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Contain your excitement over Facebook’s possible renaming of itself for the coming age of “the metaverse”, and consider Wednesday’s other story about the social media group. Facebook’s quarrel with the UK competition watchdog offered a near-perfect illustration of corporate arrogance and entitlement in action.
The case is extraordinary for the fact that the stakes were so low: Facebook’s $400m (£290m) purchase last year of Giphy, a software firm that specialises in Gifs, the essential visual aid for social media meme-peddlers, can barely have registered on Mark Zuckerberg’s radar. The purchase price equated to less than 0.5% of Facebook’s global revenues.
Yet the company seems to have been affronted to an extreme degree when the Competition and Markets Authority (CMA), in perfectly normal fashion, decided to look at the UK market implications of a transaction between two US companies.
A critical element of an CMA inquiry is the “initial enforcement order”, or IEO, in effect an instruction not to prejudice the outcome by, for example, integrating operations. Companies can request carve-outs from an IEO – and Facebook did – but they still have to comply and provide reports. Despite repeated warnings, Facebook did not, says the CMA.
When the company took its argument to the CMA’s tribunal, it lost. Then it lost again in the court of appeal. The former body’s reference to how Facebook decided “effectively to proceed on the basis of it having already been granted the carve-out requests” describes, in effect, a corporation that behaved as if rules are for other people.
The result is a £50.5m fine for breaching the IEO, which “should serve as a warning to any company that thinks it is above the law,” said the CMA, adding that no firm had ever previously been found to have breached an IEO by consciously refusing to report all the required information.
Given the number of corporate rogues the CMA has encountered over the years, that is quite a first. The metaverse can wait. The problem is Facebook’s approach to regulation in this world.
Burberry goes shopping for a new boss
Burberry normally finds a way to make a drama out of a succession crisis but, actually, the surprise this time is the lack of plot twists.
The industry veteran Marco Gobbetti said in June he was quitting as chief executive for a job back in Italy next year, a decision that took his boardroom colleagues by surprise. But here comes the new boss, Jonathan Akeroyd, who looks to be the closest thing to a like-for-like replacement.
He’s from the commercial, as opposed to the creative, side of the industry and he’s been around a few continental houses, most recently at Versace. The symmetry is completed by Akeroyd being a Brit returning to Britain.
Naturally, there was a full helping of the usual blather about “elevating” the Burberry brand (no fashion label ever says its strategy is to go determinedly downmarket), but Akeroyd’s real task is to get the revenue line moving, which was meant to be the second half of Gobbetti’s overhaul. If he can do that, and restore some life to a stale share price, he might put a stop to the takeover rumours that perpetually swirl around the company.
The familiar part of this hire is the size of the financial package. Akeroyd will get a £6m “golden hello” as compensation for loss of his incentives at Versace, and will get a £1.1m salary, a maximum annual bonus of £2.2m, and £1.8m of annual share awards. They always pay themselves well in the fashion game.
Governance concerns swirl around Moulding’s the Hut Group
Matthew Moulding ditched his “special” takeover-blocking share in the Hut Group (THG) this week, or rather said he planned to do so. Now comes more governance news: Moulding, his wife and a related entity have released a chunk of shares that had been pledged as collateral against a £100m loan from Barclays.
Very good; there’s nothing strictly wrong with such collateral arrangements, but they attract attention when the share price is on the slide. Best to live without.
THG’s next step towards the mainstream, one hopes, will be the unwinding of Moulding’s controversial role as landlord to the company. He bought a package of properties, ranging from distribution centres to a country club, from the company before last year’s float, and THG pays him rent of £19.4m a year. No matter how many times the company says “arm’s length”, it is not good governance.
Given the size of the portfolio, it would be hard to undo the setup quickly, but the medium-term aim ought to be disposal.