Qualcomm violated antitrust law

Good Wednesday morning. (Want this by email? Sign up here.)

Qualcomm loses a big antitrust case

The company suppressed competition in the smartphone chip market and then charged excessive licensing fees, a federal judge has ruled.

“Qualcomm’s licensing practices have strangled competition” in key parts of the modem chip market, the judge, Lucy Koh of the U.S. District Court in San Jose, wrote. That “harmed rivals, O.E.M.s, and end consumers in the process,” she added.

The company must now strike new licensing agreements with customers that are free from “onerous” fees for the use of its patents. Qualcomm must also be monitored for the next seven years to ensure that it complies with the remedies.

Qualcomm is considered the industry leader in wireless modem chips, an ever-more-important position as the race to develop next-generation 5G wireless networks accelerates.

The case has been closely watched since a similar lawsuit between Apple and Qualcomm was settled last month. Apple’s willingness to back down was seen as a sign of how far ahead Qualcomm is on 5G modem chips.

Trump may freeze out more Chinese tech firms

The administration’s efforts to block China’s technology industry from the U.S. ratcheted up when it limited Huawei’s ability to buy productsfrom American suppliers. Now it looks ready to expand that campaign:

• The White House is considering limiting the Chinese video surveillance company Hikvision’s ability to buy American technology, Ana Swanson and Edward Wong of the NYT report.
• Four other Chinese surveillance companies could join the black list, Bloomberg reports.
• The U.S. government has also warned that Chinese-made dronescould pose a cyberespionage risk to American businesses.
• And the U.S. “has sharply slowed approvals for the nation’s semiconductor companies to hire Chinese nationals for advanced engineering jobs” in a bid to protect U.S. know-how, the WSJ reports.

“China poses an economic, technological and geopolitical threat that cannot be left unchecked,” in the eyes of the Trump administration, Ms. Swanson and Mr. Wong write.

Fears of a tech cold war are real. Pony Ma, the head of the Chinese tech giant Tencent, said that he was “constantly watching whether the trade war will turn into a tech war,” according to a CNBC translation of remarks that he made recently. “If we don’t continue to work hard on basic research and key technologies, our digital economy will just be a high-rise built on sand.” China still relies heavily on imported computer chips.

And Huawei is scrambling to find allies. Yesterday it “implored European governments to resist American pressure,” according to the WSJ. (Europe, the Middle East and Africa generated 28 percent of Huawei’s revenue last year.) Unnamed U.S. officials told Bloomberg that their European counterparts were coming around to the Trump administration’s thinking about Huawei and national security.

Xi Jinping’s ‘long march’ on trade

President Xi Jinping of China warned his country to get ready for a protracted trade fight with the U.S., Alex Stevenson of the NYT writes.

“There is a new long march, and we should make a new start,” Mr. Xi told a cheering crowd yesterday at the start of a domestic campaign meant to rally China. The Long March of 1934 was a pivotal moment in the history of China’s Communist Party that led to Mao Zedong seizing power from Nationalists.

Mr. Xi did not specifically mention trade, but his comments appear to be the strongest signal yet that Beijing no longer expects a deal with the U.S. any time soon.

Beijing is stirring up nationalist fervor in other ways, too. Chinese state media has compared the trade war to the Korean War, in which Chinese troops fought American forces.

U.S. companies are girding themselves for long-term pain. Several American retailers are taking steps to avoid raising prices because of tariffs on Chinese imports. One, Kohl’s, also lowered its financial guidance for the rest of the year.

I.R.S. memo undercuts Mnuchin on Trump’s taxes

The I.R.S. has no choice but to honor congressional requests for President Trump’s tax returns unless he invokes executive privilege to protect them, according to a draft legal memo written by agency staffers, Alan Rappeport of the NYT reports.

That appears to contradict Treasury Secretary Steven Mnuchin, “who has refused to comply with Democrats’ requests because they lack a ‘legitimate legislative purpose,’ ” Mr. Rappeport writes. “Mr. Mnuchin said he made his decision after consulting with lawyers from the Treasury Department, the I.R.S. and the Justice Department.”

The draft memo was written last fall, an I.R.S. spokesman told the NYT. “The current I.R.S. commissioner, Charles P. Rettig, and its chief counsel, Michael Desmond, were not aware of it until this week,” Mr. Rappeport adds. “The memo was not sent to the Treasury Department.”

“It is not the official position of the I.R.S.,” the spokesman said.

Mr. Mnuchin is scheduled to testify this morning before the House Financial Services Committee, “and is likely to be grilled by Democrats about the decision not to hand over the returns,” Mr. Rappeport writes.

Is it time to replace Wall Street’s I.P.O. kings?

Morgan Stanley, Goldman Sachs and JPMorgan Chase have long dominated the business of taking companies public. But after Uber and Lyft’s flawed debuts, rivals are circling, the FT finds.

The three banks claimed 55 percent of tech I.P.O. underwriting fees last year, the data provider Refinitiv says, from an estimated total of more than $400 million. Morgan Stanley and Goldman Sachs (along with Bank of America) were Uber’s lead underwriters; JPMorgan (along with Credit Suisse and Jefferies) were Lyft’s.

Rivals say the Uber and Lyft failures are cause for a shake-up. Uber has never traded above its I.P.O. price of $45 a share, and Lyft is down 23 percent from its I.P.O. price of $72 a share.

“The quality of deal execution” is being questioned by companies and venture capitalists, David Hermer, the head of equity capital markets at Credit Suisse, told the FT.

But I.P.O. candidates may prefer to play safe. Morgan Stanley, Goldman and JPMorgan are plugged into Silicon Valley, and have the broadest connections with potential investors in almost all offerings.

“You are not going to do something crazy” if you choose a “tried and true” adviser, said Howard Lerman, who picked Morgan Stanley to lead the I.P.O. of his company, Yext, in 2017.

More: A case against the rule change that let Uber stay private so long.

#MeToo takes on McDonald’s

In newly filed accusations, McDonald’s employees have described repeated sexual harassment and then punishment for speaking out, Melena Ryzik of the NYT writes.

• “The Time’s Up Legal Defense Fund, formed last year to extend the muscle of the #MeToo movement beyond Hollywood, has taken aim at sexual harassment on the fast food chain’s assembly lines.”
• With the American Civil Liberties Union and the labor group Fight for $15, it has “announced the filing of 23 new complaints against McDonald’s — 20 sent to the Equal Employment Opportunity Commission; three filed as civil rights lawsuits; and two suits stemming from previous allegations.”
• Workers accuse McDonald’s of “gender-based discrimination, sexual harassment in the workplace and retaliation for speaking up.”
• “McDonald’s is a strategic target. The restaurant industry has one of the highest rates of workplace sexual harassment; in one survey, 40 percent of female fast food workers said they had experienced it.”
• “The company’s dominant role in the economy makes the campaign a major test of the legal and labor power of the #MeToo movement.”

Avon may finally sell itself

Avon, once a giant in the cosmetics industry, has agreed to sell itself to a Brazilian rival, Natura Cosmeticos, according to press reports. The transaction could be announced as soon as today.

The all-stock deal would be valued at about $2 billion, according to the FT, citing unnamed sources. Natura would own about 76 percent of the combined business.

Natura already owns the Body Shop and Aesop brands, and has sought to expand globally.

“The deal would mark the end of the independence of an icon of 20th-century business, which has fallen on hard times as consumer tastes and buying habits have shifted,” the WSJ notes. Avon, which became a powerhouse through door-to-door sales, lost ground to online sales, which it was slow to embrace.

Avon had already spun out its North American business, which was sold in April to LG Household & Health Care of Korea for $125 million.

One big winner: Cerberus Capital Management, which controlled Avon’s North American unit and has a big stake in the remainder of the business.

Revolving door

The White House is vetting Judy Shelton, a conservative economist who favors changing interest-rate policy, for a seat on the Fed board.

President Trump plans to nominate Brent McIntosh, the Treasury Department’s general counsel, as its undersecretary for international affairs.

The Trump administration is expected to name Ken Cuccinelli, the former attorney general of Virginia, as its immigration policy coordinator.

The investment firm Silver Lake has hired Barrett Karr, the chief of staff for the House minority leader, Kevin McCarthy, as its head of government relations.

The speed read

Deals

• Chinese regulators unwinding Anbang’s property portfolio have reportedly received bids of over $5.8 billion for its U.S. luxury hotels. (FT)
• British Steel will file for bankruptcy after talks between the U.K. government and the owner broke down. (BBC)
• Lions Gate is reportedly interested in selling the cable channel Starz to CBS. It may then sell itself to MGM. (CNBC)
• Investors in TransferWise, the European payments start-up, are selling some of their holdings at a $3.5 billion valuation. (FT)
• French companies have been using the European Central Bank’s easy-money policies to buy assets — just not in Europe. (WSJ)
• The celebrity chef Jamie Oliver has put almost all his British restaurants into bankruptcy. (NYT)

Politics and policy

• President Trump dashed hopes for a bipartisan infrastructure bill by telling Congress to pass a trade agreement with Mexico and Canada first. (NYT)
• A California lawmaker has proposed extra tax breaks for film productions relocating from states that passed abortion bans, including Georgia and Alabama. (CNBC)
• Tax plans proposed by several Democrats would cost less than Mr. Trump’s tax cuts but deliver more to the middle class, according to an analysis by a liberal think tank. (NYT)
• Ben Carson, the secretary of the Department of Housing and Urban Development, confused the term “real estate owned,” or R.E.O., homes with Oreo cookies at a hearing yesterday. (Politico)
• New York State lawmakers voted to let state prosecutors pursue charges against individuals pardoned for similar federal crimes. (NYT)

Boeing

• Europe’s aviation regulator set three conditions for Boeing’s 737 Max 8 plane to fly again, signaling a growing rift among global agencies. (FT)
• A Boeing official examining a previous Max 8 crash reportedly dismissed the risk of the scenario now suspected of triggering the Ethiopian Airlines disaster this spring. (WSJ)

Brexit

• Prime Minister Theresa May of Britain offered lawmakers what she called a “new Brexit deal,” with a chance of a second referendum. (NYT)
• The pound has fallen amid growing fears of a disorderly no-deal Brexit later this year. (WSJ)

Tech

• Google will now require clearance from companies advertising abortion services in the U.S., Britain and Ireland. (NYT)
• The company also stored some corporate users’ passwords insecurely for 14 years. (Verge)
• Alex Stamos, Facebook’s former security chief, said that Mark Zuckerberg has too much power and should step down as C.E.O. He suggested Microsoft’s president, Brad Smith, as a replacement. (Business Insider)
• The U.S. Postal Service is testing autonomous trucks. (WSJ)
• Amazon is sucking up A.I. talent in Germany and “gamifying” warehouse work. (Politico, Business Insider)
• To rein in tech monopolies, maybe we need to rethink what a monopoly is. (NYT Op-Ed)

Best of the rest

• JPMorgan Chase investors are questioning executive pay at the bank. (FT)
• Why workers without college degrees are fleeing big cities. (NYT)
• An unanswered question about Robert Smith’s promise to pay off Morehouse graduates’ student loans: Who’ll cover the tax? (WaPo)
• The S.E.C. wants stock exchanges to justify their rising data fees. (FT)
• Craig Wright, who claims to be Satoshi Nakamoto, the inventor of Bitcoin, filed to copyright the original Bitcoin white paper. Also: A Peter Thiel-backed crypto startup paid out a 6,567 percent return. (CoinTelegraph, Bloomberg)
• Tesla poached a social media manager from Britain’s Museum of English Rural Life after his tweets impressed Elon Musk. (FT)

Thanks for reading! We’ll see you tomorrow.

You can find live updates throughout the day at nytimes.com/dealbook.

We’d love your feedback. Please email thoughts and suggestions to [email protected].