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THIS WEEK'S ARTICLES
France Plans to Block Uber 'Ride-Sharing' Service
Justice Department Faces Tough Questioning in E-Books Case
Sony Tells Media Not to Use Leaked Documents
Biotech Seed Makers Try to Defuse Trade Uncertainties

France Plans to Block Uber 'Ride-Sharing' Service
by: Sam Schechner and Inti Landauro
Dec 15, 2014
Click here to view the full article on WSJ.com

TOPICS: Aerospace Industry, Business Ethics, taxi, Uber

SUMMARY: Uber Technologies Inc.'s regulatory problems deepened Monday when France became the latest country to say it would ban one of the car-hailing company's main services. Meanwhile, taxis took to the streets in a protest against the U.S. company's "unfair competition." The French government said the company's Uberpop service that uses drivers without professional licenses is "illegal." Officials said they would move quickly to apply a new transport law that will take effect on Jan. 1 and stiffens penalties for operating such services. "Passengers still don't know that it isn't a legal car service, and drivers don't understand the risks they're running, such as fines or the seizure of their vehicles," said Pierre-Henry Brandet, a spokesman for the French Interior ministry. Organizing a system that puts paying clients in touch with drivers without professional licenses will be punishable by two years in prison and a 300,000 ($373,924) fine, according to the new law cited by officials. Uber responded that it will continue to operate Uberpop until a judge decides that the new law applies to it. "It's up to the courts to ban Uberpop," said Pierre-Dimitri Gore-Coty, Uber's general manager for Western Europe. "If we're prosecuted, then we'll respond." The declaration of a French crackdown is a big blow to Uber, which is already facing bans and stiff opposition from incumbent taxi operators in cities across the world. Uber claims more than half a million users in France and operates in seven French cities, more than in any other country in Europe. Paris is the first city outside the U.S. where Uber launched, and it is still the company's second-largest market in Europe after London. In Europe alone last week, officials in Spain, the Netherlands, and Brussels all moved toward at least temporary blocks on some Uber services, threatening the expansion of the company, valued at $41 billion.

CLASSROOM APPLICATION: Uber Technologies Inc. is falling into deep regulatory problems in France, while at the same time taxi services have gone to the streets to protest the company as unfair competition. Uber operates without professional licenses, and now the French government says that is illegal. The Uber network simply connects those people who are drivers with passengers, eliminating most of the regulatory oversight that is provided for taxis. Other countries including Spain, the Netherlands, and Belgium, all moved toward temporary blocks of Uber services. Uber has a strong market in France, and the fact that it is gaining so much market share versus taxis has put pressure on regulators to eliminate its service.

QUESTIONS: 
1. (Introductory) Should the Uber ride-sharing service be regulated and considered anti-competitive even though it delivers a service that consumers want?

2. (Advanced) Uber is a global service valued at $41 billion. Is the company under attack because of its success or because it is a danger to the public?

3. (Advanced) Uber services are often 20-30 percent less than taxi fares. Because of this savings to consumers, is there any alternative to eliminating this service in countries like France because drivers do not have professional licenses?

Reviewed By: OC Ferrell, University of New Mexico


Justice Department Faces Tough Questioning in E-Books Case
by: Joe Palazzolo
Dec 15, 2014
Click here to view the full article on WSJ.com

TOPICS: Amazon, Apple Inc, Business Ethics, Price Fixing

SUMMARY: Justice Department lawyers faced tough questioning from judges reviewing a finding that Apple Inc. conspired with publishers to raise the price of electronic books in 2010. Amazon.com Inc., though not a party in the case, cast a long shadow over the hearing before the Manhattan-based Second U.S. Circuit Court of Appeals. A ruling by the Second Circuit is expected in the coming months. At least one of the three judges on the appellate panel suggested Apple's negotiations with publishers spurred competition with Amazon by "breaking the hold of a monopolist." "It's like all the mice getting together to put a bell on the cat," said Judge Dennis Jacobs. Amazon held between 80% and 90% of the e-book market before the iPhone maker decided to get into the business. However, antitrust officials believed Amazon's aggressive discounting-$9.99 for most best sellers-benefited consumers, said Malcolm Stewart, one of the Justice Department's top appellate lawyers. Most antitrust cases target horizontal agreements-collusion among competitors on the same rung of distribution. But the Second Circuit's ruling in this case could provide fresh antitrust guidance for retailers brokering contracts with manufacturers, known in antitrust parlance as vertical agreements. The Justice Department sued Apple in 2012, alleging civil antitrust violations. After a three-week trial, U.S. District Judge Denise Cote in Manhattan ruled last year that Apple helped publishers fed up with Amazon's discounts, over which they had no control, change the market landscape. Apple's agreements handed publishers power to set their own prices, an arrangement some of the publishers had suggested in meetings with Apple executives, according to evidence presented during the trial. If the Cupertino, Calif.-based company loses, it would pay $450 million, most of it to e-book consumers, as part of a settlement with private plaintiffs and 33 states that joined the Justice Department's lawsuit against the company. The publishers also reached a settlement with authorities, paying a total of about $160 million. A key provision of the Apple contacts required publishers to give Apple's store the best deal that they gave anyone on e-books. That, in turn, ensured publishers would force Amazon to change its business model, otherwise they would suffer heavy losses matching Amazon's discounted prices in Apple's e-book store, according to Judge Cote. Prices on many e-books increased immediately. One question facing the appeals court is whether Judge Cote was obligated to weigh more carefully the economic impact of Apple's entry into the market. Theodore J. Boutrous Jr. , a lawyer for Apple, said Apple increased competition by diminishing Amazon's power. Some new e-book prices increased, but average prices across the market decreased, and the number of available titles increased dramatically.

CLASSROOM APPLICATION: Judges are now saying that Apple's pricing negotiations with publishers increased competition rather than being anti-competitive. A ruling is expected in coming months to provide new antitrust guidance for retailers brokering contracts with manufacturers. If Apple loses its appeal that it engaged in fixing prices, it will have to pay $450 million to e-book customers as part of a settlement. Judges are now looking into Apple's entry into the e-book market and whether it increased or diminished competition by reducing Apple's power in e-book pricing. Amazon was using e-books as a loss leader, and Apple developed contracts with publishers at certain price points.

QUESTIONS: 
1. (Introductory) Should Apple be held accountable for fixing prices if the leading discounter is using books as a loss leader to drive consumers to its sites?

2. (Advanced) Apparently, there is much debate over what creates anti-trust agreements in the regulatory system. Will the appeal over e-book pricing help to clarify what constitutes anti-trust?

3. (Advanced) Should companies who have to charge a price that provides profits be driven out of business by companies like Amazon that sell below cost to enhance their market share?

Reviewed By: OC Ferrell, University of New Mexico


Sony Tells Media Not to Use Leaked Documents
by: Ben Fritz
Dec 14, 2014
Click here to view the full article on WSJ.com

TOPICS: Business Ethics, Cybercrime, Sony

SUMMARY: Sony Pictures Entertainment has retained David Boies, one of the nation's most prominent attorneys, in an effort to stop news publications from using stolen documents that have been leaked online. Mr. Boies sent a letter Sunday to media organizations including The Wall Street Journal, the New York Times and Bloomberg News. The letter, a copy of which was reviewed by a Wall Street Journal reporter, requested that the companies destroy any contracts, emails and other internal information that has been released on the Internet following a cyberattack on the Sony Corp. -owned studio three weeks ago. "If you do not comply with this request and the Stolen Information is used or disseminated by you in any manner," the letter reads, "[Sony Pictures] will have no choice but to hold you responsible for any damage or loss arising from such use or dissemination by you." The letter comes after many news organizations have used emails to and from Sony Pictures motion picture chief Amy Pascal, TV head Steve Mosko, and general counsel Leah Weil, in addition to contracts and other documents, as fodder for their stories. Sony Pictures executives have also lobbied journalists privately to exercise discretion in utilizing the documents, with mixed success. Many have published stories about Sony's business dealings and some have published email exchanges, among them ones that include or are about movie stars such as Angelina Jolie, Leonardo DiCaprio and Channing Tatum.

CLASSROOM APPLICATION: Sony Pictures is trying hard to prevent stolen documents from being leaked online. The company is urging media, including the Wall Street Journal, New York Times, and Bloomberg News to destroy any confidential e-mails and other internal information that was released on the Internet following a cyber-attack on Sony. Already stories about Sony's business dealings have been published on e-mail exchanges, including comments about stars such as Angelina Jolie and Leonardo DiCaprio. The problems with cyber-attacks are complicating the relationship between companies and the mass media willing to take advantage of any information they can obtain.

QUESTIONS: 
1. (Introductory) Should leading media companies such as The New York Times use restraint and not further the causes of cyber-attacks by releasing information that is confidential?

2. (Advanced) What are the ethical considerations for Sony in requesting the mass media not to publish information? What are the ethical implications for the mass media, which usually publishes any information that becomes publicly available?

3. (Advanced) If Sony's confidential information is made public, should the company be held accountable and criticized for their private conversations about movie stars, etc.?

Reviewed By: OC Ferrell, University of New Mexico


Biotech Seed Makers Try to Defuse Trade Uncertainties
by: Jacob Bunge
Dec 15, 2014
Click here to view the full article on WSJ.com

TOPICS: Business Ethics, China, GMOs

SUMMARY: The U.S. agricultural industry is crafting a framework for launching new biotech seeds in an attempt to avoid the types of trade disruptions blamed for hundreds of millions of dollars in losses over the past year. Groups representing seed companies, grain traders and farmers aim to agree next year on a set of practices that could help U.S. farmers plant new genetically modified crop varieties while steering those harvests away from countries that have yet to approve the crops for imports, officials said. The discussions are progressing as U.S. corn exports to China dropped sharply this year, after Chinese regulators in late 2013 began turning away U.S. corn shipments found to contain a biotech corn strain not yet approved in China. Grain companies including Cargill Inc. and Archer Daniels Midland Co. have sued Syngenta AG , the Swiss seed company that developed that corn, over what the companies say are tens of millions of dollars in lost sales. U.S. farmers also have filed about 180 separate lawsuits blaming Syngenta for lower corn prices stemming from the rejected shipments. Syngenta officials have said the cases have no merit, and that the company has been transparent about the approval process for the corn strain. "This is a global trading world," said Frank Terhorst, global head of seeds for Bayer AG 's agricultural division, which sells genetically engineered seeds. "The more aligned we are as an industry, the better it is." The industry discussions, convened under a group called the U.S. Biotech Crops Alliance, aim to produce voluntary guidelines about how seed companies could communicate plans to sell new products, determining which export markets may need to be avoided, and how to manage grain as it moves through elevators, trains and ports. Syngenta has participated in the discussions through its seed trade group membership, according to a spokesman for the company. China's rapidly expanding poultry and livestock operations helped make the country the fastest-growing customer for U.S. corn in recent years, purchasing $976 million worth of the grain in 2013. But following the rejected exports, sales of U.S. corn to China have dropped 87% by weight for the year through October, according to the U.S. Department of Agriculture. The episode has stirred debate within the agricultural industry over how to manage new seeds as scrutiny deepens around biotech crops, which are genetically modified to make plants resistant to weed-killing sprays and destructive bugs.

CLASSROOM APPLICATION: U.S. corn exports to China dropped sharply this year after Chinese regulators found that U.S. corn shipments contained a biotech corn strain not approved in China. U.S. grain companies such as Cargill and Archer Daniels Midland have sued a Swiss seed company that they hold responsible for the corn strain that was not approved. Apparently, U.S. farmers thought that the corn they were growing would be acceptable to Chinese regulators. Sales of U.S. corn to China dropped 87 percent in 2014 and has created a major debate over genetically-modified seeds for use in agriculture.

QUESTIONS: 
1. (Introductory) Should Syngenta AG, a Swiss seed company that developed the questionable corn seeds, be held accountable for the tens of millions of dollars in lost sales for U.S. farmers?

2. (Advanced) What should be the responsibilities of the U.S. Agriculture Department in overseeing bio-genetic seeds and their suitability for export to large markets like China?

3. (Advanced) Should farmers who thought that the seeds they were using were acceptable for export to countries like China be compensated for their losses?

Reviewed By: OC Ferrell, University of New Mexico


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