Current Events in July 2019

The Department of Justice (DOJ) has been clear that it’s skeptical of the proposed merger of T-Mobile and Sprint. Now, the DOJ is reportedly considering filing a lawsuit to block the $26.5 billion deal if the two telecom providers do not reach a settlement by next week, CNBC reports. 

Citing “people familiar with the negotiations,” CNBC says the DOJ intends to sue to block merger if T-Mobile, Sprint, Dish, and T-Mobile’s parent company Deutsche Telekom can’t reach an agreement on issues that have been holding up the deal. 

In April, the Wall Street Journal reported that the companies had been told by Justice Department officials that the merger was not likely to be approved as structured. The Department has expressed concern that the merger -- which would reduce the number of carriers to three -- could negatively affect competition in the industry and lead to higher costs for consumers. 

Dish Network’s role in question

To assuage the DOJ’s concerns, T-Mobile and Sprint recently agreed to sell the prepaid brand Boost and make Dish a fourth wireless provider to ensure competition in the industry. The DOJ said earlier this month that it was close to approving the deal if the Dish conditions were met.

However, Deutsche Telekom is reportedly concerned that if it allows Dish to use T-Mobile’s new network while Dish builds out its own infrastructure, a cable or technology company could swoop in and buy Dish and use the T-Mobile network. Deutsche Telekom wants Dish to be cut off from the T-Mobile network if it’s purchased by a cable company, but the DOJ has said it’s not willing to allow that. 

The companies had previously announced a July 29 deadline for completing their merger, but they must first gain Justice Department approval. The Federal Communications Commission has already said it supports the deal. 

Now, reports say that if the companies can’t reach a settlement by the end of next week, the Justice Department may sue to block the merger. The ultimatum comes a month after a group of U.S. state attorneys general sued to block the merger on the grounds that it would cost consumers more than $4.5 billion a year. 

The 737 MAX suffered another setback Thursday, as Southwest Airlines announced it’s delaying the return of Boeing’s beleaguered aircraft to its schedule to November 2 at the earliest.

“Southwest Airlines continues to monitor information from Boeing and the Federal Aviation Administration (FAA) on the impending 737 MAX software enhancements and training requirements,” the company said in an announcement. “We remain confident that, once certified by the FAA, the enhancements will support the safe operation of the MAX.”

Southwest -- which has 31 737 MAX planes currently in its fleet and a total order of 280 -- had already revised its flight schedule twice. Like its 737 MAX peers, United and American, Southwest is at Boeing’s mercy while it continues its quest to make sure every single flaw is found and corrected.  

“By proactively removing the MAX from scheduled service, we can reduce last-minute flight cancellations and unexpected disruptions to our Customers' travel plans,” Southwest wrote.

“The limited number of Customers who have already booked their travel and will be affected by our amended schedule are being notified of their re-accommodated travel according to our flexible accommodation procedures. The revision will proactively remove roughly 180 daily flights from our schedule out of our total peak-day schedule of more than 4,000 daily flights.”

“We offer our apologies to our Customers impacted by this change, and we thank them for their continued patience.”

Boeing weighs in 

Boeing is in a tough spot with consumer confidence, customer trust, governmental go-ahead, and investor faith all weighing in the balance.

As to the ledger side of the equation, Boeing announced that it “will recognize an impact to earnings” in anticipation of its second-quarter 2019 results set for release on July 24. The company admits that the impact is related to “concessions and considerations” it’s taken regarding the 737 MAX grounding. Boeing reports that the charge will result in a $5.6 billion reduction of revenue and pre-tax earnings in the quarter.

As for the other components, Boeing says it’s continuing to work with civil aviation authorities to make sure the 737 MAX’s return to service is safe. 

"We remain focused on safely returning the 737 MAX to service," said Boeing Chairman, President and CEO Dennis Muilenburg. "This is a defining moment for Boeing. Nothing is more important to us than the safety of the flight crews and passengers who fly on our airplanes. The MAX grounding presents significant headwinds and the financial impact recognized this quarter reflects the current challenges and helps to address future financial risks."

The price of gasoline rose again this week but still lags behind the price consumers were paying at the pump at this time a year ago.

The AAA Fuel Gauge Survey shows the average price of regular gasoline is $2.78 a gallon, just a penny a gallon higher than last Friday. It rose four cents a gallon during the previous week. 

The average price of premium gas is $3.35 a gallon, three cents higher than seven days ago. The average price of diesel fuel is holding steady at $3 a gallon, remaining at that price over the last three weeks.

The biggest one-week price rise was in Missouri, where the average price surged by 11 cents a gallon in the last week. The average price was up seven cents in Texas; six cents in Illinois, South Carolina, Tennessee, and Virginia; and five cents a gallon in Arkansas.

“Gas prices continue to increase for the majority of motorists east of the Mississippi,  while those filling up in the West Coast and Rockies regions are seeing a bit of a reprieve at the pump,” said Jeanette Casselano, AAA’s spokesperson. “While the national average is up, only seven states have gas price averages of $3 a gallon or more. And notably, compared to the same time last year, the average is still eight cents cheaper.”

Oil prices have been somewhat volatile in recent weeks, adding to regional price spikes though prices appear to be headed lower again. Last week’s tropical storm in the Gulf of Mexico reduced the flow of fuel from Gulf Coast refineries suggesting the recent rise in fuel prices could be temporary once these refineries are back at full strength.

The states with the most expensive regular gas

These states currently have the highest prices for regular gas, according to the AAA Fuel Gauge Survey:

• California ($3.73)

• Hawaii ($3.66)

• Washington ($3.32)

• Nevada ($3.27)

• Alaska ($3.22)

• Oregon ($3.19)

• Illinois ($3.11)

• Idaho ($2.93)

• Pennsylvania ($2.93)

• Connecticut ($2.90)

The states with the cheapest regular gas

The survey found these states currently have the lowest prices for regular gas:

• Mississippi ($2.40)

• Alabama ($2.43)

• Louisiana ($2.43)

• Arkansas ($2.44)

• South Carolina ($2.48)

• Oklahoma ($2.51)

• Virginia ($2.53)

• Tennessee ($2.53)

• Texas ($2.54)

• Kansas ($2.55)

Growers Express is expanding the list of select fresh vegetables recalled earlier this month.

A single retail sample was found to be contaminated with Listeria monocytogenes.

There are no reported illnesses to date.

The following items have been added to the original list:

The recalled products originated at a Growers Express production facility in Biddeford, Maine, and were shipped to Massachusetts and Maine.

What to do

Customers who purchased the recalled products should not consume them and discard them

Consumers may contact the company toll-free number listed on each package with any questions or requests for refund. Up-to-date information may be found at www.GrowersExpress.com/voluntaryrecall.

To borrow a baseball metaphor, Amazon’s Prime Day was an out-of-the-park home run, with sales surpassing the previous combined total of Black Friday and Cyber Monday. 

As you might expect, Amazon is overjoyed.

“We want to thank Prime members all around the world,” Jeff Bezos, Amazon founder and CEO, said in a statement. “Members purchased millions of Alexa-enabled devices, received tens of millions of dollars in savings by shopping from Whole Foods Market and bought more than $2 billion of products from independent small and medium-sized businesses. Huge thank you to Amazonians everywhere who made this day possible for customers.”

Cha-ching

All told, Prime members bought 175 million items. Topping that list in the U.S. were products such as the LifeStraw Personal Water Filter, Instant Pot DUO60, and 23andMe ancestry kit.

Prime Day could have easily been named Tech Day given what was sold. All told, Amazon saw more than 100,000 laptops and 200,000 TVs go out the door, but the surprise winner were smart devices, which continue to improve their place in the tech food chain.

Customers purchased twice as many Fire TV Edition Smart TVs and twice as many Ring and Blink devices as last year. Also showing some sales muscle were the MyQ Smart Garage Door Opener Chamberlain MYQ-G0301 and the Amazon Smart Plug.

Kid tech was also a big hit. Amazon reported that customers purchased hundreds of thousands of Amazon kids’ devices such as Echo Dot Kids Edition, Fire 7 Kids Edition tablet, and Fire HD 8 Kids Edition tablet.

Outside of tech, Prime members loaded up on more than 100,000 lunchboxes, 350,000 luxury beauty products, 400,000 pet products, 650,000 household cleaning supplies, and 150,000 Crest 3D White Professional Effects Whitestrips Kits.

That America has an opioid addiction crisis is not open for debate. Now, new data may reveal why.

Statistics from the Drug Enforcement Administration (DEA), previously under seal by court order, have now been made public. The numbers show pharmaceutical companies churned out more than 76 billion of the painkilling pills between 2006 and 2012.

A federal judge in Cleveland, Ohio ordered the release of the data as part of his involvement in about 2,000 cases brought against drug companies. Besides the plaintiffs, several newspapers, including the Washington Post, had petitioned the court to release the information.

During the six-year period, opioid prescriptions peaked at more than 280 million pills a year, enough to stock the medicine chest of every American adult with a month’s worth supply of the drugs.

50 percent surge

Prescriptions of hydrocodone and oxycodone, two of the more commonly prescribed opioids, surged by more than 50 percent over the six-year period. An analysis by the Washington Post estimated 12.6 billion pills were prescribed in 2012, the last year of the analysis.

It was during that six-year period that health officials began to express alarm at growing opioid addiction and the resulting death and injuries. 

The crisis began in mostly rural areas of America, such as Indiana, West Virginia, and New England. In 2014, Vermont Gov. Peter Shumlin identified heroin and other opiate addiction as the number one issue facing the state.

“In every corner of our state, heroin and opiate drug addiction threatens us,” Shumlin warned in his State of the State Address to the legislature. “It threatens the safety that has always blessed our state. It is a crisis bubbling just beneath the surface that may be invisible to many, but is already highly visible to law enforcement, medical personnel, social service and addiction treatment providers, and too many Vermont families.”

Shumlin said Vermont had seen a more than a 770 percent increase in treatment for all opiates since 2000.

Affecting life expectancy

By 2017, opioid addiction was beginning to affect U.S. life expectancy. A Centers for Disease Control and Prevention (CDC) study found that opioid-related poisoning deaths more than tripled from 2000 to 2015 in the U.S. and that they had become a significant factor in reducing the country’s average life expectancy.

Although life expectancy at birth increased by two years over the course of the study period, CDC researchers say that opioid-related poisonings contributed to an overall loss of 0.21 years in life expectancy. Their findings show that 96 percent of these deaths were unintentional.

Johnson & Johnson says it intends to defend itself against lawsuits which allege that it played a role in creating and perpetuating the opioid crisis, as well as against lawsuits claiming its talc-based baby powder causes cancer and mesothelioma, CNBC reported.

In a conference call discussing its quarterly earnings, Chief Financial Officer Joseph Wolk said Johnson & Johnson’s baby powder is “safe” and that the company acted “responsibly.”

“So we’ll continue to pursue defense of the company’s actions, as well as the product going forward,” he told analysts.

Oklahoma suit

The state of Oklahoma has filed a multibillion-dollar lawsuit against Johnson & Johnson that centers around the company’s marketing of opioids to doctors. Lawyers for the state argue that the company’s marketing of opioids as “safe and effective for every day pain” was “deceptive” and rooted primarily in greed. 

“This company went out and sponsored lies,” said attorney Brad Beckworth during closing arguments for the state, according to an NBC News report.

But Wolk argued on the call that “the facts don’t align to what the state is claiming." 

“We agree that there’s an epidemic with opiate addiction,” he said. “However it’s going to be multiple factorial in terms of the solution set and it’s going to require many sophisticated parties to make sure that we’ve got the right remedies in place for people who suffer from that.”

Defending itself against ongoing lawsuits

Johnson & Johnson currently faces more than 14,000 lawsuits over its talc-based baby powder. In the second quarter, the company recorded a $190 million charge for defending itself in talc litigation. 

The lawsuits poured in more rapidly following the publication of a Reuters article which claimed that the company’s talc and baby powder products contain asbestos and that it knew about it for decades. CEO Alex Gorsky has maintained that Johnson & Johnson’s products do not contain the known carcinogen.

"And that's demonstrated in thousands of studies, studies not only conducted by J&J, but studies conducted by independent authorities, well-respected authorities, where we work closely with regulators who are overlooking the methodology," Gorsky said in an interview last summer with CNBC.

A new study from Michigan State University shows that high schoolers have many different sources they can turn to when it comes to obtaining prescription drugs. 

While the misuse and abuse of these drugs raises concerns on its own, the team says the findings are also worrisome because the misuse of prescription drugs is often associated with other mental health concerns or substance abuse issues. 

“These adolescents are most in need of intervention to address their substance use and any other medical and mental health issues,” said researcher Ty Schepis. 

Knowing the numbers

The researchers completed two studies to gain a better understanding of young people’s misuse of prescription drugs.

In the first study, the researchers analyzed over 18,500 high school students to gain insight into their attitudes about drugs and their behaviors around them. The students were specifically asked about stimulants, opioids, and tranquilizers. 

Of the students involved in this study, 11 percent reported misusing prescription drugs, with 44 percent of those same students reporting that they had more than one way to get their hands on the drugs when they wanted them. While some opted to take leftover drugs they found in their medicine cabinets, others bought them off of their peers at school. 

The second study focused on nearly 104,000 adolescents between the ages of 12 and 17, and the researchers aimed to discover how these young people were securing prescription drugs. 

The most common source for drugs in this study was getting them for free from friends or relatives, as this accounted for roughly 33 percent of the participants’ misuse of drugs. Getting an opioid painkiller prescription from a doctor was the second highest source, with 24 percent of participants obtaining drugs this way. Buying drugs from others rounded out the list. 

These findings are certainly cause for concern, as having multiple avenues to secure prescription drugs for the wrong reasons has been proven to lead to substance use disorder in over 70 percent of young people. 

“The implications from these two studies could not be clearer,” said researcher Sean Esteban McCabe. “Parents, public health experts, and clinicians must rally to address this problem. There is a critical need for clinical workforce training to support clinical and school-based education, screening, prevention, and early intervention.”

United Airlines, of all the U.S. carriers, has the least exposure to the grounded Boeing 737 MAX aircraft. But that doesn’t mean the plane’s problems haven’t become the airline’s problems.

United only owns 14 of the planes, but it has been forced to cancel flights using the aircraft through November 2 because of uncertainty over the plane’s status. It’s been grounded worldwide since March after two of the planes crashed within five months -- most likely for the same reason.

United appears to be hedging its bets, announcing that it plans to purchase 19 used Boeing 737-700 aircraft, expected to take the place of the newer grounded aircraft. The used jets are similar to the MAX 9 aircraft but are slightly smaller. 

Used mostly for short hops and regional flights, the 737 aircraft are expected to fill the void that has been left by the absence of the MAX jets. The 737-700 can seat 126 passengers, slightly less than the 179 that can be fitted aboard the MAX 9.

Insurance policy

In a way, the purchase of the used aircraft amounts to an insurance policy. The MAX 9 may be cleared to fly again by December when United is scheduled to take delivery. Then again, it might not.

The grounding was expected to be for a relatively short time, centered on a software fix in the plane’s flight control system. But other problems arose, keeping the plane on the ground.

The addition to the fleet will enable United to increase its capacity, which it has pledged to do to the tune of as much as 4 percent per year. Without those seats, growth could be a difficult task.

Even with the grounding of the 737 MAX aircraft United had a strong second quarter. This week the airline reported revenue rose to $11.4 billion, a 6 percent gain on the second quarter of last year.

Return could be pushed to 2020

The purchase of the used 737 aircraft may turn out to be a prudent move. The return-to-service date of Boeing 737 MAX jets could be pushed into 2020 amid safety concerns from regulators and Federal Aviation Administration (FAA) officials. 

Last month, Boeing CEO Dennis Muilenburg expressed optimism that the 737 MAX would be back in service by the end of the year. He said Boeing was conducting simulated flights with air-safety regulators and would soon operate test flights with the FAA. However, airlines have been more cautious with their predictions on when the aircraft will be deemed safe to return to daily flight schedules. 

Home closings plunged in June, signaling weakness in the housing market, but maybe not a weakness in the traditional sense. The price paid for the average home keeps going higher.

According to the latest RE/MAX National Housing Report, the number of sales closing last month fell 4.7 percent from May and 7.8 percent year-over-year. That’s notable for a couple of reasons.

First, it’s a sizable decline, both from one month to another and over a 12-month period. Second, June is typically the strongest month of the year for home sale closings as families try to get moved and settled before a new school year starts.

In fact, June has recorded the most sales each of the last five years. It’s only the second June in report history to have fewer sales than May.

Can’t be blamed on inventory

So what happened? This drop can’t be blamed on a lack of available homes for sale. The inventory of homes rose 1.3 percent over June 2018. Inventory rose for the ninth straight month, and the report's 54 metro areas had the most units for sale since August 2016.

Instead of a shortage of homes, the cost of purchasing one may have kept buyers on the sidelines during the spring home-buying season. The RE/MAX report shows June’s median sale price was $276,000 -- the highest ever in the 10-year history of the report.

"Record prices appear to have kept June sales figures from topping a strong May," said RE/MAX CEO Adam Contos. "Nevertheless, there are indications, including the return of very favorable mortgage rates, that the pace could pick up in July.”

But mortgage rates rose last week

So far, however, there’s little evidence of that happening. Mortgage rates rose last week and total mortgage applications fell 1.1 percent, according to the Mortgage Bankers Association (MBA).

"Mortgage rates increased across the board, with the 30-year fixed-rate mortgage rising to its highest level in a month to 4.12 percent, which is still below this year's average of 4.45 percent," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Coming out of the July 4th holiday, applications were lower overall, with purchase activity slipping almost 4 percent.”

Despite the rise in rates and drop in mortgage applications, Contos sees some encouraging longer-term trends for the housing market. Demand for homes has held steady and now inventory levels are increasing. But he admits that supply remains a concern and that home builders need to produce more homes.

Chrysler (FCA US LLC) is recalling 81,165 model year 2014 Jeep Cherokees equipped with 3.2L engines.

In the event that a clutch becomes stuck in the transmission, the transmission software may shift the transmission to neutral.

An unexpected shift to neutral would result in a loss of drive, increasing the risk of crash.

What to do

Chrysler will notify owners, and dealers will update the transmission software free of charge.

The recall is expected to begin August 2, 2019.

Owners may contact Chrysler customer service at 1-800-853-1403. Chrysler's number for this recall is V69.

Fieldsource Food Systems of Brea, Calif., is recalling approximately 12,953 pounds of diced beef and chicken cubes.

The products contain wheat, an allergen not declared on the label.

There arena confirmed reports of adverse reactions.

The following uncooked, marinated, diced items, produced from June 9 through July 10, 2019, are being recalled:

• 20-lb. boxes containing four unmarked 5 lb. plastic bags with “FIELDSOURCE Food Systems, Inc. NORTHGATE MARKET MARINATED BEEF CUBES” and lot codes 061019 through 071019 represented on the label.
• 20-lb. boxes containing four unmarked 5 lb. plastic bags with “FIELDSOURCE Food Systems, Inc. NORTHGATE MARKET MARINATED CHICKEN CUBES” and lot codes 061019 through 071019 represented on the label.

The recalled beef cubes, bearing establishment number “EST. 45141,” and the chicken cubes, bearing establishment number “P-45141” inside the USDA marks of inspection, were shipped to grocery stores in California and used behind the deli counter. They were not sold uncooked to consumers.

What to do

Consumers with questions about the recall may contact Joe Bonefide at (714) 529-3663.

Bitcoin lost over 10 percent of its value on Tuesday following a day of hearings on Capitol Hill, during which Facebook answered lawmakers’ questions about its planned digital currency, Libra. 

Though Facebook has assured lawmakers that Libra and its digital wallet Calibra would be "licensed, regulated, and subject to supervisory oversight,” regulators have lingering questions. 

Specifically, lawmakers are concerned about the potential risks it could pose to global financial markets. Earlier this week, Treasury Secretary Steven Mnuchin even brought up the concern that Facebook’s digital coin -- which it’s hoping to launch in 2020 -- could be used for money laundering.

Skepticism from lawmakers

During Tuesday’s hearing, a U.S. senator told David Marcus, the executive overseeing the Facebook’s digital currency project, that Facebook was “delusional” to believe people will trust the company with their money. 

In the wake of the hearing, Bitcoin fell to a value of $9,300, according to research site CoinDesk. 

“Libra is essentially slammed in the Senate,” Lennon Sweeting, head trader at Coinsquare Capital Markets Ltd told Reuters. “It’s just headline-driven volatility.”

Earlier this month, Bitcoin’s value also fell 10 percent after Federal Reserve Board Chairman Jerome Powell told lawmakers that Libra raises serious concerns about all cryptocurrencies. However, the digital currency proceeded to rebound shortly thereafter. Sweeting said Bitcoin will also likely recover from this latest setback. 

Bitcoin’s value reached almost $14,000 in late June. Its record high remains $20,000, which it hit in December 2017.

After a day of hearings on Capitol Hill, one thing appears to be clear: lawmakers don’t like big technology companies and don’t trust them.

"Facebook is dangerous," said Sen. Sherrod Brown (D-Ohio) at a Senate Banking Committee hearing. "Like a toddler who's gotten his hands on a book of matches, Facebook has burned down the house over and over, and called every arson a learning experience."

Facebook joined Amazon, Google, and Apple for grillings Tuesday at three separate congressional hearings where lawmakers questioned the companies’ patriotism or accused them of stifling competition.

Google had to answer questions about whether it was aiding the Chinese military. A company executive assured Congress is was not. The charge emerged over the weekend when technology entrepreneur Peter Thiel claimed that the search giant was secretly helping China.

Roughest treatment saved for Facebook

But Facebook appeared to get the roughest reception. In an appearance before the Senate Banking Committee, David Marcus, the executive heading up Facebook’s Libra digital currency project tried to placate lawmakers by saying the company expects the digital currency to be "licensed, regulated, and subject to supervisory oversight."

For the most part, lawmakers weren’t buying it. 

"I don't trust you guys," said Sen. Martha McSally (R-Ariz.). "So instead of cleaning up your house, now you're launching into another business model with Calibra here."

Facebook has just resolved issues concerning its privacy violations. The Federal Trade Commission (FTC) late last week voted to fine the social media giant a record $5 billion to settle charges arising out of last year’s Cambridge Analytica scandal. That firm made unauthorized use of the personal data of millions of Facebook users to target political ads.

Antitrust concerns

Facebook also came in for its share of bashing before the House Judiciary Committee, which also heard subpoenaed testimony from Google, Amazon, and Apple. Lawmakers’ chief complaint appeared to be that the companies had grown too large to be fair to competitors.

Rep. Henry Johnson (D-Ga.) told the tech executives he believed much of their success is due to leveraging their massive user bases. Others suggested Big Tech had given itself an unfair advantage when it sold its own products side by side with competitors on its platforms.

“Is Facebook a monopoly?” asked Rep. Joe Neguse (D-Colo.), observing that Facebook owns four of the largest six social-networking platforms.

All four companies are currently under investigation by federal agencies to determine if their size and economic clout pose a threat to consumers and competing companies.

Spotify has teamed up with Disney to create a new streaming hub specifically for music from Disney films and TV shows. 

Starting Wednesday, Spotify users who search “Disney” will be taken to a dedicated hub for music featured in Disney, Pixar, and Marvel movies. Spotify has also created theme-oriented playlists of Disney music for its new Disney Hub. Examples of playlists include “Disney Princess,” “Marvel Music,” and “The Best of Star Wars.” 

The music streaming giant says its users have streamed nearly 2.5 billion minutes of Disney music so far this year. In launching the new Disney Hub, Spotify is likely hoping to persuade more users to purchase a family membership for $14.99 ($5 more than a Spotify Premium membership).

“Stream playlists full of everything from The Little Mermaid to modern favorites like Frozen, to Star Wars instrumentals, and even Marvel movie soundtracks,” Spotify said in a press release. “Plus, Disney compilations made for every part of your day—road trip, shower, or sleep time—will help ensure your life is nothing short of magical.” 

Spotify’s new Disney Hub is available in the U.S., U.K., Ireland, South Africa, Canada, Australia, and New Zealand.