Welcome to this week’s commercial news write up (6th February 2019).
Topics discussed this week cover:
- India’s new e-commerce rules by @Abstruser;
- Brexit concerns for the UK construction industry by @bugsy malone;
- US charges against Huawei by @kitk ; and
- The US government shutdown - including an in depth background to the US budget process, thanks to @Angel .
As always please feel free to ask any questions or add your thoughts 
1. India’s new e-commerce rules (Abstruser)
The story:
In December 2018, India introduced its new e-commerce rules, which do not allow e-commerce platforms to “exercise ownership or control over the inventory” of sellers. The regulations are an offshoot of India’s FDI regulations, and therefore only apply to foreign investors. The new rules prevent platforms like Amazon not only from selling their own goods on their marketplaces, but also from selling the goods of companies in which they hold equity stakes.
The rules are a response to complaints from independent online sellers, who have petitioned the government for a level playing field for all sellers, regardless of size or market power. The previous e-commerce rules, an offshoot of India’s FDI regulations, prevented foreign e-commerce platforms from selling their own products on their marketplaces. However, the All India Online Vendors Association accused e-commerce behemoths such as Amazon and Walmart-owned Flipkart of avoiding these rules by creating proxy companies such as Amazon’s Cloudtail Retail and Flipkart’s RetailNet, through which they indirectly sold their own products.
The rules came into force on Friday, despite both Amazon and Flipkart having requested more time to comply with the new regulations.
Impact on businesses and law firms:
As the new regulations took effect on Friday, Amazon and Flipkart began pulling thousands of items from their Indian websites. Amazon and Flipkart collectively account for more than 70% of all online sales in India, and the sudden disappearance of several items have sparked discontent among Indian consumers, who have grown accustomed to cheaply priced online shopping. Some analysts predict that almost a third of Amazon’s Indian sales, currently worth about $6 billion annually, could be temporarily affected by the new rules.
For businesses, India’s new stance on e-commerce signals renewed hostility to foreign investors and companies. Both Amazon and Walmart have invested considerable sums into entering the Indian retail market – Walmart’s $16 billion acquisition of Flipkart was the largest foreign direct investment in Indian history, and Amazon has spent $5 billion on its Indian operations.
For law firms, the new regulations may generate more commercial and corporate work, as companies like Amazon and Flipkart begin to renegotiate and restructure their vendor and supply relationships. In addition, while the new rules were intended to level the competitive playing field between all vendors, some commentators have suggested that the uneven treatment of foreign and local players may raise some competition concerns.
2. Brexit concerns for the UK construction industry (Flora)
The story:
The construction industry provides employment for millions of workers and adds billions in value to the economy every year, making it a key part of the UK economy.
Brexit uncertainty raises three major concerns for businesses in all areas of the construction industry, including infrastructure and real estate. These are investment, movement of goods, and labour.
Impact on businesses and law firms:
(a) Investment:
Construction is a continuous process however the industry fluctuates depending on investment to fund projects. Brexit may lead investors to hold back which would cause problems for financing projects. For example, infrastructure is generally funded by government spending and we are now starting to see delays over HS2 and nuclear projects. As a result, law firms may see a decrease in the firm’s finance practices.
(b) Movement of Goods:
Construction projects work on ‘lead times’, meaning the amount of time that elapses between placing an order for an item and its delivery to site. One of the largest construction materials imported into the UK is timber and 92% is from the EU.
Therefore, changes to EU boarder controls in the UK on the 29th of March could cause disruptions to lead times. If lead times are extended this could cause developers to take longer to plan for their projects, requiring them to take out finance for longer periods of time, as well as construction contracts taking longer. This would add to a projects overall costs and finance lawyers may need to come up with creative loan agreements to ensure projects continue.
(c) Labour/ Workers:
Perhaps the biggest concern is construction labour and access to labour. There are roughly 160,000 EU workers in UK construction, and so changes to EU citizens’ rights to work in the UK could have damning affects. This reliance could delay projects if businesses aren’t able to employ enough staff or if it pushes up prices of new workers brought in.
Employment lawyers will need to assist the construction industry with helping EU employees achieve ‘settled statues’, so that they can continue to work in the UK.
3. US charges against Huawei (Kitk)
The story:
Last week, the US filed 23 criminal charges against the Chinese telecommunications equipment company, Huawei.
These charges include corporate espionage which involve Huawei allegedly attempting to steal trade secrets from T-Mobile, as well as wire fraud related to Huawei’s alleged evasion of US sanctions against Iran.
Huawei has denied the US’s allegations. China has called them a misuse of state power.
Impact on businesses and law firms:
These charges have affected companies in Huawei’s global supply chain. For example, companies which make high volumes of sales to Huawei like Foxconn Industrial Internet and TSMC have seen a fall in their share prices.
They might also affect Huawei's credibility. If countries ban the use of Huawei’s equipment, Goldman Sachs has estimated that 70 suppliers worldwide and Rmb 52.4 billion worth of trade would be adversely affected. However, this could also benefit Huawei’s competitors like Samsung and Nokia.
On a broader level, these charges can make a US-China trade deal less likely. This can affect the levying of US tariffs on some $200bn worth of Chinese goods, which can in turn result in a more negative environment for carrying out international trade.
Law firms which deal with companies in the telecommunications equipment sector should be aware of how the Huawei case can affect the latter’s ability to carry out trade. Given the many charges against Huawei, the development of the Huawei case should also be of interest to practices that handle corporate crime matters.
