Settlement that could disrupt credit card business
A long-running battle between U.S. credit card giants Visa and Mastercard and retailers is nearing an end with promises of lower fees for merchants.
But the proposed class action settlement could have broader implications, including for the lucrative business of luxury credit cards and retailers.
Settlement details: Visa and Mastercard announced Tuesday that they have agreed to reduce swipe fees, a cost associated with using credit cards, for about five years. Lawyers for the merchants who filed the lawsuit estimate that this could save them about $30 billion in fees.
Perhaps more importantly, merchants will be able to increase prices based on card type. For example, buying groceries with a high-fee card (usually a premium card like the Chase Sapphire Reserve) can be more expensive than paying with a lower-cost card.
Why it's important: Swipe fees, also known as exchange fees, are big business. The Nilsson Report, which tracks the payments industry, estimates that Visa, Mastercard and card-issuing banks collected $72 billion last year alone.
For card issuers, much of that money is funneled into perks associated with luxury cards, enticing consumers to spend more and reducing fees (and potentially interest on unpaid balances) to banks. Increase.
The settlement could change that business. Consumers may be less inclined to use luxury cards if they have to pay more. Some analysts think banks can still tinker with rewards programs to hook users, but the business probably won't be as profitable as it once was.
Retailers will have to make a choice. They have the freedom to charge extra for using points cards, but do they want to annoy their customers?
Doug Canter, general counsel for the National Association of Convenience Stores, said the proposed changes “turn retailers into rate collectors and make them the bad guys in the eyes of consumers.” told the paper. (Some sellers may swallow the cost.)
Further pressure on the credit card industry is expected. Some analysts believe the settlement will allow small retailers to come together to negotiate with card issuers. And Sen. Dick Durbin, an Illinois Democrat who has long fought to rein in swipe fees, is likely to push for legislation that would impose more competition on Visa and Mastercard.
what's happening here
The Supreme Court seems unlikely to restrict access to mifepristone. The justices appeared skeptical of Tuesday's argument that the FDA acted improperly in expanding the availability of abortion pills. Although the lawsuit also touches on abortion, experts say it has a greater impact on federal agencies' ability to make rules.
The FTC could reportedly sue TikTok over its data security practices. According to Politico, authorities are investigating whether the video app violated child privacy laws by deceiving users by denying individuals in China access to their data. The latest push against Chinese tech giant ByteDance will result in federal charges, as Congress considers forcing the sale of TikTok, citing national security concerns.
Cocoa prices have set records. May futures prices for the commodity soared above $10,000 a tonne on Tuesday as unfavorable weather conditions and disease damage cocoa crops in major producing countries such as Ivory Coast and Ghana. This could hurt snack giants like Hershey and Mondelez, which are raising prices on chocolate products and promoting non-chocolate alternatives.
Apple is expected to announce its artificial intelligence strategy in June. Bloomberg reports that the iPhone maker's annual developer conference, scheduled to begin on June 10, will focus on AI (Apple executives said in announcing the event that it will be “absolutely incredible”). Tech watchers are waiting for updates from Apple. The company is working in this area amid reports that it is in talks with Google and OpenAI about incorporating its services into iOS.
Impact of the Baltimore Bridge Collapse
The collapse of the Francis Scott Key Bridge and the closure of one of the United States' busiest ports is testing already strained global supply chains, with experts saying the deadly event could cost billions of dollars. It warns that it could lead to a wave of insurance claims worth millions of dollars and cause widespread damage. serious economic damage.
Authorities are investigating why the propulsion system of the 985-foot cargo ship Dali crashed into a bridge. Officials said the six missing construction workers working on the bridge are presumed dead.
The ship was carrying cargo from Danish shipping giant Maersk. Manufactured in 2015, Dali became a mainstay around the world. Last year, Chilean inspectors warned that the boat's “propulsion and auxiliary machinery” were defective, but it was unclear whether that was connected to Tuesday's incident.
The conflict has brought into focus the country's aging infrastructure. President Biden has said he wants the federal government to pay for rebuilding the bridge (Citigroup's Andrew Hollenhorst told Bloomberg that this investment could have an inflationary effect).
More than $80 billion in goods passed through the Port of Baltimore last year, including lumber, coal and construction equipment. Ford, General Motors, and Volkswagen rely heavily on the port for passenger cars and light trucks.
Businesses and shipping lines were scrambling to reroute cargo ships. The early disruptions of the coronavirus pandemic showed how quickly delays can disrupt the logistics sector, causing traffic jams and weeks of waits at sea. But there were big lessons learned about how to adapt.
“The ports of Norfolk, New York and New Jersey have the capacity to cope with flooding,” said Lars Jensen, CEO of consulting firm Vespucci Maritime. “This will cause some delays, bottlenecks and costs, but nothing dire.”
Global trade routes are already under stress. Yemen's Iran-backed Houthi militia has vowed to step up attacks on ships in the Red Sea, an operation that has disrupted vital trade routes and sent freight costs soaring. Ships are also avoiding the drought-stricken Panama Canal.
Until Tuesday, there had been little disruption to trade routes to the U.S. East Coast, analysts said.
A new front in the US-China trade war
Chinese President Xi Jinping met with a group of American business leaders in Beijing on Wednesday, seeking to demonstrate that China is not closed off to American companies and investors.
But Treasury Secretary Janet Yellen is set to issue a new warning about China's clean energy exports flooding global markets, with the photo shoot resolving trade tensions between the world's two largest economies. Probably not.
CEOs wanted to project a sense of normalcy. U.S. executives attending the event included Steve Schwartzman of Blackstone. Cristiano Amon of Qualcomm. Raj Subramaniam of FedEx. Evan Greenberg of insurance company Chubb. Mark Carney, a former central banker and current chairman of Bloomberg LP, has been vocal about his commitment to key global markets.
And Mr. Xi sought to strengthen his dominance. Even the operational plans for the event, including whether President Xi would host it and last-minute invitations that forced many participants to change their schedules., According to one longtime China watcher, this is a “total power move.”
But a new trade war over green energy is about to begin. Yellen is expected to say in a speech Wednesday that Chinese exports could “hurt American businesses and workers,” distort markets and damage the global economy. He is scheduled to make his second trip to China as Treasury Secretary in the coming weeks.
China has poured billions of dollars into clean technology. Energy consultancy Wood Mackenzie said the country spent more than $130 billion last year on its solar power industry alone, and predicts the business will be dominated by China for years to come.
The Biden administration has drawn criticism for its green energy policies. The Inflation Control Act made billions of dollars in federal subsidies available to boost domestic production of electric vehicles and other clean technologies. This has infuriated European countries, who say the incentives are driving investment away from the continent and toward the United States.
The Chinese government is fighting back on trade. The company filed a lawsuit with the World Trade Organization on Tuesday, arguing that the Biden administration's subsidies to domestic EV manufacturers discriminate against Chinese companies.
“They are a real and present danger, and wildfires are happening right now.”
— rob de pruiyOfficials at Canada's insurance industry trade association warned that businesses and governments are bracing for a repeat of last summer's summer, when a record number of wildfires blanketed North America in smoke.
Lessons learned from Trump Media's blockbuster debut
Donald Trump's social media company rose again in premarket trading Wednesday after its first day of trading.
On Tuesday, Trump Media & Technology Group stock rose as much as 59% despite volatile trading that forced a pause. The rally added billions of dollars in paper money to the fortune of the former president, who faces huge legal costs and is running for president. Still, the company isn't profitable and has lower revenue and user numbers compared to other social media platforms.
Here are three things that are disturbing market watchers:
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As of Tuesday's close, Trump Media had a market capitalization of about $8 billion, making it more valuable than companies such as Alaska Airlines and Western Union.
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The company was trading on a price-to-sales basis. Approximately 2,300, compared to peers like Reddit, which is impressively high. The company reported revenue of $3.3 million and a loss of $49 million in the first nine months of last year.
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Trump Media stock has become one of the most expensive stocks to short, according to data firm S3 Partners, which tracks such trades.
speed reading
Information of sale
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Chinese internet giant Alibaba has abandoned plans to list its logistics business in Hong Kong, four months after canceling the initial public offering (IPO) of its cloud unit. (WSJ)
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International Paper is in talks to buy DS Smith for about $7.2 billion, potentially starting a bidding war with Mondi over the British packaging company. (Reuters)
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“U.S. investors caught up in scrum over TikTok” (NYT)
policy
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Andy Bechtlesheim, the billionaire co-founder of Sun Microsystems, has agreed to a five-year ban from serving as an officer or director of a public company after being accused of insider trading. (Bloomberg)
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“Taxing the wealthy is actually a popular bipartisan stance, poll finds” (Bloomberg)
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Could the Justice Department's antitrust lawsuit against Apple put a damper on Big Tech's stock buyback frenzy? (FT)
the best of the rest
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Investors who bet on crypto stocks like MicroStrategy and Coinbase have lost about $2 billion this year as Bitcoin hit record levels. (Business Insider)
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While President Biden is campaigning against carbon emissions, he is also presiding over the oil boom. (Axios)
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“Stanford War” (Atlantic)
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