, becoming Boeing's fastest-selling aircraft until its grounding, which has now been lifted. 

After the COVID-19 crisis decimated demand, airlines cancelled hundreds of orders for the plane.

VILNIUS — Thanks in part to Brexit, Lithuania is becoming a fintech hub as a growing number of UK-linked digital financial companies are getting licences there so they can continue to operate in the European Union.

The Baltic eurozone state with a population about a third the size of London is now leading the EU in fintech with over 230 companies, according to the Invest Lithuania government agency.

Some two dozen have links to Britain.

One of the first to come after the 2016 Brexit referendum was London-based Revolut bank.

"Lithuania is currently a hub for our European operations after Brexit," Virgilijus Mirkes, CEO of Revolut Bank in Lithuania, said.

"We opened our Vilnius office in 2017 after considering the fintech-friendly business environment," he said, pointing to a speedy licencing process and good local talent.

Invest Lithuania estimates that the sector employs more than 4,000 people in the country — an increase of more than 18 per cent in the past year.

"During the Brexit transition period, fintech companies began to search for an alternative EU harbour and thus Lithuania has become one of their primary options," said Jekaterina Govina, a senior official in charge of supervision at Lithuania's central bank.

'Continue to scale' 

Lithuania says it can process licence applications in as little as three months, more quickly than anyone else in the EU.

The central bank has granted a total of 118 fintech licences allowing companies to operate anywhere in the EU — far higher than Germany with 77 licences and France with 76, according to a report from Invest Lithuania.

Britain is still first by far with 610 licences.

Lithuania's central bank has also set up a "regulatory sandbox" — a framework to allow fintech companies to test out innovations.

"That was a lighthouse for companies searching for a cure for Brexit," Govina said.

While the capital Vilnius does not offer the big city attractions of London and getting there is tricky at the moment because of coronavirus restrictions, internet speeds in Lithuania are good and it has a tech-savvy workforce.

Revolut employs some 200 people in the country, including in product development and customer support, and Mirkes said the company would "continue to scale [up] our operations here".

Revolut started its operations in Vilnius in a gleaming glass-fronted office hub called Rockit, which is funded by Swedbank and provides workspace and industry events for some 30 member companies.

"Our hub helps to create a fintech community where foreign companies can easily find local partners," Rockit CEO Sarune Smalakyte told AFP during a recent visit to the space.

Need for 

firmer approach 

But the push into fintech also comes with risks.

Sergejus Muravjovas, CEO of Transparency International Lithuania, said "the ambition to become a fintech centre comes with a responsibility to take money laundering prevention to a new level.”

"There is a need for a firmer and more data-driven approach from monitoring the institutions involved," he said.

Govina said the authorities were "fully aware" of their responsibilities as a licence in the Baltic state opens the gates to the entire EU market.

Another company that has recently set up in Lithuania is London-based DiPocket Group, which has developed an e-money wallet app.

"Brexit was definitely the trigger event," said DiPocket CEO and co-founder Fedele Di Maggio.

He said he found the central bank "both strict and supportive" and described the local workforce as "generally English-speaking and with reasonable financial expectations".

WASHINGTON — Fears that inflation could spiral out of control due to a massive US stimulus package are overblown, IMF Chief Economist Gita Gopinath said on Friday.

Her argument contradicted critics of US President Joe Biden's proposed $1.9 trillion rescue package for the world's largest economy, who say the amount is excessive, and even those Democratic economists who have also raised concerns about price spikes.

Gopinath estimated that with the full amount of stimulus, inflation "would reach around 2.25 per cent in 2022, which is nothing to be concerned about", she said in a blog post.

Some economists, including former Treasury secretary Larry Summers, have urged caution saying excess spending could spark an inflationary spiral that the Federal Reserve (Fed) would find difficult to control.

Rising prices would erode purchasing power while higher interest rates to control inflation would send the cost of borrowing soaring in an economy already awash in debt amid the coronavirus pandemic.

Gopinath noted the "concerns about an overheated economy that could push inflation well above the comfort zone of central bankers". But she said "the evidence from the last four decades makes it unlikely." 

In the decade following the global financial crisis, US annual inflation barely cracked the Federal Reserve's 2 per cent target, and in December the rate was just 1.3 per cent.

Gopinath said the proposed government aid will push US gross domestic product up 5 to 6 per cent over three years, which would recoup the 3.5 per cent contraction in 2020.

The IMF has consistently supported a large US stimulus plan to recover from the COVID-19-induced recession that has left millions jobless.

US Treasury Secretary Janet Yellen repeated on Thursday the administration view that "the price of doing too little is much higher than the price of doing something big”.

Yellen noted that inflation has been very low for over a decade, and while it remains a risk "it's a risk the Fed and others have tools to address."

Market turbulence 

Yellen, like US central bank chief Jerome Powell, who succeeded her in the post, stressed that true unemployment in the US is close to 10 per cent — above the government's official rate of 6.3 per cent last month — and about nine million people remain unemployed, which she says justifies the size of the government aid.

But growing signs that the economy is coming back to life as businesses reopen amid an accelerating vaccination campaign have caused markets to begin to fret about impending price hikes.

The yield on 10-year Treasury notes, a benchmark for inflation expectations, has been rising sharply since October, and accelerated since the start of the year to around 1.3 per cent, the highest since before the pandemic.

Those fears got a boost from a spike in the producer price index, which showed wholesale inflation surged 1.3 per cent in January, the largest since the index was revamped in December 2009.

But Powell last week brushed off inflation concerns, saying after prices collapsed last year, some sharp increases are expected but would be unlikely to last.

In the current environment, "we want to see actual inflation," before the Fed would take any steps to raise interest rates or roll back the massive bond-buying programme, Powell said.

His colleague John Williams at the Fed's New York branch said he was "not really concerned about stimulus... right now being excessive”.

He said the central bank is not worried about Treasury yields and so far is not seeing any signs of excessive behaviour by businesses or households.

Gopinath, the IMF economist, acknowledged "the danger of market turbulence" due to temporary price swings, or bad news about new virus variants.

But she said that in the wake of the crisis "considerable slack remains in the global economy" which would dampen price pressures, and worldwide supply chains have largely not suffered disruptions, removing another potential source of rising costs.