South Korea legislators on Tuesday approved the first law in the world that requires app stores to let users pay for in-app purchases through multiple payment systems, a blow to the market dominance of Apple and Google, which opposed the bill.
South Korea’s National Assembly passed amendments to the country’s Telecommunications Business Act that prevent app marketers like Google and Apple from forcing certain payment methods, unfairly delaying the review of mobile content and unfairly deleting mobile content from the app market.
The app-store revenue is lucrative for the tech giants. Apple takes a cut of up to 30 percent through in-app purchases; last year, Google indicated that it intends to follow suit by applying a 30 percent cut to more purchases than it had in the past. The legislation will be a blow to the profit they make in South Korea, where the two control more than 85 percent of the app market, according to lawmakers.
The measures were proposed last year and faced strong resistance from Apple and Google. Two South Korean lawmakers, Jo Seoung Lae and Park Sungjoong, said Google representatives were in direct contact with the National Assembly and its staff.
“Google is a company that wants to maximize their profits,†Mr. Park said in an earlier interview. “Of course they are against people like us ministers who are trying to pass this law.â€
Mr. Jo revealed that Apple “provided their feedback†opposing the legislation. Both lawmakers are members of the South Korea’s Science, ICT, Broadcasting and Communications Committee at the National Assembly.
The law is not expected to cause trade tensions between Seoul and Washington, but the Biden administration has expressed concern over that possibility, according to the director of the Asia Internet Coalition, which has Apple and Google listed among its members.
In normal times, the devastation of a massive hurricane like Ida tends to be followed by an aggressive rebuilding effort, as carpenters, roofers and other skilled workers descend on affected communities to repair the damage.
These are not normal times.
With the global supply chain besieged by trouble — extreme shipping delays, persistent product shortages and soaring costs — construction teams are likely to struggle to secure needed goods. At the same time, the hurricane’s damage to critical industries in the Gulf Coast area and the urgent need to rebuild are expected to cascade through the country’s already strained shipping infrastructure.
“The supply was already terrible,†said Eric Byer, the president of the National Association of Chemical Distributors, a trade association representing 400 companies that make and sell raw materials used in a vast array of industries, including construction and pharmaceuticals. “Now, it’s going to be worse.â€
For months, a surge of trade from Asia to the United States has exhausted the supply of shipping containers, forcing buyers to pay 10 times the usual rate on popular routes like Shanghai to Los Angeles.
As dockworkers have contracted Covid or have landed in quarantine, loading and unloading at ports has been constrained. The pandemic has sidelined truck drivers, limiting the availability of vehicles that can carry products from ports to warehouses to customers.
Hurricane Ida will almost certainly make this situation worse, as available trucks are diverted en masse toward affected communities to deliver relief supplies. No one questions the merits of this course, but it will leave even fewer trucks available to carry goods everywhere else, intensifying already-profound shortages.
“The domestic trucking situation has been bad for some time, and the hurricane will add to that,†said Megan Gluth-Bohan, the chief executive of TRInternational, an importer and distributor of chemicals just outside Seattle. “You’re going to see more logjams at the ports.â€
Her company relies on a supplier in Taiwan for hydrocarbon resins, selling them to American manufacturers that make paints, varnishes and other coatings. She brings in chemicals from Thailand that are included in industrial cleaning products and imports glycols, which are used in food products, makeup, and industrial coatings.
“These are the raw materials that make everything,†Ms. Gluth-Bohan said.
Ms. Gluth-Bohan was still assessing the impact of Ida on her industry, but it seemed obvious that the rebuilding effort would face challenges as the availability of necessary supplies becomes even tighter.
“It’s going to have a significant impact,†she said. “Companies that make coatings, paint, shingles or treated lumber — a lot of these companies are going to have to slow down.â€
Part of the impact is a result of where the storm landed. The Gulf Coast is home to refineries and plants that make all manner of industrial chemicals — a fact brought home last winter, when an intense freeze in the region knocked factories out of commission, causing product shortages that still endure.
In Ida’s wake, the plastics industry was girding for another jump in prices that were already at record highs.
The Royale Group, which manufactures and distributes chemicals from its base near Wilmington, Del., buys only a small percentage of its supplies from plants on the Gulf of Mexico. But that is no comfort, said the company’s chief executive, John Logue, because shortages of a single ingredient can be enough to halt production of many items.
The auto industry has been severely constrained by a persistent shortage of computer chips. Similarly, Mr. Logue’s company, which relies heavily on suppliers in China and India, has for weeks been unable to complete an order for a pharmaceutical company because it is waiting for one raw material.
“Any hiccup in the supply chain right now just adds fuel to the disaster,†Mr. Logue said. “We are not manufacturing what we want to manufacture. We are manufacturing what we are able to manufacture.â€
Jury selection begins on Tuesday in the long-awaited trial of Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos who faces a dozen counts of fraud and conspiracy to commit wire fraud.
At the heart of the trial are questions of what exactly Ms. Holmes, 37, knew of the problems with Theranos’s blood-testing devices and whether she intentionally misled investors over the company’s technology. If convicted, she could serve up to 20 years in prison.
Who’s Who in the Elizabeth Holmes Trial
Erin Woo📍Reporting from San Jose, Calif.
Who’s Who in the Elizabeth Holmes Trial
Erin Woo📍Reporting from San Jose, Calif.
Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial soon for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.
Here are some of the key figures in the case →
The case has captured public attention as another example of a Silicon Valley start-up gone wrong. But Theranos was unusual in that it was led by a female entrepreneur. Ms. Holmes exploited that difference, using it to build attention. She often wore a Steve Jobs-esque uniform of a black turtleneck and spoke in an unusually deep voice. Before Theranos fell from grace, Ms. Holmes was crowned the world’s youngest billionaire and regularly posed for magazine covers.
Her high profile may pose a challenge for jury selection. Prosecutors and her defense lawyers may find it difficult to pick jurors who have not already made up their minds about the case. Around half of the 200 potential jurors had already consumed media related to the case, according to court filings last week.
Potential jurors have filled out a 28-page questionnaire asking them about their media consumption habits, medical history and knowledge of more than 200 possible witnesses. An even more extensive questionnaire put forth by Ms. Holmes’s legal team included more than 100 questions. In June, it was rejected by Judge Edward Davila of U.S. District Court for the Northern District of California, who is overseeing the case. The trial is in San Jose, Calif.
Jury selection is expected to extend into Wednesday and could run longer. Opening arguments start next week.
Gary Gensler, the chair of the Securities and Exchange Commission, said on Monday that a ban was “on the table†for a practice that underpins some of the most popular free stock-trading apps.
Mr. Gensler told Barron’s in an interview that he would consider banning “payment for order flow†— the practice in which large trading operations pay to execute trades for clients of retail brokerage firms, such as Robinhood.
The arrangement is central to the way Robinhood and some of its competitors, including E-Trade and Charles Schwab, have organized their businesses to offer commission-free trades — a crucial factor in the rush of millions of everyday people into the stock market.
The big trading operations, including Citadel Securities and Virtu Financial, that execute the orders make tiny profits on such trades, and the enormous user base of commission-free brokerage firms means those tiny profits can quickly add up.
Mr. Gensler told Barron’s that the practice has “an inherent conflict of interest†because the firms that execute the trades can benefit from that information.
“They get the data, they get the first look, they get to match off buyers and sellers out of that order flow,†he said.
Over the past several months, Mr. Gensler has made a series of statements saying he was closely examining the practice and was open to a wide range of regulatory options. He ordered the agency to look into the matter shortly after he was confirmed; the review is still ongoing.
Robinhood pointed to comments its chief financial officer, Jason Warnick, made as the company prepared for its initial public offering this year. “We think payment for order flow is a better deal for our customers versus the old commission structure,†he said at the time. In a call with investors earlier this month to discuss quarterly earnings, Robinhood officials said that they did not anticipate an outright ban of payment for order flow, but their sources of revenue were diverse and could easily withstand such a move.
Citadel had no immediate comment. Virtu declined to comment.
Consumer advocates and others have criticized the practice, complaining that it can give the large trading operations an advantage.
Banning it would be a welcome development, said David Lauer, the chief executive of the data analytics firm Urvin.ai and a former high-frequency stock trader.
“It is an intractable conflict of interest,†he said. “The brokers cannot get around it.â€
But, he said, ending the practice wouldn’t necessarily spell the end of free stock trades: Firms such as Fidelity already offer free trading without employing the payment-for-order-flow system.
Robinhood’s shares finished the day down nearly 7 percent. Shares of Virtu Financial also moved lower after Mr. Gensler’s comments were published, finishing the day down almost 4 percent.
Matthew Goldstein, Kate Kelly and Tara Siegel Bernard contributed reporting.
