Top Brands Pull Out of Facebook Ads

Top Brands Pull Out of Facebook Ads

Growing concerns over the rampant spread of false information and hate speech on Facebook has started the #StopHateForProfit campaign prompting hundreds of advertisers to stop spending on the platform resulting in $56 billion loss of market value in a single day.

Crux of the Matter

#StopHateForProfit Campaign
After the death of George Floyd and subsequent anti-racism protests, a coalition of civil rights groups namely Color of Change, National Association for the Advancement of Colored People, Sleeping Giants, Free Press, Anti-Defamation League, and Common Sense Media accused Facebook of not taking efforts to control the spread of racist content online.

The coalition urged businesses to pull their ads from Facebook and Instagram and this movement is now widely known as the ‘Stop Hate For Profit’ campaign. This campaign is now not limited only to the US but also is spreading globally as nearly 160+ companies have decided to not advertise on Facebook for the next 30 days.

99% of Facebook’s revenue is generated from its 8 million advertisers. Though many of them are small companies, there are several big corporations like Unilever Group & Verizon, which alone spends nearly $42 million & $2 million respectively yearly on Facebook ads, that have halted advertising. Some also have stopped ad-spends on Twitter and other social media sites.

Some major brands who have paused advertising on Facebook include CocaCola, PepsiCo, The North Face, Starbucks, Unilever Group, Honda Motor Co, Ben & Jerry’s, Magnolia Pictures, The Hershey Company, REI, and Verizon.

We’re pausing our advertising until Facebook can create an acceptable solution that makes us comfortable and is consistent with what we’ve done with YouTube and other partners.

John Nitti, Chief Media Officer Verizon

After the announcement by giants like Unilever and Verizon, the shares of Facebook dropped by 8.3% along with Mark Zuckerberg losing $7.2 billion of his net worth. Even in the past Facebook has faced backlashes over its handling of user data but its revenue was never seriously impacted by any of the protests. Facebook has lost nearly $56 billion in revenues.

The advertisers are unhappy with Facebook’s laissez-faire attitude towards posts from US President Trump. The organisers of the 2020 US presidential election fear that a highly polarised audience on social media could increase the potential for spreading misinformation and discriminatory content.

Unilever in India has dropped the word ‘fair’ from its popular skin-lightening product called Fair and Lovely. The outrage over the death of Floyd has led to an unprecedented reaction from corporations around the world.

Response by Facebook
Facebook conducted a conference call with over 200 of its advertisers and informed that they were working towards addressing the ‘trust deficit‘. The founder Mark Zuckerberg announced changes in content moderation policy via a live stream.

Facebook will now necessarily not take down posts that may violate its policies, but will instead begin to label them. The posts that ‘may lead to violence or deprive people of their right to vote ‘will be taken down regardless of who has shared it or whether it is newsworthy. It will also label political speech that violates its rules and take measures to prevent voter suppression and protect minorities from abuse.

I am committed to making sure Facebook remains a place where people can use their voice to discuss important issues. But I also stand against hate or anything that incites violence or suppresses voting, and we’re committed to removing that content, no matter where it comes from.

Mark Zuckerberg, Founder Facebook
  • Facebook’s main color is blue because Zuckerberg has red-green color blindness. In an interview, he said that “blue is the richest color for me — I can see all of blue.”
  • In finance, FAANG is an acronym that refers to the stocks of five prominent American technology companies: Facebook, Amazon, Apple, Netflix, and Alphabet (Google). The term was coined by Jim Cramer, the television host of CNBC’s Mad Money.
  • Facebook users in the U.S. will have the option to “turn off” all political advertising on the platform. The new feature will give users more control over what they see — at least for users who decide to flip the new setting to “off.”

Curious Case of Wirecard Fraud

Curious Case of Wirecard Fraud

Wirecard, a German payment processing company, stated that €2 billion from its books were non-existent. The fraud amount in Indian rupees is to the tune of more than ₹15,000 crores and when compared to other infamous scams of India like the Vijay Mallya, PNB and Nirav Modi, or even Rana Kapoor, Wirecard turns out to be clear winner. With what could be the fraud of the year, let’s find out how an entity based in a developed financial market carried out this fraud.

Crux of the Matter

Wirecard was established in 1999 as a payment processing industry in Germany. To expand its business, Wirecard wanted a license to issue prepaid bank cards in the Hong Kong region. But getting a license proved to be a tough nut for the company as the Hong Kong Monetary Authority demanded significant business revenue to consider the application. As the company didn’t have enough revenue, its Asia-pacific team was set on a task to convince regulators at the Hong Kong Monetary Authority.

Inflating Books & Incoming Probe
To acquire the license, Wirecard manipulated its accounts. The Parent company in Germany pumped money through opaque transactions to show that these funds are being paid by external customers. To put it simply, money flew from Germany to Asia and then back to Germany, completing a whole circle and indicating that the transactions were made by third parties. By doing so, accounts will show the Asian wing’s performance up to par.

Financial Times (FT) was investigating the matter and had sent some information to the compliance staff of Wirecard in 2019. The company’s compliance staff found that the claims of whistleblowers were credible and launched an investigation with the codename: project Tiger. Rajah & Tann (R&T), a Singapore based company wrote a 30-page report accusing Wirecard’s Asian wing of forgery, cheating, criminal breach of trust, corruption, money laundering, etc.

First Investigation Closed
To save the company’s tarnished image after this report got published, the parent company in Germany remained defiant and sued FT. Wirecard CEO Markus Braun rebuked the investigative stories, saying “there are personal animosities between employees involved”. FT got an order to stop the investigation and somehow this accounting deviance was normalized.

Relentless FT
FT, on the other hand, continued its investigation, albeit on a slightly different matter. While researching, they found that accounts with no physical presence were in business with Wirecard. Transfers were processing payments from gambling and adult websites. Moreover, such fake transfers accounted for nearly half of sales in 2018. FT wrote about it and the report went live. When Germany’s financial regulator BaFin should have intervened in the matter, it responded very oppositely and sued FT reporters including lead investigative journalist McCrum. BaFin had its own agenda i.e. to protect Germany’s pride as Wirecard is among the top 30 companies in terms of valuation listed on the Germand stock exchange DAX.

Chickens Come Home To Roost
Recently, auditor KPMG said it could not corroborate suspected accounts as it had no access to several documents. It announced missing €2 bn. And after 3 days of the auditor’s
announcement, the company said that cash never existed. CEO Markus Baum was arrested.

  • Wirecard was one of Germany’s Top 30 most valuable companies on the German stock market (DAX) and has been ranked in the “Top 100 Most Innovative Growth Companies in the World” by Forbes Magazine.
  • On 30 January 2019, Wirecard shares plunged after the Financial Times reported that a senior executive was suspected of falsification of accounts and money laundering in the company’s Asia-Pacific operations. Wirecard issued a statement calling the report “false, inaccurate, misleading and defamatory.” Wirecard also announced a lawsuit against the Financial Times for “unethical reporting” and a lawsuit for market manipulation.
  • Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. At the end of 2001, it was revealed that Enron’s reported financial condition was sustained by an institutionalized, systemic, and creatively planned accounting fraud, known since as the Enron scandal.

Patanjali – From Ayurveda To FMCG Behemoth

Patanjali - From Ayurveda To FMCG Behemoth

Patanjali has become the talk of the town after it reportedly came up with an Ayurveda-based medicine Coronil to fight Covid-19. However, authorities have ordered Patanjali to stop promoting it as Covid treatment due to a lack of clarity about its composition and efficacy.

Crux of the Matter

Patanjali has launched the Coronil kit to treat Covid-19, clamming that it even had successful results.

Patanjali, headquartered in Haridwar, Uttarakhand is one of the fastest-growing FMCGs in India and was founded by Baba Ramdev and Acharya Balkrishna in 2006. Currently, it operates 15,000 stores and 100 mega-marts. Moreover, it is the 8th Company to get a full-time security cover of 35 armed Central Industrial Security Force (CISF) commandos. The company manufactures 2500+ products. Recently, Patanjali acquired debt-ridden Ruchi Soya Industries at a valuation of Rs.4350 crore.

Understanding Medicines
Ayurveda: It is a holistic approach to healing based on empirical observations and plant extracts. It is believed to be a 5000-year old healing practice originated in India. It is described in the Atharvaveda. Moreover, the word Ayurveda is derived from two Sanskrit words “Ayur” meaning life and “Veda” meaning knowledge. So, Ayurveda means knowledge of life. Ayurveda gives emphasis on the balance between body, mind, and soul for healthy living. It also gives emphasis on good digestion, proper excretion, exercise, yoga, meditation, etc.

Homeopathy: The term homeopathy is derived from two Greek words: “homoios” meaning like and “pathos” meaning suffering. It is based on the principle that “like cures like”, meaning the substance which can cause symptoms in a healthy person can be consumed in a small amount to cure a sick person with the same symptoms. Homeopathy was discovered in the 19th century in Germany by Samuel Hahnemann. It is claimed to be a pseudoscientific method of alternate medicines.

Unani: It is a Perso-Arabic traditional medicine practiced in Mughal India based on the works of Hippocrates. It was Originated in Ancient Greece.

  • Patañjali was a sage in India, thought to be the author of a number of Sanskrit works. The greatest of these are the Yoga Sutras, a classical yoga text. Patanjali is one of the 18 siddhars in the Tamil siddha tradition.
  • Divya Yoga Pharmacy in Haridwar was a pharmacy founded by Balakrishna and Ramdev in 1995 prior to Patanjali. The pharmacy later became a manufacturing unit for Patanjali Ayurveda.
  • As of January 2020, Balkrishna was reported by Forbes to have a net worth of $1.5 billion. He was awarded the Champions of Change award in 2019, for his work in the field of Ayurved.

Kurzarbeit – A Realistic German Approach To UBI?

Kurzarbeit - A Realistic German Approach To UBI?

The state-funded German safety net Kurzarbeit is a social insurance program whereby employers reduce their employees’ working hours instead of laying them off. It has ensured safety to millions of workers amidst the pandemic.

Crux of the Matter

Under Kurzarbeit, the German government compensates around 60% of the foregone net wages of an employee & 67% if the employee is a parent. The program can be initiated when employers need to cut wage costs and working times amid economic slowdown or any crisis like the COVID-19.

Main Features
Kurzarbeit is a crisis management tool to protect workers’ income and support aggregate demand. Since workers do not lose their jobs, they are secured while companies also retain their human capital.

The strong performance of employment during the global financial crisis bolsters domestic demand, with stable labour income supporting private consumption, and reduced the need for precautionary savings; thus opening the way to a rapid recovery.

A worker receives 60% of his or her pay for the hours not worked, whereas receives full payment for the hours worked. For example, a worker would only face a 10% salary loss for a 30% reduction in hours. In 2009, the German government was highly appreciated for saving nearly 500,000 jobs and keeping the unemployment rate below 8% during the recession using Kurzarbeit.

It has provided greater income protection during Covid-19. It provides 60% income for the first 3 months of reduced working hours, 70% income from 4th to 6th months, and 80% income from the 7th month. The maximum duration of the program is 21 months. During the pandemic, the coverage was expanded to temporary workers as well. Kurzarbeit can be applied for if employees’ working hours are reduced by more than 10% compared to 30% before Covid-19.

Critics say that Germany ‘s excessive reliance on Kurzarbeit can potentially reduce flexibility in the labor market, and increase the divide between workers in more and less-protected segments of the labor market.

Kurzarbeit subsidies could discourage restructuring of underperforming companies.

Jacob Kirkegaard, Peterson Institute for International Economics.

Following the pandemic, the German government has made this scheme more flexible, more attractive to employers, and more generous to employees while expanding coverage across sectors and across different types of jobs.

Universal Basic Income
On the contrary to Kurzarbeit, UBI is a periodic cash payment unconditionally delivered to every adult regardless of economic and employment status. UBI was proposed in the Economic Survey of India published in January 2017.

Incorporating UBI would bring more people into the formal banking system and also increase rural access to formal credit. Basic income increases the resilience to economic shocks but also increases the risks of a rise in inflation due to increased demand.

Current social welfare schemes like MNREGA, Ujjwala, Awas Yojana, etc. cost India about 4-5% of GDP, but UBI is expected to cost almost 6-7% of GDP. Experts say the ongoing social welfare schemes focus on long-term improvement on human development, rural infrastructure, employment and can’t be substituted by cash transfer. Seeing Germany as an example one can say that Kurzarbeit will prove to be highly expensive in the Indian context.

While some consider UBI as a universal right for everyone; some argue whether it should be distributed to rich or not. Many also believe that money should not be given to those who do not contribute to society through their labor and it is feared that employed workers would drop out of the labor force leading to encouraging idleness.

The idea of UBI is not new but in the past few years, it has been discussed widely on global platforms as a means of redistributing income. Unlike Kurzarbeit, UBI is based on the idea that society, as a first priority, should look out for its people’s survival.

  • A pay-as-you-earn tax (PAYE), in Australia and the United States, is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns.
  • On 4 October 2013, Swiss activists celebrated the successful collection of more than 125,000 signatures, forcing the government to hold a referendum in 2016 on the decision to incorporate the concept of basic income in the federal constitution. They did so by dumping 8 Million coins on a public square in Bern, each coin representing each person of Switzerland’s population. 
  • If unpaid care work performed by women were compensated at even the minimum wage around the world, this would boost measured global economic output by $12 trillion. Hence the Scottish economist Ailsa McKay argues that basic income is a way to promote gender equality.

Cars, Coronavirus and China

Cars, Coronavirus and China

Indian automobile sector had been facing a slump before Coronavirus made matters worse. Just when automobiles saw signs of improvements after no or very less cars were sold during Covid-19 lockdown, the current Indo-China face-off has created anti-China sentiments. It must be noted that Indian automobile sector relies heavily on China for a range of components.

Crux of the Matter

Automobile Sector in India
The automobile sector in India is very important as it contributes around 7.5% to India’s GDP and 49% to the manufacturing sector. Moreover, it employs around 1 crore people in India. However, the sector is facing a crisis since last year. In August 2019, sales of passenger vehicles fell by 31.57% and passenger cars declined by almost 36%. Last fiscal, the automobile sector performed the worst in the last 22 years. Approximately 2-3 lakh job losses were registered and some companies even declared production holiday. Maruti Suzuki declared that it sold 0 cars in April.

What Could Be The Possible Reasons?
In the 2018 Sep-Dec quarter, companies had reportedly produced excessive stock anticipating heavy sales in the coming festival season. Moreover, SC’s decision to stop sales of BS4 models of the vehicle from 1st April 2020 has resulted in fewer sales of BS4 models and piling up of stock in the companies. High prices of BS6 models soured the sector’s revival hopes. The economic slowdown and fall of GDP to 5% in 2019 April-June could also be attributed to the weak performance over and above the gradual shift in demand toward car-pooling or electric cars due to environmental concerns. In addition, there was a liquidity crunch in the market caused by NBFCs, which resulted in the postponement of the customers’ decision to buy cars as NBFCs account for 1/3rd of credit sales of automobiles in rural areas and tier 3 cities. 

Impact of Covid

  • Disruption in demand and supply in the market
  • People not buying cars due to cash crunch
  • High prices of BS6 Models
  • Companies’ production lines halted due to cut in the supply of components
  • Several other sectors on which automobiles are dependent facing a slow recovery

Chinese Factor
China is one of the leading manufacturers of automobiles and its components. India is dependent on China for importing driving transmission, steering wheel, and electrical, interior and engine components. In coming times of electric cars era, dependency on China may continue as Chinese companies have leverage over producing lithium batteries.

  • Faraday Future is a technology company focused on the development of electric vehicles; It was founded by Chinese businessman Jia Yueting in 2014. Yueting also founded LeEco, a chinese video streaming and cloud service provider.
  • Maruti Udyog Limited was founded by the Government of India in 1981, only to merge with the Japanese automobile company Suzuki in October 1982. The company is headquartered at New Delhi & in May 2015 it produced its fifteen millionth vehicle in India.
  • Tesla Giga Shanghai is a factory in Shanghai, China operated by Tesla, Inc. The Shanghai regional government approved the agreement to build the production facility in July 2018, and a long-term lease was signed for about 86 hectares (210 acres) of land in October 2018. The plant began initial production of Tesla Model 3 cars in October 2019.