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Automobiles china Industrial Espionage International Trade and World Market Mergers, Acquisitions and Divestitures Solar Energy Uncategorized United States International Relations United States Politics and Government Wind Power

How China Obtains American Trade Secrets

BEIJING — The new trade deal between Washington and Beijing is intended in part to address one of the most acrimonious issues between them: China’s tactics in acquiring technology from companies based in the West.

It’s a thorny topic, and one that is unlikely to be fully solved with a trade pact.

The Trump administration blames China for stealing Western trade secrets, and it used those allegations as the legal basis for launching the trade war nearly two years ago. Trade talks between the two sides quickly became about broader issues, but the partial trade pact set to be signed on Wednesday includes pledges by China to stop some of the practices that Western businesses have long criticized. Depending on the details, that could make the deal more palatable for American businesses.

Underpinning these concerns is that China has repeatedly shown that it can acquire technology and, through heavy government subsidies, build competitive rivals to American companies. Businesses worry that it could do the same in other industries, like software and chips.

China has long denied that it forces foreign companies to give up technology. They do it willingly, Beijing asserts, to get access to China’s vast and growing market. Still, Chinese officials say they are taking steps to address the concerns.

The American authorities have long accused Chinese companies and individuals of hacking and other outright theft of American corporate secrets. And some in the Trump administration worry that Chinese companies are simply buying it through corporate deals.

American companies say Chinese companies also use more subtle tactics to get access to valuable technology.

Sometimes China requires foreign companies to form joint ventures with local firms in order to do business there, as in the case of the auto industry. It also sometimes requires that a certain percentage of a product’s value be manufactured locally, as it once did with wind turbines and solar panels.

The technology companies Apple and Amazon set up ventures with local partners to handle data in China to comply with internal security laws.

Companies are loath to accuse Chinese partners of theft for fear of getting punished. Business groups that represent them say Chinese companies use those corporate ties to pressure foreign partners into giving up secrets. They also say Chinese officials have pressured foreign companies to give them access to sensitive technology as part of a review process to make sure those products are safe for Chinese consumers.

Foreign business groups point to renewable energy as one area where China used some of these tactics to build homegrown industries.

Gamesa of Spain was the wind turbine market leader in China when Beijing mandated in 2005 that 70 percent of each wind turbine installed in China had to be manufactured inside the country. The company trained more than 500 suppliers in China to manufacture practically every part in its turbines. It set up a plant to assemble them in the city of Tianjin. Other multinational wind turbine manufacturers did the same.

The Obama administration questioned the policy as a violation of World Trade Organization rules and China withdrew it, but by then it was too late. Chinese state-controlled enterprises had begun to assemble turbines using the same suppliers. China is now the world’s biggest market for wind turbines, and they are mostly made by Chinese companies.

A somewhat similar industrial evolution occurred soon after in solar energy. China required that its first big municipal solar project only use solar panels that were at least 80 percent made in China. Companies rushed to produce in China and share technology.

The Chinese government also heavily subsidized the manufacture of solar panels, mostly for export. Chinese companies ended up producing most of the world’s solar panels.

Some in the Trump administration fear the same thing is happening in cars.

Shortly after opening China to foreign auto companies, Chinese officials held a competition among global automakers for who would be allowed to enter the market. The competition included a detailed review of each company’s offer to transfer technology to a joint venture to be formed with a Chinese state-owned partner.

General Motors beat out Ford Motor and Toyota by agreeing to build a state-of-the-art assembly plant in Shanghai with four dozen robots to make the latest Buicks. Executives at Volkswagen, the German automaker that had entered China even earlier, were furious, because competitive pressures forced them to upgrade their technology as well.

China is now the world’s largest car market. But except for a few luxury models, practically all of the cars sold in China are made there. Steep Chinese tariffs on imported cars and car parts have also played a role, as has the desire of foreign companies to avoid the costs and risks of transporting cars from distant production sites.

In the trade truce expected to be signed on Wednesday, Chinese officials have agreed not to force companies to transfer technology as a condition of doing business, and they undertook to punish firms that infringe on or steal trade secrets. China also agreed not to use Chinese companies to obtain sensitive technology through acquisitions.

Even before that, Chinese officials pledged to drop the joint venture requirement in areas like cars.

The question is whether China will stick to its pledges. Chinese officials have already issued rules echoing much of what they promised in Wednesday’s agreement. Foreign lawyers say the new rules have large loopholes. The rules give Chinese regulators broad discretion to act as they see fit in cases that involve “special circumstances,” “national state interests” and other fuzzy exceptions.

The trade pact calls for consultations within 90 days if the United States thinks Beijing is not living up to its commitments, but it is unclear whether the Trump administration could then force compliance. More broadly, the pact does not address China’s subsidies for new industries, a key factor in what happened in sectors like solar panels. China has largely rebuffed calls to rein in subsidies for homegrown competitors in industries like semiconductors, commercial aircraft, electric cars and other technologies of tomorrow.

The Trump administration is counting on tariffs to counterbalance that. The partial trade pact will leave in place broad tariffs on many of those industries to prevent Chinese competitors from flooding the American market. Leaving broad tariffs in place also gives Western companies a strong financial incentive to reconsider supply chains that are heavily reliant on China.

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5G (Wireless Communications) Antitrust Laws and Competition Issues Delrahim, Makan Justice Department Mergers, Acquisitions and Divestitures Regulation and Deregulation of Industry Sprint Nextel Corporation T-Mobile US Inc Uncategorized Wireless Communications

How a Top Antitrust Official Helped T-Mobile and Sprint Merge

WASHINGTON — As the $26 billion blockbuster merger between T-Mobile and Sprint teetered this summer, Makan Delrahim, the head of the Justice Department’s antitrust division, labored to rescue it behind the scenes, according to text messages revealed this week in a lawsuit to block the deal.

Mr. Delrahim connected company executives with the F.C.C. and members of Congress. And he gave executives insight into the thinking of Ajit Pai, the chairman of the F.C.C. who would also have to approve the merger.

He is “open and willing” to discussions about the deal, Mr. Delrahim said in one text message in June, a month before regulators blessed the transaction.

The messages between Mr. Delrahim and the executives involved in structuring one of the telecom industry’s most significant mergers in generations provide a rare inside look at the hands-on work the Justice Department’s top antitrust official undertook to shape the deal.

While it is not unusual for a law enforcement official to work behind the scenes to help companies overcome antitrust concerns, efforts like the one undertaken by Mr. Delrahim are almost always hidden from view.

The text messages show that he played a crucial role in bringing together top executives of T-Mobile, Sprint and another company, Dish, for negotiations. The Justice Department has said it would not have approved the merger without the emergence of another competitor like Dish.

The Obama administration rejected an earlier proposed merger between the companies, and it remains deeply unpopular with some consumer groups who fear it will increase prices for Americans, especially in rural areas.

Mr. Delrahim oversaw the often hostile talks between the companies, while pulling strings to get lawmakers and other regulators on board.

“Had a generally good chat with the chairman,” Mr. Delrahim wrote to Charles Ergen, the chief executive of Dish, the company that would prove crucial to the deal’s passage. The following day he encouraged Mr. Ergen to lobby lawmakers to urge Mr. Pai to approve new deal terms that would give Mr. Ergen more time to build out a competitive telecom business.

Mr. Ergen did so. He told Mr. Delrahim that he had “very good” meetings in Washington and that he talked to Mitch McConnell, the Senate majority leader, about the deal, according to the text messages.

When asked about the text messages, a Justice Department spokesman said that “the Antitrust Division is proud of its work in reviewing this important merger on behalf of the American consumer,” but declined to comment further.

T-Mobile and Dish declined to comment on the messages, which were submitted as evidence in a legal challenge to the merger led by the New York and California state attorneys general. Sprint didn’t immediately respond to requests for comment.

The messages also show that SoftBank, the Japanese conglomerate that owns the majority of Sprint, discussed lending Dish money to buy the assets it needed to become a telecom company.

In such an arrangement, SoftBank would essentially be financing a competitor to its own company, Sprint. But SoftBank also stood to lose financially if a Sprint-T-Mobile merger did not happen.

SoftBank declined to comment on Thursday.

In one strained exchange, Mr. Ergen told John Legere, the chief executive of T-Mobile, that he was still working to get terms of a deal done, pending board approval and “any other issues from our/your team.”

“And waiting on Softbank to finance the deal?” Mr. Legere wrote.

Mr. Ergen said publicly this week that several potential lenders had emerged to help his company buy assets, including JPMorgan Chase and SoftBank.

Sprint and T-Mobile, the third- and fourth-largest wireless companies, announced their latest merger plans in April 2018. The carriers promised their union would allow them to combine resources and bring the next generation of wireless broadband, known as 5G, for fifth generation, to rural America. They would have a combined 80 million United States subscribers.

The Justice Department announced its approval of the deal in July, citing the creation of a fourth and new competitor in Dish, which would buy assets from Sprint and T-Mobile to become a telecom company. In a parallel review, the chairman of the Federal Communications Commission announced it planned to approve the deal weeks later.

The merger is being challenged in court by several states and cannot close until that lawsuit is resolved. State attorneys general in New York and California are unconvinced that Dish will provide true market competition.

“Dish is a struggling satellite TV firm with no experience running a mobile wireless business — and no current mobile wireless business,” Paula Blizzard, California’s deputy attorney general, said on a call with journalists this month. “We cannot count on Dish one day in the future somehow growing into a viable wireless company equal to Sprint’s reach today.”

Mr. Delrahim was pressured to block the merger throughout the department’s review. Several Democratic lawmakers, consumer groups and state attorneys general said the deal would harm consumers by reducing the number of national wireless carriers to three from four. The reduction in competition would most likely lead to higher consumer wireless bills, the critics warned.

To salvage the deal, the companies came up with a solution: bring in Dish Network to buy some of their wireless assets to form another competitor and maintain four national mobile carriers.

Mr. Delrahim told reporters at a press event in July that the deal would not have passed muster without Dish, which had agreed to buy Sprint’s prepaid wireless service, Boost, for $5 billion, as well as other assets from T-Mobile.

“We were prepared to sue to block the deal,” Mr. Delrahim said in July, when he announced his approval.

In texts sent this May and June, Mr. Delrahim helped coordinate meetings between Mr. Ergen, Mr. Legere and Marcelo Claure, the chief operating officer of SoftBank and the chairman of the Sprint board, as they negotiated asset sales to Dish.

“I anticipate being part of the meeting and then leaving it to you guys to hash out details as needed,” Mr. Delrahim wrote in one text to Mr. Ergen about a meeting with Mr. Legere.

The telecom executives gave Mr. Delrahim regular updates on their often difficult negotiations. Both T-Mobile and Sprint executives were frustrated at times with Mr. Ergen, who told them he needed time to get his board to approve aspects of the deal.

“Why do you always play games. You got a deal of a lifetime and don’t blow it,” Mr. Claure told Mr. Ergen. “And you control your board.”

Mr. Legere and Mr. Ergen were sometimes hard to wrangle. At one point, when Dish sought funding from SoftBank, Mr. Legere was indignant.

“You’ve crossed the line,” he wrote. “For full disclosure (which may be a new term to you) I have told Makan I don’t believe you are serious about doing a deal.”

Mr. Delrahim seemed aware of the friction. In one set of messages, he invited Mr. Ergen to a meeting the next day with Mr. Legere and Mike Sievert, the president of T-Mobile, in his conference room at the Justice Department. “2pm confirmed,” Mr. Delrahim wrote. “I have not told John and Mike the meeting is w you yet, I will tell them in the AM.”

But the day the meeting was scheduled, Mr. Delrahim gave Mr. Ergen an update about a long talk he had held with Mr. Legere, Mr. Sievert and Mr. Claure.

“John is going to reach out to you,” Mr. Delrahim wrote. “May make good sense for you all to meet alone at 2, and then we all meet later today? I will make myself available.”

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Car Services and Livery Cabs Computers and the Internet Delivery Services India Initial Public Offerings Khosrowshahi, Dara Mergers, Acquisitions and Divestitures Start-ups Uber Eats Uber Technologies Inc Uncategorized Zomato Media Pvt Ltd

Uber in Talks to Sell Its Food-Delivery Business in India

SAN FRANCISCO — Uber is in advanced discussions to sell its food-delivery business in India, according to two people with knowledge of the plans, as the company moves to stem its losses.

The ride-hailing company is nearing a deal to sell its Uber Eats service in India to Zomato, an Indian food-delivery service, said the people, who spoke on condition of anonymity because they were not authorized to do so publicly. The sale could be announced as early as this week, they said.

A spokesman for Uber declined to comment. The talks were earlier reported by TechCrunch, which said a deal would value the India business of Uber Eats at $400 million.

Dara Khosrowshahi, Uber’s chief executive, has been trying to pare back money-losing businesses to prove to investors that the company can turn a profit. Investors have agitated both in public and behind the scenes for Uber to clean up its balance sheet since it went public earlier this year.

Uber’s initial public offering in May was a disappointment, with the company’s shares immediately plunging as investors questioned how much money the ride-hailing service loses. That event marked a turn in sentiment around high-profile-but-unprofitable tech start-ups, many of which had burned cash for years in the pursuit of growth. WeWork, another highly valued start-up, later shelved its plans for an I.P.O. as private investors cut the company’s valuation to a fraction of its former worth.

Investors have recently homed in on several issues at Uber, according to two people briefed on the conversations. Those include continued regulatory challenges around the world — most recently, transportation authorities said they would not extend Uber’s taxi license in London, one of its biggest markets — and ballooning expenditures.

Some investors have privately grumbled that Uber also paid too much for Careem, a Dubai-based ride-hailing and delivery company that Uber announced this spring it would acquire for $3.1 billion.

According to two people familiar with the matter, investors have also privately complained to Mr. Khosrowshahi about the expense of its Advanced Technologies Group, which develops self-driving vehicles. No decisions have been made about the unit, these people said, which has more than 1,000 full-time employees.

While Uber Eats has been a bright spot for revenue growth, the company has offered subsidies and free promotional offerings to gain new users, which has been expensive. In a conference call with investors last month, Mr. Khosrowshahi said his plan for Uber Eats was to take first or second place in every city it operates.

“If we can’t make it to that level, we’ll look to dispose or we’ll get out of the market,” he said at the time.

In India particularly, Uber Eats has struggled to sign up restaurants, diners and delivery agents in a brutally competitive market where Zomato and other delivery start-ups like Swiggy are well established. Uber has had to offer heavy incentives to lure customers there.

In September, Uber also announced that it was pulling its Eats business out of South Korea, where the company faced stiff competition from local start-ups.

Mr. Khosrowshahi has previously retreated in ride-hailing in Southeast Asia, where the company faces difficulties competing. In 2017, under then-chief executive Travis Kalanick, Uber pulled out of China, where the company was burning billions of dollars. That same year, Uber largely withdrew from Russia.

Mike Isaac reported from San Francisco and Katie Benner from Washington. Vindu Goel contributed reporting from India.