The Recap: Judge rules that Apple colluded on e-book pricing

A federal judge ruled this week that Apple colluded with major book publishers to drive up e-book prices. It was the latest development in an antitrust case that has already led to settlements between the Justice Department and five major publishers. It is also something of a strange case in that, while there is evidence of collusion by the publishers, they were colluding for the purpose of creating more competition. Publishers have a love-hate relationship with Amazon, which, through Kindle e-book platform and its large share of physical book sales, has an uncomfortable degree of control over the industry. In their negotiations with Apple over making e-books available in iTunes, the publishers may have been violating antitrust law, but it was, ironically, to try to stop Amazon from having monopoly power in the e-book market.

Business

Wal-Mart, Gap and 15 other major U.S. retailers announced an initiative Wednesday to improve safety conditions in Bangladeshi garment factories after a building collapse in April killed 1,127 workers. It calls for inspections of all the factories that the retailers work with within the first year, the development of common safety standards within three months, and the transparent sharing of inspection reports.

McGraw-Hill Financial, Fitch Group, and Moody’s were sued by liquidators of two collapsed Bear Stearns hedge funds seeking more than $1 billion over allegedly faulty investment ratings.

Hulu owners Walt Disney Co., Comcast’s NBCUniversal and 21st Century Fox called off their sale of the video-streaming service and will instead invest $750 million in the company. The decision ends an auction that had been underway.

The Financial Stability Oversight Council on Tuesday designated American International Group and GE Capital as systemically important, formally bringing the companies under stricter regulatory oversight. Prudential Financial disclosed that the council proposed designating it as systemically risky, but the company has said it will contest the proposal.

The owner of the New York Stock Exchange will take over the running of Libor in an attempt to restore credibility to the benchmark interest rate rocked last year by a global rate-rigging scandal.

Gasoline prices rose the most in eight months, with futures climbing four straight days, up 7.6 percent for the week. That was the largest weekly increase since Sept. 30. Valero Energy began shutting the fluid catalytic cracker at its Port Arthur, Texas, refinery.

The SyFy channel’s “Sharknado” television movie attracted widespread commentary on Twitter. But the buzz appeared not to translate into high ratings, with about 1.4 million viewers reported by Nielson.

Deals

Kroger will acquire competing grocery chain Harris Teeter for $2.5 billion, or $49.38 per share. The combined company aims to compete with larger grocery chains more effectively.

Tribune Co., publisher of the Los Angeles Times, Chicago Tribune and Baltimore Sun, plans to spin off its newspapers into a separate business, letting the company focus on its more lucrative local television stations. The plan would create a newspaper company called Tribune Publishing and a TV-focused business named Tribune with 42 stations in 33 markets, mimicking the breakup of News Corp.’s newspaper and TV assets in June.

Caesars Entertainment shares surged after the company’s new online gambling business said it would sell up to $1.18 billion in stock. Caesars shareholders will receive the right to buy one share of Caesars Acquisition stock for each of their shares.

AT&T said it will buy Leap Wireless International for $15 per share in cash.

Billionaire investor Carl Icahn is offering shareholders a chance to own a bigger stake in Dell, seeking to force Michael Dell to sweeten his $24.4 billion buyout offer for the personal-computer maker. Icahn is adding a warrant to his $14-a-share offer that holders could exchange for additional stock, he said in a letter.

Earnings

JPMorgan Chase says its second-quarter earnings surged from a year ago as profits from investment banking grew. The bank made $6.1 billion in the second quarter after stripping out payments to preferred shareholders. That was up 32 percent from the same period a year ago, when it made $4.6 billion. Profits in the year-ago period were affected by a trading loss.

United Parcel Service cut its 2013 earnings forecast, saying a slowing U.S. economy hurt second-quarter profit and revenue. Its shares fell sharply.

San Francisco-based Wells Fargo reported earnings that were 19 percent better than a year ago. Revenue increased to $21.4 billion, and expenses were reduced, the bank reported.

Economy

The International Monetary Fund revised downward its forecasts for global economic growth, in an update of its World Economic Outlook. The IMF expects the world economy to grow 3.1 percent this year, 0.2 percentage points less than it had predicted in April. It envisions slower growth than originally forecast in the United States, Europe and China.

New minutes of the last Federal Reserve policy meeting showed that there were major divisions on the Federal Open Market Committee over the course of monetary policy in the years ahead.

Standard & Poor’s lowered Italy’s credit rating, saying the country’s economic prospects are getting weaker. The nation was assigned a BBB rating, down from BBB+.

The Bank of Japan showed hints of optimism that its policies of aggressive monetary intervention are boosting economic growth in the nation. “Japan’s economy is starting to recover moderately,” the bank said in a statement released after a two-day policy meeting.

Washington

The Securities and Exchange Commission voted to allow hedge funds and other private firms to raise money by advertising to the public for the first time in decades, a dramatic loosening of the rules governing the investing landscape.

A bipartisan group of senators including Sens. Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) proposed legislation that would separate commercial and investment banking activity, returning some key aspects of the 1933 Glass-Steagall Act that were reversed in the 1990s. “Despite the progress we’ve made since 2008,” the biggest banks continue to threaten the economy,” Warren said Thursday.

House Republicans on Thursday released details of legislation that would shutter mortgage finance giants Fannie Mae and Freddie Mac and nearly eliminate the government’s role in backing the nation’s mortgage market. The bill goes further than a bipartisan bill in the Senate that would preserve a federal role in housing finance.

Transitions

Federal Reserve Governor Elizabeth A. Duke said she will step down on or around Aug. 31. Duke, a former banker who has focused on bank regulation for the Fed, has been a governor since 2008.

Royal Dutch Shell unexpectedly named refining boss Ben van Beurden to succeed chief executive Peter Voser.

— From news services and staff reports

4.51 %

30 year fixed-rate mortgage

That’s the average rate on the 30-year fixed-rate mortgage last week, a two-year high. Rates have been rising on expectations that the Federal Reserve will slow its bond purchases this year. Freddie Mac said Thursday that the rate jumped from 4.29 percent the previous week. Just two months ago, it was 3.35 percent — barely above the record low of 3.31 percent. The average on the 15-year fixed mortgage rose to 3.53 percent, from 3.39 percent last week. That’s the highest since August 2011.

 
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