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Business

Exclusive: India enforcement agency threatens Flipkart, founders with $1.35 bln fine

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Small toy shopping cart is seen in front of displayed Flipkart logo in this illustration taken, July 30, 2021. REUTERS/Dado Ruvic/Illustration

NEW DELHI, Aug 5 (Reuters) – India’s financial-crime agency has asked Walmart’s (WMT.N) Flipkart and its founders to explain why they shouldn’t face a penalty of $1.35 billion for alleged violation of foreign investment laws, three sources and an agency official told Reuters.

The Enforcement Directorate agency has been investigating e-commerce giants Flipkart and Amazon.com Inc (AMZN.O) for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.

The Enforcement Directorate official, who declined to be named, said the case concerned an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.

A so-called “show cause notice” was issued in early July by the agency’s office in southern city of Chennai to Flipkart, its founders Sachin Bansal and Binny Bansal as well as current investor Tiger Global, to explain why they should not face a fine of 100 billion rupees ($1.35 billion) for the lapses, said the agency official and the sources, who are all familiar with the content of the notice.

A Flipkart spokesperson said the company is “in compliance with Indian laws and regulations”.

“We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” the spokesperson added.

The Indian agency does not make public such notices issued to parties during an investigation.

One of the sources said Flipkart and others have around 90 days to respond to the notice. WS Retail ceased operations at the end of 2015, the person added.

Tiger Global declined to comment. Binny Bansal and Sachin Bansal did not immediately respond to requests for comment. The Enforcement Directorate also did not respond outside regular business hours.

Walmart took a majority stake in Flipkart for $16 billion in 2018, its biggest deal ever. Sachin Bansal sold his stake to Walmart at the time, while Binny Bansal retained a small stake. Walmart did not respond to a request for comment.

Flipkart’s valuation doubled to $37.6 billion in less than 3 years at a $3.6 billion funding round in July, during which SoftBank Group (9984.T) reinvested in the company ahead of an expected market debut. read more

The notice is the latest regulatory headache for the online retailer, which is already facing tougher restrictions and antitrust investigations in India, and a growing number of complaints from smaller sellers.

India’s brick-and-mortar retailers say Amazon and Flipkart favour select sellers on their platforms and use complex business structures to bypass the foreign investment laws, hurting smaller players. The companies deny any wrongdoing.

In February, a Reuters investigation based on Amazon documents showed it had given preferential treatment for years to a small group of sellers, publicly misrepresented ties with them and used them to bypass Indian law. Amazon says it gives no preferential treatment to any seller.

Reporting by Aditya Kalra, Aftab Ahmed and Sanjeev Miglani in New Delhi; Additional reporting by Sankalp Pharityal; Editing by Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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Business

Zoom reaches $85 mln settlement of lawsuit over user privacy, ‘Zoombombing’

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Small toy figures are seen in front of Zoom logo in this illustration picture taken March 15, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

Aug 1 (Reuters) – Zoom Video Communications Inc (ZM.O) agreed to pay $85 million and bolster its security practices to settle a lawsuit claiming it violated users’ privacy rights by sharing personal data with Facebook, Google and LinkedIn, and letting hackers disrupt Zoom meetings in a practice called Zoombombing.

A preliminary settlement filed on Saturday afternoon requires approval by U.S. District Judge Lucy Koh in San Jose, California.

Subscribers in the proposed class action would be eligible for 15% refunds on their core subscriptions or $25, whichever is larger, while others could receive up to $15.

Zoom agreed to security measures including alerting users when meeting hosts or other participants use third-party apps in meetings, and to provide specialized training to employees on privacy and data handling.

The San Jose-based company denied wrongdoing in agreeing to settle. It did not immediately respond on Sunday to a request for comment.

Saturday’s settlement came after Koh on March 11 let the plaintiffs pursue some contract-based claims. read more

Though Zoom collected about $1.3 billion in Zoom Meetings subscriptions from class members, the plaintiffs’ lawyers called the $85 million settlement reasonable given the litigation risks. They intend to seek up to $21.25 million for legal fees.

Zoombombing is where outsiders hijack Zoom meetings and display pornography, use racist language or post other disturbing content.

Koh said Zoom was “mostly” immune for Zoombombing under Section 230 of the federal Communications Decency Act, which shields online platforms from liability over user content.

Zoom’s customer base has grown sixfold since the COVID-19 pandemic forced more people to work from home.

The company had 497,000 customers with more than 10 employees in April 2021, up from 81,900 in January 2020. It has said user growth could slow or decline as more people get vaccines and return to work or school in-person.

The case is In re: Zoom Video Communications Inc Privacy Litigation, U.S. District Court, Northern District of California, No. 20-02155.

Reporting by Jonathan Stempel in New York; Editing by Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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Business

Israel PM warns Unilever of “severe consequences” from Ben & Jerry’s decision

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JERUSALEM, July 20 (Reuters) – Israel warned consumer goods giant Unilever Plc (ULVR.L) on Tuesday of “severe consequences” from a decision by subsidiary Ben & Jerry’s to stop selling ice cream in Israeli-occupied territories, and urged U.S. states to invoke anti-boycott laws.

The Ben & Jerry’s announcement on Monday followed pro-Palestinian pressure on the South Burlington, Vermont-based company over its business in Israel and Jewish settlements in the West Bank, handled through a licensee partner since 1987.

Ben & Jerry’s said it would not renew the license when it expires at the end of next year. It said it would stay in Israel under a different arrangement, without sales in the West Bank, among areas where Palestinians seek statehood. read more

Most world powers deem Israel’s settlements illegal. It disputes this, citing historical and security links to the land, and has moved to penalise anti-settlement measures under Israeli law while securing similar legal protection in some U.S. states.

Israeli Prime Minister Naftali Bennett’s office said he spoke with Unilever CEO Alan Jope about the “glaring anti-Israel measure” by the ice cream maker.

“From Israel’s standpoint, this action has severe consequences, legal and otherwise, and it will move aggressively against any boycott measure targeting civilians,” Bennett told Jope, according to the statement from his office.

Britain’s Unilever did not immediately respond to a Reuters request for comment.

Gilad Erdan, Israel’s ambassador to Washington, said he had raised the Ben & Jerry’s decision in a letter sent to 35 U.S. governors whose states legislated against boycotting Israel.

“Rapid and determined action must be taken to counter such discriminatory and antisemitic actions,” read the letter, tweeted by the envoy, which likened the case to Airbnb’s 2018 announcement that it would delist settlement rental properties.

Airbnb reversed that decision in 2019 following legal challenges in the United States, but said it would donate profits from bookings in the settlements to humanitarian causes.

Palestinians welcomed the Ben & Jerry’s announcement. They want the West Bank, East Jerusalem and the Gaza Strip for a future state. Israel deems all of Jerusalem its capital – a status not recognised internationally.

Writing by Dan Williams
Editing by Jeffrey Heller and Raissa Kasolowsky

Our Standards: The Thomson Reuters Trust Principles.

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Business

Tencent snaps up British video game developer Sumo in $1.3 bln deal

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  • Shares surge in early trading to all-time high
  • Tencent offers 513p per Sumo share
  • Sumo boss says he is keen work with Tencent

July 19 (Reuters) – China’s Tencent (0700.HK) will buy British videogame developer Sumo (SUMO.L) in a $1.27 billion deal, it said on Monday, adding new titles to its growing portfolio of chart-topping videogames.

The purchase, which will boost the Chinese internet giant’s presence globally, brings together Sumo’s racing and snooker games with Tencent’s more high-profile range of games that includes Call of Duty’s mobile version.

Shareholders in Sheffield-based Sumo will get 513 pence in cash per share, a 43% premium to the last price and valuing the company at 919 million pounds, Tencent said, sending Sumo’s shares surging 42% to a record high.

The deal comes days after China’s market regulator decided to block Tencent’s plans to merge videogame streaming sites, Huya (HUYA.N) and DouYu, on antitrust grounds.

It is the second major deal involving a British video game company over the past year, following U.S. video game maker Electronic Arts’ (EA.O) deal to buy Britain-based Codemasters. read more

Tencent, with stakes in companies that make Fortnite and League of Legends, is the world’s second-largest videogame group by revenue after Sony.

“Chinese deals may imply a higher regulatory risk, but we see no likely resistance or counterbid,” Jefferies analysts said.

EXPERTISE AND RESOURCES

Sumo, which counts Microsoft’s Xbox, Amazon Game Studios, Apple, Google and BBC as its clients and partners, has seen its value soar since a 2017 listing on LSE’s junior market AIM at 100 pence.

“The Board of Sumo firmly believes the business will benefit from Tencent’s broad videogaming eco-system, proven industry expertise and its strategic resources,” non-executive chairman Ian Livingstone said.

Tencent owns 8.75% and is the second-biggest shareholder in Sumo, which has 14 studios in five countries and released the video games including Hotshot Racing, Sackboy: A Big Adventure and WST Snooker last year.

Sumo’s boss Carl Cavers said he and co-founders Paul Porter and Darren Mills would reprise their roles.

“The opportunity to work with Tencent is one we just couldn’t miss,” said Cavers, who founded the company 18 years ago.

($1 = 0.7261 pounds)

Reporting by Muvija M in Bengaluru; Editing by Arun Koyyur and Edmund Blair

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Business

U.S. judge ends Amazon challenge to $10 bln cloud contract after Pentagon cancellation

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WASHINGTON, July 9 (Reuters) – A U.S. judge on Friday dismissed Amazon.com’s legal challenge to the Defense Department’s2019 decision to award a $10 billion JEDI cloud-computing project to rival Microsoft Corp (MSFT.O) after the Pentagon canceled the contract.

Amazon.com had accused then-President Donald Trump, alleging that the former president exerted improper pressure on military officials to steer the contract away from Amazon. The Pentagon said on Tuesday it expected the new multi-billion dollar contract would be split between Amazon and Microsoft.

Amazon did not object to dismissing its 2019 lawsuit.

Judge Patricia E. Campbell-Smith of the U.S. Court of Federal Claims agreed to dismiss the lawsuit at the government’s request, saying the case was now moot.

Trump publicly derided then-Amazon CEO Jeff Bezos and repeatedly criticized the company. Amazon had sought to question Trump about his role in the contract decision.

The Pentagon hopes to have the first awards by April 2022 for its new Joint Warfighter Cloud Capability (JWCC).

John Sherman, acting chief information officer for the Defense Department, said on Tuesday he expects both Microsoft and Amazon will get cloud contracts.

Microsoft said in a statement that the company was confident it will “continue to be successful as the DoD selects partners for new work.”

Amazon’s Amazon Web Services cloud unit said it agreed with the Pentagon’s decision to cancel the contract. It said the initial award was “not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement.”

In April, Campbell-Smith refused to dismiss Amazon’s claims alleging the Trump administration interfered in the Pentagon’s award to Microsoft after putting it on hold indefinitely in February 2020.

The now-canceled Joint Enterprise Defense Infrastructure Cloud (JEDI) contract was budgeted for as much as $10 billion and was part of a broader digital modernization of the Pentagon aimed at making it more technologically agile.

Reporting by David Shepardson; Editing by Dan Grebler

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Business

China’s Didi raises $4.4 bln in upsized U.S. IPO -sources

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  • Didi sold 317 mln ADS, more than planned 288 mln -sources
  • Sells ADS at $14 a piece – sources
  • Would give Didi $73 bln valuation on fully diluted basis

June 29 (Reuters) – Chinese ride hailing company Didi Global Inc (DIDI.N) raised $4.4 billion in its U.S IPO on Tuesday, pricing it at the top of its indicated range and increasing the number of shares sold, according to two sources familiar with the matter.

Didi sold 317 million American Depository Shares (ADS), versus the planned 288 million, at $14 apiece, the people said on condition of anonymity ahead of an official announcement.

This would give Didi a valuation of about $73 billion on a fully diluted basis. On a non-diluted basis, it will be worth $67.5 billion. The company is expected to debut on the New York Stock Exchange on June 30.

The increase in deal size came after the Didi investor order book was oversubscribed multiple times, one of the sources said.

Investors have been told to expect their orders to be scaled back once allocations are completed on Wednesday, according to a separate source with direct knowledge of the matter.

Didi did not respond to a request for comment.

The listing, which will be the biggest U.S. share sale by a Chinese company since Alibaba raised $25 billion in 2014, comes amid record IPO activity this year as companies rush to capture the lucrative valuations seen in the U.S. stock market.

Didi’s IPO is more conservative than its initial aim for a valuation of up to $100 billion, Reuters has previously reported. The size of the deal was cut during briefings with investors ahead of the IPO’s launch. read more

This suggests increasing investor worries about China’s potential anti-trust related crackdown and a more volatile IPO environment globally in 2021, said Douglas Kim, a London-based independent analyst, who writes on Smartkarma.

A Didi logo is seen at the headquarters of Didi Chuxing in Beijing, China November 20, 2020. REUTERS/Florence Lo/File Photo

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“But it seems like many investors like this deal, the volatile IPO environment helped to lower IPO price and valuation looks attractive,” Kim told Reuters.

Didi’s IPO was covered early on the first day of the book-build last week and the investor books were closed on Monday, a day ahead of schedule. read more .

An over-allotment option, or greenshoe, exists where another 43.2 million shares can be sold to increase the deal size.

DIDI HISTORY

Didi was co-founded in 2012 by former Alibaba employee Will Wei Cheng, who currently serves as the chief executive officer. Cheng was joined by Jean Qing Liu, a former Goldman Sachs banker and the current president of the ride-sharing company.

The company counts SoftBank (9984.T), Uber Technologies Inc (UBER.N) and Tencent (0700.HK) as its main backers.

Didi is also known for successfully pushing Uber out of the Chinese market after the U.S. company lost a price war and ended up selling its China operations to Didi for a stake. Liu Zhen, the head of Uber China at the time, is Didi’s Liu’s cousin.

Like most ride-hailing companies, Didi had historically been unprofitable, until it reported a profit of $30 million in the first quarter of this year.

The company reported a loss of $1.6 billion last year and an 8% drop in revenue to $21.63 billion, according to a regulatory filing, as business slid during the pandemic.

Its shares are due to start trading under the “DIDI” symbol.

Reporting by Echo Wang in New York and Anirban Sen in Bengaluru and Scott Murdoch in Hong Kong; Editing by Greg Roumeliotis, Bill Berkrot and Himani Sarkar

Our Standards: The Thomson Reuters Trust Principles.

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