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Jul 1, 2019

Axios Login

Situational awareness: Applied Materials will buy Japanese chipmaker Kokusai Electric from KKR for roughly $2.2 billion in cash, and Axios' Dan Primack explains why it's a big deal.

Today's Login weighs in at 1,385 words (~ 5 minute read).

1 big thing: Just because it's legal doesn't mean it's right

Illustration: Aïda Amer/Axios

A wave of recent scandals has focused on things that tech companies did that were legal, but nonetheless icky, Axios' Kia Kokalitcheva reports.

Why it matters: Companies are under constant business pressures to grow at all costs and squeeze revenue and profits wherever they can, but what seem like clever legal loopholes can backfire when customers find out. 

There are tons of examples of tech companies big and small doing things that were legal but looked bad. Here are a few...

DoorDash: The company’s pay model since 2017 includes customer tips as part of the minimum amount guaranteed to its delivery workers (similarly to tipped employees such as waiters, although DoorDash’s workers are not classified as employees).

  • Customers, though, were upset learn their tips weren’t always treated as additional earnings for the delivery workers. The company says it's trying to provide earnings in line with the work delivered while also providing a guaranteed level of pay.
  • Instacart previously used a similar model, as does Amazon’s Flex program. 

Grubhub: Last week, a report showed that the company had been purchasing website domains with names similar to its marketplace restaurants and only including phone numbers and links that would route food orders through its service. (Meaning it would take a cut from all orders generated from the sites.)

  • The company told Axios that it had “created microsites for [restaurants] as another source of orders and to increase their online brand presence” as part of their contracts and “it has always been our practice to transfer the domain to the restaurant as soon as they request it.” It no longer offers this.
  • OrderAhead was caught doing something similar in 2015. 

Facebook: Earlier this year, it emerged that Facebook had been paying users aged 13 to 35 to install a separate app that gave the social network deep access to their smartphones so the company could collect data about their activities. The news came as Facebook was already under fire for its treatment of user data. 

  • Apple promptly booted Facebook’s app from its Enterprise Developer Program, meant for companies to internally test apps, for violating its rules. (Google had been doing something similar and was also briefly suspended from Apple's program).
  • Facebook pulled a similar Android app as well, but recently launched a new, similar program for Android users.

The bottom line: Following the law is important, of course. But it's not the only standard to which companies are and should be held.

2. Fast 5G mobile service off to slow start

With T-Mobile's launch of 5G in parts of 6 cities on Friday, all 4 major carriers now offer some form of the higher-speed service.

Yes, but: The 5G service that exists today is nascent to say the least, and each carrier offers at most a couple of devices that work on the high-speed network. True utility and mainstream adoption are still far away for most of the country.

Why it matters: 5G holds a lot of promise, from offering faster speeds to enabling smart cities and robotic surgery. All of that may come to pass, but it is very, very early.

Details: Here's what each of the major carriers is offering...

  • AT&T announced 5G service for parts of Las Vegas, bringing the total number of cities (well, portions of cities) covered to 20.
  • Sprint launched mobile 5G service on May 30 in parts of the Atlanta, Dallas-Fort Worth, Houston and Kansas City areas and said it plans to add service in portions of Chicago, Los Angeles, New York City, Phoenix and Washington, D.C., in the coming weeks.
  • T-Mobile started offering service Friday in parts of Atlanta, Cleveland, Dallas, Las Vegas, Los Angeles and New York.
  • Verizon has 5G service in parts of Chicago and Minneapolis and plans to be in more than 30 cities by the end of 2019.

Be smart: Think very long and hard before plunking down money on a 5G device, even if you live in one of the cities where it's partially available.

  • Also, be aware that AT&T has muddied the water by rebranding 4G service on existing devices as "5G Evolution" and showing a "5G E" logo.
  • Real 5G requires both available service and a new 5G-capable phone.

What to watch: Wall Street is closely watching for a decision from the Justice Department on the T-Mobile-Sprint merger which, if approved, would roll up significant high-speed spectrum assets under the new combined company.

  • But even if the deal is approved, the 5G network they've promised won't appear overnight, and integrating two wireless companies' infrastructures will take time.

Go deeper: Read CNET's comparison of peak speeds for the 4 carriers.

3. Facebook's civil rights efforts

Facebook COO Sheryl Sandberg. Photo: Thomas Trutschel/Photothek via Getty Images

Facebook issued a civil rights report on Sunday, touting its recent progress and pledging to remain vigilant on efforts to manipulate either the 2020 election or the census.

What's new: Facebook COO Sheryl Sandberg wrote in a blog post announcing the report that the social media giant is introducing a new policy in the fall that protects against misinformation related to the census. "We'll also partner with non-partisan groups to help promote proactive participation in the census," she said.

"To protect elections, we have a team ... already working to ban ads that discourage people from voting, and we expect to finalize a new policy and its enforcement before the 2019 gubernatorial elections. This is a direct response to the types of ads we saw on Facebook in 2016. It builds on the work we’ve done over the past year to prevent voter suppression and stay ahead of people trying to misuse our products."
— Sheryl Sandberg, in blog

Why it matters: Facebook embarked on the audit to address allegations that it censors conservative voices and discriminates against minority groups. Facebook hopes the independent audit and formal advising partnership will show it takes these issues seriously.

  • Meanwhile, the election and census-protection efforts are extensions of existing work in that area.

What they're saying: The Change the Terms coalition, made up of 40 nonprofit, civil rights, human rights and other organizations that have previously criticized Facebook on civil rights issues, published a blog post in response to Facebook's audit findings with comments from member groups.

  • Some said the report shows the company is being responsive and making progress, but other groups said more work is needed, pointing to its response to the Facebook live stream of the fatal New Zealand mosque shootings as an example of how it can be slow to act.
4. U.S. companies can sell some parts to Huawei

President Trump, as part of a broader pause in tensions with China, said Sunday that U.S. companies can continue to sell parts to embattled telecom firm Huawei, provided there are no national security concerns specific to those products.

Why it matters: While many of the concerns were around Huawei's networking business, U.S. sanctions were also threatening the viability of the company's smartphone business too, given its reliance on chips and software from the U.S.

Between the lines: It's not clear just how much a reprieve Trump is granting, nor how long it will last. A White House official said Sunday that the exemption will cover only widely available goods.

What they're saying:

  • Sen. Mark Warner said he wants to see the details "but we need to remember that Huawei represents a threat to our national security. Allowing Huawei to participate in building our next generation communications networks should be unacceptable for everyone. If the President’s deal goes too far, Congress would certainly act to reverse it.”
  • Sen. Lindsey Graham, on "Meet the Press," said: “There will be a lot of pushback if it is a major concession,” to Huawei.

Our thought bubble: Conflating a trade dispute and national security concerns is a dangerous game.

5. Take Note

On Tap

  • It's a fairly slow week, at least in terms of official events, with the July 4 holiday coming up. Speaking of which, Login will be off Thursday and Friday.

Trading Places

  • Taiwan Semiconductor Manufacturing CFO Lora Ho is stepping down from that role as of Sept. 1, and will head Europe and Asia sales after that, per Bloomberg. Wendell Huang will take over as CFO.
  • Matt Bross, former CTO of British Telecom, Williams Communications and Huawei, has joined CloudScale Capital Partners as a partner.


  • Intel is auctioning off many patents related to the wireless modem business it's exiting. The news was initially reported by I AM magazine, but also confirmed to Axios by Intel.
  • An insightful profile of Jay Carney, the former Obama aide who heads Amazon's PR and policy efforts. (CNBC)
  • Google is sharing a bit more detail on its Fuchsia operating system effort, which has been ongoing for several years, though its exact ambitions remain unclear. (Google)
  • If you are still thirsty for more coverage of Jony Ive's exit from Apple, this one from the Wall Street Journal is worth a read, as is this one from Bloomberg.
  • The trial for former Theranos CEO Elizabeth Holmes is scheduled for the summer of 2020. (The Verge)
6. After you Login

It appears you can't halve your cake and eat it too, at least if the cake really belongs to Walmart.