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Legal News Report 4-22-2016
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EU Files Formal Charges Against Google Over Android Conduct
Apr 20, 2016 | Wall Street Journal
By Sam Schechner and Jack Nicas
For the second time in a year, Alphabet Inc.’s Google is facing charges from European regulators of abusing a dominant market position to bolster other parts of its business. This time, the allegations strike at the fastest-growing part of its core search unit: mobile phones. -
Volkswagen Reaches Deal With U.S. Over Diesel Emissions Scandal
Apr 21, 2016 | Wall Street Journal
By Sara Randazzo and William Boston
Volkswagen AG this week took a major step toward resolving its diesel-emissions cheating crisis, agreeing to offer U.S. owners of nearly 500,000 vehicles a blend of car buybacks, repairs and compensation. -
Uber settles for $100M in lawsuit over driver status
Apr 22, 2016 | CNBC
By Arjun Kharpal
Uber has agreed to pay $100 million to settle a class action lawsuit in two U.S. states in a closely-watched case that could have threatened the taxi hailing app's business model.
Legal News
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EU Files Formal Charges Against Google Over Android Conduct
Apr 20, 2016 | Wall Street Journal
By Sam Schechner and Jack Nicas
For the second time in a year, Alphabet Inc.’s Google is facing charges from European regulators of abusing a dominant market position to bolster other parts of its business. This time, the allegations strike at the fastest-growing part of its core search unit: mobile phones.
The European Union on Wednesday accused Google of using its Android mobile-operating system, which runs more than 80% of the world’s smartphones, to strong-arm phone makers and telecom companies into favoring Google’s search engine and browser on their devices.
One such example: Google denies access to its Play Store, with more than one million apps, to phone makers that don’t meet its requirements, including making Google the default search engine on their devices. Regulators say Europeans get 90% of their Android mobile apps from the Play Store.
Google on Wednesday declined to comment about each specific allegation. In an online post, it said it funds the development of Android, which is free for phone makers, by including Google apps and services on Android devices. That business model “keeps manufacturers’ costs low and their flexibility high, while giving consumers unprecedented control of their mobile devices.”
Last year, the EU charged Google with skewing its online search results to favor its comparison-shopping service. Google denied those allegations.
Each of the two cases could lead to fines of up to 10% of Google’s annual revenue, which last year totaled $74.5 billion, though in practice the EU’s fines are usually much lower.
More important, the cases strike at how Google makes money: by selling ads placed alongside search results. The new case centers on Google’s efforts to maintain the primacy of its search engine on mobile devices, which have rapidly become users’ primary portal to the Web. Google said last year that mobile searches surpassed searches on traditional computers for the first time.
Changes to those practices could have widespread impact, analysts said. “If Google could write a $5 billion check to make this go away, they would do it now,” said Bernstein Research analyst Carlos Kirjner. Over time, he said, changes to open Android to other browsers and search engines “could loosen Google’s grip on the mobile world.”
Regulators elsewhere have taken a more benign view of Android. On Tuesday, Canada’s competition authority closed its probe of Google’s practices involving the operating system. And U.S. regulators, who in 2013 closed an investigation of Google’s search practices after Google agreed to voluntary changes, haven’t made any visible moves toward an Android case.
Helped in part by Android, Google has become the biggest seller of mobile advertising, with an estimated 35% of the $70 billion global mobile-ad market in 2015, according to eMarketer. Morgan Stanley predicts that when Alphabet reports first-quarter earnings Thursday, mobile-search revenue will reach $4.8 billion, up 60% from a year earlier and nearly one-third of Google’s overall ad revenue from its own websites.
Google released Android in 2007 as an open-source operating system, meaning others can use its underlying computer code for free to build their own version. But the EU said Google effectively prevents the use of Android versions that don’t comply with its requirements by banning manufacturers from using Google services, including the Play Store, on all their devices if they offer even a single phone with noncompliant Android.
Google points to companies that have sold Android phones without complying with its rules, including Amazon.com Inc. and Chinese smartphone maker Xiaomi Corp. But Amazon’s Fire phone failed, in part because it lacked Google services, while Xiaomi doesn’t have access to Google services, which aren’t available in China.
“If you want to make a commercially viable Android smartphone in [the Western world], I challenge you to make one that doesn’t have the Play Store,” said Harvard University professor Ben Edelman, who studies Internet antitrust issues and has consulted for Google’s competitors.
The EU accused Google of effectively paying phone makers to include only Google’s search engine out of the box. Google withholds lucrative revenue-sharing agreements from device makers that pre-install rival search engines alongside Google on their phones, the EU alleged. Users can download other browsers, but the EU says pre-installing a service and setting it as a default creates a lasting advantage. Google declined to comment about that specific allegation.
In its online post Wednesday, Google said its agreements are voluntary and manufacturers can build Android phones without its requirements. Google said users have downloaded more than 50 billion apps on Android devices, the vast majority of them from companies other than Google.
Google added that “Android has helped foster a remarkable—and, importantly, sustainable—ecosystem” and that it would work with the EU “to demonstrate that Android is good for competition and good for consumers.”
Technology executives and lobbyists on Wednesday argued that intervention in cases like Google’s could do more harm than good. Some argued that the charges effectively penalize Google for allowing others to use its operating system, even if there are conditions. Apple Inc., by contrast, is the only maker of devices using its iOS operating system.
“The danger is that you do something which just helps some players in the market and doesn’t help consumers,” said James Waterworth,Brussels-based vice president of the Computer & Communications Industry Association, a lobby group for tech firms including Google. “Some people don’t like having to compete with Google. So they would like the commission’s help.”
European Antitrust Commissioner Margrethe Vestager dismissed those objections.
“It is not our job to defend companies. It is our job to protect competition,” she said. “If dominance is abused, then we have an issue.”
Google has 12 weeks to file a response to the EU’s charge sheet. After that, antitrust officials will decide whether to issue fines or other remedies, which Google can appeal in court.
http://www.wsj.com/articles/eu-files-formal-charges-against-google-over-android-conduct-1461145354
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Volkswagen Reaches Deal With U.S. Over Diesel Emissions Scandal
Apr 21, 2016 | Wall Street Journal
By Sara Randazzo and William Boston
Volkswagen AG this week took a major step toward resolving its diesel-emissions cheating crisis, agreeing to offer U.S. owners of nearly 500,000 vehicles a blend of car buybacks, repairs and compensation.
The full scope and price tag of the German auto maker’s deal won’t be known for several weeks, but likely would cost billions of dollars, said experts, and speed the damaging saga to a conclusion. A U.S. district judge on Thursday revealed the broad outlines of a settlement among the company, U.S. authorities and plaintiffs’ lawyers representing car owners.
Volkswagen, which has admitted cheating on U.S. diesel-emissions tests, said the potential agreement is “an important step on the road to making things right. Volkswagen intends to compensate its customers fully and to remediate any impact on the environment from excess diesel emissions.”
The proposal would include an undisclosed payment to a fund for environmental remediation efforts related to the vehicles, which are equipped with devices that allowed them to emit nitrogen oxides in excess of U.S. vehicle standards. Other funds will go toward promoting green automotive technology, said Judge Charles Breyer.
Still looming are government fines and a continuing criminal investigation into a scandal that has engulfed the auto maker and damaged its business. Some 11 million vehicles world-wide have the engine-control devices enabling the deception.
The company has already taken a €6.7 billion ($7.56 billion) charge to earnings over the crisis and on Friday its board of directors is expected to approve a charge against 2015 earnings in the “double-digit billions” of euros, according to people familiar with the situation.
The deal represents forward movement in a dispute that has dragged on for months after a September admission that some diesel-powered Volkswagen, Audi and Seat brand vehicles, were equipped with a “defeat device” able to dupe emissions tests.
A turning point in initially contentious discussions came after the car maker in January installed a legal team that appeared to take a new approach in dealing with the U.S. Environmental Protection Agency, one person said. U.S. authorities felt Volkswagen’s initial response to the diesel scandal was slowed by management upheaval and a confrontational attitude.
Volkswagen has until June 21 to lay out the specifics of the proposed deal for scrutiny by the court, which is overseeing the consolidation of more than 500 civil lawsuits against the company. A hearing on the settlement, which will need the court’s approval, is scheduled for July 26.
For now, the auto maker has pledged to give drivers of about 480,000 2-liter diesel vehicles the option of selling the cars back to Volkswagen, or having them modified to meet emissions standards, the judge said. Those with a lease can cancel it and return the vehicle to Volkswagen. Consumers also will get “substantial compensation” on top of that, the judge said.
Peter Haralovich, who owns a 2010 diesel-powered Jetta, said he is leaning toward returning the car, believing any fix would not preserve the vehicle’s current pep and fuel-economy. “Given the deception, it’s hard for me to consider buying another one,” said Mr. Haralovich, 67 years old.
Discussions are still under way on what to do with nearly 90,000 vehicles with 3-liter diesel engines on U.S. roads that are equipped with the devices, the judge said.
Elizabeth Cabraser, the lead plaintiffs’ attorney involved in the California suits, said the offer represents a “fair, effective and integrated solution for consumers and for the environment.”
The EPA referred requests for comment to the Justice Department, which said in a statement the agreement addresses “one important aspect” of the case, and that the department’s “other investigations into VW’s conduct remain active and ongoing.” The California Air Resources Board, another party to the deal, declined to comment.
Judge Breyer has pressured Volkswagen since February to produce a fix for the cars. He made it clear last month that if no solution was offered by this week, he would consider a request by the plaintiffs to set a summer trial.
The judge said on Thursday he was “extremely pleased” at the progress made so far and that there is “definite momentum” to resolve the case.
Volkswagen is keen to assign the bulk of the financial pain from the diesel scandal in 2015, allowing the company to quickly move forward. But the increase in provisions to pay for the U.S. buy-back, compensation and potential penalties could hurt the company’s credit rating.
Volkswagen has considerable cash reserves and recently secured a revolving credit facility for more than €20 billion from a consortium of large banks.
Left unclear after Thursday’s hearing: the degree to which the deal will undo the significant damage to Volkswagen’s reputation that has been caused by the cheating scandal.
Steve Kalafer, who owns a Volkswagen dealership in New Jersey, said the offers made so far will help restore customer loyalty. However, he questioned what it means for dealers that have invested millions of dollars in their businesses, and whether consumers will be made whole. “Will this be another Wall Street settlement where regulators get their victory but consumers are an afterthought?” he said.
The mushrooming fallout from the scandal has cost Volkswagen’s chief executive and top U.S. manager their jobs and led to plunging U.S. sales. Dealers have been left with expensive inventory they are unable to unload, and some have sued, alleging that Volkswagen defrauded them.
Volkswagen for years promoted its diesel line as environmentally friendly vehicles with good fuel economy. The Federal Trade Commission sued the company alleging false advertising last month, pointing to such taglines as “Diesel. It’s no longer a dirty word,” and “Green has never felt so right.”
The potential deal lifted its stock 5% to €127.05 on Thursday in Frankfurt.The stock is up 16% so far this week.
http://www.wsj.com/articles/volkswagen-reaches-deal-with-u-s-authorities-over-diesel-emissions-scandal-1461252731
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Uber settles for $100M in lawsuit over driver status
Apr 22, 2016 | CNBC
By Arjun Kharpal
Uber has agreed to pay $100 million to settle a class action lawsuit in two U.S. states in a closely-watched case that could have threatened the taxi hailing app's business model.
The lawsuit revolved around whether Uber drivers in California and Massachusetts were classed as contractors or employees, in which case they would be entitled to other benefits, driving the taxi start-ups costs higher.
As part of the settlement, the two sides agreed that the drivers will remain contractors, not employees, a good result for Uber and one likely to be welcomed by others start-ups in the on-demand economy.
The $100 million settlement is made up of an $84 million payment to the roughly 385,000 drivers involved in the cases. A second payment of $16 million will be handed out if Uber goes public and the valuation of the company increases one and a half times from its December 2015 financing valuation with the first year of the initial public offering.
Uber is the world's most valuable private technology start-up worth over $62 billion.
Uber has agreed to pay $100 million to settle a class action lawsuit in two U.S. states in a closely-watched case that could have threatened the taxi hailing app's business model.
The lawsuit revolved around whether Uber drivers in California and Massachusetts were classed as contractors or employees, in which case they would be entitled to other benefits, driving the taxi start-ups costs higher.
As part of the settlement, the two sides agreed that the drivers will remain contractors, not employees, a good result for Uber and one likely to be welcomed by others start-ups in the on-demand economy.
The $100 million settlement is made up of an $84 million payment to the roughly 385,000 drivers involved in the cases. A second payment of $16 million will be handed out if Uber goes public and the valuation of the company increases one and a half times from its December 2015 financing valuation with the first year of the initial public offering.
Uber is the world's most valuable private technology start-up worth over $62 billion.
"Importantly, the case is being settled — not decided," Shannon Liss-Riordan, the attorney representing the drivers in the suit, said in a statement.
"This case, however, with this significant payment of money, and attention that has been drawn to this issue, stands as a stern warning to companies who play fast and loose with classifying their work force as independent contractors," Ms. Liss-Riordan said.
Uber also agreed to change many of its terms and conditions for drivers as part of the settlement. The taxi app said it would:Provide drivers with more information about their individual ratings, which are chosen by the users, and how it compares to their peers.Fund the creation of a driver's association in California and Massachusetts and meet them quarterly to discuss "the issues that matter most to driver"Publish a "driver deactivation policy" which explains why some drivers are taken off and barred from the platformAgree not to deactivate drivers who regularly decline trips when they are logged onto an app. A driver gets a request for a job and it is their decision to accept or reject it. Previously a driver could face deactivation if they declined a certain amount of trips. Uber is loosening this policyCreate an appeals process in both states for drivers who disagree with decisions about their account being deactivated
"Uber is a new way of working: it's about people having the freedom to start and stop work when they want, at the push of a button," Travis Kalanick, chief executive of Uber wrote in a blog post, late on Thursday.
"As we've grown we've gotten a lot right—but certainly not everything. This new deactivation policy is an important step forward when it comes to working with drivers."
http://www.cnbc.com/2016/04/22/uber-makes-100-million-settlement-in-lawsuit-over-driver-status.html
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