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WASHINGTON (Reuters) – The United States Postal Service should have more flexibility to raise rates for packages, according to recommendations from a task force set up by President Donald Trump, a move that could hurt profits of Amazon.com Inc (AMZN.O) and other large online retailers. The task force was announced in April to find ways to stem financial losses by the service, an independent agency within the federal government. Its creation followed criticism by Trump that the Postal Office provided too much service to Amazon for too little money.
FILE PHOTO – A view shows U.S. postal service mail boxes at a post office in Encinitas, California in this February 6, 2013, file photo. REUTERS/Mike Blake/Files
The Postal Service lost almost $ 4 billion in fiscal 2018, which ended on Sept. 30, even as package deliveries rose.
It has been losing money for more than a decade, the task force said, partially because the loss of revenue from letters, bills and other ordinary mail in an increasingly digital economy have not been offset by increased revenue from an explosion in deliveries from online shopping.
The president has repeatedly attacked Amazon for treating the Postal Service as its “delivery boy” by paying less than it should for deliveries and contributing to the service’s $ 65 billion loss since the global financial crisis of 2007 to 2009, without presenting evidence.
Amazon’s founder Jeff Bezos also owns the Washington Post, a newspaper whose critical coverage of the president has repeatedly drawn Trump’s ire.
The rates the Postal Service charges Amazon and other bulk customers are not made public.
“None of our findings or recommendations relate to any one company,” a senior administration official said on Tuesday.
Amazon shares closed down 5.8 percent at $ 1,669.94, while eBay (EBAY.O) fell 3.1 percent to $ 29.26, amid a broad stock market selloff on Tuesday.
The Package Coalition, which includes Amazon and other online and catalog shippers, warned against any move to raise prices to deliver their packages.
“The Package Coalition is concerned that, by raising prices and depriving Americans of affordable delivery services, the Postal Task Force’s package delivery recommendations would harm consumers, large and small businesses, and especially rural communities,” the group said in an emailed statement.
Most of the recommendations made by the task force, including possible price hikes, can be implemented by the agency. Changes, such as to frequency of mail delivery, would require legislation.
The task force recommended that the Postal Service have the authority to charge market-based rates for anything that is not deemed an essential service, like delivery of prescription drugs.
BAD NEWS FOR AMAZON
“Although the USPS does have pricing flexibility within its package delivery segment, packages have not been priced with profitability in mind. The USPS should have the authority to charge market-based prices for both mail and package items that are not deemed ‘essential services,’” the task force said in its summary.
That would be bad news for Amazon and other online sellers that ship billions of packages a year to customers.
“If they go to market pricing, there will definitely be a negative impact on Amazon’s business,” said Marc Wulfraat, president of logistics consultancy MWPVL International Inc.
If prices jumped 10 percent, that would increase annual costs for Amazon by at least $ 1 billion, he said.
The task force also recommended that the Postal Service address rising labor costs.
The Postal Service should also restructure $ 43 billion in pre-funding payments that it owes the Postal Service Retiree Health Benefits Fund, the task force said.
Cowen & Co, in a May report, said the Postal Service and Amazon were “co-dependent,” but that Amazon went elsewhere for most packages that needed to arrive quickly.
Cowen estimated that the Postal Service delivered about 59 percent of Amazon’s U.S. packages in 2017, and package delivery could account for 50 percent of postal service revenue by 2023.
The American Postal Workers Union warned against any effort to cut services. “Recommendations would slow down service, reduce delivery days and privatize large portions of the public Postal Service. Most of the report’s recommendations, if implemented, would hurt business and individuals alike,” the union said in a statement.
Reporting by Diane Bartz and Jeffrey Dastin; editing by Bill Berkrot
WASHINGTON (Reuters) – U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.
The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said.
The decision marks a victory for Treasury Secretary Steven Mnuchin in a fierce White House debate over the scope of such curbs.
Mnuchin had favored a more measured and global approach to protecting U.S. technology, using authority approved by Congress, while White House trade adviser Peter Navarro, the administration’s harshest China critic, had argued for China-specific restrictions.
“We are not, on a wholesale basis, discriminating against China as part of a negotiation,” Mnuchin said on CNBC on Wednesday.
The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.
“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.
U.S. stocks rose after Trump announced the new approach to U.S. investment restrictions but reversed gains in afternoon trading.
Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the “crown jewels” of U.S. intellectual property.
Trump said in his statement that upon final passage of the legislation, known as the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”
If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.
The decision to stick with CFIUS was a pragmatic move because the new CFIUS legislation “will put a crimp in China’s efforts to move up the value chain in high tech,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.
But it will likely do little to stop the activation of U.S. tariffs on $ 34 billion worth of Chinese goods, scheduled for July 6, or jump-start trade negotiations between the two economic superpowers, Kennedy said.
And the mixed messages from the administration do not help Trump’s negotiating position, he said.
“It shows the Chinese that the Trump administration is still undependable and can be moved back from the most hardline positions,” Kennedy added.
Mnuchin on CNBC downplayed the dissent within the administration, saying that Trump wants to hear differing views on important issues, but the administration’s economic team typically comes together on major recommendations such as the investment restrictions.
Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near U.S. military bases.
“This isn’t a question about being weak or strong, this is about protecting technology. We have the right tools under this legislation to protect technology,” Mnuchin said.
COMMERCE EXPORT CURBS
Trump also said that he has directed Commerce Secretary Wilbur Ross to examine U.S. export controls and recommend modifications that may be needed “to defend our national security and technological leadership.”
A Commerce Department spokesman could not be immediately reached for comment on the study.
The CFIUS legislation is headed for negotiations between U.S. House and Senate lawmakers in the coming weeks to craft a final version, with guidance from the Treasury.
A sticking point that could emerge is language in the Senate version that would reinstate the ban on Chinese telecom equipment maker ZTE Corp (000063.SZ) from purchasing U.S. components for a year. The Commerce Department ban had effectively shut the Shenzhen-based company down, angering Beijing.
The House version has less stringent language prohibiting the U.S. Department of Defense from purchasing any ZTE communications gear.
Reporting by David Lawder; Editing by Jeffrey Benkoe and Steve Orlofsky
WASHINGTON (Reuters) – A U.S. Senate Commerce Committee panel plans to call a former Cambridge Analytica contractor at the center of a scandal involving the use of data from millions of Facebook users, a committee source told Reuters on Thursday.
The panel’s subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security will hold a hearing next Tuesday on data privacy risks focusing on Cambridge Analytica, a British political consultancy, and other Facebook Inc (FB.O) partners, the committee announced Wednesday.
The session follows hearings in April with Facebook Chief Executive Mark Zuckerberg and will focus “on the collection and use of social media data, the privacy concerns raised in the wake of the Cambridge Analytica/Facebook scandal, and potential steps to protect consumers,” the committee said.
The committee will call Aleksandr Kogan, a contractor for Cambridge Analytica, to testify, a source briefed on the matter said. A lawyer for Kogan did not immediately respond to a request for comment.
Facebook said in April that the personal information of up to 87 million users, mostly in the United States, may have been improperly shared with Cambridge Analytica. The London-based consultancy’s clients included President Donald Trump’s 2016 election campaign.
Facebook says Kogan harvested the data by creating an app on the social media network that was downloaded by 270,000 people, providing access not only to their own personal data but also data from their friends. Facebook said Kogan then violated its policies by passing the data to Cambridge Analytica.
Cambridge Analytica disputed Facebook’s estimate of how many users were affected.
Cambridge Analytica and its British parent, SCL Elections Ltd, said in May that they would shut down immediately and begin bankruptcy proceedings in both the United Kingdom and the United States after suffering a sharp drop in business. Cambridge Analytica filed for Chapter 7 bankruptcy in New York last month.
In April, Kogan, who worked for the University of Cambridge, told British lawmakers that all the data he collected had, to the best of his knowledge, been deleted. He said he would double-check that none remained.
“This has been a very painful experience, because, when I entered into all of this, Facebook was a close ally,” Kogan said. “I was thinking this would be helpful to my academic career and my relationship with Facebook. It has very clearly done the complete opposite.”
Also expected to appear at next week’s hearing are John Battelle, who helped found Wired Magazine and is a board member of database marketing company Acxiom Corp (ACXM.O), and Ashkan Soltani, who was former chief technologist for the Federal Trade Commission during the administration of President Barack Obama.
Reporting by David Shepardson; editing by Jonathan Oatis