Google is being scrutinized by European antitrust officials, who have notified the Internet search giant that three companies have complained about its practices.
The European Commission is investigating complaints made by Ciao! from Bing, which is a unit of Microsoft (MSFT, Fortune 500); UK price comparison site Foundem; and French legal search engine ejustice.fr, Google said.
The three are arguing that the search firm suppresses the ranking of its competitors in search results.
"The Commission has not opened a formal investigation for the time being," according to a statement released by the executive arm of the European Union. "As is usual when the Commission receives complaints, it informed Google earlier this month and asked the company to comment on the allegations cash advance."
Google (GOOG, Fortune 500), which revealed the inquiry in a post on an official company blog early Wednesday, said that given its growth, it wasn’t surprised its search and search advertising practices were being examined.
"This kind of scrutiny goes with the territory when you are a large company," senior competition counsel Julia Holtz said on the company’s European Public Policy blog.
She said that Google will provide information on the complaints and said that the company is confident its business operates in line with European competition law.
Lending cash to individuals looking for cash advance or payday loans.
Huge losses in the Small Business Administration’s main loan program have led President Barack Obama to propose phasing out the government subsidy for 7(a) loans beginning in fiscal 2012.
This would force the agency to support its government-guaranteed loans by charging higher fees on borrowers and lenders. That’s what occurred when Congress ended the subsidy for 7(a) loans – at President George W. Bush’s request – in 2004. Congress restored the subsidy this fiscal year, at a cost of $80 million.
The economic stimulus bill provided the SBA with an additional $375 million to waive fees for borrowers on most 7(a) loans and 504 loans, which mostly finance real estate, and increase the government guarantee on SBA loans from the typical 75 percent to 90 percent. Those enhancements made the loans more affordable for borrowers and less risky for lenders, enabling SBA lending to rebound after cratering during the financial crisis.
SBA loans are an important source of credit for small businesses that can’t obtain conventional loans.
In December, Congress came up with another $125 million to extend the fee reductions and higher loan guarantee until the end of February. Obama wants Congress to pass additional legislation extending them through Sept. 30, the end of the fiscal year.
The president’s budget proposal for next fiscal year, however, reveals that defaults on SBA loans have exploded over the past year, costing the government a projected $4.5 billion. Most of the problem loans were made between 2005 and 2007.
The administration proposes a $165 million subsidy for 7(a) loans next year, double this year’s subsidy if economic stimulus funds are excluded.
Beginning in 2012, however, Obama wants to give the SBA “the flexibility to adjust fees in the program to enable it to be self-sustaining over time,” according to the president’s budget plan. This would “strengthen the program’s long-term economic foundation,” the budget plan states.
Default rates for 7(a) loans aren’t much worse than the default rates for conventional loans, said Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, which represents SBA lenders.
If the economy improves, default rates should fall, he said. A better business climate also could make an end to the government subsidy for 7(a) loans bearable, he said.
Apply for a payday loans today and as a first time customer, you can get up to $1000 directly to your account overnight.
Toyota’s suspension of U.S. sales of some of its top-selling models — amid intense pressure from the federal government — deals a blow to the automaker’s reputation for quality.
Toyota Motor Corp. announced late Tuesday it would halt sales of certain models — including the Camry and Corolla sedans and the RAV 4 crossover — to fix gas pedals that could stick and cause unintended acceleration. Last week, Toyota issued a recall for the same eight models affecting 2.3 million vehicles.
Toyota is also suspending production at six North American car-assembly plants beginning the week of Feb. 1. It gave no date on when production could restart.
Toyota insisted the problem — sudden, uncontrolled acceleration — was "rare and infrequent" and said dealers should deal with customers "on a case-by-case basis."
Officials under President Barack Obama said they pressed Toyota to protect consumers who own vehicles under recall and to stop building new cars with the problem.
David Strickland, the administrator of the National Highway Traffic Safety Administration, told reporters in Washington that the Transportation Department had been in regular
communication with Toyota about the recall.
"Toyota was complying with the law. They consulted with the agency. We informed them of the obligation, and they complied," Strickland said. He wouldn’t address why Toyota failed to stop selling the vehicles five days earlier when it announced the recall.
Across the country, Toyota dealers —swamped by calls Wednesday from drivers — said they were concerned the move would hamper sales. They hoped parts to fix the problem could be distributed quickly.
John McEleney, who owns a Toyota dealership in Clinton, Iowa, said the sales stoppage affects about 60 percent of the inventory on his lot.
He said he was hopeful Toyota would come up with a fix soon — especially because the longer a vehicle stays on a dealer lot, the more money a dealer pays in interest fees.
"Short-term, it’s going to be difficult," McEleney said. "It will certainly set us back, but I think the impact will be very short-lived."
Still, Tom Seeger, president of Seeger Toyota in Creve Coeur, said the automaker did the right thing by suspending sales of affected models until the problems are corrected.
"I am just unbelievably impressed by the decision Toyota has made out of concern for safety," he said.
Seeger said Toyota dealerships would provide loaner vehicles for owners whose vehicles show symptoms of the problems. No one had brought such a vehicle back to Seeger Toyota by late Wednesday, he said.
Gerry Hogan, sales manager at Jay Wolfe Toyota of West County in Ballwin, said: "We’ve had calls, but it’s not as bad as I thought it would be. We’ve sold thousands of these Toyotas, and I haven’t seen one (with the gas pedal problems) yet."
Meanwhile, rental car companies Avis Budget Group and Clayton-based Enterprise Holdings on Wednesday said they were pulling thousands of Toyota models covered by the recall.
Enterprise Holdings, which controls the Enterprise, National and Alamo brands, said it would pull an unspecified number of Toyota models from its fleet, accounting for about 4 percent of the cars it has in service. The company also will stop selling used Toyotas while the automaker finds a fix for the problem.
The suspect parts are made by a U.S. supplier, but they are also found in its European-made vehicles. Toyota said it hasn’t decided what to do there.
Sean Kane, director of Safety Research and Strategies, a consumer group that conducts research into motor vehicle safety issues, said his firm has identified 2,274 incidents of sudden unintended acceleration in Toyota vehicles leading to at least 275 crashes and 18 deaths since 1999.
The firm cites as sources the National Highway and Traffic Safety Administration, direct reports from drivers and incidents mentioned in lawsuits. Toyota would not confirm the numbers.
The supplier of the gas pedals used in the recalled car and trucks, CTS Corp. of Elkhart, Ind., said it knew of only a few cases of drivers having problems with accelerators. It said it’s working with Toyota to design a new pedal.
Also late Wednesday, Toyota said it will add 1.09 million vehicles in the United States to an earlier recall over the risk of accelerator pedals becoming stuck in the floor mats.
The fresh recall would affect five models — 2008-2010 Highlander, 2009-2010 Corolla, 2009-2010 Venza, 2009-2010 Matrix, and 2009-2010 Pontiac Vibe, which is built on a Toyota platform. Toyota has already recalled 4.2 million vehicles in the U.S. over such problems. About 1.7 million vehicles fall under both recalls.
Two years ago, Toyota beat out General Motors Co. to become the world’s largest automaker. Now it is stopping some sales in its biggest market, the U.S., when it desperately needs to sell cars here after reporting its first-ever annual loss last year.
John Wolkonowicz, a longtime auto analyst with IHS-Global Insight, said Toyota is fortunate in that it has a loyal customer base — primarily baby boomers who have been buying Toyotas for decades. That, he said, will help minimize the sales impact in the short term.
"But it will further impede their ability to get the younger buyers that they so dearly want to get into the Toyota fold," Wolkonowicz said.
The sales halt calls into question the aggressive growth strategy pursued under former company president Katsuaki Watanabe, a cost-cutting expert, who led the Japanese automaker to the No. 1 spot in global vehicle sales in 2008, analysts say.
The automaker’s problems in the U.S. may be an extension of the spate of quality problems that plagued Toyota several years ago in Japan, its home market, during the aggressive growth strategy pursued under Watanabe.
In 2006, the Japanese government launched a criminal investigation into accidents suspected of being linked to vehicle problems, though no one was charged. Watanabe later acknowledged overzealous growth was behind the quality problems.
Watanabe was replaced last year by Akio Toyoda, the grandson of Toyota’s founder.
The problems hit Toyota extra hard because it has touted quality for years to gain advantage over competitors, said Brenda Wrigley, chair of the public relations department at Syracuse University’s S.I. Newhouse School of Public Communications.
"Quality was their differentiator, and now it’s their Achilles heel," she said.
The Associated Press, Detroit Free Press and Robert Kelly of the Post-Dispatch contributed to this report.
The fat cats were supposed to get their comeuppance.
After Wall Street’s most prominent firms — by their own admission — helped cause the 2008 financial meltdown and got bailed out by the government, they were supposed to stop handing out million-dollar bonuses to employees. No one was supposed to get seven- and eight-figure rewards, not after the Great Recession left one in 10 Americans unemployed. Not after President Barack Obama — who on Thursday called such pay "obscene" — had promised to clamp down on lavish bonuses.
It turns out little actually changed.
Americans will see that starting Friday when JPMorgan Chase & Co. releases its 2009 financial results. The other big banks will follow. The messages will be the same: Compensation is at near-record levels.
The form of the pay is changing. Instead of cash, bonuses will be paid mostly in stock that can’t be redeemed for years. But the numbers are still staggering. Together, the six biggest U.S. banks are on pace to pay $150 billion in 2009, slightly less than the record $164 billion in 2007 before the crisis, according to New York state comptroller’s office.
How this happened is complicated. It involves a remarkable turnaround by the banks, but one fueled by the bailout. It shows the power of the financial lobby. And it highlights the age-old debate about how much U.S. companies need to pay to retain talented bankers and traders.
Scott Talbott of the Financial Services Roundtable says keeping those workers from going to overseas firms is critical. "The market will find a way to pay these people what they’re worth," says Talbott, chief lobbyist for the group representing some of the largest financial firms.
But Douglas Elliott, a fellow at the Brookings Institution and a former banker, thinks "The way the public sees it is that we wrote a $700 billion check to the banks, and they got to burn through it as they pleased."
THE BAILOUT
The government played a big role in the bonanza by bailing the banks out. In the days after the meltdown, banks were given access to cheap government loans and other federal subsidies. Because the banks weren’t required to put it toward lending, they could use it as they pleased.
Many bet on risky securities that paid off when the markets surged. The result: big profits and big bonuses. Profit at Goldman Sachs nearly doubled to $8.4 billion in the first nine months of 2009 from the previous year, and analysts expect its full-year profits to top $10 billion.
Goldman set aside $16.71 billion from January through September for compensation, including salaries, bonuses and associated costs. That puts it on pace to meet the record $20.2 billion in compensation costs it had for all of 2007.
Should Goldman’s annual compensation go that high, it works out to $600,000 each for its 31,700 employees. It won’t be distributed like that, of course. The best performers and executives stand to earn millions.
The nation’s biggest banks all took money from the Troubled Asset Relief Program. Some needed it; others were pressured by federal officials to take it. Regardless, the banks weren’t restricted in how to spend it. They faced limits on compensation, but that lasted for only as long as they held the funds, which gave them incentive to pay the TARP back quickly. In total, banks took $245 billion and have paid back $162 billion.
LOBBYING MACHINE
Bonus outrage and the momentum to do something about it peaked last February, when crippled insurer American International Group Inc. moved to pay $165 million in bonuses to hundreds of employees in the same financial unit that brought down the company. Treasury Secretary Timothy Geithner called Wall Street pay "out of whack."
The fact it didn’t happen speaks to the industry’s powerful lobbying machine. In the past decade, no industry has spent more lobbying dollars than Wall Street and its offshoots. From 1998 to 2009, the FIRE lobby — or finance, insurance, real estate — spent $3.8 billion, according to the Center for Responsive Politics. By comparison, the energy and defense industries spent $2.6 billion and $1.08 billion, respectively.
Meanwhile, Wall Street’s generosity to political candidates ramped up even as the industry began careening. Financial firms contributed a record $476 million in the last election cycle. That’s more than double the No. 2 donor, the health care industry, which gave $166 million, even as Congress began to debate landmark health care legislation.
WHAT’S NEXT
Washington is scrambling to get something done to temper the populist anger. The financial lobby still could block those efforts.
The Obama administration is proposing a 10-year tax on the largest banks to cover a projected $117 billion shortfall in the bailout fund.
The Fed is reviewing a plan that would give it more oversight on compensation by reviewing pay practices at thousands of banks. The central bank would be able to veto pay plans if it found them to encourage excessive risk-taking by executives, traders or loan officers.
The Federal Deposit Insurance Corp., which regulates most of the nation’s banks, is seeking input on a plan that would tie fees that banks pay for deposit insurance to how much a company’s compensation plan encourages workers to take risks in order to achieve higher returns.
A few in Congress want to go further. Rep. Dennis Kucinich, D-Ohio, introduced legislation Tuesday to impose a 75 percent bonus tax.
"What you’re seeing is a public-be-damned attitude from the banks," he said. "They’re rolling in dough while the taxpayer has to sacrifice.
There’s always a coffee war brewing somewhere. The latest one has small, neighbourhood espresso shops kicking grinds in the face of Starbucks, the grande operator of the indie coffee business.
Apparently, independent designer coffee shops – 25 new ones opened in Toronto this year – are stealing coffee drinkers from Starbucks faster than you can say "fratta-latte," so the Seattle-based corporation is fighting back. And it’s using the independents’ playbook as its guide.
Earlier this year, Starbucks opened up a shop in the Capitol Hill neighbourhood of Seattle. However, the new Starbucks wasn’t called Starbucks. The sign outside read: "15th Avenue Coffee and Tea" and in much smaller letters below were the words: "Inspired by Starbucks."
Now it appears more "Inspired by Starbucks" shops may pop up in neighbourhoods across the United States – not Canada, for the time being, though, according to Starbucks – as the coffee giant hopes to perk up enthusiasm among what could well be described as the anti-Starbucks crowd.
According to independent shop owner Stuart Ross, Starbucks has no one to blame but itself for the competition.
Without the corporate coffee giant, the owner of Bull Dog Coffee at Granby and Church streets says a majority of coffee drinkers would likely never have been turned on to espresso-based drinks in the first place.
"They (Starbucks) are the ones who told us, `Now is the time to drink Americanos, macchiatos,’" Ross says.
"What they’re good at is marketing, which paved the road for places like mine."
Starbucks Coffee Canada calls the company’s new cafés "a celebration of each community’s personality and culture," and "learning labs for us to incubate ideas and evaluate various concepts."
Starbucks says the new locations have been received with community enthusiasm, but a number of Seattle’s independent café owners weren’t so sanguine.
A week before the opening of 15th Avenue Coffee and Tea, the Seattle Times reported that owners of at least two independent shops, Seattle Coffee Works and Victrola Coffee Roasters, spotted Starbucks’ employees on research trips lingering in their stores.
"They spent the last 12 months in our store up on 15th (Ave.) with these obnoxious folders that said, `Observation’ written on them," said one independent owner.
Jamie Naessens thought so. She used her credit card to get a free sample of a tooth whitener advertised as cheaper than visiting a dentist.
"A friend of mine on Facebook posted about a product she was happy with that she got for free," she says. "Her account was hacked, but I didn’t know until later."
She went to the website, www.premiumwhitepro.com, and agreed to pay $1.95 (U.S.) to cover shipping costs. But a confirmation email showed $11.90 charged to her credit card.
"We charge an extra $9.50 for international orders," she was told after calling the Colorado-based company for a live chat on the night she did the transaction.
Only when she asked to cancel did she find out that accepting the trial order could have trapped her in a monthly shipping program.
"If you don’t cancel, you will be billed $87.62 for the product and you’ll then become a PremiumWhite Celebrity Member," the website says.
Naessens cancelled the trial order, but the company insisted the $11.90 shipping charge was non-refundable. Luckily, she had a screen shot of her live chat and sent it to her credit card issuer, President’s Choice Financial.
She also cancelled her credit card and asked for a new one to be issued with a new number.
Erin Gray, a President’s Choice spokeswoman, said customers have to take precautions against online scams.
"Ms. Naessens was reimbursed for the charge she incurred from the company," Gray said. "By taking the extra step of closing her card and opening a new one, she should avoid further charges related to the online offer.
"Should the company proceed with charging the card again, we will certainly work with Ms. Naessens to find a resolution (including adjusting the charge)."
Complaints about recurring charges by merchants often have the same result No teletrack payday loans. Customers have to call their credit card issuer every month and file a dispute.
This happens despite guarantees by Visa and MasterCard against unauthorized purchases made in a store, over the phone or online.
Naessens feels a little foolish, but a lot wiser, about how credit card companies operate.
"I have always considered myself a fairly smart consumer. However, I’ve been humbled recently.
"I feel that credit card issuers are not committed to changing the system to protect consumers.
"It is true that the issuer has promised to work with me in the future. However, that is not the same as making a promise to reverse any future charges, even though I did everything I could possibly do, given the situation.
"The very fact that suspect merchants can resubmit the charges is unacceptable — and once again, the consumer is victimized."
Naessens had one more surprise. She joined a security group at Facebook to share her experience.
But she couldn’t comment online without verifying her Facebook account. This meant having to provide her cellphone number, so she could be sent a text message with a security code.
"I’d already compromised my credit card number. I wasn’t going to do that with my cellphone number," she says.
Internet user beware. A free sample is a common come-on for monthly shipments of vitamins or cosmetics. And if you complain, the company will say you agreed to the terms and conditions before placing your order.
Next week, we’ll wrap up this Sunday series on fraud before tackling something new in the new year.
eroseman@thestar.ca
WASHINGTON – House Democrats headed into the final stretch on a long-awaited Wall Street regulation bill Friday after fending off an effort to kill a proposed U.S. consumer agency that is a central feature of the legislation.
The sweeping regulatory overhaul aims to address the myriad conditions that led to last year's financial crisis.
Test votes during two days of debate indicate that Democratic support for the underlying legislation will hold in final passage.
Before the final vote Friday, House members rejected by a vote 223-208 an amendment that would have killed a proposed Consumer Financial Protection Agency. The agency would consolidate consumer lending regulations and enforcement that is now split among several banking regulators.
A bipartisan coalition had proposed keeping the consumer powers within each regulator and creating an oversight council. The U.S. Chamber of Commerce lobbied heavily to kill the agency and ran national television ads against it. Consumer groups said it was essential to the overall regulatory package.
In a separate vote Friday, Democratic leaders failed to revive legislation that would let bankruptcy judges rewrite mortgages to lower homeowners' monthly payments. The measure was rejected by a 241-188 .
The House previously passed bankruptcy-mortgage legislation, but it failed in the Senate.
Democrats hoped that by inserting the provision in the regulatory legislation they would have had another opportunity to make it law. Aiding homeowners through bankruptcy had been a key feature of President Barack Obama's foreclosure fighting proposal, but the president did not push for it.
Banks and credit unions have lobbied against the bankruptcy measure. They say it would force a flood of bankruptcy filings and ultimately drive up mortgage rates paperless payday loans.
Late Thursday, scores of Democrats voted with Republicans on amendments that eroded the reach of proposed regulations on complex derivatives trades.
Democratic attempts to toughen the legislation failed.
Though not major setbacks, the votes illustrated the difficulties facing House Financial Services Chairman Barney Frank and the Obama administration as they seek to pass the most ambitious rewrite of financial regulations since the New Deal of the 1930s.
The Chamber has been an aggressive opponent of the legislation, running television ads against the proposed consumer agency and pressuring lawmakers to vote to eliminate it and to ease the derivatives regulations.
The legislation still imposes restrictions on derivatives, aiming to prevent manipulation and bring transparency to a $600 trillion global market. An amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, exempted businesses that trade in derivatives, not as financial speculators, but to hedge against market fluctuations such as currency rates or gasoline prices. The amendment also provided an exception for businesses that are considered too small to be a risk to the financial system.
A Democratic effort to make more companies subject to derivatives regulation failed 279-150.
For Democrats, the votes split along turf lines. All but a few of the Democrats on the House Agriculture Committee voted for the broader exception. The Agriculture Committee oversees commodities trading and had recommended less restrictive derivatives rules, but the final bill did not include them.
Nortel Networks Corp. pensioners reacted with disgust on Friday to reports of new lavish bonuses for the company’s top executives.
It was yet another blow to Nortel’s distressed pensioners, retirees and long-term disabled former employees, who have dealt with financial uncertainty since the former Canadian tech darling declared bankruptcy in January.
“It seems so aberrant, in terms of the executive of the company awarding themselves really, really rich pay raises for doing the job of taking the company apart,” said Tony Marsh, who retired from Nortel in 2000 after 30 years.
“Those of us who built the company up, into arguably the world’s No. 1 telecom company, could never have dreamed of such riches,” Marsh added.
An internal Nortel file “outlines a new compensation scheme for 72 Nortel executives that will see them get a total of $7.5 million U.S. on top of their current salaries in 2009,” according to CBC News.
The company has argued that bonuses are necessary to keep executives aboard what is essentially a sinking ship following Nortel’s filing for bankruptcy protection and the subsequent selling off of the company’s assets.
Nortel would not comment on details of the plan. It issued a statement saying: “As Nortel works through the highly complex tasks of this restructuring, it is critical to have the right specialist resources in place … Any steps taken around these individuals has been within the context of a previously approved compensation plan, taken in consultation with the creditor committees, external legal counsel and the Canadian Monitor.”
Earlier, former CEO Mike Zafirovski claimed $12.3 million (U.S.) for back pay and bonuses. In March, some 100 executives were awarded $45 million in retention bonuses.
The company’s divisions are being auctioned off in a process dragged out by bankruptcy court approvals. Retirees are worried that when Nortel’s various global divisions are entirely sold off, they will be stuck with even less than they are now, which is not much, Marsh said.
Campbell Soup Co. reported that its first-quarter profit rose 17 percent with the help of lower costs from increased efficiency in getting its products from its plants to store shelves, as well as lower prices for grain ingredients. Earnings were $304 million, or 87 cents per share, up from $260 million, or 70 cents per share, a year ago. But revenue fell 2 percent to $2.2 billion with dips in sales for most categories, ranging from condensed soup to Prego pasta sauce.
Hewlett-Packard said cost cutting helped its profit jump 14 percent in the fourth quarter despite an 8 percent revenue decline. H-P got higher profit from Electronic Data Systems Corp., a tech services company H-P bought for $13.9 billion last year to better compete against IBM Corp. The world’s top seller of personal computers earned $2.4 billion, or 99 cents a share, compared with $2.1 billion, or 84 cents a share, a year earlier. Revenue was $30.8 billion, down from $33.6 billion. Analysts had expected earnings of $1.13 a share, on revenue of $30.4 billion, according to a consensus survey by Thomson Reuters.
Tyson Foods Inc. said it made strides in the meat business this year and predicts more improvements next year. The world’s largest meat producer, based in Springdale, Ark., said a hefty impairment charge in its beef business left it with a loss for the fourth quarter. But all of its business units, including chicken and pork, were profitable, when excluding the $560 million noncash charge. The company lost $455 million, or $1.22 a share, compared to a profit of $48 million, or 13 cents a share, a year ago. Excluding the charge, Tyson would have earned 28 cents a share, two cents better than analysts had forecasted. Revenue inched higher to $7.21 billion, up $13 million from a year ago.
Treasury prices were lifted Tuesday as investors pulled back on the previous day’s gains on Wall Street, spurring demand for perceived safe haven assets.
"Bonds are trading on some weakness in the equity market today," said Bill Larkin, portfolio manager at Cabot Money Management.
Stocks fell from their highest level in 13 months on Tuesday as investors reacted to a stronger dollar. The greenback, which is also perceived as a safer investment, rebounded from 15-month lows Tuesday.
Going forward, Larkin said prices of longer-dated treasuries will turn lower and prices for short term bonds will rise as the Federal Reserve holds interest rates near zero.
"That market will start to anticipate higher future inflation," Larkin said. "Because the Fed is on the sidelines, there is more embedded risk that inflation will become a problem for longer-dated securities."
Investors are keeping a close eye on the Fed for any indication of when it will raise interest rates loan till payday.
"The Fed’s change from the current liquidity to tightening monetary policy and raising interest rates without choking the economic growth will be just as challenging as it was getting the economy going again," he said. "And the market will be focus on that change."
Bond prices. The benchmark 10-year note was up 3/32 to 10-14/32, and its yield fell to 3.33% from 3.34% late Monday. Bond prices and yields move in opposite directions.
The 30-year bond rose 17/32 to 102-6/32, and its yield eased to 4.25%.
The 2-year note edged higher to 100-15/32. Its yield fell to .77%.
The yield on the 3-month bill .07%
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