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London (CNN Business)How Facebook, Uber and Robinhood run their businesses is under threat around the world, a warning sign for investors who have been all too willing to ignore regulatory risks for fast-growing tech companies in recent years.
What’s happening: An increasing number of elected officials want Facebook to pay news organizations for their content. The UK Supreme Court has ruled that Uber drivers are workers and not independent contractors. And Robinhood’s model of commission-free stock trading is under intense scrutiny as US lawmakers weigh next steps.The developments indicate that momentum is building behind legal and regulatory threats, and serve as a reminder that political leaders and judges have the power to force big changes in the marketplace.
Take Facebook (FB), which decided this week to block news on its platform in Australia after lawmakers proposed legislation that would force it to pay publishers for content. The move has triggered a global backlash, hardening sentiment among elected officials in the United Kingdom, Canada, Germany and the United States.
Facebook faces a global backlash over its bid to 'bully' Australia “It is one of the most idiotic but also deeply disturbing corporate moves of our lifetimes,” Julian Knight, the lawmaker who chairs the Digital, Culture, Media and Sport Committee in Britain’s parliament, told broadcaster Sky News.Read MoreCanada has vowed to move ahead with a policy similar to what’s been pursued in Australia. Others could soon follow.Then there’s Uber (UBER), which faced a big legal loss in a major market Friday. The UK’s top court dismissed an appeal by the company and said that drivers on the ride-sharing app should be classified as workers because the company sets fares and exercises significant control over them.The decision could change how Uber does business in the United Kingdom, potentially forcing it to grant additional benefits to drivers including paid time off and a minimum wage. It could also set a precedent for other workers and companies that participate in the booming gig economy.A grueling hearing on Capitol Hill Thursday put Robinhood’s business in the hot seat, too. Lawmakers zeroed in the fact that the app makes money by selling its order flow to market makers like Citadel Securities, which then executes the trades. CEO Vlad Tenev said this practice accounts for more than half of Robinhood’s revenue.”There is an innate tension in your business model between democratizing finance, which is a noble calling, and being a conduit to feed fish to sharks,” Rep. Sean Casten, a Democrat from Illinois, told Tenev.After adding tons of users during the pandemic, Robinhood had hoped to go public this year. The hostile climate in Washington could make that harder.Investor insight: Facebook’s shares fell 1.5% on Thursday but are up slightly in premarket trading. Uber’s shares are off 2% Friday. If there’s a market reckoning, it doesn’t seem to have arrived yet. But events this week make clear that life could quickly get a lot harder for these companies. That should force Wall Street to give rosy expectations for the future another look.
Lagarde says countries must not ‘brutally’ pull stimulus
Some politicians are worried that countries will borrow too much to prop up the economy over the coming year. Christine Lagarde doesn’t share their concerns.
Exclusive: Christine Lagarde says countries must not 'brutally' pull stimulusThe European Central Bank president told CNN Business’ Richard Quest that her biggest fear isn’t that the European Union will accumulate a mountain of debt, but that governments could “brutally” withdraw job guarantees and income support before the time is right.Such programs, she said, must be eased “gradually” and with care.”That’s the moment which I think is the most difficult, the most subtle, and where judgment will have to be applied,” Lagarde said in the interview.Remember: Governments unleashed trillions of dollars in relief spending over the past year to cushion the economic blow dealt by the Covid-19 pandemic, adding to unprecedented support from central banks like the ECB. European leaders also approved a €1.8 trillion ($2.2 trillion) recovery package and budget to help strengthen the bloc’s economies once the crisis passes. But Lagarde emphasized that even as the economy starts to improve and the recovery takes hold, politicians should not withdraw support prematurely.The ECB, she added, is “in for the long run.”Eye on G7: Her warning comes as G7 leaders gather Friday for a virtual meeting to discuss global vaccine distribution, which is expected to trigger a powerful global economic recovery later this year.On this front, Lagarde appeared optimistic. But she sounded a note of caution.”We have vaccines — more by the week, which is good. They’re being manufactured, they’re being distributed,” she said. “But people are not yet vaccinated. So it’s going to take a while until we have this herd immunity, which will not be in and of itself satisfactory because we have the variants.”
Corporate America hasn’t been this confident since 2004
Millions of Americans are jobless, struggling with childcare or just itching for social contact. But America’s CEOs are the most confident they’ve been in 17 years.The latest: Company leaders expect fewer layoffs and further improvements in the business environment, according to a recent survey from the Conference Board, my CNN Business colleague Anneken Tappe reports.The poll, which was conducted in January, found that 36% of CEOs expected to boost employees’ wages by more than 3% in the next 12 months, up from 22% in September. Just 12% said they anticipated cutting their workforce over the next 12 months, down from 34%.”With the vaccine rollout underway in major economies, CEOs entered 2021 historically upbeat,” Conference Board chief economist Dana Peterson said in a statement.The survey found that 82% of CEOs expected economic conditions to improve over the next six months, up from 63%.Big picture: Such confidence doesn’t change tough current conditions, and the virus remains a key risk. More than 18 million people received government jobless benefits in the last week of January, the Labor Department reported Thursday. But the report could point to better days ahead.
Up next
The composite Purchasing Manufacturers’ Index for the United States, which provides a read on the manufacturing and services sectors, posts at 9:45 a.m. ET.Coming next week: House Democrats plan to push President Joe Biden’s Covid relief plan through the chamber. It would then head to the Senate, where debate remains fierce.
Source: edition.cnn.com