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This Facebook co-founder wants to split the company
Chris Hughes helped create the company when he was Mark Zuckerberg’s roommate at Harvard, and collected millions for his work. Now he’s working with academics to create arguments for dismantling the tech giant, Steve Lohr of the NYT reports.
Mr. Hughes has participated in meetings with regulators like the F.T.C., the Justice Department and state attorneys general. In those meetings, he has joined Scott Hemphill of New York University and Tim Wu of Columbia in laying out an antitrust case against Facebook.
Their case: Facebook has used acquisitions over the years — including purchases of Instagram and WhatsApp — to neutralize potential rivals, charge advertisers higher prices and create worse experiences for users.
Mr. Hughes could provide investigators with leads to current and former company employees and competitors to interview or subpoena, Mr. Lohr writes. It isn’t clear what role he’s formally providing.
The argument could be compelling, antitrust experts say, since it focuses on specific situations instead of a broad review of Facebook’s behavior. That said, it would require regulators to show actual economic harm.
Why this matters: “Mr. Hughes’s involvement stands out because few founders have gone on to argue for the dismantling of their company,” Mr. Lohr writes. (Mr. Hughes has already written an NYT Op-Ed calling for more regulation of the tech giant.)
More: Australia plans stricter regulations for Facebook and Google. And while Mr. Zuckerberg warned about the business risks of tougher government oversight, investors apparently don’t believe him.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced in London.
SoftBank’s Vision Fund 2 is official
Vision Fund 2 has already drawn $108 billion in financing commitments, with investors including SoftBank itself (which is putting in $38 billion), Apple, Microsoft and the sovereign wealth fund of Kazakhstan. It’s expected to grow even bigger.
Noticeably absent from the list of investors are Saudi Arabia and Abu Dhabi, the biggest backers of the first Vision Fund. But the WSJ reports, citing unnamed sources, that they’ve indicated interest in the new fund, though perhaps giving it less money.
It’s a victory lap for SoftBank’s founder, Masa Son. He was the driving force behind the Vision Fund, betting that he could take big stakes in technologies like A.I. that are poised to reshape the world.
And it’s coming just in time. The WSJ notes that the first Vision Fund has invested about $70 billion in deals. Factoring in cash set aside for payouts to investors, that fund is nearly spent.
But the prospects for success are unclear. The first Vision Fund scored wins with huge investments in Uber, Didi Chuxing and other tech businesses. But other big technology-focused funds have emerged as competitors, and some start-ups that SoftBank has invested in have not emerged as game-changers.
How Jeffrey Epstein used Les Wexner’s billions
For years, Mr. Epstein’s only notable client was Mr. Wexner, the retail magnate who controls L Brands, the parent company of Victoria’s Secret. But the NYT describes the ways that the financier took advantage of the billionaire’s wealth to finance a lavish lifestyle — one now alleged to have included sexual abuse of underage girls.
Their relationship began in the late 1980s. Mr. Epstein had a thin résumé — a college dropout whose work experience was teaching high school math and briefly working at Bear Stearns — but he persuaded Mr. Wexner to let him manage his money.
Mr. Epstein began to dominate his client’s life. He oversaw the construction of a 316-foot yacht for Mr. Wexner, for instance, and served as an M.C. at parties for the retail executive.
Crucially, Mr. Wexner gave his financial adviser power of attorney in 1991, giving Mr. Epstein the ability to borrow money, hire people, and buy and sell properties on his behalf.
“That document gave Mr. Epstein unmatched authority over Mr. Wexner’s financial affairs — and it corresponded to a period in which Mr. Epstein came to control or own valuable assets that previously belonged to Mr. Wexner or his companies,” the NYT reports. That included Mr. Wexner’s Manhattan mansion and a Boeing 727 previously owned by L Brands.
Mr. Epstein may have earned over $200 million from the relationship, the WSJ reported, citing estimates by people familiar with the arrangement.
It took years for Mr. Wexner to sever ties to the financier. Only in 2008 — after the authorities charged Mr. Epstein with molesting a minor, and well after a model accused him of assaulting her under the guise of being a Victoria’s Secret talent scout — did the relationship officially end.
More: Mr. Epstein’s ties to President Bill Clinton reportedly began as early as 1993, and included visits to the White House and meetings with administration officials.
Inside Beijing’s efforts to keep trade flowing
China is reviving talks to create a free-trade zone across Asia and lower tariffs on huge swaths of goods from around the world. It’s all an effort to find new markets for its products as it battles with the U.S., Keith Bradsher of the NYT reports.
• “China this week formally restarted its efforts to create a free-trade zone across the Asia-Pacific region, with an unlikely goal of striking a deal by November,” Mr. Bradsher writes.
• “China has also been in long-running talks with Japan and South Korea on a trilateral trade partnership,” though a trade battle between Tokyo and Seoul makes that unlikely.
• And Beijing “is unilaterally reducing its own tariffs on a broad range of goods from all over the world, even as it puts higher retaliatory tariffs on American-made goods.”
• “At stake is the health of the Chinese economy,” Mr. Bradsher writes. “Last week China reported that its growth slowed to its most sluggish pace in nearly three decades, in part because the trade war with the Trump administration has begun to hit its crucial export sector.”
• There are problems with China’s plans, however: “No country can absorb the sheer volume of what China sells to American customers,” Mr. Bradsher adds, and “China’s regional neighbors compete against it in a number of industries.”
More: The Trump administration unveiled details of a $16 billion aid package for U.S. farmers hurt by the trade war.
Big carmakers defy Trump on emissions standards
Four of the world’s biggest auto companies struck an agreement with California on stringent new emissions rules, despite the Trump administration’s efforts to roll back Obama-era pollution standards, Coral Davenport and Hiroko Tabuchi of the NYT report.
Ford Motor, Volkswagen, Honda and BMW negotiated with California lawmakers to create new emissions standards. Together, they make up about 30 percent of U.S. car sales.
The new rules are slightly looser than Obama-era ones: The carmakers agreed to produce vehicles that hit an average of 51 miles per gallon by 2026, instead of 54.5 miles per gallon by 2025. It also provides credits for fuel-saving technology.
A key point is that the standards can be applied nationwide. California has always been important to U.S. car pollution standards, since it is America’s biggest market. The carmakers said the agreement provided “much-needed regulatory certainty” and avoided “a patchwork of regulations.”
The deal is a bet against President Trump’s efforts to roll back emissions standards to 37 miles per gallon. The administration is trying to force California to comply with its forthcoming federal standards, but the state has pledged to take the fight to the Supreme Court if necessary.
Other companies may be poised to join the pact, despite opposition from Washington. An unnamed executive at a big automaker told the NYT that the deal offered enough concessions to make it attractive. And Margo Oge, a former E.P.A. official, said she expected G.M. and Toyota to sign on.
What Saudi Arabia wants its $500 billion city to look like
The Middle Eastern country turned heads when it announced plans to create Neom, a futuristic city that would arise out of barren desert and undeveloped seaside. Documents from advisers reviewed by the WSJ give a sense of the Saudis’ ambitions for the project.
• Plans devised by the advisers — including Boston Consulting Group and McKinsey & Company — include flying taxis, automated maids, artificially created clouds and robot cage fights.
• There was even discussion of having drones create the illusion of a giant moon rising each night.
• “A court system developed by law firm Latham & Watkins and labeled ‘independent’ would have judges reporting directly to the king, and operating under Sharia law, or Islamic jurisprudence,” the WSJ reports.
• Surveillance is also a key feature: “This should be an automated city where we can watch everything,” according to documents from Neom’s board.
• The plans also envision forcibly relocating 20,000 people from local tribes.
• “Former Neom employees and people familiar with the project say they don’t know how much of the plan will become reality due to potential funding issues and technological limitations.”
Judy Shelton, one of President Trump’s picks for the Fed’s board of governors, has resigned as U.S. envoy to the European Bank for Reconstruction and Development.
Tom Barrack, the financier and Trump ally, will step down as C.E.O. of his Colony Capital investment company, but will remain chairman.
Warren Kanders stepped down as vice chairman of the Whitney Museum of American Art over his company’s sales of tear gas to government agents.
Yum Brands has hired Mark King, a former president of Adidas, as C.E.O. of its Taco Bell chain. It also named Artie Starrs as C.E.O. of Pizza Hut.
The speed read
• The Justice Department is reportedly pushing states to back its forthcoming agreement to allow T-Mobile and Sprint to merge in return for selling assets to Dish Network. (WSJ)
• Apple struck a deal to buy most of Intel’s smartphone modem chip business for about $1 billion. (Reuters)
• The Indian metals tycoon Anil Agarwal has sold holdings that gave him a 20 percent stake in the miner Anglo American. (FT)
• Barclays has reportedly poached hedge fund clients with $20 billion worth of balances from Deutsche Bank. (CNBC)
• Barneys is said to be raising financing for a potential bankruptcy filing, which could come as soon as next week. (CNBC)
• Nike is reportedly considering selling its Hurley surfer-focused brand. (Reuters)
Politics and policy
• The House passed a two-year budget agreement that would lift the debt ceiling, though with scant Republican support. (NYT)
• Representative Tulsi Gabbard, who is running for president, has sued Google, claiming that it shut down her advertising account after the first Democratic presidential debate. (NYT)
• The European Central Bank said it was weighing measures to push up inflation in the eurozone. (NYT)
• The Senate Intelligence Committee concluded that Russia tried to hack election systems in all 50 states in 2016. (NYT)
• The E.U.’s top Brexit negotiator, Michel Barnier, called the terms for a deal demanded by Prime Minister Boris Johnson of Britain “unacceptable.” (FT)
• The leader of Brexit Party, Nigel Farage, is teaming up with U.S. allies to raise money to lobby for Britain’s withdrawal from the E.U. (FT)
• The E.U. and Canada agreed to a new way to settle trade disputes as an alternative to the W.T.O.’s appeals court. (FT)
• The trade battle between Japan and South Korea has made U.S. tech companies worried about their supply chains. (WSJ)
• Alphabet, Google’s parent, reported nearly $10 billion in second-quarter profit. (NYT)
• Amazon’s sales rose 20 percent in the second quarter, though its $2.6 billion in profit fell short of analyst estimates. (NYT)
• The police in Hong Kong have been accused of trying to use facial-recognition software against protesters. (NYT)
• The F.B.I. is investigating whether illegal insider trading took place when an iced tea company pivoted its focus to blockchain services. (Quartz)
• Meet the C.E.O. of FaceApp. (Forbes)
Best of the rest
• Southwest Airlines is shutting down its operations at Newark Liberty International Airport after passenger traffic declined following the grounding of Boeing’s 737 Max. (NYT)
• Documents show that the consulting giant McKinsey & Company advised Johnson & Johnson on how to increase sales of opioids. (NYT)
• Lawmakers grilled Juul executives over programs introducing teenagers to its vaping products. (NYT)
• Copart has appointed its first-ever female director, the last S&P 500 company to do so. (WSJ)
• Think airplanes are cramped? Cebu Airlines wants to prove you wrong. (Bloomberg)
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