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Business July 30, 2019

U.S.-China Trade Talks Resume

As slow-moving trade talks with China resume this week, NPR’s Ari Shapiro speaks with Wendy Cutler, a veteran U.S. trade negotiator.



ARI SHAPIRO, HOST:

Trade negotiators from China and the U.S. are resuming talks in Shanghai, and both sides are downplaying chances for a real breakthrough.

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LARRY KUDLOW: I wouldn’t expect any grand deal.

SHAPIRO: That’s Larry Kudlow, director of the White House National Economic Council speaking Friday on CNBC.

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KUDLOW: I think talking to our negotiators, they’re going to kind of reset the stage and hopefully go back to where the talks left off last May.

SHAPIRO: Wendy Cutler is a veteran U.S. trade negotiator, and she joins us to preview the latest season of this long-running drama. Welcome back, Wendy.

WENDY CUTLER: Thank you, Ari.

SHAPIRO: Did last season end on a cliffhanger? Remind us what happened when talks left off in May.

CUTLER: Well, the talks broke down last May, and this was really over the issue of which negotiating text to work off of. The U.S. had sent China a text with about 150 pages of what the U.S. thought had been agreed upon and was quite surprised when China sent the text back with about 30 pages just crossed out of the text. And as a result, the talks broke down.

SHAPIRO: What’s the issue that is making it so difficult for negotiators to make a deal?

CUTLER: There are a lot of difficult issues on the table, including how to address the current tariffs that have been put in place. China wants all those tariffs lifted. The United States wants to keep some in place. And there’s a whole range of what we call structural issues whereby the United States is asking China to curtail its industrial subsidies, to stop its practices of forcing U.S. companies to turn over their technology and to strengthen its intellectual property protection regime, as well as enforcement of its intellectual property laws.

SHAPIRO: Yeah. The U.S. is asking China to make some really sweeping changes beyond who buys what and what they pay for it. Is China seriously entertaining any of this?

CUTLER: My understanding is yes they are. With respect to forced technology transfer, I think China is coming to grips with the fact that this is an unfair trade practice and that they need to change their existing practices trying to force our companies to hand over their technology secrets to their potential Chinese competitors.

SHAPIRO: Wow. If China really did enforce technology transfer, that would be huge. I mean, we’ve heard a lot of American farmers saying, yes, this is painful, but it’ll be worth it in the long run if we get a big breakthrough. That sounds like if it happened, it would be a big breakthrough.

CUTLER: It would be a tremendous breakthrough. But what will be key is that China actually enforces the obligation that it’s undertaken. And that has prevented progress in the past. And that’s why this administration is pressing so hard for a strong enforcement mechanism.

SHAPIRO: President Trump has been very black and white, as he is on so many things, when he discusses this. He says trade wars are easy to win. The standoff has been good for American manufacturers, even though the evidence suggests that’s not necessarily true. Yesterday, he tweeted that, for China, until now, the U.S. has been easy pickings. Is his objective clear here?

CUTLER: I don’t think so, and I think China is confused about what the U.S. is seeking in these negotiations. Some days, it seems to be that the U.S. just wants to see increased purchases and the reduction in the U.S. bilateral trade deficit with China. Other days, it seems these structural issues are the most important. And so this has confused the Chinese, and I think as a result has made this negotiation unnecessarily even more difficult than it would be.

SHAPIRO: President Trump also told reporters today the companies are leaving China to avoid the U.S. tariffs. Is that true? And if so, are they coming to the U.S. or are they going to some other country like Vietnam that doesn’t have similar tariffs?

CUTLER: Well, there are anecdotes of U.S. companies but also Chinese companies that are leaving China in order to evade these tariffs. But at least for China, it seems that they’re moving their operations to Southeast Asia and countries like Vietnam and not coming to the United States.

SHAPIRO: And is China making moves to try to be less reliant on the U.S. market as these talks drag on?

CUTLER: Absolutely. And I think important signal of this is that this coming weekend, China will be for the first time hosting the ministers of the Regional Comprehensive Economic Partnership negotiations, trying to unlock those negotiations so a deal could be reached by the end of this year. Unclear about whether this meeting will be successful but, wow, in the same week for the trade minister to be meeting with Ambassador Lighthizer and Secretary Mnuchin and then later in the week meeting with 15 ministers from all around Asia – what a busy week he’s having.

SHAPIRO: That is former U.S. trade negotiator Wendy Cutler. She’s now vice president of the Asia Society Policy Institute.

Thanks for speaking with us.

CUTLER: Well, thank you.

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Business July 29, 2019

Boeing 737 Max Grounding Takes Toll On Airlines And Passengers

Boeing 737 Max airplanes are stored in an area adjacent to Boeing Field, on June 27, in Seattle. Airlines around the world are cutting flights because of the grounding of the plane.

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When Nancy Dunne goes to see her family outside Chicago, she likes to fly Southwest Airlines from Newark Liberty International Airport near her home in Maplewood, N.J.

Starting in November, she’ll need to make alternate arrangements.

Last week, Southwest announced it would no longer fly to Newark. The grounding of the Boeing 737 Max after two deadly crashes in Ethiopia and Indonesia has forced the airline to cancel flights and consolidate routes into places such as Newark, which are less profitable.

“For me this is really a big thing. I’ll figure something out. Maybe it’s time for me to move back to Chicago,” says Dunne with a laugh, as she stands near the airport’s Southwest counter.

When the 737 Max was taken grounded last March, carriers around the world were forced to adjust suddenly, canceling thousands of flights and delaying the retirement of some older planes.

Now, the impact of the grounding on airlines and their passengers is becoming more clear: smaller profits and more crowded planes.

“Obviously it was a shock to everybody in the industry,” says airline analyst Richard Aboulafia. “But of course this has grown significantly as a problem over the past few months.”

In recent days, airlines have begun releasing their earnings reports for the second quarter, and some major carriers have taken a big hit.

No longer able to use their 737 Maxes, airlines have been forced to reduce the number of routes they serve. American Airlines has cancelled 115 flights per day, potentially affecting about 23,000 passengers daily.

Foreign carriers have been hit as well. Flydubai, a low-cost Middle East airline serving 95 destinations, has canceled 17% of its flying schedule. European budget airline Ryanair warned Monday that it may have to lay off employees because of the grounding.

With so many cancellations, flights are naturally becoming more crowded. Southwest, which flies more 737 Maxes than any other U.S. carrier, said last week that the number of passengers per jet had risen during April, May and June.

“For customers, what people will notice compared with the same season of last year is the airplanes have become fuller,” says Yi Gao, associate professor in the School of Aviation and Transportation Technology at Purdue University.

The cancellations are also having an impact on the airlines’ bottom line. Southwest said the grounding had reduced its second-quarter profit by $175 million.

Boeing has set aside nearly $5 billion for losses tied to the grounding, and some part of that will go toward compensating the airlines for their losses. But how much it will pay is to be negotiated individually.

Fortunately, these are good times for the airline industry, with heavy demand for seats, and airlines such as Southwest are still making money.

“At the moment the U.S. economy is strong, so people are traveling. No matter [if it’s] business persons or leisure travelers, they’re all traveling,” Gao says.

But the longer the grounding goes on, the more precarious each airline’s positions will be.

Aboulafia notes that the 737 Max is part of a new generation of planes that were supposed to be much more fuel efficient than their predecessors. Being forced to use older planes will make operations more costly, he says.

“Increasingly, there are other airlines that have new-generation Airbus jets, and they’re at a competitive advantage” in terms of efficiency, he says.

That’s bad news for carriers like American, United and Southwest that rely on the 737 Max, and good news for those — such as Delta Airlines — that don’t.

And right now, no one can say for sure when the 737 Maxes will be back in the air. While Boeing hopes to get them flying by October, the 737 Max’s fate remains in the hands of regulators.

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Business July 28, 2019

Did Facebook CEO Mark Zuckerberg Intend To Deceive?

Facebook CEO Mark Zuckerberg testifies before the House Energy and Commerce Committee on April 11, 2018.

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Updated at 1:23 p.m. ET

Facebook has a long track record in deception: telling people one thing, while doing another. That’s according to federal regulators, at least one of whom says the government missed its chance to find out why the company has repeatedly misled its users.

This past week, the Federal Trade Commission decided to enter into a settlement with Mark Zuckerberg without interviewing him first. The FTC secured a $5 billion penalty from Facebook but, FTC Commissioner Rohit Chopra says, the agency sacrificed discovering the truth about the CEO in the process.

“It’s still really a mystery to me as to what role [Zuckerberg] played,” says Chopra, who opposed the settlement.

The FTC complaint against Facebook highlights a prominent moment when Zuckerberg said one thing while his company did another.

“The thing is, we don’t ever want anyone to be surprised about how they’re sharing on Facebook. I mean that’s not good for anyone,” Zuckerberg told the audience of Facebook’s annual F8 conference in 2014.

Regulators at the FTC had investigated Facebook for taking the personal data of users and, without consent, handing it off to outsiders — third-party app developers. Following that and other embarrassing revelations, Zuckerberg made a promise.

“Now, everyone has to choose to share their own data with an app themselves,” he said. “We think that this is a really important step for giving people power and control.”

Sounds great. Only, it wasn’t true. According to the FTC, Facebook kept handing over user data secretly — without consent — to dozens of outside developers (like Cambridge Analytica, the political research firm that worked on President Trump’s campaign).

It wasn’t the only time Zuckerberg misrepresented the truth. In 2018, he did it again — this time not on his own stage, but in front of the entire country.

Zuckerberg — summoned to the U.S. Congress — apologized for enabling Russian interference in the American elections, for helping to spread fake news and hate speech, and for violating the privacy of users.

“It’s clear now that we didn’t do enough to prevent these tools from being used for harm as well,” he testified. “And that was a big mistake, and it was my mistake, and I’m sorry. I started Facebook. I run it, and I’m responsible for what happens here.”

Sounds great. Only, in the same month Zuckerberg gave that testimony (it was in April 2018), regulators say, the company began to use facial-recognition tracking on some 60 million users — again, without consent.

The FTC’s Chopra voted against entering the settlement with Facebook.

“We cut off this investigation too early, [and] Facebook was willing to pay more money in order to hide Mark Zuckerberg’s testimony from this investigation,” he says.

Three Republican FTC members voted in favor of settling. The FTC extracted a $5 billion penalty from Facebook. Agency officials say that’s more than the government would have gotten in court, if they’d litigated.

Chopra, a Democrat, says his agency underplayed its hand, and missed the opportunity to uncover if Zuckerberg’s misrepresentations were intentional. The FTC spoke to Zuckerberg’s lawyers, but not to him. He was not required to answer questions or turn over his emails; and the settlement lets the CEO off the hook for the many privacy mishaps the FTC scrutinized. Zuckerberg did not personally face charges for violating an earlier settlement his company had reached with the FTC in 2011, though he could have been.

“Facebook fully cooperated with the FTC’s investigation and provided tens of thousands of documents, files and emails—including from Mark Zuckerberg,” Colin Stretch, Facebook’s general counsel, said in a statement Sunday after this story aired.

The new FTC settlement includes provisions that could hold Zuckerberg liable, through civil and criminal penalties, for any future violations of the agreement with the commission.

Zuckerberg’s actions may stand at odds with the philanthropic, altruistic image he’s worked hard to cultivate. CEOs break rules all the time. The ousted chief of Uber appeared to take pride in bulldozing his way into cities, assuming the laws that apply to cabs didn’t apply to his operation. But Zuckerberg has worked very hard to project the image of model super citizen: Harvard dropout committed to connecting the world with an American brand that’s more omnipresent that Coca-Cola; funding woefully neglected school systems; and conducting a listening tour to hear real people.

(Facebook is one of NPR’s financial sponsors.)

It bothers Chopra that his agency didn’t pursue the truth because Zuckerberg isn’t just a CEO. He has structured the stock so that he controls the majority of votes in Facebook. Chopra explained in his written dissent that in other cases, when a chief calls the shots in a company, the FTC takes a hard look at them.

“We didn’t even want to look at something that seemed fundamentally important, and instead traded it away for a higher fine, and none of that money will actually go to Facebook’s users,” Chopra says. The $5 billion goes to the U.S. Treasury, as mandated by law.

Zuckerberg lauded the settlement, saying in a post that his company has a “privacy-focused vision” and that, while Facebook already works hard to protect people’s privacy, “now we’re going to set a completely new standard for our industry.” He did not mention that his company fought tooth and nail, according to regulators, against the fine and new external oversight the deal imposed on Facebook.

Meanwhile, Zuckerberg’s team is on Capitol Hill, trying to get permission to mint money — a new digital currency. This cannot succeed without the public trust. Facebook is making the case that lawmakers and regulators should trust it. But Chopra says he doesn’t trust Zuckerberg or his company.

NPR business desk intern Amy Scott contributed to this report.

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Business July 27, 2019

Can Fast Fashion And Sustainability Be Stitched Together?

Zara’s parent company Inditex announced new sustainability goals this month. But can a fast-fashion brand built on growth truly become sustainable?

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As a fashion brand, Zara has made a name for itself by democratizing the latest clothing styles for consumers at an affordable price. But the rapid pace of that trend-driven business model, known as “fast fashion,” can come at high environmental and social costs.

Last week, Zara’s parent company, Inditex, announced its plans to grow more sustainable.

The fast-fashion giant pledged that by 2025, all of its eight brands will only use cotton, linen and polyester that’s organic, sustainable or recycled, which is 90% of the raw materials its uses. CEO and executive chairman Pablo Isla said that renewable sources will power 80% of the energy consumed by the conglomerate’s distribution centers, offices and stores. It also plans to transition to zero landfill waste.

It’s a significant step for a company that churns out 500 new designs per week, says Elizabeth L. Cline, the author of two books on the impact of fast fashion.

“What they’re doing is they’re sourcing materials that do have a better environmental profile,” she says. “These are materials that use less water, less energy, less chemicals to produce.”

Cline says the move sends a powerful message down the supply chain to manufacturers about being more green.

Still, Cline cautions that the announcement should be taken with a grain of salt, arguing that fast fashion and sustainability are inherently incompatible.

Cline says that even if Zara is using materials that are more ethically sourced or have a lower environmental impact, the vast majority of the carbon footprint of fashion comes from the manufacturers who supply brands with their materials. When a business is built on a fast turnover of styles, making those products still swallows a lot of energy, regardless of whether it’s using organic cotton or selling products in more eco-efficient stores.

“The business model will have to change and evolve for them to operate sustainably,” she says.

Agriculturally, growing cotton impacts soil health, carbon emissions and water consumption, says Mark Sumner, who lectures on fashion and sustainability at the University of Leeds in England. Polyester, a popular and cheap synthetic material in fast fashion, requires the oil industry’s extraction and refinement of petroleum, processes known to fuel climate change. Then there’s the energy-intensive processes of converting that raw material into wearable garments. Dying the fabric can also introduce harmful chemicals.

“When we add up all of those different impacts we then start to get to see a picture of those environmental issues associated with clothing,” he says.

What complicates things even more, says Sumner, is that depending on who you ask, the definition of sustainability can vary.

“The fashion industry isn’t actually just one industry, it’s a whole raft of other industries that are used and exploited to deliver the garments that we’re wearing now,” he says in an interview with NPR’s All Things Considered.

Which is why Cline thinks any excitement over Inditex’s announcement needs to be tempered.

“They’re acting overly confident about a subject that we’re still figuring out,” she says. “We are still gathering data. We are still figuring out best practices. So for Zara to kind of come out of the gate and say we’re going to be sustainable by 2025 belies the long road ahead of us that we have on sustainability and fashion.”

Inditex is committing $3.5 million to researching textile recycling technology under a partnership with the Massachusetts Institute of Technology, an investment Cline supports.

At the same time, Cline says it can’t be up to the fast-fashion industry alone. Consumers and government regulators have a role to play too.

Inditex’s announcement is a response to consumer pressure, Cline says. “We’re in the midst of a consumer-led revolution in fashion sustainability.”

Unfortunately, she says, a big part of that movement is tilted toward greenwashing — a term that refers to a deceptive marketing ploy in which companies spend more effort on its eco-consciousness image than actually being eco-conscious.

The fact that Zara’s parent company has gone public with its sustainability targets is a good sign, Sumner says.

“Over time, they’ll be held accountable by their shareholders, by NGOs, by media by commentators,” he says. “Hopefully, what they will do is also encourage other brands and retailers to be bold and to make these statements as well.”

NPR’s Leena Sanzgiri and Tinbete Ermyas produced and edited the audio of this story.

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Business July 26, 2019

The U.S. Has Nearly 1.9 Billion Acres Of Land. Here’s How It Is Used

The U.S. is a big place, nearly 1.9 billion acres. Stacey Vanek Smith and Cardiff Garcia from NPR’s daily economics podcast, The Indicator, look at how all that land is divvied up.



MARY LOUISE KELLY, HOST:

There are 1.9 billion acres of land in the continental United States. But how does that land get used? The co-hosts of NPR’s daily economics podcast The Indicator, Stacey Vanek Smith and Cardiff Garcia, use a familiar fast-food meal to answer that question.

CARDIFF GARCIA, BYLINE: The U.S. is enormous. It’s hundreds of millions of acres big, and it’s full of resources, not to mention some of the most productive land on Earth.

STACEY VANEK SMITH, BYLINE: And this got us thinking. The U.S. has all of this land, and it’s been such an amazing resource for the country and for the economy. How exactly are we using this resource? And Cardiff, I will present you with the object that I think best represents how we use land in the U.S. But, first, I want to speak with Lauren Leatherby. She’s a data journalist from Bloomberg News. And she went through the reports issued from the U.S. Department of Agriculture.

It’s about 1.9 billion acres of land that we’re dealing with, entirely. What was the biggest use of land in the U.S.?

LAUREN LEATHERBY: Cattle.

VANEK SMITH: Cattle (laughter).

LEATHERBY: Just livestock in general. About 41% was used for either grazing or to grow food for livestock – was, really, pretty surprising to us.

VANEK SMITH: What was the second biggest use of land in the U.S.?

LEATHERBY: Forestland. And that’s a combination of unprotected forestland, which means that it’s not a part of a national park or state park, and about 14% was owned by corporations. But it was quite striking to see this massive chunk of the U.S. designated as forestland, and about 2% of that goes away and then comes back every year (laughter) – gets replanted.

VANEK SMITH: (Laughter).

But that still leaves us with about 700 million acres. So what is the third biggest use of land in the U.S.?

LEATHERBY: So that’s cropland. Cropland is about a fifth of the U.S. But what’s interesting is that the amount of food that we eat from all of that cropland, a lot of it is used for livestock. And so that’s corn for livestock, soy for livestock.

VANEK SMITH: All told, that is nearly 1.6 billion acres of land for just those three uses. And then we get to a relatively small category, which is urban areas.

LEATHERBY: That’s by far the fastest growing. In the past 10 years, it’s been growing at a rate of about 1 million acres per year. So that’s the size of about Phoenix and LA and Houston combined, every year, growing in urban area.

VANEK SMITH: After going over the land use data myself, I came up with this object that I think really represents in one word – I guess it’s actually two words – how we use land in the U.S. It’s a Happy Meal. OK, so the main events of the Happy Meal is of course the beef burger.

GARCIA: Yes.

VANEK SMITH: And this is of course the largest use of land in the U.S. – that is, cow pasture – 654 million acres, plus the feed for the livestock, which is 127.4 million acres. And then of course there is the paper that the Happy Meal box is made out of. That is the second largest use of land in the U.S. – unprotected forest. That’s 538.6 million acres. Wheat for the bun – 21.5 million acres. Also in the box – the fries. A million acres of potatoes are grown in the U.S.

But also, private land ownership, which is also on the rise. Most of the top landowners in the U.S. are cattle ranchers and oil barons. So if we add all of these things up together, that is roughly 1.5 billion acres of land of the 1.9 billion available all wrapped up in this Happy Meal.

GARCIA: Cardiff Garcia.

VANEK SMITH: Stacey Vanek Smith, NPR News.

(SOUNDBITE OF MUSIC)

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Business July 25, 2019

Economists Say Trump Administration Is Overpaying Farmers For Trade Losses

A worker at the port in Nantong, in China’s eastern Jiangsu province, displays soybeans imported from Ukraine. Imports of soybeans from the U.S., once China’s biggest supplier, have dropped massively since a trade war between the U.S. and China began in 2018.

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If you’re caught in a trade war, it’s good to be a farmer.

Lots of American companies have lost sales since the Trump administration and China embarked on the current cycle of tariff-raising and retaliation. Few, if any, have been compensated as handsomely as farmers.

This week, Secretary of Agriculture Sonny Perdue unveiled details of the latest aid package for farmers who’ve lost export sales. It includes $14.5 billion in direct payments to farmers, another $1.4 billion in government purchases of agricultural commodities that will be distributed to food banks, and $100 million in loose change to promote exports to new countries. This is on top of $12 billion in aid that the Trump administration distributed last year.

Farmers will receive payments simply based on how much land they’ve planted with crops that are affected by tariffs, how much milk they produce or how many hogs they own. “We want sign-up to be easy for producers [and] straightforward,” said Bill Northey, undersecretary for farm production and conservation, “[so] that we can get these payments to them to address the challenges that they have due to these tariffs.”

In his remarks, Perdue portrayed the payments as a modest contribution toward the enormous losses that farmers have endured.

Agricultural economists, however, disagreed. “This is going to be a lot of money pumped into the Corn Belt,” said Scott Irwin at the University of Illinois.

Even last year’s smaller aid package probably overpaid farmers for their trade-related losses, according to a new analysis from the University of Missouri’s Food and Agricultural Policy Research Institute. The study, as first reported by the The Food and Environment Reporting Network’s Ag Insider, looked specifically at soybeans, because soybeans were hit hardest by the trade dispute, and most of the aid package went to soybean farmers.

According to the new study, Chinese tariffs caused the price of soybeans grown in the U.S. to drop by $.78 per bushel. Last year’s aid package, however, paid farmers more than twice that much — $1.65 per bushel of soybeans that each farmer produced.

Pat Westhoff, the main author of the new study, wrote in an email to NPR that the USDA calculated farmers’ losses by estimating their lost sales due to foreign tariffs. The reality, he says, is more complex: As China bought soybeans in Brazil, rather than the United States, other buyers stepped in to purchase more soybeans in the United States, rather than Brazil. After all the reshuffling, American soybean farmers saw a rather modest decline in the prices they received for their soybeans.

Irwin agrees. “Most agricultural economists would probably put the damage at $.80 to $1 per bushel” of soybeans, he says. That’s about half what the USDA paid soybean farmers last year.

Secretary Perdue, in rolling out the new aid program, dismissed that analysis. “If you go out and survey farmers, you won’t find any that think they are being made whole by this [aid],” he said. “I guess some academicians can do whatever they want to with numbers, but they aren’t here on the ground producing and struggling to pay the bills.”

This year, the USDA calculated its aid differently in order to keep farmers from simply pursuing more government aid money by planting more soybeans. Instead, farmers will get paid a set amount per acre, as long as they’ve planted a crop that’s eligible for aid. The USDA set different payment rates for each county in the country, apparently based on which crops typically are grown in each area, and whether those crops have been affected by tariffs.

Irwin says that, at first glance, the payouts look “generous.” Farmers in many counties in Illinois will be paid more than $80 per acre. “That’s a lot of money!” Irwin says.

Two days ago, the USDA was in a distinctly less generous mood when it came to another group of people who get government aid. The agency proposed new rules for the SNAP program — the Supplemental Nutrition Assistance Program, formerly known as food stamps — that could prevent about 3 million people from continuing to receive benefits. That change would reduce spending on SNAP by about $2.5 billion a year.

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Business July 24, 2019

FTC: Facebook’s Zuckerberg Must Give Progress Reports To Regulators

The FTC and Facebook entered a new settlement over privacy violations. CEO Mark Zuckerberg must give quarterly progress reports directly to regulators. Facebook must also pay a $5 billion fine.



STEVE INSKEEP, HOST:

Mark Zuckerberg has a stunning new responsibility. The founder of Facebook is now required personally to give regular progress reports directly to federal regulators. He needs to show Facebook’s progress in protecting the privacy of users. This is part of a newly announced settlement between Facebook and the Federal Trade Commission, a settlement that also includes a $5 billion fine for past violations. NPR’s Aarti Shahani is on this story. Hi there, Aarti.

AARTI SHAHANI, BYLINE: Hi.

INSKEEP: What does Zuckerberg himself have to do exactly?

SHAHANI: So Zuckerberg, who dropped out of Harvard, has homework to do. Under the government’s order being filed today, he’ll have to sign the dotted line on a brand-new compliance document. He’s in charge of submitting it every quarter – four times a year – to the FTC and to the Facebook board. This has been a long road, OK? Back in 2011, Facebook entered a settlement with the FTC for violating user privacy. And then it looks like they violated again and also engaged in brand-new deception.

INSKEEP: Which was what?

SHAHANI: So basically, according to regulators, Facebook lied to users in two new ways. Facebook asks for phone numbers. Give us your cell, so if we need to reset your password, we can verify it to you with a text.

INSKEEP: Sure.

SHAHANI: Millions of people trusted the company. Maybe you did, too. And then Facebook took those phone numbers and used them not just for security but for advertising purposes. OK, lie number two – Facebook wrote up some terms on facial recognition and then switched them up and tracked people who never consented. So we can expect to see about 60 million users get notices asking if they’d like Facebook to delete all the facial recognition tracking it’s been doing unlawfully.

INSKEEP: OK, 60 million people.

SHAHANI: That’s right, according to FTC.

INSKEEP: That suggests the scale of this company because that’s just a tiny fraction of their users. Weren’t they already under scrutiny for the sheer extent of their power and how they’d been using it?

SHAHANI: That’s right. The Justice Department announced it’s starting an antitrust review of a handful of Internet giants who’ve gotten very big and powerful. And I would point out, Steve, about the FTC action that’s focused on consumer privacy, it’s holding the CEO accountable. Facebook is agreeing to abide by federal privacy rules. And if Facebook fails, if its compliance reports are inaccurate, Zuckerberg himself could face civil and criminal penalty.

INSKEEP: Wow.

SHAHANI: So that’s significant.

INSKEEP: That’s quite a threat over his head. Now, the $5 billion fine – is that a lot for a company as big as Facebook?

SHAHANI: Well, it depends. Facebook’s revenue in just the first quarter of this year was 15 billion. After the company announced in its last earnings call that it expected to pay a multibillion-dollar fine, its stock price jumped. That means investors believe the future of a company is solid. That said, the FTC’s James Kohm. He really disagrees with critics who say who say the fine was not big enough.

JAMES KOHM: The idea that $5 billion is a slap on the wrist just doesn’t pass the laugh test. It is an enormous amount of profits. They didn’t give it up easily. It is way higher than any case in U.S. history other than Deepwater Horizon, where there was massive amounts of harm.

SHAHANI: So data privacy harm is less tangible than oil spill harm. But the FTC says the 5 billion is for deterrence, to send a message to other tech companies and that Facebook fought tooth and nail against it. Facebook, which is an NPR sponsor, declined to comment.

INSKEEP: OK. Aarti, thanks for the update. Really appreciate it.

SHAHANI: Thank you.

INSKEEP: NPR’s Aarti Shahani covers tech.

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NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Business July 23, 2019

Offers Pour In To Cover Pa. Students’ Meal Debt, But School Officials Not Interested

Wyoming Valley West High School in Plymouth, Pa. Officials with the school district are not responding to several offers to settle debt students accrued from not paying for cafeteria meals.

Courtesy of Luzerne County /Courtesy of Luzerne County


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Courtesy of Luzerne County /Courtesy of Luzerne County

A public school district in Pennsylvania that faced a national outcry after threatening to place children in foster care over unpaid cafeteria debt has received several offers to pay off the entire delinquent meal tab, but school officials do not seem interested.

In a letter sent on July 9 to about 40 parents in the Wyoming Valley West School District in an effort to collect the debt, officials warned that if it went unpaid, “The result may be your child being taken from your home and placed in foster care.”

According to Luzerne County Manager David Pedri, at least five donors have stepped forward willing to satisfy the $22,000 in debt accrued by dozens of students whose parents did not give them money to pay for the meals.

A prominent media figure is among those who has tried to settle the students’ debt. An assistant to this person, who requested anonymity, told NPR that attempts to reach school officials were unsuccessful.

“These are gracious and kindhearted people, and I have forwarded their information over to the Wyoming Valley West School District for their review,” Pedri said.

Another one of the potential donors is Todd Carmichael, the Philadelphia-based chief executive of coffee-roasting company La Colombe.

In an interview with NPR, Carmichael said he grew up poor, one of four kids raised by a single mom outside Spokane, Wash. Hearing about a school in rural Pennsylvania threatening to remove children from a household for not being able to pay a lunch bill struck a nerve with him.

“I know what it’s like to be shamed at school. I know what these things are. And I know how my mother would react if someone threatened to take her children away,” Carmichael said.

So, Carmichael’s team contacted the district’s school board.

“And,” he said. “We were rejected.”

Carmichael said his assistant called the school district’s president, Joseph Mazur, and the conversation quickly became combative before Mazur abruptly hung up the phone.

Mazur and members of the Wyoming Valley West administration did not respond to NPR’s numerous requests for comment on Tuesday.

The situation has left Carmichael, who has done a fair amount of philanthropy, searching for answers.

“I’m just completely mystified by it,” he said. “I’m still picking through the pieces and saying, ‘What is this?'”

State records show that the school district is one of the poorest in Pennsylvania, and it is situated in a blue-collar community outside of Wilkes-Barre, which is a former coal mining town.

When Mazur talked to NPR earlier in the week, he defended the letter by saying the school district is strapped for cash and desperate for ways to save money.

That has left Carmichael wondering why the district would turn down donations.

“This really isn’t about the money,” he concludes. “I think it’s about teaching people who are struggling some sort of moral lesson they need to learn, no matter what the consequences are.”

Pedri, who oversees the foster care program in Luzerne County, recently sent the district a letter admonishing school officials for the letter and asking them never to do it again.

“Foster care is something we utilize as a shield to assist kids. It’s not a sword. We don’t like foster care being utilized to try to terrorize individuals,” Pedri told NPR.

In an a recent editorial, The Times-Tribune of Scranton called the threats “shameful” and “an act of hubris.”

“The state Department of Education and the Legislature had no way of knowing that some school district officials would play the schoolyard bully, issuing threats to separate children from their parents in pursuit of lunch money,” the editorial board wrote, urging state lawmakers to “outlaw such outlandish conduct by law and regulation covering lunch debt collection.”

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Business July 22, 2019

Equifax Reaches Up To $700 Million Settlement Over Massive Data Breach

The credit bureau Equifax will pay up to $700 million in fines and monetary relief to consumers over a massive data breach two years ago. The agreement settles claims by federal and state authorities.



ARI SHAPIRO, HOST:

Two years ago, hackers hit the credit bureau Equifax and exposed the data of nearly 150 million people. That’s more than half the adult population of the United States. Now some of the people affected by that breach stand to be compensated. Equifax will pay up to $700 million in fines and monetary relief to consumers. We’re joined by NPR’s Chris Arnold, who has been following today’s settlement with state and federal regulators.

Hi, Chris.

CHRIS ARNOLD, BYLINE: Hey, Ari.

SHAPIRO: So is most of this money actually going to go to people who were affected in some way by the breach?

ARNOLD: Well, most of it will. It looks like upwards of $400 million will go to those people. We spoke to California’s attorney general, Xavier Becerra, who was involved in the settlement along with other state and federal regulators. And here’s what he said.

XAVIER BECERRA: We’re trying to make sure that anyone who was impacted by this data security breach has a chance to recover their costs. If you lost your privacy, if identity thieves have taken advantage of your private information, you deserve to be compensated by Equifax.

ARNOLD: Now, people can conceivably get up to as much as $20,000. They got to document the time and what all this cost them. For many people, it’ll probably be a lot less. Also, if you spent money and time just signing up for preventive stuff, like credit monitoring or whatever else you had to do, the goal is that you will be compensated for that too. And they’ll pay – I think it’s $25 an hour for up to 20 hours that you had to deal with that.

SHAPIRO: I’m sure many people are asking, how do I get the money?

(LAUGHTER)

SHAPIRO: What do they have to do?

ARNOLD: I’m sure, since there were that many people involved in the breach, yes. There is a website, as there often is – equifaxbreachsettlement.com. I’m going to say that again because it’s radio – equifaxbreachsettlement.com. Assuming the court approves the settlement, people can go there. And they’ll tell you what to do. But you have to do this within the next six months to get compensation.

SHAPIRO: Within six months of court approval of the settlement.

ARNOLD: Right.

SHAPIRO: It’s always hard to get a sense of the magnitude of these penalties with huge, huge companies. Is $700 million viewed as a meaningful deterrent for a company as big as Equifax?

ARNOLD: Well, it depends on who you talk to. But with consumer advocates – not so much. We talked to Ed Mierzwinski with the nonprofit consumer advocacy group U.S. PIRG. He says, look. I mean, it’s great that people are getting some money back. That’s fantastic. But as far as a real effective deterrent…

ED MIERZWINSKI: I don’t think it’s a lot of money. I think it’s more of, hey, go away money rather than a real penalty or a punishment. And I think that’s a calculated bet by Equifax. They went in there and negotiated a parking ticket rather than a punishment.

ARNOLD: And at least some of the people affected by the breach feel the same way. We spoke with Jessamyn West from Randolph, Vt. Her information was stolen, she says. And here’s her reaction that people will be getting some money back.

JESSAMYN WEST: I mean, it’s garbage, right? Like, money isn’t going to solve this problem. Like, what we need is an overhaul of the way bank corporations are allowed to handle our personal information.

SHAPIRO: It’s interesting, Chris, that, like, Equifax wasn’t the hackers here, right? Equifax got hacked, and yet everybody wants to punish Equifax. There were hearings in Congress when news broke. Lawmakers were outraged. Explain why there was so much anger at the company that, in all likelihood, sees itself as the victim.

ARNOLD: Sure. You know, first, 150 million people – but what Equifax has in its sort of vaults of information is your credit score, which allows you to get a mortgage or a loan. They got your credit card numbers, your Social Security number. You know, and this exposed that they were not doing a good job keeping that safe.

SHAPIRO: And has any policy changed to prevent this from happening in the future?

ARNOLD: Well, very quickly, there has not been a major overhaul for regulating credit bureaus that may be coming, though. There is some bipartisan support. We should also say Equifax, in a statement, called today’s settlement, quote, “a positive step for U.S. consumers.”

SHAPIRO: NPR’s Chris Arnold, thanks a lot.

ARNOLD: Thanks, Ari.

(SOUNDBITE OF J BOOGIE’S DUBTRONIC SCIENCE SONG, “TRY ME”)

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Business July 20, 2019

ProPublica Report: Black Americans Lose Big Under Longtime Property Provision

NPR’s Sarah McCammon speaks to ProPublica reporter Lizzie Presser about heirs property, a form of land ownership that has cost black Americans billions of dollars in land loss.



SARAH MCCAMMON, HOST:

The issue of reparations is back in the news. Democratic presidential hopefuls are talking about it. Senator Cory Booker and Congresswoman Sheila Jackson Lee proposed legislation this year that would create a commission to study reparations. And this week, Senator Chuck Schumer said he’d support that bill. Proponents of the concept argue that reparations are not just about slavery but also injustices black Americans have endured since the Jim Crow era and beyond. One of those injustices includes the losses of enormous amounts of property to a form of land ownership called heirs property, which some economists say has cost black Americans hundreds of billions of dollars in lost land over the past century.

Joining us now to talk about this is reporter Lizzie Presser, who investigated heirs property in a collaboration between ProPublica and The New Yorker. She followed the case of Melvin Davis and Licurtis Reels, who spent eight years in jail fighting for the land they call home. And she joins us now from our New York bureau. Hi, Lizzie. Welcome.

LIZZIE PRESSER: Hi, Sarah. Thanks for having me.

MCCAMMON: One of the people you spoke to in your reporting called heirs property the worst problem you never heard of. Can you tell us more about what it is?

PRESSER: So heirs property is a form of ownership. And essentially what happens is that someone dies without a will, and their descendants inherit an interest in the land. So instead of owning a physical piece of it, they’re owning a share, kind of like holding stock in a company. And as that land is passed down through generations, that can mean that dozens or hundreds of family members co-own a piece of land. And it creates a very unstable form of ownership.

MCCAMMON: And why is it structured that way?

PRESSER: Intestate succession is what it’s called legally, and essentially that’s just what will happen if you die without a will. And so families often believed, actually, that if they owned land in this way, they were protecting it from being taken from them. But in reality, it made their ownership very vulnerable to takings.

MCCAMMON: In the heart of your investigation is the case of the Reels family, two brothers – Licurtis Reels and Melvin Davis in Carteret County, N.C. Tell us a little bit about how their story starts and then how it starts to unravel.

PRESSER: So Melvin and Licurtis’s great-grandfather bought 65 acres in 1911. And in 1970, their grandfather Mitchell Reels died without a will. What ended up happening was a distant uncle who hadn’t lived on the property in two decades used an arcane law called the Torrens law to carve out the most valuable slice of the property right on the river. And this is a family of shrimpers and crabbers and fishers. And so that’s – that wasn’t just the most valuable property in terms of its value to sell, it was also the way in which these men made their money and fed their community. Once he was able to take that land, he very quickly sold it off to developers. And that’s really when the trouble started for the Reels family.

MCCAMMON: And so the two brothers get their day in court in 2011. What happens next?

PRESSER: The brothers had been occupying the waterfront. They didn’t really understand that their uncle had taken it. And, in fact, they lived with the belief that the land was theirs, and they weren’t going to let go. So even when there were court orders that required the brothers to remove their homes, they refused. In 2011, they went to court thinking that they were just going to argue their case again. But the judge found them guilty of civil contempt, and he ordered them sent to jail.

MCCAMMON: You document multiple ways, both judicial and extrajudicial, in which black Americans have had property taken from them. I want to turn to another legal mechanism you describe that really seems to allow developers to take advantage of heirs property landowners. It’s called partition action. Can you explain that?

PRESSER: So in a partition action, any single heir to the property or a speculator who buys the interest of a single heir can go to the court and ask for a sale of the entire property. So imagine if you have 15 relatives, and one person says, I want to sell. And then they get to go to the court and say, I want to sell, and the court says, sure, you can. And everyone then is dispossessed. This is what was happening and continues to happen across the South. But in many cases, what you see are speculators, companies, developers who buy off interests of individual heirs and then bring it to the court.

MCCAMMON: And if I could just ask one last sort of bigger-picture question – as you hear candidates in the 2020 campaign talking about issues of racial justice and reparations, do you think this issue of heirs property, though it’s less understood, do you think it helps to make that case?

PRESSER: Absolutely. I think what I was hoping to convey with this piece is that black families had very good reason to be suspicious of white southern courts under Jim Crow. And as a result, we have seen this unstable form of land ownership take hold across the South. And it’s a very significant example of how racial discrimination and segregation has fueled a legal system that is stacked against African American landowners.

MCCAMMON: That’s ProPublica Lizzie Presser. Lizzie, thanks so much for joining us.

PRESSER: Thanks for having me.

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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