Good morning. Andrew Nusca here, filling in for Alan.
After a year and a half, the arguments of the case are fairly well known. AT&T argues the two companies don’t directly compete and therefore aren’t subject to an antitrust challenge. Meanwhile the Justice Department insists that a deal will give the combined company enough leverage to harm its competition, regardless of whether it’s a so-called vertical merger, in which a company acquires a supplier.
Namely: How can large legacy companies compete with the largest tech companies—Alphabet, Amazon, Apple, Facebook, and so forth—if they can’t scale up through M&A? The world’s largest telecom company combining with the No. 3 entertainment company is sure to create an enormous media giant worthy of scrutiny. Indeed, the combined market cap of ATT-TWX is about $300 billion. But how big is too big when you’re competing against companies with market caps well above $500 billion? What would you do if one or more deep-pocketed tech companies came gunning for your industry?
Technology has allowed business to become more fluid and cross-competitive than ever before. Times have changed; so have markets. We’ll soon find out if the law should change with them, too.
Speaking of what to watch this week: I’m in sunny Laguna Niguel, Calif., for Fortune’s fabulous Brainstorm Health conference. Among those who will grace the stage today: Aetna CEO Mark Bertolini, who will likely have a thing or two to say about tech companies gunning for his industry. Watch the livestream here.
More news below.
Facebook Data Scandal
Facebook got caught up in a major storm this weekend over reports that Cambridge Analytica obtained the personal data of 50 million Facebook users without their informed consent, to better target them with political messages. (The key stories there came from the Observer and the New York Times.) Regulators and lawmakers in the U.S. and Europe are outraged. Facebook might find itself facing massive fines from the Federal Trade Commission, and sanctions from EU data protection authorities. Washington Post
Conspiracies for Kids
Alphabet might be able to observe Facebook’s potential regulatory mauling from the sidelines, but its YouTube platform continues to have its own issues. The latest involves the YouTube Kids app, which, it turns out, has been steering young viewers towards ludicrous and somewhat anti-educational conspiracy videos. “No system is perfect and sometimes we miss the mark,” said YouTube. Business Insider
Forty-five trade associations are begging President Donald Trump to steer away from levying tariffs on China, warning that doing so “would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports; and raising costs for businesses and consumers.” Signatories represent the likes of Apple, Google, IBM, Nike and Walmart, among many other concerns. Wall Street Journal
The newly-elected Russian president is… wait for it…Vladimir Putin. Facing no serious challengers (arch-critic Alexei Navalny was barred from running,) Putin swept up more than three-quarters of the vote. “We are a great big team together and I am a member of your team,” he told supporters last night. Current Russian law says this must be Putin’s last six-year term, though as China’s Xi Jinping has just demonstrated, these things can be changed. CNN
Around the Water Cooler
Wall Street may see a weak open this morning after President Trump spent much of the weekend blasting those investigating him. Trump accused Special Counsel Robert Mueller (a Republican) of hiring “hardened Democrats” and no Republicans. He also suggested that fired Deputy FBI Director Andrew McCabe, who had been involved in the agency’s investigation of Hillary Clinton, had faked the memos McCabe says he made as his position came under threat. Some fear Trump may try to fire Mueller too. CNBC
An NBC News/WSJ poll suggests the Democrats have a 10-point lead over the Republicans in the run-up to this year’s midterms. At the same time, it appears Trump’s approval rating has also increased to 43%, with the president enjoying gains among Republicans, white men and independents. NBC
Chinese Central Bank
China has a new Central Bank governor: Yi Gang. Yi, who has been deputy governor for the last decade, succeeds Zhou Xiaochuan and appears to represent more of the same—although he takes over a bank that has expanded powers as of last week. That includes a greater role in devising new laws for the financial and insurance sectors, although China’s Central Bank is not independent of the government. BBC
An Italian firm called X Electrical Vehicle (XEV) claims that, by Q2 2019, its 3D-printed cars will be hitting the streets. The cars will be made in China, which XEV also sees as its biggest market. They only operate at low speeds—about 43 miles per hour—but XEV says they’ll cost less than $9,500 each. Postal service providers are apparently particularly interested. The only parts of the car that aren’t 3D-printed are its windows, tires and chassis. South China Morning Post