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Technology

S.Korea set to curb Google, Apple commission dominance

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SEOUL, Aug 24 (Reuters) – South Korea is likely to bar Google and Apple from requiring software developers to use their payment systems, effectively stopping them from charging commissions on in-app purchases, the first such curbs on the tech giants by a major economy.

The parliament’s legislation and judiciary committee is expected on Tuesday to approve the amendment of the Telecommunications Business Act, dubbed the “Anti-Google law,” that takes aim at app store operators with dominant market positions.

If the bill gets the committee’s approval, it will be put to a final vote on Wednesday. Lawmakers in South Korea have pushed the issue of the commission structure since mid last year.

Alphabet Inc’s (GOOGL.O) Google and Apple Inc (AAPL.O) were not immediately available for comment.

Both companies have faced global criticism because they require software developers using their app stores to use proprietary in-app payment systems that charge commissions of up to 30% on in-app purchases.

“For gaming apps, Google has been forcing app developers to use its own payment system … and it wants to expand its policy to other apps like music or webtoon,” said Kwon Se-hwa, a general manager at the Korea Internet Corporations Association, a nonprofit group representing Korean IT firms.

“If the new bill becomes the law, developers will have options to use other independent payment systems,” Kwon said.

The European Union last year proposed the Digital Markets Act, taking aim at app store commissions. The rules are designed to affect large companies, but some European lawmakers are in favour of tightening them to specifically target American technology giants, Reuters reported in June. read more

Earlier this month in the United States, a bipartisan trio of senators introduced a bill that would rein in app stores of companies that they said exert too much market control, including Apple and Google. read more

In South Korea, the home market of Android phone maker Samsung Electronics Co Ltd (005930.KS), Google Play Store earned revenue of nearly 6 trillion won ($5.29 billion) in 2019, according to a government report published last year.

Earlier this year, Google said it will lower the service fee it charges developers on its app store from 30% to 15% on the first $1 million they earn in revenue in a year. Apple has made similar moves. read more

For Apple too, commissions from in-app purchases are a key part of its $53.8 billion services business, and are a major expense for some app developers.

In May, an antitrust lawsuit filed by the maker of the popular game “Fortnite” against Apple revealed that the game maker paid $100 million in commissions to Apple over two years. read more

Reporting by Heekyong Yang in Seoul, Additional reporting by Stephen Nellis in San Francisco
Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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Technology

Policy groups ask Apple to drop plans to inspect iMessages, scan for abuse images

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Aug 19 (Reuters) – More than 90 policy and rights groups around the world published an open letter on Thursday urging Apple (AAPL.O) to abandon plans for scanning children’s messages for nudity and the phones of adults for images of child sex abuse.

“Though these capabilities are intended to protect children and to reduce the spread of child sexual abuse material, we are concerned that they will be used to censor protected speech, threaten the privacy and security of people around the world, and have disastrous consequences for many children,” the groups wrote in the letter, which was first reported by Reuters.

The largest campaign to date over an encryption issue at a single company was organized by the U.S.-based nonprofit Center for Democracy & Technology (CDT).

Some overseas signatories in particular are worried about the impact of the changes in nations with different legal systems, including some already hosting heated fights over encryption and privacy.

“It’s so disappointing and upsetting that Apple is doing this, because they have been a staunch ally in defending encryption in the past,” said Sharon Bradford Franklin, co-director of CDT’s Security & Surveillance Project.

An Apple spokesman said the company had addressed privacy and security concerns in a document Friday outlining why the complex architecture of the scanning software should resist attempts to subvert it.

Those signing included multiple groups in Brazil, where courts have repeatedly blocked Facebook’s (FB.O) WhatsApp for failing to decrypt messages in criminal probes, and the senate has passed a bill that would require traceability of messages, which would require somehow marking their content. A similar law was passed in India this year.

“Our main concern is the consequence of this mechanism, how this could be extended to other situations and other companies,” said Flavio Wagner, president of the independent Brazil chapter of the Internet Society, which signed. “This represents a serious weakening of encryption.”

Other signers were in India, Mexico, Germany, Argentina, Ghana and Tanzania.

Surprised by the earlier outcry following its announcement two weeks ago, Apple has offered a series of explanations and documents to argue that the risks of false detections are low.

Apple said it would refuse demands to expand the image-detection system beyond pictures of children flagged by clearinghouses in multiple jurisdictions, though it has not said it would pull out of a market rather than obeying a court order.

Though most of the objections so far have been over device-scanning, the coalition’s letter also faults a change to iMessage in family accounts, which would try to identify and blur nudity in children’s messages, letting them view it only if parents are notified.

The signers said the step could endanger children in intolerant homes or those seeking educational material. More broadly, they said the change will break end-to-end encryption for iMessage, which Apple has staunchly defended in other contexts.

“Once this backdoor feature is built in, governments could compel Apple to extend notification to other accounts, and to detect images that are objectionable for reasons other than being sexually explicit,” the letter says.

Other groups that signed include the American Civil Liberties Union, Electronic Frontier Foundation, Access Now, Privacy International, and the Tor Project.

Reporting by Joseph Menn; Editing by Edwina Gibbs

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Business

Robinhood, gateway to ‘meme’ stocks, raises $2.1 billion in IPO

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Robinhood logo is seen on a smartphone in front of a displayed same logo in this illustration taken, July 2, 2021. REUTERS/Dado Ruvic/Illustration

July 28 (Reuters) – Robinhood Markets Inc, the owner of the trading app which emerged as the go-to destination for retail investors speculating on this year’s “meme’ stock trading frenzy, raised $2.1 billion in its initial public offering on Wednesday.

The company was seeking to capitalize on individual investors’ fascination with cryptocurrencies and stocks such as GameStop Corp (GME.N), which have seen wild swings after becoming the subject of trading speculation on social media sites such as Reddit. Robinhood’s monthly active users surged from 11.7 million at the end of December to 21.3 million as of the end of June.

The IPO valued Robinhood at $31.8 billion, making it greater as a function of its revenue than many of its traditional rivals such as Charles Schwab Corp (SCHW.N), but the offering priced at the bottom of the company’s indicated range.

Some investors stayed on the sidelines, citing concerns over the frothy valuation, the risk of regulators cracking down on Robinhood’s business, and even lingering anger with the company’s imposition of trading curbs when the meme stock trading frenzy flared up at the end of January. read more

Robinhood said it sold 55 million shares in the IPO at $38 apiece, the low end of its $38 to $42 price range. This makes it one of the most valuable U.S. companies to have gone public year-to-date, amid a red-hot market for new listings.

In an unusual move, Robinhood had said it would reserve between 20% and 35% of its shares for its users.

Robinhood’s platform allows users to make unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies. Its simple interface made it popular with young investors trading from home during the COVID-19 pandemic.

Robinhood enraged some investors and U.S. lawmakers earlier this year when it restricted trading in some popular stocks following a 10-fold rise in deposit requirements at its clearinghouse. It has been at the center of many regulatory probes.

The company disclosed this week that it has received inquiries from U.S. regulators looking into whether its employees traded shares of GameStop and AMC Entertainment Holdings, Inc (AMC.N) before the trading curbs were placed at the end of January.

In June, Robinhood agreed to pay nearly $70 million to settle an investigation by Wall Street’s own regulator, the Financial Industry Regulatory Authority, for “systemic” failures, including systems outages, providing “false or misleading” information, and weak options trading controls.

The brokerage has also been criticized for relying on “payment for order flow” for most of its revenue, under which it receives fees from market makers for routing trades to them and does not charge users for individual trades.

Critics argue the practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it incentivizes brokers to send orders to whoever pays the higher fees. Robinhood contends that it routes trades based on what is cheapest for its users, and that charging a commission would be more expensive. The U.S. Securities and Exchange Commission is examining the practice.

Robinhood was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt. They will hold a majority of the voting power after the offering, these filings showed, with Bhatt having around 39% of the voting power of outstanding stock while Tenev will hold about 26.2%.

The company’s shares are scheduled to start trading on Nasdaq on Thursday under the ticker “HOOD”

Goldman Sachs and J.P. Morgan were the lead underwriters in Robinhood’s IPO.

Reporting by Echo Wang and David French in New York; Editing by Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

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Business

Robinhood CEO says he is considering offering U.S. retirement accounts

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July 24 (Reuters) – Robinhood Markets Inc is considering launching U.S. retirement accounts, CEO and co-founder Vlad Tenev said on Saturday in a webcast with users of its trading app looking to participate in its initial public offering, which is set to price next week.

The online brokerage has about 18 million funded investment accounts on its platform, most of which are held by retail traders.

Offering individual retirement accounts (IRAs) and Roth IRAs, which offer tax advantages to those saving for retirement, would allow Robinhood to tap a vast market. Americans held $12.6 trillion in IRAs at the end of March, up 2.8% from the end of December, according to the Investment Company Institute.

“We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers. We want to make first-time investors into long-term investors,” Tenev said in response to an investor question.

Due to the penalties involved in withdrawing money, IRAs tend to attract long-term investments, rather than the quick flip in stocks, options and cryptocurrencies that some investors turn to Robinhood for.

In his webcast, however, Tenev said: “We see evidence that the majority of our customers are primarily buy and hold.”

Robinhood, which is targeting a valuation of up to $35 billion in its IPO, has said it will allocate 20% to 35% of shares offered to its users, an unusual move for a high-profile offering. One of the reasons many IPOs enjoy a first-day trading pop is because the retail investors that Robinhood has invited are excluded and must buy shares in the open market.

Robinhood launched its IPO Access platform earlier this year to enable users to buy into the IPOs of other companies if it can negotiate deals with the investment banks handling them.

Some individual investors are calling for a boycott of Robinhood’s IPO on Reddit and other social media over its handling of the ‘meme’ stock-trading frenzy in January. Robinhood placed restrictions on buying GameStop Corp (GME.N) and other stocks that hedge funds had bet against, on grounds it was needed for the financial and operational stability of its platform.

Tenev said in Saturday’s webcast that Robinhood had invested in the stability of its platform to avoid another such incident.

PAYMENT FOR ORDER FLOW

Robinhood’s popularity has soared over the past 18 months of coronavirus-induced social restrictions that have kept many retail investors at home. It has said its mission is to “democratize finance for all” by allowing users to make unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies.

The brokerage has been criticized for relying on “payment for order flow” for most of its revenue, under which it receives fees from market makers for routing trades to them and does not charge users for individual trades, however.

Critics argue the practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it incentivizes brokers to send orders to whoever pays the higher fees. Robinhood contends that it routes trades based on what is cheapest for its users, and that charging a commission would be more expensive.

Robinhood chief financial officer Jason Warnick left the door open for the company to change the practice if necessary.

“If a ban or other limitations on it were to be imposed, we believe Robinhood and the industry would adapt and explore other revenue sources,” Warnick said.

Robinhood was founded in 2013 by Stanford University roommates Tenev and Baiju Bhatt, who will hold nearly two-thirds of the voting power after the offering, a filing with the stock exchange showed.

Robinhood customer Minjie Xu, who works as a software engineer in Missouri, remained unimpressed after the presentation on concerns the offering was overpriced.

“This is not unique to them, as I think most IPOs are overpriced,” Xu told Reuters.

Reporting by Echo Wang and Krystal Hu in New York
Editing by Greg Roumeliotis and Sonya Hepinstall

Our Standards: The Thomson Reuters Trust Principles.

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Technology

Apple, Intel become first to adopt TSMC’s latest chip tech – Nikkei

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A 12-inch wafer is seen at Taiwan Semiconductor Manufacturing Co. (TSMC) in Hsinchu June 15, 2010. REUTERS/Pichi Chuang

July 2 (Reuters) – Apple Inc (AAPL.O) and Intel Corp (INTC.O) will be the first adopters of Taiwan Semiconductor Manufacturing Co’s (2330.TW) next-generation chip production technology ahead of its deployment, possibly next year, Nikkei Asia reported on Friday.

Apple and Intel are testing their chip designs with TSMC’s 3-nanometer production technology, the report added, citing several sources briefed on the matter. Commercial output of such chips is expected to start in the second half of next year, Nikkei Asia said.

Reporting by Kanishka Singh in Bengaluru; Editing by Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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