World

UK inflation has eased on lower motor fuel costs but remains close to 40-year peaks, official data showed Wednesday as the nation faces more strikes over a cost-of-living crisis.

The Consumer Prices Index slowed to 9.9 percent in August, the Office of National Statistics said.

CPI for July had stood at 10.1 percent, the highest level since 1982, fuelled by surging domestic energy bills and soaring food prices.

The Bank of England, which has delayed its next interest rate decision until after the funeral of Queen Elizabeth II, is still expected to again ramp up borrowing costs by sizeable amounts in the coming months with Britons set to a hike in energy bills.

The UK data follows Tuesday’s higher-than-expected US inflation print that has cemented expectations of a prolonged period of rate hikes by the Federal Reserve.

– Strike action –

Rampant inflation sparked a summer of strikes in Britain, spearheaded by tens of thousands of railway workers as pay offers fail to keep pace, although some walkouts have been postponed following the queen’s death.

Retail Prices Index inflation — which includes mortgage interest payments and is used by unions and employers when negotiating wage increases — remains unchanged at a 1981 peak of 12.3 percent, the ONS said Wednesday.

Although motor fuel prices dropped last month, they remain historically very high, while average food prices rocketed more than 13 percent in August. 

Inflation has soared around the globe this year also on supply constraints after economies reopened from pandemic lockdowns, and in the wake of Russia’s invasion of Ukraine.

The Bank of England last month ramped up its key interest rate by 0.5 points to 1.75 percent, the biggest hike since 1995, as it seeks to dampen red-hot inflation.

– Energy price freeze –

British Prime Minister Liz Truss last week announced a two-year freeze on domestic energy prices in an multi-billion-pound attempt to bring down the soaring cost of living.

However, household electricity and gas prices will still jump substantially next month ahead of the peak-demand winter.

“While energy prices have been capped, people will still be paying more for their gas and electricity come October and, as the nights draw in, they’ll also be using more power,” said AJ Bell analyst Danni Hewson.

The BoE has forecast an inflation-induced UK recession starting this year, and has predicted a CPI peak of 13 percent.

The August inflation rate is almost five times the BoE’s government-set target of 2.0 percent.

Club Med owner Fosun, one of China’s largest private-sector conglomerates, saw billions wiped off its value on Wednesday as jittery investors reacted to a media report that the group was under regulatory scrutiny.

There has been growing concern about the debts of Chinese companies, particularly after a run of high-profile defaults in the property sector last year that rippled through the wider economy.

Bloomberg News on Tuesday cited unnamed sources as saying that regulators, including China’s banking watchdog and the local commission overseeing state investments, have told large lenders and state-owned enterprises to closely examine their exposure to Fosun.

Shares in Fosun International Limited, the conglomerate’s flagship company, slid as much as 9.6 percent in Hong Kong on Wednesday. 

They later pared some of those losses, ending the day down 6.6 percent at HK$4.56, the lowest level since late 2012.

Fosun’s Chief Financial Officer Alex Gong rejected the Bloomberg report as “completely false”.

“Neither the China Banking and Insurance Regulatory Commission (CBIRC) nor the Shanghai Banking and Insurance Regulatory Commission have asked commercial banks to find out about Fosun’s financial exposure, and those institutions have not received any notice of this,” Gong told the South China Morning Post.

The public had a “one-sided interpretation” of Fosun’s recent reductions in shareholdings and divestments and failed to see that they were part of a long-term financial strategy, the Shanghai-based company added in a statement.

– Circus and football –

Co-founded by tycoon Guo Guangchang in 1992 during the heady days of China’s initial “reform and opening” period, Fosun started off in pharmaceuticals and real estate but has since built a sprawling business empire that includes tourism and finance. 

A prolific buyer of global assets, Fosun owns French brand Club Med and has a controlling stake in the fashion house Lanvin.

It owns English Premier League football club Wolverhampton Wanderers and has a major stake in Canadian circus producer Cirque du Soleil.

In 2020, Fosun struck a deal with Germany’s BioNTech to manufacture its coronavirus vaccine in China and later became its exclusive distributor to the Greater China region.

Chinese companies have faced growing scrutiny over their debt exposure, especially those in the property sector. 

Multiple construction giants, including Evergrande, have defaulted on debts and been forced into major restructuring.

Beijing has also launched regulatory investigations in multiple sectors, including education and technology businesses, clipping their growth.

In recent months China’s economy has been reeling from a debt crisis in its massive property sector, mortgage boycotts, as well as disruptions from coronavirus lockdowns in finance and manufacturing hubs.

Fosun faces as much as $8 billion in bond repayments through 2023, according to Bloomberg News.

Fosun’s dollar bonds also fell by as much as six cents on Wednesday, adding to declines a day earlier that were the biggest since a rout in June.

The CBIRC’s request to banks to check their exposure to Fosun debt does not mean it wants lenders to change their financing, and the regulator’s move may not result in any action, Bloomberg reported.

The Beijing branch of the State-owned Assets Supervision and Administration Commission was also among the regulators who asked institutions for closer scrutiny regarding Fosun, the report added.

Fosun’s debt stood at 261 billion yuan ($37.7 billion) as of June 30, up from 237 billion yuan at the end of last year, according to an earnings report last month.

Moody’s last month downgraded Fosun, citing weak liquidity and a weakening portfolio amid asset sales.

— Bloomberg News contributed to this story —

The European Union’s second-highest court on Wednesday overwhelmingly upheld the EU’s record fine against Google over its Android operating system for mobile phones, slightly reducing the fee for technical reasons.

In a statement, the EU’s General court said it “largely confirms the commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices” in order to benefit its search engine.

The court, however, said the fine should be slightly reduced to 4.125 billion euros ($4.1 billion), instead of the 4.3 billion euros decided by the commission in 2018, after reviewing the duration of the infringement. 

The levy remains the EU’s biggest ever despite Google’s arguments that the commission’s case was unfounded and falsely relied on accusations it imposed its search engine and Chrome browser on Android phones.

The company also pushed the case that the EU was unfairly blind to the strength of Apple, which imposes or gives clear preference to its own services such as Safari on iPhones

“We are disappointed that the Court did not annul the decision in full,” a Google spokesperson said in a short statement. 

“Android has created more choice for everyone, not less, and supports thousands of successful businesses in Europe and around the world,” it added.

The complainants welcomed the decision as it confirmed that Google “can no longer impose its will on phone makers”, said Thomas Vinje, a lawyer representing the industry group FairSearch, whose original complaint launched the case in 2013.

“This shows the European Commission got it right,” he added.

The commission said it “took note” of the decision and “will carefully study the judgement and decide on possible next steps”.

The decision by the General Court is not necessarily the end of the story. Both sides can turn to the EU’s highest court, the European Court of Justice, for a final say on the fine, which was the equivalent of $5 billion when levied.

– Global action –

The Android case was the third of three major cases brought against Google by the EU’s competition czar Margrethe Vestager, whose legal challenges were the first worldwide to directly take on the Silicon Valley giants.

Since then, global regulators have followed suit, with Google facing a barrage of cases in the United States and Asia based on similar accusations.

Last year, South Korea fined Google nearly $180 million for abusing its dominance in a similar case targetting Android.

Vestager has already won against Google in its appeal of a separate case, a 2.4-billion-euro fine for the company for abusing its search engine dominance. As expected, the tech giant appealed that setback to the high court.

The EU, however, has lost recent cases involving the microchip industry. 

Vestager’s team lost an appeal against a $1 billion fine imposed on Qualcomm in the same court in June. 

That followed another setback in January when the EU lost the court’s backing for a 1.06-billion-euro fine on Intel.

Frustrated at the length of time it takes to pursue competition cases, Brussels has since adopted the Digital Markets Act (DMA), which puts a much tighter leash on the way Big Tech can do business. 

The new law, set to come into force next year, would set up a rulebook of do’s and don’ts for Big Tech companies such as Google and Facebook. 

The DMA includes specific bans or limits on Google, Apple and other gatekeepers from promoting their own services on platforms.

Lufthansa said Wednesday the German state had sold the stake it took in the airline as part of a rescue package at the peak of the Covid pandemic, and booked a healthy profit in the process.

In the spring of 2020, borders were shutting worldwide, forcing airlines everywhere to ground planes and put staff put on forced leave.

To save Lufthansa from bankruptcy, the German government took a 20-percent stake in the group under a nine-billion-euro (dollar) state aid package.

Under the deal, the government agreed to sell the stake by October 2023.

But with the airline’s finances stabilising as travel resumed, Berlin was able to start selling its holdings as early as November last year.

Lufthansa said the remaining 6.2 percent of the share capital was sold on Tuesday.

“This brings the stabilisation of Lufthansa to a successful conclusion,” said Carsten Spohr, its CEO.

“The stabilisation of Lufthansa was successful, and is also paying off financially for the German government and thus for the taxpayer,” he added.

The state paid 306 million euros for the stake and sold it for 1.07 billion euros — a profit of 760 million.

“With this gratifying balance, the WSF’s (Economic Stabilisation Fund’s) participation comes to an end and the company is once again in private hands,” said Jutta Doenges, who ran the fund.

Lufthansa in August reported its first net profit since the pandemic, booking 259 million euros in earnings for the second quarter as it benefited from pent-up demand for travel.

The group — which includes Eurowings, Austrian, Swiss and Brussels Airlines — made huge net losses of 6.7 billion euros in 2020 and 2.2 billion euros in 2021 as the pandemic shut down large parts of the airline industry.

The European Union is on a mission to rein in US tech giants, which have been accused of tax avoidance, stifling competition, raking in billions from news without paying for it and spreading misinformation.

In the past few years, the EU has slapped eye-watering fines on Apple and Google in tax and competition cases, and drawn up a landmark law to curb the market dominance of Big Tech. Brussels has also toughened its code of conduct on disinformation and hate speech.

As a European court on Wednesday rejected Google’s appeal against a 4.3-billion-euro antitrust fine ($5 billion at the time it was levied), we look at the battle between Brussels and Silicon Valley:

– Stifling competition –

The digital giants are regularly criticised for dominating markets by elbowing out rivals.

In July, the European Parliament adopted the Digital Markets Act to curb the market dominance of Big Tech, with violations punishable with fines of up to 10 percent of a company’s annual global sales.

Brussels has slapped over eight billion euros in fines on Google alone for abusing its dominant market position. 

In 2018, the company was fined 4.3 billion euros — the biggest ever antitrust penalty imposed by the EU — for abusing the dominant position of its Android mobile operating system to promote Google’s search engine. 

Google lost its appeal against that decision on Wednesday, though the fine was reduced to 4.1 billion euros.

The firm is also challenging a 2.4-billion-euro fine from 2017 for abusing its power in online shopping and a separate 1.5-billion-euro fine from 2019 for “abusive practices” in online advertising. 

The EU has also gone after Apple, accusing it of blocking rivals from its contactless iPhone payment system, and fined Microsoft 561 million euros in 2013 for imposing its search engine Internet Explorer on users of Windows 7.

Italy joined in the action last year, hitting Amazon with a 1.1-billion-euro antitrust fine for abusing its dominance to push its logistics business.

– Taxation – 

The EU has had less success in getting US tech companies to pay more taxes in Europe, where they are accused of funnelling profits into low-tax economies like Ireland and Luxembourg.

In one of the most notorious cases, the European Commission in 2016 found that Ireland granted illegal tax benefits to Apple and ordered the company pay 13 billion euros in back taxes.

But the EU’s General Court later overturned the ruling, saying there was no evidence the company broke the rules.

The Commission also lost a similar case involving Amazon, which it had ordered to repay 250 million euros in back taxes to Luxembourg.

Frustrated by the lack of progress, France, Italy and several other European nations forged ahead with their own taxes on tech companies while waiting for a global agreement on the issue.

That came in October 2021 when the G20 group of nations agreed on a minimum 15 percent corporate tax rate. Nearly 140 countries signed up to the deal.

– Personal data –

Tech giants are regularly criticised over how they gather and use personal data.

The EU has led the charge to rein them in with its 2018 General Data Protection Regulation, which has since become an international reference.

Companies must now ask for consent when they collect personal information and may no longer use data collected from several sources to profile users against their will.

Amazon was fined 746 million euros by Luxembourg in 2021 for flouting the rules.

Earlier this month, Irish authorities fining Instagram, a Meta subsidiary, 405 million euros for breaching EU regulations on the handling of children’s data. 

– Fake news and hate speech –

Social networks, particularly Facebook and Twitter, are often accused of failing to tackle disinformation and hate speech.

In July, the European Parliament approved a Digital Services Act that forces big online companies to reduce risks linked to disinformation or face fines of up to six percent of their global turnover.

– Paying for news –

Google and other online platforms are also accused of making billions from news without sharing the revenue with those who gather it.

To tackle this, an EU law in 2019 created a form of copyright called “neighbouring rights” allowing for print media to demand compensation for use of their content. 

France was the first country to implement the directive.

After initial resistance, Google and Facebook agreed to pay French media, including AFP, for articles shown in web searches.

That did not stop the company being fined half-a-billion euros by France’s competition authority in July 2021 for failing to negotiate “in good faith”, a ruling Google has appealed.

Facebook has also agreed to pay for some French content.

The EU plans a “deep and comprehensive” reform of the electricity market to cope with an energy crisis sparked by Russia’s war in Ukraine, European Commission chief Ursula von der Leyen said Wednesday.

The measures include a cap on electricity producers’ profits that would raise 140 billion euros ($140 billion) and “cushion” consumers from high prices, she said in her annual State of the European Union address.

Other steps involve rationing energy, temporary state aid and decoupling the prices of gas and electricity.

She also announced the creation of a new bank designed to spur investment of up to three billion euros in hydrogen as a Green alternative to fossil fuels.

The measures were in response to soaring energy costs as Europe painfully unhitches its decades-long dependency on Russian fossil fuels.

Sanctions on Russia and retaliation by Moscow by cutting off gas supplies have sent prices skyrocketing, leaving Europe to confront a difficult coming winter.

“Russia keeps on actively manipulating our energy market. They prefer to flare the gas than to deliver it,” von der Leyen said.

“This market is not functioning any more.”

– Gas reserves –

To partly prepare for a tough winter, the bloc has hastily stockpiled gas reserves, hitting 84 percent of capacity well ahead of an October deadline, von der Leyen said.

But the hole left by missing Russian supplies will still hurt.

The idea to tax profits by non-gas electricity providers is to divert the money to households and businesses to weather the situation.

“These companies are making revenues they never accounted for, they never even dreamt of,” von der Leyen said.

“In these times it is wrong to receive extraordinary record profits benefiting from war and on the back of consumers,” she said.

She said “major oil, gas and coal companies” would also “have to give a crisis contribution”.

At the same time, von der Leyen highlighted that the EU is pivoting to “reliable suppliers”, naming the United States, Norway and Algeria among them.

Longer-term, the EU wants greater reliance on renewable energies, von der Leyen said, hammering a key promise of her mandate. The hydrogen investment bank proposal is another step towards that future.

– Kyiv trip –

Another announcement made by von der Leyen was planned legislation to secure critical raw materials for the EU as it shifts towards greater use of electric vehicles and other more environmentally friendly technologies.

In her speech, she highlighted the stranglehold China has over resources such as lithium that are key to the energy transition.

“Today, China controls the global processing industry. Almost 90 percent of rare earths and 60 percent of lithium are processed in China,” she said in her annual State of the European Union address.

The proposed law would identify “strategic projects all along the supply chain” and “build up strategic reserves where supply is at risk,” she said.

As for Russia, the EU chief signalled that the bloc would maintain its sanctions pressure on Russia as long as it waged its war in Ukraine.

“I want to make it very clear, the sanctions are here to stay. This is the time for us to show resolve, not appeasement,” she said.

Ukraine’s first lady Olena Zelenska attended the gathering in Strasbourg, receiving a standing ovation from lawmakers.

Von der Leyen told MEPs that she would travel to Kyiv to meet Ukrainian President Volodymyr Zelensky, her third trip to the Ukrainian capital since the war started.

“I will travel to Kiev today to meet President Zelensky” to discuss “in detail” the continuation of European aid, she said in her major annual political address.

“For the first time in its history, this Parliament is debating the state of our Union while war is raging on European soil,” said von der Leyen, dressed in Ukrainian colours.

The European Union’s second-highest court on Wednesday overwhelmingly upheld the EU’s record fine against Google over its Android operating system for mobile phones, slightly reducing the fee for technical reasons.

In a statement, the EU’s General court said it “largely confirms the commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices” in order to benefit its search engine.

The court, however, said the fine should be slightly reduced to 4.125 billion euros ($4.1 billion), instead of the 4.3 billion euros decided by the commission in 2018 after reviewing the duration of the infringement. 

The levy remains the EU’s biggest ever despite Google’s arguments that the commission’s case was unfounded and falsely relied on accusations it imposed its search engine and Chrome browser on Android phones.

The company also pushed the case that the EU was unfairly blind to the strength of Apple, which imposes or gives clear preference to its own services such as Safari on iPhones.

Google insisted that downloading rival apps was only a click away and that customers were in no way tied to Google products on Android.

The EU and complainants responded that Google used contracts with phone makers in the early days of Android to stifle rivals.

“This shows the European Commission got it right,” said Thomas Vinje, a lawyer representing FairSearch, whose original complaint launched the case in 2013.

“Google can no longer impose its will on phone makers. Now they may open their devices to competition in search and other services, allowing consumers to benefit from increased choice,” he added. 

The decision by the General Court is not necessarily the end of the story. Both sides can turn to the EU’s highest court, the European Court of Justice, for a final say on the fine, which was the equivalent of $5 billion when levied.

– Global action –

The Android case was the third of three major cases brought against Google by the EU’s competition czar Margrethe Vestager, whose legal challenges were the first worldwide to directly take on the Silicon Valley giants.

Since then, global regulators have followed suit, with Google facing a barrage of cases in the US and Asia based on similar accusations.

Last year, South Korea fined Google nearly $180 million for abusing its dominance in a similar case.

Vestager has already won against Google in its appeal of a separate case, a 2.4-billion-euro fine for the company for abusing its search engine dominance. As expected, the tech giant appealed that setback to the high court.

The EU, however, has lost recent cases involving the microchip industry. 

Vestager’s team lost an appeal against a $1 billion fine imposed on Qualcomm in the same court in June. 

That followed another setback in January when the EU lost the court’s backing for a 1.06-billion-euro fine on Intel.

Frustrated at the length of time it takes to pursue competition cases, Brussels has since adopted the Digital Markets Act (DMA), which puts a much tighter leash on the way Big Tech can do business. 

The new law, set to come into force next year, would set up a rulebook of do’s and don’ts for Big Tech companies such as Google and Facebook. 

The DMA includes specific bans or limits on Google, Apple and other gatekeepers from promoting their own services on platforms.