Commercial Awareness Update- December 2018
- By Sara Moon
- Commercial Awareness Discussion
- 4 Replies
Hi, everyone! The last month of 2018 has just begun and here is a new commercial awareness thread for December updates! Hope you find this helpful and have a nice week ahead
5th December
1. Tech Industry and Competition Law (by Angel)
The story
Whenever a user buys an application on the App Store, Apple collects the money and keeps an amount of commission before handing the remaining sum to the application developers. Customers are now bringing an action against Apple, alleging that the tech giant is exploiting its market dominance and monopolising the App Store to inflate the price of iPhone applications.
The decade-long battle is over the legal question of whether:
The claimant (iPhone customers) argued that Apple is operating anti-competitively because:
For Apple, losing the case can wipe out a considerable revenue stream since the company is becoming increasingly dependent on revenues from software and services, especially when its hardware sales are stalling. The tech giant may be forced to change its pricing structure and potentially faced hundreds of millions in penalties to refund some of the commission it has taken.
For the wider industry, the Supreme Court’s ruling, which could be in June 2019, is definitely one to look out for. It could be a precedent-setting decision that confer implications for other companies that operate e-marketplaces such as Facebook, Ebay, Amazon and Google. If the Supreme Court issues a ruling to continue the suit, the ruling would be damaging to both Apple and the rest of the tech industry. As the decision is one that will ultimately affect how much power consumers have over digital platforms, if Apple loses the case, there is potential for further litigation from unhappy customers against Apple and the other tech giants.
2. Winding down quantitative easing (by Shu Qin)
The story
Quantitative easing (‘QE’) is an expansionary monetary policy intended to stimulate economic growth. Under QE, central banks increase the supply of circulated currency in the economy by printing money and purchasing bonds and other securities. This has the effect of pushing interest rates down, thereby encouraging consumer spending, lowering financing costs and increasing economic growth. QE was first used by Japan from 2001 to 2006, but perhaps the most prominent use of QE was by the US Federal Reserve (‘the Fed’) following the financial crisis. Under its QE program, the Fed bought Treasury bonds and mortgage-backed securities worth more than $3.7 trillion from 2008 to 2015. The European Central Bank (‘the ECB’) implemented its own QE program in 2015 after seven years of austerity, and has since spent more than $2.93 trillion on private and public-sector bonds.
After the financial crisis, a key concern for central banks is how to respond in the hypothetical event of another recession. One option is to implement fiscal policy, where government increases spending to stimulate economic growth. However, as buying securities under QE has resulted in increased public debt – the Fed doubled its balance sheet to $4.5 trillion under QE, while the ECB currently has a $5.23 trillion balance sheet – government spending may be limited by high debt. As such, central banks are beginning to ‘unwind’ their QE policies by ending bond purchases and slowly offloading their balance sheets. The latter is a delicate process, as an abrupt sell-off could severely disrupt the bond and stock markets. The Fed stopped buying new securities in 2014, but has continued reinvesting dividends from maturing holdings. The ECB is set to follow suit by the end of this year.
Another way that central banks might theoretically be able to deal with an economic meltdown is to cut interest rates to stimulate growth again. However, this won’t be possible if interest rates are already low. For instance, the ECB’s main refinancing rate is already 0%. This logic underpins the Fed’s recent interest rate hikes, as the central bank pushes towards a ‘neutral’ interest rate that allows it sufficient room to cut rates again, should the economy require stimulus in the future. The Federal Funds Rate has been hiked three times from 1.5% to 2.25% this year alone, with a fourth hike likely before the end of 2018. In June, ECB president Mario Draghi indicated the ECB could possibly raise its rates after summer 2019.
Impact on businesses and law firms
It follows that for central banks, winding down QE is a two-pronged strategy – offloading securities, as well as raising interest rates.
With regard to the former, reduced investment from these institutional players have a negative impact on bond prices, as supply outstrips demand. According to analysts at JPMorgan, Eurozone investment-grade retail funds have seen a €15 billion outflow this year, the largest redemption since 2010. The ECB was a generous investor, as it did not assess the credit quality of bond issuers. As such, businesses reliant on ECB investments may be negatively affected. For instance, Spanish supermarket Dia’s bonds, of which the ECB was a large investor, were rated investment-grade as of early October. However, a profit warning in mid-October saw its bonds spiralling into junk territory, amidst investor concern for the supermarket’s future without ECB funding. This may provide opportunities for law firms to assist with restructuring, as businesses teeter towards insolvency or financial instability.
As to rising interest rates, these may also rattle equity markets as bonds begin to look like more attractive investment instruments than stocks. This is well illustrated by the US stock sell-off over the past few months (which was covered in last week’s update). More broadly, rising interest rates in the US will put a dampener on consumer spending, which may affect business revenues. The cost of borrowing will also increase, as interest rates on loan repayments will rise, which may force some companies to rethink their financing strategies and business operations. In the Eurozone, however, this provides short-term opportunities for law firms to assist businesses with arranging fresh financing or refinancing existing debt while interest rates are still favourable.
5th December
1. Tech Industry and Competition Law (by Angel)
The story
Whenever a user buys an application on the App Store, Apple collects the money and keeps an amount of commission before handing the remaining sum to the application developers. Customers are now bringing an action against Apple, alleging that the tech giant is exploiting its market dominance and monopolising the App Store to inflate the price of iPhone applications.
The decade-long battle is over the legal question of whether:
- Apple can obliged to damages to customers who allege that the App Store is a monopoly and
- that the 30% commission that Apple charges on the applications bought through the marketplace is unlawful
The claimant (iPhone customers) argued that Apple is operating anti-competitively because:
- Apple has control over choosing what applications can be sold,
- developers are given a limited pricing structure and
- iPhone users are forced to use the App Store (any third-party stores require jailbreaking the phone which voids the warranty)
For Apple, losing the case can wipe out a considerable revenue stream since the company is becoming increasingly dependent on revenues from software and services, especially when its hardware sales are stalling. The tech giant may be forced to change its pricing structure and potentially faced hundreds of millions in penalties to refund some of the commission it has taken.
For the wider industry, the Supreme Court’s ruling, which could be in June 2019, is definitely one to look out for. It could be a precedent-setting decision that confer implications for other companies that operate e-marketplaces such as Facebook, Ebay, Amazon and Google. If the Supreme Court issues a ruling to continue the suit, the ruling would be damaging to both Apple and the rest of the tech industry. As the decision is one that will ultimately affect how much power consumers have over digital platforms, if Apple loses the case, there is potential for further litigation from unhappy customers against Apple and the other tech giants.
2. Winding down quantitative easing (by Shu Qin)
The story
Quantitative easing (‘QE’) is an expansionary monetary policy intended to stimulate economic growth. Under QE, central banks increase the supply of circulated currency in the economy by printing money and purchasing bonds and other securities. This has the effect of pushing interest rates down, thereby encouraging consumer spending, lowering financing costs and increasing economic growth. QE was first used by Japan from 2001 to 2006, but perhaps the most prominent use of QE was by the US Federal Reserve (‘the Fed’) following the financial crisis. Under its QE program, the Fed bought Treasury bonds and mortgage-backed securities worth more than $3.7 trillion from 2008 to 2015. The European Central Bank (‘the ECB’) implemented its own QE program in 2015 after seven years of austerity, and has since spent more than $2.93 trillion on private and public-sector bonds.
After the financial crisis, a key concern for central banks is how to respond in the hypothetical event of another recession. One option is to implement fiscal policy, where government increases spending to stimulate economic growth. However, as buying securities under QE has resulted in increased public debt – the Fed doubled its balance sheet to $4.5 trillion under QE, while the ECB currently has a $5.23 trillion balance sheet – government spending may be limited by high debt. As such, central banks are beginning to ‘unwind’ their QE policies by ending bond purchases and slowly offloading their balance sheets. The latter is a delicate process, as an abrupt sell-off could severely disrupt the bond and stock markets. The Fed stopped buying new securities in 2014, but has continued reinvesting dividends from maturing holdings. The ECB is set to follow suit by the end of this year.
Another way that central banks might theoretically be able to deal with an economic meltdown is to cut interest rates to stimulate growth again. However, this won’t be possible if interest rates are already low. For instance, the ECB’s main refinancing rate is already 0%. This logic underpins the Fed’s recent interest rate hikes, as the central bank pushes towards a ‘neutral’ interest rate that allows it sufficient room to cut rates again, should the economy require stimulus in the future. The Federal Funds Rate has been hiked three times from 1.5% to 2.25% this year alone, with a fourth hike likely before the end of 2018. In June, ECB president Mario Draghi indicated the ECB could possibly raise its rates after summer 2019.
Impact on businesses and law firms
It follows that for central banks, winding down QE is a two-pronged strategy – offloading securities, as well as raising interest rates.
With regard to the former, reduced investment from these institutional players have a negative impact on bond prices, as supply outstrips demand. According to analysts at JPMorgan, Eurozone investment-grade retail funds have seen a €15 billion outflow this year, the largest redemption since 2010. The ECB was a generous investor, as it did not assess the credit quality of bond issuers. As such, businesses reliant on ECB investments may be negatively affected. For instance, Spanish supermarket Dia’s bonds, of which the ECB was a large investor, were rated investment-grade as of early October. However, a profit warning in mid-October saw its bonds spiralling into junk territory, amidst investor concern for the supermarket’s future without ECB funding. This may provide opportunities for law firms to assist with restructuring, as businesses teeter towards insolvency or financial instability.
As to rising interest rates, these may also rattle equity markets as bonds begin to look like more attractive investment instruments than stocks. This is well illustrated by the US stock sell-off over the past few months (which was covered in last week’s update). More broadly, rising interest rates in the US will put a dampener on consumer spending, which may affect business revenues. The cost of borrowing will also increase, as interest rates on loan repayments will rise, which may force some companies to rethink their financing strategies and business operations. In the Eurozone, however, this provides short-term opportunities for law firms to assist businesses with arranging fresh financing or refinancing existing debt while interest rates are still favourable.
Questions to ask a Law Firm at Interview
- By Jaysen
- Interviews Discussion
- 0 Replies
I came across a list of general questions I had prepared to ask law firms at interviews. I thought I'd share in case you need some back up questions (ideally, you wanna go for genuine questions). I've split them between questions to ask partners/trainees/graduate recruitment.
A little warning: some are pretentious/cheesy/only relevant to particular firms, so use them at your own risk
Questions to ask partners
A little warning: some are pretentious/cheesy/only relevant to particular firms, so use them at your own risk
Questions to ask partners
- Is the firm dominated by the states or more collaborative? What do you make of the relationship between offices?
- How does the London office fit in with the broader strategy of the firm?
- Does the US cultural influence make any difference on your day to day work?
- How involved are you with US lawyers on a typical case? Does this pose challenges regarding time zones?
- How involved is London in the firm’s overall decision making?
- What are the biggest challenges about working on multi-jurisdictional deals (that aren’t related to the actual work)?
- What proportion of partners trained within the firm?
- Do you think there will be any consolidation among the major city firms?
- Why do you think the best friend's network/alliance/merger is the best model for global practice?
- Why do you do what you do? What gets you up in the morning?
- Is the aim for the firm’s culture to be uniform across borders or distinct in each jurisdiction?
- How did you end in at your practice area? Where would you have gone if you hadn't ended up here?
- Is there any scope to contribute ideas to the firm as a trainee?
- How is it ensured that trainees on client secondments get the same standard of training?
- How do you view the rise of US firms in London?
- How would you describe X firm’s place in the market?
- In terms of personal training/development, what does the law firm offer?
- What are you most looking forward to in your future?
- How many of you tend to work on a deal?
- Do you find the culture non-hierarchical? Open door policy?
- How involved are you with business development (BD) and promoting the firm?
- What do you wish you’d known about being a trainee before you started that you now do?
- How does the lack of billable hours affect your practice?
- With the best friends network/alliance approach, has do secondments work?
- Because there are fewer trainees at this firm, would you say there is greater trainee responsibility/exposure?
- What was it like when you actually began at the firm? How did you find the transition?
- How are seats allocated?
- What are the skills you look for in a trainee?
- Is there a mentoring programme available on the training contract?
- Why did you join?
- Can you tell us about the structure of your training contract assessment days?
- How do trainees receive feedback? Is there a formal appraisal?
- Are there opportunities for pro bono work?
Hogan Lovells Application question
- By Lauren
- Applications Discussion
- 1 Replies
Hi, I was wondering if I could have any advice or guidance on how to approach this Hogan Lovells application question.
Sustaining a successful and profitable practice requires both commercial awareness and innovative thinking. Tell us about something that you have done that shows you have a strong innovative or entrepreneurial spirit.
I've pasted below how I was thinking of approaching it but I am not sure whether it fully demonstrates what they are looking for. Any advice would be appreciated!
I demonstrated a strong entrepreneurial spirit in setting up my own business with three friends providing face painting and glitter tattoo services at children’s parties. As a new business, it was crucial we developed a strategy to establish a client base in an already crowded market. I was responsible for managing the range of glitter tattoos and face paints we offered, ensuring we had sufficient stock and designs which would appeal to every child. I did this by maintaining a spreadsheet which kept a record of our stock which was updated following each event. I also worked closely with our customers, requesting feedback on events which I would act upon at our future events. This formed an important component of our business strategy by adapting our products to meet customer requests. For example, I was able to differentiate ourselves from competitors by updating our glitter tattoo and face paint range to include Frozen designs to capitalise on a recent trend, meaning I was able to anticipate future demand. As a result of this development of our business strategy, six successful events were held over the year which reported high levels of parent and child satisfaction and generating an average profit of £70 per event.
Sustaining a successful and profitable practice requires both commercial awareness and innovative thinking. Tell us about something that you have done that shows you have a strong innovative or entrepreneurial spirit.
I've pasted below how I was thinking of approaching it but I am not sure whether it fully demonstrates what they are looking for. Any advice would be appreciated!
I demonstrated a strong entrepreneurial spirit in setting up my own business with three friends providing face painting and glitter tattoo services at children’s parties. As a new business, it was crucial we developed a strategy to establish a client base in an already crowded market. I was responsible for managing the range of glitter tattoos and face paints we offered, ensuring we had sufficient stock and designs which would appeal to every child. I did this by maintaining a spreadsheet which kept a record of our stock which was updated following each event. I also worked closely with our customers, requesting feedback on events which I would act upon at our future events. This formed an important component of our business strategy by adapting our products to meet customer requests. For example, I was able to differentiate ourselves from competitors by updating our glitter tattoo and face paint range to include Frozen designs to capitalise on a recent trend, meaning I was able to anticipate future demand. As a result of this development of our business strategy, six successful events were held over the year which reported high levels of parent and child satisfaction and generating an average profit of £70 per event.
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