Commercial Awareness Update - March 2019!

[Angel]

Hi everyone!

Hope you have all been well, and welcome to the first commercial news update in March! Happy reading!

Commercial News Update - 6th March 2019

Topics covered this week:

• Rising tensions between India and Pakistan (Qin)
• End to the trade war? (Sara)
• US Task Force on Competition in Technology Industry (Kit)
• AT&T – Time Warner Merger Update (Angel)
• The Trend of Carmakers Increasingly Working Together (Flora)

1. Rising tensions between India and Pakistan (Qin)

The story:

On February 14, a suicide bomber in Kashmir killed 40 Indian soldiers. The attack was claimed by Pakistan-based terrorist group Jaish-e-Muhammad (“Army of Muhammad”), a group whose main motive is to separate Kashmir from India. Kashmir has been a historic bone of contention between India and Pakistan, with both countries having fought four wars and several skirmishes over the region.

Although Pakistan’s Prime Minister, Imran Khan, offered his country’s cooperation in a peaceful investigation, India retaliated by carrying out several “pre-emptive” airstrikes on terrorist camps in Pakistan. Relations between the two countries subsequently deteriorated sharply. Pakistan responded by shooting two Indian aircrafts, and capturing an Indian pilot. Fire was traded on the ground across the Kashmir line of control, and at least six Pakistani civilians were killed in the conflict.

Mike Pompeo, US Secretary of State, and Jeremy Hunt, UK Foreign Secretary, called for both sides to exercise restraint and to de-escalate the situation. On March 1st, Pakistan returned the Indian pilot as a gesture of peace and goodwill. However, the situation is far from resolved. In response to Pakistan’s announcement that the pilot would be returned, Indian Prime Minister Narendra Modi suggested ominously that the airstrikes on Pakistan were just a taste of what was to come. “A pilot project has just been finished. Now, the real thing must be done, the first one was just practice.”

Impact on business and law firms:

The escalating violence of last week prompted Pakistan to shut down its airspace, causing severe disruptions to international airlines. Several routes connecting Asia and Europe with the Middle East rely on passage through Pakistani airspace, and several airlines were forced to reroute or cancel their flights as a result of the shutdown. Emirates, for example, cancelled all flights from Dubai-Pakistan on March 1, while Singapore Airlines and Thai Airways rerouted their Europe-bound flights through Dubai, Mumbai and China instead.​

The conflict also had a broader impact on Asian markets, as global investors shy away from the region more generally. On the day Pakistan shot down the Indian jets, stock markets in Singapore, Hong Kong and Malaysia swung into the red, alongside the Indian and Pakistani bourses. Investors seeking to avoid geopolitical risks in the Indian subcontinent moved instead to safer assets, such as the Japanese yen and Swiss franc, both of which gained against the US dollar.

For law firms, the India-Pakistan conflict underscores the importance of managing geopolitical risk for businesses. A common contractual mechanism is to include a force majeureclause. Such a clause relieves contractual parties of liability when an unforeseen and/or uncontrollable event makes contractual performance impossible. By way of example, Indian-owned GAIL (previously known as Gas Authority of India Limited) has a 20-year supply contract with US LNG supplier Cheniere, and a similar contract with the US Cove Point plant in Maryland. In an interview with analysts from Wells Fargo, Cheniere’s CEO indicated that the conflict had not yet escalated to a force majeuresituation for GAIL, and that the GAIL contract would continue to be honoured.
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2. End to the trade war? - Trump’s decision to pause increasing taxes over China (Sara)
The story

Tariffs on $200 billion worth of Chinese exports to the US was due to rise from 10% to 25% on March 1st. However, on 24thof February, President Trump announced that the US will be suspending the tariff rise on China indefinitely, following “productive” talks, which led the two sides “getting very, very close”. Trump tweeted that there has been “substantial progress” on negotiations with Xi Jinping on issues including intellectual property protection and forced transfer of US technology. Last Sunday (3rdMarch), the Wall Street Journal reported another hopeful news that the two leaders are “in the final stage of completing a trade deal”, and that the deal may be reached around March 27.

The final trade deal, which will bring an end to the year-long trade war, is likely to include China lowering tariffs and other restrictions on “American farm, chemical, auto and other products” and the US “removing most, if not all, sanctions levied against Chinese products since last year”. In regard to the trade deficit between the two countries (the US is purchasing significantly more from China than China is from the US), China has already committed itself to buy an extra $1.2 trillion of American goods.

Impact on businesses and law firms

The US-China trade war had serious ramifications worldwide and in industries of all kind. The 10% tariff on Chinese goods raised costs of production and thus final price of goods, costing American businesses and consumers $2 billion per month. The trade war also caused extra damage to the Chinese economy, which was already slowing down. This led to a fall in consumer confidence, which was a huge threat around the globe, as demand from the world’s largest consumer base drastically fell. The effects were even felt by the tech titan Apple and US-based construction machinery behemoth Caterpiller as their profits fell. Honda also recently announced to close its Swindon plant, blaming China’s economic slowdown and the trade war for its decision. Therefore, the trade deal, if reached, will recover business certainties around the world and hopefully, assist China in getting out of the economic slump. Following the news on a possible trade deal, China’s benchmark stock index, the Shanghai Composite, rose more than 3% and the European stocks were traded higher (the pan-European Stoxx 600 provisionally closed 0.23% higher) on Monday.
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3. US Task Force on Competition in Technology Industry (Kit)​

The story:

Last week, the US Federal Trade Commission (FTC) announced that it would be setting up a Technology Task Force. This would be a task force focusing on “monitoring competition in U.S. technology markets, investigating any potential anticompetitive conduct in those markets, and taking enforcement actions when warranted”.

The task force will include approximately 17 staff attorneys and a Technology Fellow, “who will provide important technical assistance and expertise to support the task force’s investigations”.

The task force’s powers will include reviewing existing and prospective mergers of technology companies. For the former, the task force would be able to seek the full set of remedies, such as unwinding and divestment of companies, that would be available during the review of a prospective merger.

The FTC has not named specific companies or deals which would be targeted by the task force.

Impact on businesses and law firms:

The FTC’s move is the latest in what appears to be a transnational trend towards greater regulation of technology companies’ market conduct. For instance, last year, the European Commission imposed an unprecedented fine of €4.34bn on Google for abusing its dominance in the online search market by restricting the use of its Android operating system. An example of such a restriction is that Google has arrangements with Android device manufacturers which incentivise the pre-installation of Google’s products on the devices. In a more recent case last month, Germany’s Federal Cartel Office prohibited Facebook from combining data from Facebook, Instagram, WhatsApp and third-party websites without the explicit consent of Facebook users.​

Overall, it seems that Big Tech would be facing an increasingly stringent regulatory landscape. Technology companies, and the law firms which advise them, should be prepared to review whether their seemingly innocuous, existing market conduct is likely to be deemed anti-competitive. They would also need to be conscious of the possible anti-competitive implications of any future policies and behaviour which they wish to adopt.​

 

[Angel]

4. AT&T – Time Warner Merger Update (Angel) ​

The Story: (in a timeline)

• Oct 2016: AT&T and Time Warner first announced plans to merge. The merger was valued at USD 85 billion.
• Nov 2016: Such news did not garner newly elected US President Mr Trump’s favour. He thought that the merger risks putting ‘too much competition of power in the hands of too few’.
• March 2018: Actions first filed by DOJ to block the proposed merger. Former President Bush-appointed Judge Leon gave green light to the deal.
• June 2018:AT&T announced a successful acquisition of Time Warner.
• Nov 2018: DOJ appealed against the merger on the basis that it would lead to ‘higher prices and less innovation’ for Americans. Because merger had already happened, the DOJ’s case is essentially asking the Court of Appeals (“COA”) to ‘unmerge’ the companies despite having combined operations for approximately 7 months.
• Dec 2018: Representatives from both AT&T and Time Warner testified in the COA in Washington DC.
• Feb 2019: COA rejected DOJ’s appeal. Following the decision, a representative of DOJ said that the DOJ have no plans to seek further reviews for the time being. Time Warner has since been renamed as WarnerMedia.

Impact on businesses and law firms

It is important for M&A lawyers to understand the implications of antitrust lawsuits, especially one this big and rare. This case would be a bellwether for future M&A activities. On a wider level, these lawsuits brought on by the DOJ made history – it marked the first time in decades since the US government last intervened in private M&A activities.

From the government’s perspective, the intervention is justified to prevent massive concentration of powers from falling into the hands of one. The combination of one of the world’s largest wireless telco companies with one of the world’s largest media and entertainment companies gives the entity too great of a bargaining leverage in the industry.
Time Warner controls some of the biggest entertainment brands in the world. This includes CNN, HBO, Warner Brothers and many others. If the merger is successful, there is a risk that the AT&T can market its products through Time Warner’s content to consumers. Combined, the entity would have an expansive reach to many different business areas and culture, locally and internationally. This would greatly disadvantage other telco businesses as they cannot afford to achieve the same level of promotion. They can also collect data based on consumers’ viewership taste and potentially construct a digital advertising department to compete with FAANG companies such as Facebook and Google.

There are also risks that smaller cable companies/ TV distributors/ related businesses may be coerced to pay more for the rights to carry popular channels and movies. These businesses can either absorb the costs to remain competitive but at a reduced profit or pass the cost to consumers. Regulators are also concerned with preserving healthy competition within an industry and the protect consumers. The successful merger risks stifling growth, innovation and efficiencies. Ultimately, the biggest beneficiary within the chain is the originator, AT&T- WarnerMedia.
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5. The Trend of Carmakers Increasingly Working Together (Flora)​

The story:

The automotive industry has seen an increase in competitors teaming up to prepare for an uncertain future. Last week BMW and Daimler announced a £880m partnership to develop a number of mobility services together. Honda invested £2.1bn in rival General Motors’ driverless unit. As well as Ford and Volkswagen agreeing to investigate ways of working on electric and autonomous vehicles together.

It is unclear what the future of mobility is going to be. Some predict electric cars, ride sharing and autonomous driving radically changing how cars are used and a fall in ownership. The research and development to develop these new technologies costs billions so it makes sense to share the burden rather than duplicating. Problem for the industry is that its struggling to afford its own future. Teaming together will lower carmakers risks.

Problem that having to overhaul their production processes fast. There is a danger of new players coming in who can be radically different in how they make and sell cars or transport services. For example, US firm Tesla has become the world’s number one manufacturer of plug-in passenger cars in little over 15 years, and the Chinese are making huge strides in developing electrics, backed by generous subsidies from the Chinese government. In addition, tech companies like Uber and Google’s driverless car business Waymo have created even more competition.

The impact on businesses and law firms:

These agreements are rarely exclusive or involve cross ownership and they tend to collaborate only in certain areas, while remaining competitors in others. Given the competitive nature of the industry, lawyers should be very careful with the wording of these agreements to ensure their clients remain in favourable position and prevent potential competition issues.

Full mergers between car brands seems unlikely due to the huge costs involved in aligning the production processes and marketing. Instead we can expect to see more rationalisation, with carmakers pulling out of unprofitable markets and forging more strategic pacts similar to Daimler and BMW. Legal expertise will be required for these restructurings.

That's all for this week! Let us know your thoughts by commenting below. Have a great week ahead, everyone! ​

 

[Alice G]

Great write-ups everybody! Really palatable and concise summaries yet detailed enough to get a great understanding of the issues! Thank you all

 

[Sara Moon]

Hi everyone!

Hope you are having a great week and as always, here are this week's commercial write-ups! Enjoy

Commercial News Update - 13th March 2019

Topics covered this week:

• Calls for reforms of EU competition rules (@Sara Moon )
• House of Lords Committee wants more tech regulation (@kitk )
• The reduction of import tariffs in a no-deal Brexit (@bugsy malone)
• Italy prepares to endorse China's Belt and Road Initiative (@Abstruser )
  
  
  1. Calls for reforms of EU competition rules - @Sara Moon
  The story:
  
  Since the EU's rejection of the Siemens-Alston railway deal on the grounds that the merger will cut competition and drive up prices for high-speed trains, France and Germany have been calling for reform of the EU's competition law. The EU's competition commissioner Margrethe Vestager, when rejecting the deal, explained that if the deal succeeds, customers will be encouraged to seek for alternative cheaper suppliers, thus inviting foreign competitors like the Chinese CRRC into the market, which was the very thing the deal was trying to prevent. However, French finance minister Bruno Le Maire criticised Ms. Vestager's decision as a mistake and along with German counterpart Peter Altmaier, proposed an overhaul of EU competition law. The proposal included, among others, granting politicians the power to override EU commission decisions and ensuring regulators to make decisions with a global view rather than merely looking at competition within the EU or individual member states. Although the call for reforms of competition rules have frequently emerged at the end of every commission mandate, often by France, according to the Financial Times, the situation this year is different because Germany is backing France and the UK, traditional defenders of strict EU rules, are heading to Brexit.
  
  Then what is Ms. Vestager's view on suggested reforms? It seems like she is taking a more cautious view of reforming strict EU competition rules. Last week, in an interview with the Financial Times, she warned that member states should be "aware of the consequences" of weakening merger rules. She also emphasised that the overhaul will require a "strategic choice" between going down towards a more American economic model or a more Chinese model. China has adopted state capitalism, supporting state-owned monopolies to achieve the government's global ambitions, while the US has opted to the Chicago School of competition policy, which tolerates concentration of market power on the grounds that market concentration and the existence of dominant market players are not always detrimental to competition. Ms. Vestager's greatest concern on revamping competition rules of the EU is that any change will have consequences on not just within the European bloc, but beyond it, given the EU's influence over the approach other countries take.
  
  Although Ms. Vestager believes that the current EU competition law framework has served well for years, she did acknowledge the need for "a more nuanced and more pragmatic approach". However, her focus is more on regulating digitalised markets. She said that there is a need to police "data monopolists" who control access to a vast amount of data and set prices, thus undermining competition.
  
  Impact on businesses and law firms:
  
  It seems like the time has come to reform the EU's competition rules. With China pursuing state monopolies and the US being a protectionist nation, EU's strict merger rules that make it difficult for European companies to merge and compete against outsiders, especially Chinese companies, are against protecting the bloc. Although it is uncertain whether Ms. Vestager will ultimately accept Franco-German views of the reform, the EU might update its rules to take into account the global market when making decisions on merger activities, rather than limiting its view to the European bloc, and to adapt to digitalisation of the markets. Since mergers and acquisitions are a key strategies for companies to expand their businesses, both businesses and law firms would have to keep an eye on whether the EU will be reforming its rules. The decision of the EU will not just affect the EU itself but will also impact the approaches other countries take in regard to competition rules.
  
  
  2. House of Lords Committee wants more tech regulation - @kitk
  
  The story:
  
  Last week, the UK House of Lords Communications Committee released a report, "Regulating in a Digital World", which demanded more regulation of technology companies.
  
  The report noted that there are currently numerous regulators, such as Ofcom and the Information Commissioner's Office (ICO), which have oversight of the digital world. To counteract such fragmented regulation of technology companies, the report recommended 10 principles to "shape and frame all regulation of the internet". These principles are: parity; accountability; transparency; openness; privacy; ethical design; recognition of childhood; respect for human rights and equality; education and awareness-raising; democratic accountability, proportionality and an evidence-based approach.
  
  Another proposal of the report is the creation of a new Digital Authority, to coordinate existing regulators of technology companies, examine legislation, make recommendations for improvement and report to a joint committee of both Houses of Parliament.
  
  The report also called for online services to provide "maximum privacy and safety settings" as the default to allow users more control over their data, the ICO to be able to conduct audits where there are risks associated with using algorithms in decision-making, and online services to be subject to a duty of care enforced by Ofcom that would require moderation of user-generated content.
  
  Impact on businesses and law firms:
  
  Given the wide scope and stringent requirements of the report's recommendations, companies providing digital services are likely to face more restrictions and costs in doing business. It is unclear how this would affect the business models of many technology companies, which provide their services on publicly available platforms. For example, these companies might turn to charge fees for all or some of their services, consolidating the services that they provide, or discontinuing their services. Also, as the regulation of technology companies is set to become more cross-disciplinary, law firms which advise technology companies would need to gain a broader and deeper understanding of how their clients operate to advise them of the legal implications that might arise.
  
  3. The reduction of import tariffs in a no-deal Brexit - @bugsy malone
  
  The story:
  
  Last week the UK government announced they may cut between 80-90% of tariffs on imported goods if we leave without a Brexit deal.
  
  It may be argued that tariffs are really about protectionism, and yet, in instances such as steel, they have not worked. For example, the Chinese have been able to dump freely on world markets because they have a glut of steel. In this instance, the EU and its protectionist laws have not been of use.
  
  The government could use zero import tariffs as a negotiation tactic to try to get the best deal possible from the EU.
  
  Impact on businesses and law firms:
  
  Zero tariffs are likely to worry some UK producers in industries which are sensitive to competition. However, some UK industries will still be protected. For example, textiles, cars, and farming such as beef, lamb and dairy. In February 2019, environment secretary Michael Gove gave concerned farmers reassurances that the government will continue to apply tariffs to food.
  
  Zero tariffs would be beneficial as it could attract more foreign investment into the UK, as companies find the UK a good stepping stone to making an investment. For example, in the 90s under Margaret Thatcher, car companies came to the UK to use it as a platform into Europe.
  
  Zero tariffs alsoencourages companies to sell more goods into the UK, giving consumers more choice of goods to buy. Zero tariffs could be a great opportunity to cut the cost of food, clothing and footwear and improve the standard of living for British people. This is why the reduction of tariffs is one of the exciting opportunities Brexit offers.
  

 

[Sara Moon]

4. Italy prepares to endorse China's Belt and Road Initiative - @Abstruser
The story:

Last Wednesday, Italian officials confirmed that Italy is currently in negotiations to be part of China's Belt and Road Initiative (BRI). By way of background, the BRI is an ambitious infrastructure program that aims to create land and sea trade passages between China and the Middle East, Europe and Africa.

Officials have indicated that Italy is likely to sign a formal memorandum of understanding by the end of the month, in time for President Xi Jinping's visit to the country. In an interview with the Financial Times, junior industry minister Michele Geraci stated "We want to make sure that ‘Made in Italy' products can have more success in terms of export volume to China, which is the fastest-growing market in the world."

If the signing does take place, Italy will be the first G7 country to formally support the BRI. The vast majority of G7 countries still view China's BRI with a degree of suspicion. In response to Italy's decision, a spokesman for the White House National Security Council stated: "We are sceptical that the Italian government's endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy's global reputation in the long run."

Impact on businesses and law firms:

At first blush, the connective infrastructure provided by the BRI would seem to allow significant international business opportunities for participant countries. However, the initiative is not without controversy. Many BRI projects (such as high-speed railways) are located in developing economies such as Pakistan and Indonesia, countries which lack the ability to fund such massive projects alone. As such, most BRI projects to date have involved a significant amount of Chinese funding, creating the risk of a ‘debt trap', whereby countries are unable to repay their Chinese debts.

A prominent case in point is Sri Lanka. In 2010, Sri Lanka borrowed over $1 billion from China to build a BRI port in Hambantota. However, far from becoming the "major" trade hub as was promised, the Hambantota port was a dismal failure – in 2012, the port only drew 34 ships. As the port failed to generate any income streams, the Sri Lankan government struggled to repay the Chinese debt it had taken on. In 2015, in order to settle its debts, Sri Lanka granted China a 99-year lease of the port and a surrounding 15,000 acres of land.

Still, in the short term, should Italy formally join China's BRI, businesses in the construction industry could benefit from Italian infrastructure projects implemented as part of the BRI. Law firms with expertise in project finance could also benefit from advising on the financing of BRI projects in Italy.

 

[Bugsy Malone]

20th March 2019

Hi everyone!

This week’s write up includes:

• Spotify filed a complaint against Apple for unfair fees (@Sara Moon )
• Boeing 737 Max aircraft issues (@Abstruser
• A Brexit update and its impact on the debt restructuring business (@Angel)

1. Spotify filed a complaint against Apple for unfair fees (@Sara Moon )

The story:

Last Wednesday (13th March), the Spotify CEO Daniel EK published a blog post announcing that Spotify had filed a complaint with European antitrust officials arguing that Apple imposed unfair fees on it which, “purposely limit choice and stifle innovation at the expense of the user experience”. Apple currently requires Spotify and other content providers to pay a 30% fee on each purchase made through Apple’s in-app payment system. When Spotify agreed in 2014 that it will pay the fee, it had to raise its premium subscription price from €9.99 to €12.99 while Apple released its own ‘Apple Music’ service for €9.99 in 2015. Spotify then decided to opt out of paying the fee in 2016, and as a result, it had to pull its premium subscription service from the App Store. It is currently supporting only the free version of its app in the App store. Spotify asked the European Commission to interfere to prevent Apple’s anticompetitive behaviour.

Impact on businesses and law firms:

It’s not just Spotify who has complaints about Apple’s unfair rules. Netflix has also, last December, opted out of Apple’s payment system and decided to no longer sell paid subscriptions in its Apple mobile apps. Instead, like Spotify, it sells subscriptions on its own website where it doesn’t have to split revenue with Apple. There is also a pending class-action lawsuit against Apple (Apple Inc. v Pepper), which is to be heard by the US Supreme Court. Interestingly, the claim was brought by iPhone users not app developers. The issue in the case is ‘whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense’ (see Supreme Court of the United States Blog). In other words, the case will decide on the issue of whether consumers of app offered through the App store could sue Apple for higher price they suffered due to Apple’s anti-competitive practice in the App Store. Apple argues that it cannot be responsible for the app price rise because 30% fees are imposed on app developers, not on consumers.

Not only this, similar anti-competitive behaviour we see from Apple can also be seen from other tech behemoths. For example, last year, the European authorities fined Google €4.34 billion for its breach of EU antitrust rules by imposing ‘illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search’. For example, Google required manufacturers to pre-install the Google Search app and Chrome app as a condition for licensing Google’s app store. The European Commission has held that Google’s abuse of power has led to the dominance of its search engine and prevented rivals from competing with it, thus denying consumers the benefits of effective competition.

Due to the growing use of anti-competitive business strategies from the largest technology companies like Amazon.com Inc., Alphabet Inc. (who owns Google), Facebook Inc and Apple, the Massachusetts senator Elizabeth Warren has called for legislation that would designate these companies as “platform utilities” and unwind technology mergers that undermine competition and hurt small businesses. She proposed that some mergers by these huge tech companies which has led to damage on healthy competition to be unwound, such as Amazon’s purchase of Whole Foods, Facebook’s acquisition of Instagram and Google’s deals for Waze. Also, under her proposal, these “platform utilities” with more than $25 billion in global revenue will be barred from owning participants on their own platform. For example, Amazon Marketplace and AmazonBasics would have to be separated.

So what does this all mean to businesses and law firms? It seems like there is growing pressure on big tech companies like those mentioned above to avoid any abuse of power and ensure that they do not hinder rival companies from competing on their own merits. For Apple, the previous case of Google might mean that it may soon be subject to thorough investigation by the European regulators on its anti-competitive policies and end up having to pay a huge fine. For law firms, how the US Supreme Court would decide the case on Apple would be something to keep an eye on, because if the court decides on the consumer’s favour, it would mean that the tech companies would really have to review any of their anti-competitive policies that affect consumers to avoid floodgate of lawsuits. Also, if Ms Warren’s proposal is accepted, the law firms would have to investigate whether companies that would be classified as the so-called “platform utilities” (essentially, those providing a platform) have any mergers that needs to be unwound and help them over the unwinding procedure.

 

[Bugsy Malone]

2. Boeing under fire for 737 Max fleet (@Abstruser)

The story:

On March 10, an Ethiopian Airlines aircraft crashed south of Addis Ababa, just 6 minutes after take-off. All 157 passengers on board were killed in the accident. The aircraft was a Boeing 737 Max 8 carrier. The 737 Max is Boeing’s latest range of aircrafts, and only entered service in May 2017.

The Ethiopian Airlines incident comes just 5 months after a brand-new 737 Max 8 operated by Indonesian airline Lion Air crashed 12 minutes after take-off, killing all 189 passengers on board. Preliminary investigations into the Lion Air crash revealed issues with the plane’s flight control software shortly after take-off, with the automated system repeatedly pushing the plane downwards despite the pilot’s attempts to gain altitude.

In a highly unprecedented move, the Civil Aviation Administration of China ordered its domestic airlines to ‘ground’ and suspend operations of all Boeing 737 Max aircrafts on March 11, despite no official action from the US Federal Aviation Authority (“FAA”), which is the authority responsible for certifying the Boeing 737 Max. Indonesian authorities promptly followed suit. Shortly after, the FAA issued a “continued airworthiness notification” to all international operators of 737 Max aircrafts, insisting on Twitter that there was “no basis to order grounding the aircraft."

Despite the FAA’s announcement, aviation authorities in Singapore, Malaysia, Australia and the EU all moved to ground the 737 Max on March 12. On March 13, the FAA gave in to pressure from President Donald Trump and other international authorities, and grounded all 737 Max planes until further notice. Boeing grounded its global fleet of 737 Max planes on 14 March.

Impact on businesses and law firms:

The Ethiopian Airlines incident prompted a steep sell-off in Boeing shares, with the company losing over $25 billion in market value in the week that followed the incident. The incident has already impacted broader customer confidence in Boeing. Speaking on the 737 Max 8, Indonesian airline Garuda Indonesia stated that “[w]e have lost confidence in the product”, and is currently in talks with Boeing to cancel orders for 20 Boeing 737 Max carriers. Similarly, Malaysian Airlines’ order for 25 Boeing 737 Max planes is now under review.

Boeing has since suspended all deliveries of 737 Max carriers, and has announced that it will be fixing future 737 Max aircrafts with a software update. Analysts estimate the fixes to cost $500 million to the company, and around 6 months to implement. According to Morgan Stanley, this is a “worst-case scenario” for Boeing, as the 737 Max currently makes up 70% of Boeing’s commercial production, and accounts for over $600 billion in orders. Some analysts estimate that each month of delay could cost Boeing between $1.8 billion to $2.5 billion in delayed revenue under the current state of affairs. Delayed delivery could also negatively affect Boeing’s supply chain, as it has to make arrangements to store extra components and products that are no longer being used or delivered.

For law firms, the financial side-effects of the Max 737’s grounding may prompt airlines to seek damages or compensation from Boeing. Analysts at Morningstar have estimated that airlines are losing up to $75,000 in revenue for every day that the 737 Max remains grounded and inoperable. That figure is likely to rise as summer approaches and airlines receive more travellers. Norwegian Air has already publicly stated that it would seek compensation from Boeing for all revenue lost due to the 737 Max’s grounding. While the legal success of such claims would depend on the specific clauses of each contract, aviation law firm Kreindler & Kreindler stated that “One way or another, whether there's a contractual provision that covers it or not, there are almost certainly going to be claims made against them.” Analysts from JPMorgan estimate that such claims could cost Boeing up to $115 million per month.

Quite aside from seeking damages, the delay in deliveries is likely to trigger late delivery clauses for airlines who have already placed 737 Max orders with Boeing. While some airlines may try to use late delivery to cancel delivery altogether, analysts note that it may be impractical for airlines to do so, as the only industry alternative to the 737 Max is the Airbus SE A320, which has no delivery slots available for the next few years. As such, industry seniors have noted that where airlines do not receive an aircraft as promised, it is not uncommon that the planemaker cover the cost of financing. In other words, where airlines have taken out loans to purchase 737 Max aircrafts, Boeing may compensate them for repayments plus interest. However, the exact cost of compensation remains unknown.

 

[Bugsy Malone]

3. A Brexit update and its impact on the debt restructuring business (@Angel)

The story

An update:

• First, the exit deal (that Mrs May had spent 2 years negotiating and renegotiating countless times) was rejected by the MPs for the second time.
• Second, on the following day, MPs rejected the possibility of a no-deal Brexit as well.
• Third, MPs voted in favour of a 3-month extension of Article 50, bringing the new Brexit day to 30th June.
  • The government must now make an official request for the extension
  • The EU will have to make a unanimous decision

As pointed out by The Economist (https://www.economist.com/leaders/2019/03/14/oh-uk-what-next-for-brexit), Mrs May’s tactics from here on is somewhat equivalent to compelling MPs to choose from options that they are disenchanted with, and neglect alternatives that MPs are convinced to be better. From a constitutional and political point of view, it seems that regardless of the outcome, given the divided views and factions, a truly consenting parliamentary majority to move things forward in carving the future relationship between the UK and the EU is harder than ever.

Impact on businesses and law firms (specifically, debt restructuring):

The amount of literature covering the impact of Brexit in all practical and possible ways are countless. But, just to bring things closer to home for aspiring commercial lawyers, the legal practice of debt restructuring in the UK is perhaps an area worth considering more closely.

Background:

A company/ business can run into financial difficulties anytime. This could be due to various factors that may or may not be within the control of the company. For example, a change in consumer taste (current high-street brands), economic downturns (Lehman Brothers), unprecedented geopolitical changes, or simply just mismanagements within the company (Patisserie Valerie).

Sure, the company can try to inject additional funds by obtaining more debt (i.e. bank- loans or issuance of bonds), reduce costs by increasing efficiency or even change the strategic direction of the business as a whole. However, if its financial difficulty is too substantial (i.e. its inability to pay its creditors is too much), it is doubtful that these internal modifications would do much help. The company will then only have two choices; to close down the business altogether or to seek help to ‘rescue’ the company.

The legal regime available in the UK to restructure a company’s debt (i.e. to reorganise/ renegotiate/ propose new terms with the creditors to give the company some leeway to continue business and not be closed down just because of some cash-flow problem) is a popular one to domestic, EU and foreign companies. Whether it is the UK courts’ pragmatic approach or the availability of creative ways to restructure a business in the UK that are unavailable in other jurisdictions (including the EU), the legal service to advise major companies on debt restructuring is a big business to London law firms.

Just to name a few, Clifford Chance and Kirkland & Ellis have been involved in seminal restructuring cases such as with a German-based group, Rodenstock. Dentons, Slaughter and May and Linklaters were involved in the restructuring of Luxembourg-incorporated group, Wind Hellas. For a more recent example, Shearman & Sterling recorded an interesting podcast the restructuring of Greek-based Frigoglass at https://www.shearman.com/perspectives/2018/09/podcast-on-frigoglass-restructuring .

What Brexit means:

What these companies have in common is:

• They are/ were all based and set up in the EU;
• London-based law firms were instructed to restructure these high-profile businesses to gain access to the UK jurisdictions;
• As a Member State of the EU, proceedings in the UK are automatically recognised in the EU under the provisions of the EU Insolvency Regulations.

After Brexit, this would all change. The UK government indicated that EU Insolvency laws will be repealed on Brexit day. The biggest concern is the inevitable outcome of UK proceedings losing its competitive advantage in attracting EU-based companies to seek relief in the UK. There is no point in doing so if UK proceedings will no longer be recognised in the EU and vice versa. While the UK government also indicated that the current UK regime will be improvised to increased its competitiveness in a post-Brexit, law firms remain sceptical (for example, http://www.allenovery.com/SiteCollectionDocuments/UK_Corporate_Insolvency_Reforms_Factsheet.pdf)

PS: Just in case you missed it, do check out these other awesome updates and in-depth analysis on Brexit in other ways.

• https://www.thecorporatelawacademy.com/brexit-impact-on-debt-financing-transactions/
• https://www.thecorporatelawacademy....ay-15-january-2018-7pm.1115/page-2#post-10212
• https://www.thecorporatelawacademy....t-on-law-firms-a-post-referendum-analysis.35/
• https://www.thecorporatelawacademy....xit-updates-news-and-resources.818/#post-5985

 

[Jaysen]

20th March 2019

Hi everyone!

This week’s write up includes:

• Spotify filed a complaint against Apple for unfair fees (@Sara Moon )
• Boeing 737 Max aircraft issues (@Abstruser
• A Brexit update and its impact on the debt restructuring business (@Angel)

1. Spotify filed a complaint against Apple for unfair fees (@Sara Moon )

The story:

Last Wednesday (13th March), the Spotify CEO Daniel EK published a blog post announcing that Spotify had filed a complaint with European antitrust officials arguing that Apple imposed unfair fees on it which, “purposely limit choice and stifle innovation at the expense of the user experience”. Apple currently requires Spotify and other content providers to pay a 30% fee on each purchase made through Apple’s in-app payment system. When Spotify agreed in 2014 that it will pay the fee, it had to raise its premium subscription price from €9.99 to €12.99 while Apple released its own ‘Apple Music’ service for €9.99 in 2015. Spotify then decided to opt out of paying the fee in 2016, and as a result, it had to pull its premium subscription service from the App Store. It is currently supporting only the free version of its app in the App store. Spotify asked the European Commission to interfere to prevent Apple’s anticompetitive behaviour.

Impact on businesses and law firms:

It’s not just Spotify who has complaints about Apple’s unfair rules. Netflix has also, last December, opted out of Apple’s payment system and decided to no longer sell paid subscriptions in its Apple mobile apps. Instead, like Spotify, it sells subscriptions on its own website where it doesn’t have to split revenue with Apple. There is also a pending class-action lawsuit against Apple (Apple Inc. v Pepper), which is to be heard by the US Supreme Court. Interestingly, the claim was brought by iPhone users not app developers. The issue in the case is ‘whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense’ (see Supreme Court of the United States Blog). In other words, the case will decide on the issue of whether consumers of app offered through the App store could sue Apple for higher price they suffered due to Apple’s anti-competitive practice in the App Store. Apple argues that it cannot be responsible for the app price rise because 30% fees are imposed on app developers, not on consumers.

Not only this, similar anti-competitive behaviour we see from Apple can also be seen from other tech behemoths. For example, last year, the European authorities fined Google €4.34 billion for its breach of EU antitrust rules by imposing ‘illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search’. For example, Google required manufacturers to pre-install the Google Search app and Chrome app as a condition for licensing Google’s app store. The European Commission has held that Google’s abuse of power has led to the dominance of its search engine and prevented rivals from competing with it, thus denying consumers the benefits of effective competition.

Due to the growing use of anti-competitive business strategies from the largest technology companies like Amazon.com Inc., Alphabet Inc. (who owns Google), Facebook Inc and Apple, the Massachusetts senator Elizabeth Warren has called for legislation that would designate these companies as “platform utilities” and unwind technology mergers that undermine competition and hurt small businesses. She proposed that some mergers by these huge tech companies which has led to damage on healthy competition to be unwound, such as Amazon’s purchase of Whole Foods, Facebook’s acquisition of Instagram and Google’s deals for Waze. Also, under her proposal, these “platform utilities” with more than $25 billion in global revenue will be barred from owning participants on their own platform. For example, Amazon Marketplace and AmazonBasics would have to be separated.

So what does this all mean to businesses and law firms? It seems like there is growing pressure on big tech companies like those mentioned above to avoid any abuse of power and ensure that they do not hinder rival companies from competing on their own merits. For Apple, the previous case of Google might mean that it may soon be subject to thorough investigation by the European regulators on its anti-competitive policies and end up having to pay a huge fine. For law firms, how the US Supreme Court would decide the case on Apple would be something to keep an eye on, because if the court decides on the consumer’s favour, it would mean that the tech companies would really have to review any of their anti-competitive policies that affect consumers to avoid floodgate of lawsuits. Also, if Ms Warren’s proposal is accepted, the law firms would have to investigate whether companies that would be classified as the so-called “platform utilities” (essentially, those providing a platform) have any mergers that needs to be unwound and help them over the unwinding procedure.

Really strong update this week guys.

Great follow up to this particular story in the news today: https://www.bbc.co.uk/news/business-47639228 - "Google hit with €1.5bn fine from EU over advertising".

I think I've mentioned this before, but I expect the regulation of big tech companies could be a hot topic at interviews this year. So much attention has turned on them recently through many different angles.

For example:

• Should social media sites be forced to remove "harmful" video footage? (A link to the criticism against social media sites after the New Zealand attack and Instagram vowing to remove self harm images after a dad said the app "helped kill" his daughter).
• Will regulating big tech companies stifle innovation?
• Can regulating Google and Facebook stop the spread of fake news?
• Should the US follow the EU with a widespread data protection law?

If anyone has any thoughts on this or any other topics in this week's update, do feel free to share!

 

[Alice G]

Really strong update this week guys.

Great follow up to this particular story in the news today: https://www.bbc.co.uk/news/business-47639228 - "Google hit with €1.5bn fine from EU over advertising".

I think I've mentioned this before, but I expect the regulation of big tech companies could be a hot topic at interviews this year. So much attention has turned on them recently through many different angles.

For example:

• Should social media sites be forced to remove "harmful" video footage? (A link to the criticism against social media sites after the New Zealand attack and Instagram vowing to remove self harm images after a dad said the app "helped kill" his daughter).
• Will regulating big tech companies stifle innovation?
• Can regulating Google and Facebook stop the spread of fake news?
• Should the US follow the EU with a widespread data protection law?

If anyone has any thoughts on this or any other topics in this week's update, do feel free to share!

Precisely what my Slaughters case study was about and I didn’t do a good job on it as I wasn’t as aware of the topic. They directly asked me about stifling innovation

 

[Jaysen]

Precisely what my Slaughters case study was about and I didn’t do a good job on it as I wasn’t as aware of the topic. They directly asked me about stifling innovation

Ah very useful to know they chose that topic. Sorry to hear about that - same thing happened in my Jones Day interview back in the day, I hadn’t heard of the topic they wanted to discuss so I struggled with all the follow up questions. I remember feeling frustrated because any other topic and I felt I would have been OK.

 

[Alice G]

Ah very useful to know they chose that topic. Sorry to hear about that - same thing happened in my Jones Day interview back in the day, I hadn’t heard of the topic they wanted to discuss so I struggled with all the follow up questions. I remember feeling frustrated because any other topic and I felt I would have been OK.

Yeah it’s going to be my downfall but you know what you know and can’t help that which you don’t! I tried my best! But yes going forwards I’d advise anybody to engage with this topic

 

[Abstruser]

Commercial Awareness Update - 27th March 2019

Hi everyone,

The topics covered in this week's update are:

1. Brexit update
2. Weak EU economic growth
3. Big Tech: Google vs EU

As always, please feel free to share your thoughts and comments below. Happy reading

1. Brexit update (by @Alice G)

The story:

Despite the turbulence of the last couple of weeks in Parliament, Brexit does not appear to be any more certain. Two points of significance have come to fruition in the last week.

The first is the petition to revoke Article 50. At the time of writing, the petition has been signed 5,741,638 times. Despite the great number of signatories, Theresa May has ardently stated that this is not something she would be prepared to entertain under her leadership. This isn’t too surprising given the groundwork that the Prime Minister has put into her own deal and it is highly unlikely that any leader would revoke Article 50 without exhausting all other means to reach a solution. However, what this petition does demonstrate is the exercise of democracy amongst the British people. It arguably shows the desire for people to be more actively engaged in this process which might well spur a greater call for a second referendum, the ‘People’s Vote’, to allow people that chance to have their say. (Interestingly, the Great Debaters Club have proposed the following ‘Is The Revoke Article 50 Petition Pointless?’ for their next debate.)

The second is the People’s March which took place on Saturday 25th March. Although the number of participants is debated, there was indeed a significant turnout of people. There was a great number of people attending the march who were not of legal voting age back in 2016, arguing that they deserve the right to vote on Brexit which will ultimately determine the nature of their futures.

May is still hoping to get the backing for her deal in a third vote. Jacob Rees-Mogg has indicated that he might consider backing the deal but the DUP still state they would prefer a year long delay over the proposed deal. If May cannot get the backing she needs to meet the agreed extension (22nd May) then she will need to return to Brussels on 12th April with alternative plans. MPs also voted to be allowed indicative votes to indicate where they think the Brexit process ought to go next. Theresa May has said she may not abide by the desire for indicative votes.

Impact on law firms and businesses:

There is daily uncertainty in Parliament which is never good news for the business world. M&A activity and transactional departments will be suffering from this uncertainty because of the way it stifles investments and deals. During bouts of uncertainty, it is hard for businesses to appraise the risks, benefits and likelihoods of potential deals and the future viability of them. As such, businesses might be increasingly relying upon the more advisory departments, such as competition, to see how their business might fare in the varying different outcomes that seem reasonably possible at this stage. Despite the lack of deal-making, businesses will need to calculate their best courses of action to mitigate risks that might arise from Brexit and to safeguard their future operations too.



2. Weak EU Economic Growth (by @Sara)

The story:

Last Friday, the Eurozone Composite Purchasing Managers’ Index fell to 51.3 from 51.9 in February. The index for manufacturing specifically fell to 47.7 in March, from 49.9 in February. The Purchasing Managers’ Index (PMI), according to Investopedia, is ‘an indicator of economic health for the manufacturing and service sectors’. Each country’s PMI is based on the survey of senior purchasing executives at over 400 companies. The index provides ‘information about current business conditions to company decision makers, analysts and purchasing managers’.

The Eurozone’s PMI this month marked one of the worst readings in the last five years, although it barely managed to stay above the 50 mark, which separates economic expansion from contraction. In other words, where a country’s PMI falls below 50, its economy has shrunk rather than grown.

One of the countries that failed to maintain the 50-threshold was Germany, the Eurozone’s largest economy, which saw its PMI for the manufacturing sector fell to 44.6 in March, from 47.6 in February. This was the lowest in 79 months. Also, France, the Eurozone’s second-biggest economy, saw its PMI fell to 48.7 in March from 50.4 in February, which was below the 50.7 forecast by economists in a Reuters poll.

Impact on businesses and law firms:

PMI is a crucial index because it is seen as an early warning sign of economic slowdown. The weak industrial output in the Eurozone signed a potential global recession and led to falling in Dow Jones Industrial Average on the same day by 1.8%. Dow Jones Industrial Average is a stock market index which measures the daily stock price movements of 30 large publicly-owned US companies. This was the worst performance of the index in over three months. The news of the weak manufacturing in Germany, which is seen as ‘the powerhouse of Europe’ must have concerned investors.

There are various factors that have led to weak economic growth in the EU. Most important among them was firstly, Brexit uncertainties, which must have had an impact in the zone, both on consumers and on manufacturers. Secondly, the US-China trade war contributed to a fall in demand for exports. China’s economic slowdown, which partly resulted from the war, has particularly hit Germany hard because Germany’s manufacturing sector heavily relies on exports to China.

Given the weak PMI, in the upcoming future, we are likely to hear about businesses suffering from fall in their sales and weak market condition deterring investors. Whether the US and China reach a trade deal will be the utmost important issue to many businesses because this can change the global economic climate by helping China to get out of an economic slowdown. For law firms, the possible global recession may mean demand for insolvency and restructuring from poor performing businesses.

 

[Abstruser]

3. Big Tech – EU vs Google (by @Angel)

The story:

On 20th March 2019, the European Union imposed a fine on Google (totalling $1.7 billion) for allegedly stifling competition in the advertising market by blocking rival online search advertisers from displaying search advertisements for a ten-year period between 2006 to 2016. Google did this by forcing customers of its AdSense business to sign contracts against accepting advertisements from rival search engines through the use of exclusivity clauses. Google also imposed other anti-competitive rules such as requiring publishers/ website owners to accept a minimum number of Google advertisements, and they must receive written permission from Google before making any changes to the display of the advertisements.

This fine is one of the three separate antitrust investigations that the EU has launched into Google since 2010 - all of which have led to formal charges. Just to recap, Google was previously fined $5.5billion in July 2018 for allegedly abusing its dominance in the Android-mobile industry (also the biggest fine ever imposed by the EU on any one company for anti-competitive behaviour), and a $2.7 billion in 2017 in relation to allegations of manipulating its online shopping search results.

Impact on businesses and law firms:

(Author’s personal views may be implied)

Although the EU – Google saga may not seem to have a direct or obvious impact on businesses who were not directly involved, it is still valuable because it exemplifies the potential legal, commercial, and social consequences when suits are filed against the company.It also alerts businesses to the trends of policies and regulations. Knowledge of these trends provides more certainty to businesses and lawyers when making commercial plans/ deals.

There are a number of lessons from this EU – Google saga to take note of.

First, it is worth noting that despite the fine, Alphabet’s shares (Google’s parent company) nevertheless rose 2% by the end of trading after the fine was announced. The rise added approximately $17 billion to the company’s market value, outpacing both Apple and Microsoft. It is worth considering whether this apparently heavy penalty has any significant impact on the tech giant or not, given that it barely nudged Google’s profits, if not make them better. Admittedly, in response to the fine, Google announced that they would be more committed towards making their practices more transparent. However, one might wonder whether this is solely for the sake of its public perception and reputation.

Second, similar implications of anti-competitive behaviour apply here. It starts with Google’s rivals being unable to grow. If so, they cannot compete. As a result, website owners will have very little choice as to who they can sell the advertising spaces on their websites to (given that the small rivals cannot afford them). Website owners will thus be forced to rely on Google, which, in turn, further increases Google’s ability to dominate the industry. The cycle thus repeats.

Third, the EU also made clear that it will keep an eye on Google’s other areas. Margrethe Vestager (EU Competition Commissioner) said that the EU will continue to monitor developments, and look into the ‘complaints’ that ‘keep coming’ in. This means that it is possible for a fourth instalment to be added to the EU vs Google saga.

Fourth, it is important to note that Google is only obliged to pay the EU because it conducts trade and business in Europe. It is irrelevant that Google itself is not incorporated in the EU. Nor is it relevant that the EU reflects more of an international institution rather than a ‘national government’ when it comes to imposing or legislating law. In cases like these, international laws are involved, and the jurisdiction of the European Court will be established.

Finally, on a macro-level comparison, these cases show that the EU regulators are much more robust when it comes to dealing with Big Tech companies when compared to their US counterparts. It is interesting how these US originated Big Tech companies are subjected to more vigorous approaches in the EU, especially when it comes to competition, data protection, and tax issues. It is opined that for the benefit of the end-users (the consumers), the EU’s approach is welcome. Constraining the power of arguably the world’s most powerful industry can help boost economies by increasing competition for more competitive services, innovation, and prices.

For an interesting take on why big tech should fear Europe, have a look at https://www.economist.com/leaders/2...l/n/2019/03/21n/owned/n/n/nwl/n/n/UK/217410/n.

 

[Jaysen]

2. Boeing under fire for 737 Max fleet (@Abstruser)

The story:

On March 10, an Ethiopian Airlines aircraft crashed south of Addis Ababa, just 6 minutes after take-off. All 157 passengers on board were killed in the accident. The aircraft was a Boeing 737 Max 8 carrier. The 737 Max is Boeing’s latest range of aircrafts, and only entered service in May 2017.

The Ethiopian Airlines incident comes just 5 months after a brand-new 737 Max 8 operated by Indonesian airline Lion Air crashed 12 minutes after take-off, killing all 189 passengers on board. Preliminary investigations into the Lion Air crash revealed issues with the plane’s flight control software shortly after take-off, with the automated system repeatedly pushing the plane downwards despite the pilot’s attempts to gain altitude.

In a highly unprecedented move, the Civil Aviation Administration of China ordered its domestic airlines to ‘ground’ and suspend operations of all Boeing 737 Max aircrafts on March 11, despite no official action from the US Federal Aviation Authority (“FAA”), which is the authority responsible for certifying the Boeing 737 Max. Indonesian authorities promptly followed suit. Shortly after, the FAA issued a “continued airworthiness notification” to all international operators of 737 Max aircrafts, insisting on Twitter that there was “no basis to order grounding the aircraft."

Despite the FAA’s announcement, aviation authorities in Singapore, Malaysia, Australia and the EU all moved to ground the 737 Max on March 12. On March 13, the FAA gave in to pressure from President Donald Trump and other international authorities, and grounded all 737 Max planes until further notice. Boeing grounded its global fleet of 737 Max planes on 14 March.

Impact on businesses and law firms:

The Ethiopian Airlines incident prompted a steep sell-off in Boeing shares, with the company losing over $25 billion in market value in the week that followed the incident. The incident has already impacted broader customer confidence in Boeing. Speaking on the 737 Max 8, Indonesian airline Garuda Indonesia stated that “[w]e have lost confidence in the product”, and is currently in talks with Boeing to cancel orders for 20 Boeing 737 Max carriers. Similarly, Malaysian Airlines’ order for 25 Boeing 737 Max planes is now under review.

Boeing has since suspended all deliveries of 737 Max carriers, and has announced that it will be fixing future 737 Max aircrafts with a software update. Analysts estimate the fixes to cost $500 million to the company, and around 6 months to implement. According to Morgan Stanley, this is a “worst-case scenario” for Boeing, as the 737 Max currently makes up 70% of Boeing’s commercial production, and accounts for over $600 billion in orders. Some analysts estimate that each month of delay could cost Boeing between $1.8 billion to $2.5 billion in delayed revenue under the current state of affairs. Delayed delivery could also negatively affect Boeing’s supply chain, as it has to make arrangements to store extra components and products that are no longer being used or delivered.

For law firms, the financial side-effects of the Max 737’s grounding may prompt airlines to seek damages or compensation from Boeing. Analysts at Morningstar have estimated that airlines are losing up to $75,000 in revenue for every day that the 737 Max remains grounded and inoperable. That figure is likely to rise as summer approaches and airlines receive more travellers. Norwegian Air has already publicly stated that it would seek compensation from Boeing for all revenue lost due to the 737 Max’s grounding. While the legal success of such claims would depend on the specific clauses of each contract, aviation law firm Kreindler & Kreindler stated that “One way or another, whether there's a contractual provision that covers it or not, there are almost certainly going to be claims made against them.” Analysts from JPMorgan estimate that such claims could cost Boeing up to $115 million per month.

Quite aside from seeking damages, the delay in deliveries is likely to trigger late delivery clauses for airlines who have already placed 737 Max orders with Boeing. While some airlines may try to use late delivery to cancel delivery altogether, analysts note that it may be impractical for airlines to do so, as the only industry alternative to the 737 Max is the Airbus SE A320, which has no delivery slots available for the next few years. As such, industry seniors have noted that where airlines do not receive an aircraft as promised, it is not uncommon that the planemaker cover the cost of financing. In other words, where airlines have taken out loans to purchase 737 Max aircrafts, Boeing may compensate them for repayments plus interest. However, the exact cost of compensation remains unknown.

Further to this story: https://www.bbc.co.uk/news/business-47834556

"Boeing is temporarily cutting production of its best-selling 737 airliner in the continuing fall-out from crashes in Ethiopia and Indonesia."