Archive for category: Diversified Industries

Here’s What You Need To Know

California is once again making waves by laying down a key policy marker in the form of Assembly Bill 5 (AB5), which last month was signed into law by Governor Newsom. The law aims to reshape the gig economy and what it means to be a worker in the 21st century, but its implications will go well beyond Uber, Lyft, or whichever other platforms you may use out of convenience (or to make some extra money yourself) in daily life.

AB5 changes California employment law to limit companies’ usage of independent contractors, leaving companies and workers across the country scrambling to determine how it impacts them, whether and how they can push back, and if similar measures may be coming in other states. Here’s what you need to know about AB5 and what might come next in this clash between the 21st century gig economy and 20th century regulatory frameworks:

• What Is AB5? Assembly Bill 5 codifies and expands a 2018 California Supreme Court decision making it more difficult to classify workers as freelancers. AB5 requires the reclassification of gig economy workers to employees instead of contractors. As noted by the American Action Forum (AAF),  whether a worker was an employee or a contractor was previously determined by evaluating several factors such as how they were paid, their work hours, investment in work equipment, and the extent to which the employer could control the worker and the way the work is done – as is done at the federal level across the U.S. AB5 reverses the existing framework by assuming workers are employees unless they meet three specific criteria, known as the “ABC test.” The law takes effect on January 1, 2020.
   
• Why Flip The Script On The Existing Contractor – Employee Classification? The new law seeks to address the idea that employers are classifying workers as contractors in order to reduce compensation and benefit costs, as well as legal requirements like unionization, payroll taxes, and insurance coverage. This factor motivated the law’s support among organized labor, some gig economy workers, and Democratic presidential candidates like Bernie Sanders, Elizabeth Warren, and Pete Buttigieg.
   
• Implications For Workers: The shift to employee status could mean minimum wage protections, overtime, workers’ compensation, sick and family leave, employer contributions to Social Security and Medicare, and mileage reimbursement. However, such benefits would not come without a cost. Gig workers could find their flexibility and hours limited, resulting in less money and opportunity or required working hours that don’t align with their preferences, to say nothing of the costs of complying and figuring out the appropriate classification of certain “gigs” they may have.
   
• Implications Far Beyond Ridesharing: While companies such as Uber, Lyft, Doordash, Instacart and other technology companies come to mind when thinking of the gig economy, the ramifications of AB5 are actually much broader. Despite some professions receiving carve-outs, the bill has the potential to change the status of 1 million workers in California, ensnaring those in non-tech jobs such as yoga teachers, barbers, truck owner-operators, paper carriers, freelance writers, and more. Yet, some of the main targets of the legislation – the popular, tech-centric ridesharing companies – suggest that their businesses don’t fall under the law’s legal framework at all, and are preparing to counter its enforcement.
   
• Companies Are Taking Their Case To The Voters In 2020: After unsuccessfully trying to influence lawmakers for a more favorable regulatory framework (including a $21 minimum wage in the Golden State), Uber, Lyft, and Doordash are taking the lead in challenging the implementation of the law (and its application to their businesses). Each company has pledged $30 million each – $90 million total – to fund a ballot measure to make their case directly to voters to exempt gig workers. An Uber executive stated that these funds will go toward hiring “the best campaign team and best advisors we possibly can to run a successful ballot initiative.” As other companies and states wonder if California Attorney General Xavier Bercerra’s assertion that “as California goes, so goes the nation” is indeed true, there will likely be significant resources – both from labor and businesses – poured into influencing the outcome of the 2020 ballot initiative.

The passage of AB5 into law may mark the end of the beginning for the wild frontier of the 21st century gig economy, and how it is implemented and challenged will determine its effect on policy and regulatory frameworks in other states. An analysis by AAF’s Isabel Soto estimates that the implementation of AB5’s “ABC test” nationwide would impact “over 13 million workers who produce over $1.6 trillion in economic output, about 8.5 percent of gross domestic product.” If such is the case, many companies and industry groups may find an investment in California’s 2020 ballot initiative now to be an appealing strategic decision for later.

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THE SELFIE STRATEGY

While Sen. Elizabeth Warren may not know the definition of a selfie, she definitely knows how to use them to her advantage. Ending every campaign rally with a well-executed selfie line, her campaign staffers snap pictures of the candidate with voters, and the lines keep getting longer and longer. At a recent rally in New York, Warren spent four hours taking about 4,000 pictures, bumping up her total tally to more than 59,000 selfies since she kicked off her campaign.

Warren’s strategy strives to build individual connections by creating original digital content and gaining free advertising in the process as her supporters excitedly post the pictures to social media. As one political strategist pointed out, 4,000 selfies multiplied by an average social network of 150 people equals 600,000 viral impressions just from one rally. As recent polls show, this grassroots strategy just may be working, and may change the way candidates approach campaigning well into the future.

ACTIVISM CLOSURE OR OPENING? 

It was a slow day in the office for many on September 20th as people skipped work and businesses shut down to participate in the youth-led Global Climate Strike. According to the American Sustainable Business Council, more than 450 businesses either gave workers the day off, closed stores, or halted manufacturing. In addition, over 7,000 companies participated digitally by giving ad space to promote the strike, and thousands of tech workers staged walkouts.

Companies condoning and even encouraging participation in this strike marks a new level of corporate employee activism that has not been seen at this large of a scale before. If more and more companies leverage their corporate brand, reputation, and resources on public policy issues, it may succeed in influencing elected officials to support particular policies as they seek to gain political (and financial) support. Also, it may enable more employee activism, which could turn on the employer itself and lead to potentially negative implications for employees.

CUE THE BREAKUP PLAYLIST 

A love story that reached its peak during the Obama Administration is now headed for a nasty divorce. Once the party of Big Tech, Democrats are now attempting to break away from Silicon Valley as a “techlash” gains popularity. Mark Zuckerberg has even gone so far as to call an Elizabeth Warren presidency an “existential” threat to Facebook due to the Senator’s calls to break up the company.

However, some Democratic presidential candidates are still wooing Silicon Valley while continuing to publicly attack it. With regulatory scrutiny and the breakup of Big Tech now safely a bipartisan issue, this reality may ironically present an opportunity for Big Tech to strategically engage with policymakers from across the political spectrum to favorably influence whatever regulatory outcomes may come – without being viewed through a partisan lens and the baggage it can bring.

TINSELTOWNS ABOUND

As Amazon and HBO proved at the Emmys, streaming services have dramatically changed Hollywood, but the streaming wars have done a lot more than shakeup awards shows. In an effort to develop original content local to their global viewers, streaming giants are spending billions on content producers in foreign countries – using local languages and storylines – which has resulted in the creation of “mini-Hollywoods.”

These new production regions are popping up in places such as Croatia, Serbia, and in Latin America, with Hollywood investment lured by large tax incentives and low labor costs. Besides attracting cash and tourism to host countries, these streaming-enabled “tinseltowns” have disrupted the traditional Hollywood model by creating a unique competitive advantage: highly-localized content that can be quickly leveraged to become the next global hit, thereby at once capturing more subscribers around the world while reducing operating costs.

Here’s What You Need To Know

With Labor Day behind us and the arrival of pumpkin spice season in front of us, we are now a year away from when the majority of American voters traditionally begin tuning in to the presidential contest and other down ballot campaigns. If that seems like a long time away and of no consequence, think again.

Ideas being floated now on the campaign trail can have a real impact on future policy and legislative initiatives, even if the particular candidate espousing them doesn’t survive the primary or get elected. For a recent example, look no further than Bernie Sanders’ failed 2016 bid for the Democratic nomination and his influencing that year’s nominee (and in fact driving the broader policy conversation since then) on issues ranging from support for a single-payer health system, free college tuition, a $15 federal minimum wage, and more.

This election cycle, candidates’ ability to influence policy and legislative outcomes – win or lose – is even more true because voters appear to be far more interested, engaged, and ready than in elections of the recent past, and they are not waiting until post-Labor Day 2020 to tune in. For companies whose business objectives could be negatively impacted by these campaign trail policy ideas, here’s what you can do before politics become policies:

1. Begin Monitoring Your Issue Set Now: With a recent Fox News national poll showing 57% of respondents already “extremely” interested in the 2020 election, companies impacted by policy and regulatory frameworks – and key societal issues in the public arena – should be even more interested in the current campaign-related conversations and developments pertaining to their interests. These conversations and developments can be tough to track and make sense of, not only because of the wide range of sources and information flows where they’re unfolding, but because campaign conversations are shaped by more than just a candidate and campaign staff. Other actors such as advisors, surrogates, endorsers, pundits, and third parties from academia to think tanks to advocacy groups are trying to influence the issue debate, too. To stay on top of it all, companies need a system in place to monitor information flows and synthesize insights that can be used to understand the impact of events on their interests quickly. By keeping informed of developments, changes in the state-of-play, and key trends, companies can leverage these insights to better stay ahead of the curve and anticipate what happens next.
    
2. Know The Candidates’ Records And Hold Them Accountable: Throughout primary and general election campaigns, candidates are often adjusting their messaging around politics and policy ideas in order to best appeal to the voters whose support they are trying to earn at that time. The result for companies is that it can be difficult to decipher candidates’ true beliefs on key policy issues, let alone separate the signal from the political noise to determine how they could influence policy outcomes. Therefore, examining candidate records – both personal and professional – is critical. What candidates have said or done in the past is a strong indicator of what they may say or do in the future, and in the event their campaign trail ideas stray from the former, a public affairs strategy highlighting their records can help hold them accountable and positively influence the debate surrounding an issue set (lest they risk being labeled a “flip-flopper”).
    
3. Understand The Networks Influencing Your Issue Set: As mentioned above, candidates and their campaigns are only a piece of the landscape of stakeholders and interests seeking to influence policy and legislative discussions on the campaign trail. The danger of focusing on one component of this complex whole is that ideas that hurt a company’s interests can come to pass despite successful efforts to influence a particular candidate, simply because other politicians, activists, NGOs, think tanks, and the like were not influenced or rebutted – and ultimately had arguments a candidate found more compelling. To avoid this scenario, companies should identify and understand the entire universe of stakeholders that make up the network influencing an issue set. In doing so, public affairs and advocacy efforts can be strategically applied to better position companies to succeed in achieving their desired policy and legislative outcomes.
    
4. Know What You Are Up Against: Competitors, stakeholders, and other groups are constantly engaging in political, policy, and regulatory arenas to influence outcomes favorable to their interests. Given the impact that campaign trail ideas can have on future outcomes, and the influence that candidate networks can have on what ideas they float in the first place, companies need to also be able to understand who these specific influencers are. Examining their backgrounds, activities, and operations provide insight into why they might want a candidate to support a certain idea. Knowing this can also give your company’s interests a boost in campaigns of interest, as this type of information can be used to present connections to the media and public that may raise uncomfortable questions for non-favored candidates.

The early arrival of the 2020 election cycle will no doubt mean more surreal Twitter timelines, yet importantly, it will also bring a greater need for companies to make sense of the unrelenting information flows and universe of stakeholders influencing candidate policy and legislative ideas on the campaign trail impacting their interests and priorities. With public engagement this cycle greater than it has been in the past, the risk that a damaging idea can gain a receptive audience, be amplified and leveraged to organize, and set the marker for future policy discussions is greater than ever. Preparing accordingly now can help companies avoid being caught by surprise and having their policy agenda undermined when the 2020 campaign dust settles. If you find yourself overwhelmed by the tasks ahead of your organization in sorting the policy signals from the 2020 political noise, we happen to know some folks who can help.

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POLE TROLL

It turns out it isn’t just Russian bots who are waging troll campaigns on social media. Polish Deputy Justice Minister Łukasz Piebiak resigned last month after it was revealed he used an internet troll to wage a smear campaign against judges opposed to the Polish government’s judicial reforms.

Piebiak, through the troll named Emilia, allegedly sent over 2,000 letters and emails, including fabricated and “gossipy” details about Judge Krystian Markiewicz, who opposed the government’s efforts to restructure the Polish judicial system. Piebiak claims he is a victim of hate speech and that the allegations are “tools in a political fight.”

Whether the allegations are true or not, the latest scandal to rock Polish politics exemplifies the breadth and increasingly sophisticated nature of modern-day smear campaigns. Now, not even elected officials can be trusted to resist the temptation to use bots to take down political opponents. The scandal abroad is certainly something to keep an eye on as we move closer to the 2020 election here in the U.S. and elsewhere around the world.

A SURPRISE DELIVEROO FOR GIG WORKERS

Last month, online food delivery company Deliveroo shocked many customers and employees when it announced it would no longer operate in Germany. As of late, Deliveroo has faced the wrath of many unions in Europe over the company’s claim that the company’s workers are “self-employed” rather than full-time employees. The unions argue this policy means Deliveroo’s workers get few protections that are granted to employees in other sectors of the economy. Deliveroo’s exit highlights the increasingly contentious relationship between European governments, workers, and the gig economy.

In fact, last April, the European Union (EU) passed a law that guarantees minimum rights for workers in “casual or short-term” employment, specifically calling out Uber and Deliveroo. Still, it isn’t just gig economy companies in Europe that need to be worried. Such regulations make it difficult for startups to be nimble and pivot as they seek growth opportunities. Policymakers in the U.S. are increasingly targeting sharing economy companies, such as Uber, Lyft, and Airbnb, arguing that they take advantage of workers. Of course, these policymakers fail to realize that the result may be fewer jobs and less economic opportunity for hard-working Americans – including those who want the flexibility a “gig” offers.

EMPLOYEES GET ICE-Y 

In this age of extreme polarization and outrage, it should come as a shock to no one that employees at some of the largest companies in the U.S. are protesting against doing any work for agencies that enforce Trump Administration immigration policies. For instance, employees at Google circulated a petition last month demanding that the tech company publicly commit not to support government agencies, including Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and the Office of Refugee Resettlement (ORR), which they claim engage in “human rights abuses.” Whole Foods employees demanded that their parent company Amazon cut ties with software company Palantir, since it provides software to ICE.

Herein lies the catch-22 for companies: businesses and their executives are increasingly being pressured by employees and customers to “take a stand” on social issues, yet they must do so without alienating customers. Nobody wants to be the next Gillette, which lost billions of dollars following an ad campaign that shamed their core customers, men. Companies must strike a balance or risk hurting their bottom lines, meaning it may be time to revisit our thoughts on key points to consider before plunging your business into politics. 

PUBLISHERS CALL AN AUDIBLE 

Seven of the world’s largest book publishers are suing Amazon, accusing the e-commerce giant of a “quintessential” violation of copyright law. At issue is Amazon’s audiobook company Audible and its new, controversial “speech-to-text feature” called Captions. The feature uses artificial intelligence to transcribe spoken words into written ones, so users can read along while they listen to an audiobook. The problem? Amazon is being accused of not obtaining the necessary licenses to reproduce the written versions of the physical books.

The case could have far-reaching implications for the future of intellectual property rights in the digital age, especially as artificial intelligence gains sophistication. It also highlights how a range of laws and regulations, including those regarding intellectual property, have not kept pace with the emerging digital world in which consumers expect to be able to consume information in whichever format suits them.

Here’s What You Need To Know

Food, agriculture, consumer packaged goods, health, and other related industries beware…we’re in for a food fight. From the European Union (EU) to the United Kingdom and even in Latin America, nongovernmental organizations (NGOs) and activists are pressuring governments and supranational bodies to crack down on corporate interests that can be blamed and held accountable for the rising levels of obesity around the world.

While the “obesity wars” have been dragging on for years, the nature of the battle is rapidly changing, and it presents an inflection point for companies and industry groups. Here at Delve, we have deep experience helping our clients understand and anticipate how such public policy movements begin, gain momentum, spread around the world, and impact our clients’ operating environments. Here’s what you need to know about this key trend so that your business is prepared for these developments in the fight against obesity:

• The Inflection Point: Just recently seven NGOs, brandishing new studies that claim to show that obesity carries more cancer risks than smoking, announced they were leaving the European Platform for Diet, Physical Activity, and Health. The NGOs argue the Platform has failed to prove it had made “any meaningful impact on curbing childhood obesity.” In short, the NGOs decided that they can influence a greater impact outside of traditional institutions.
   
• The Repercussions Of This Inflection Point In The EU And Latin America: A recently released UN report found that 338 million school-age children around the world are now considered obese, and the staggering figures have led Great Britain’s National Health Service (NHS) Chief Executive Simon Stevens to declare that “obesity is the new smoking.” Stevens continued signaling the increased risks for companies when he stated that “families, food businesses and government all need to play their part if we’re to avoid copying America’s damaging and costly example.” The declaration, part of a broader message from activists and some policymakers about obesity, suggest that their approach could match the investigate, vilify, tax, and prosecute tactics used against the tobacco companies in the last century. Indeed, the British government, which already implemented a tax on sugary drinks in April 2018, recently released a green paper that announced supermarkets can no longer sell energy drinks to children under the age of 16 and floated a potential sugar tax on milkshakes. While new Prime Minister Boris Johnson has voiced his opposition to “the creep of the nanny state” in the past and vowed to review these “sin taxes,” the development is instructive of anti-obesity networks that will not stop at new policies until people are compelled to behave how they want. Meanwhile, in Latin America, governments have passed new laws aimed at reducing obesity, including banning advertisements for foods high in calories and saturated fat between certain hours in Chile.
   
• How Do Things Currently Look In the U.S.? Similar to other countries, a number of experts and doctors have called on the U.S. government to do more to tackle obesity, as 70% of American adults are considered overweight. Earlier this year, Congressman Ron Kind (D-WI) introduced the “Treat and Reduce Obesity Act of 2019,” which aims to amend the Social Security Act to provide for the coordination of programs to prevent and treat obesity. It has 116 co-sponsors from both parties. Currently, the U.S. Departments of Agriculture and Health and Human Services are developing the 2020-2025 Dietary Guidelines for Americans, which is updated every five years to help Americans eat a healthier diet. The food industry has been able to influence the list in the past and successfully lobbied against adding sustainability guidelines back in 2015. However, in the past year industry influence has been exposed and become the focus of activist criticism, part of an effort by NGOs and advocacy groups to discourage and undermine similar efforts this time around. Outside of government, civil society organizations are “playing their part” in combating obesity in America, with one philanthropic organization donating over $40 million to investigate the causes of obesity, which can be utilized by advocacy campaigns to reshape and influence government policies related to it.
   
• How Can You Prepare For This New Anti-Obesity Activism? An understanding of how momentum builds for these types of public policy movements, as well as the taxonomy of the networks of influence that enable them to gain that momentum, provides a roadmap for how a company anticipating impacts from this battle can develop an effective public affairs strategy to mitigate their risk from such efforts. The new energy behind anti-obesity networks can unfairly vilify law-abiding, responsible companies, driving a wedge between industry and its consumers as well as the policymakers that can determine the industry’s future. Gaining and leveraging an information advantage about this activism can enable industry to engage with policymakers and regulators now, before they face intense pressure to act.

The incoming “obesity wars” in the U.S. will touch many industries, both directly and indirectly, and affect all consumers, including their choices in the marketplace and the cost of those choices. The future of the policy and regulatory fight is uncertain, but companies can work to shape the future. In order to avoid the same fate as their counterparts in the EU and Latin America, companies in the U.S. will need to have an information advantage over their opposition to be prepared for any public affairs (or, ahem, food) fight they may face.

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DELIVERY SERVICE DEBACLES

Last week, we covered the public affairs challenges at Grubhub, but it is not the only food delivery service facing a public affairs challenge. After previously defending its tipping model, DoorDash came under attack after a New York Times article exposed the company’s practice of using customer tips to subsidize the guaranteed minimum wages the company pays delivery drivers rather than have the tips go directly to its “Dashers.” Following public outrage from customers feeling mislead, CEO Tony Xu announced on Twitter that the company would change its tipping system, ironically leaving some “Dashers” concerned their guaranteed minimum will now decrease.

This episode serves as a reminder that companies must understand their own vulnerabilities to craft public affairs strategies to protect and defend their operations and policies from scrutiny, foster employee engagement, and avoid bad press. Especially as the national conversation around the future of work and minimum wage laws increases, gig economy companies need to be proactive about managing their exposure to political and reputational risks.

WHOSE MEDIA MAKES THE PRESIDENT?

In Taiwan’s recent presidential primary for the opposition party, the victory by populist mayor Han Kuo-yu of the island nation’s second-largest city came with some help from unexpected friends. Two major news channels promoting “nonstop coverage” of Han, whose party has shown sympathy for Beijing’s view that Taiwan is part of the broader Chinese nation, are influenced by the Chinese government.

Largely credited for helping create the “Han Wave” that “transformed a politician seen as past his prime into a resurgent star,” CTi-TV and CTV are owned by the Want Want China Times Group, a media company that infuses the Chinese Communist Party’s voice and angle into its coverage.

China’s leveraging of democratic politics and a free media to meddle in its rival’s elections is a cautionary tale and national security issue to free democracies around the world. Besides media, a variety of industries should be aware of the creative approaches Beijing employs to influence politics and policy outside its borders, especially in light of popular camera apps worldwide that can put international users’ data at the fingertips of the Chinese Communist Party.

WHERE’S THE AGENCY?

The Federal Trade Commission (FTC) reached a $5 billion settlement with Facebook over its collection and handling of users’ data. When news of the settlement broke, Facebook’s stock price hit its highest point in almost a year, and bipartisan derision arose over the historically large, yet “laughably small” penalty when considering Facebook’s vast resources.

Democrats and consumer advocates are now calling for a new way to regulate Silicon Valley, claiming the FTC does not have the money, staff, or resources to appropriately handle monitoring these online platforms, especially with its already broad oversight duties. Proposals include creating a special agency to protect online privacy or a fully new department that focuses solely on online platforms, while others are pushing to just give the FTC the resources and power it needs to properly regulate. With new regulatory powers, including potentially a new regulatory agency, hanging in the balance, companies and causes with the potential to be impacted should gear up now to best influence an outcome favorable to their interests.

TOFURKY FIGHTS BACK

As we predicted, the public policy fights around plant-based meat are increasing, but this time Tofurky is fighting back. Tofurky, which sells plant-based meat alternatives, and the ACLU have teamed up to file a federal lawsuit claiming an Arkansas bill violates free speech rights. Deemed the “truth in labeling” bill, it is slated to go into effect in March and would ban meatless products from being described by meat-adjacent phrases, such as “veggie burgers,” claiming such names confuse customers.

ACLU calls this claim “absurdly patronizing” and instead claims the bill limits free speech and restricts customer access to healthier, more sustainable choices. This lawsuit may set a precedent for cases in other states and will also affect dairy alternatives and vegetable alternatives to grains (looking at you, cauliflower “rice”).  Arkansas is currently one of six states (along with a proposal in the EU) that has passed a law restricting meat-like labels, and given the momentum the winner of the suit can be expected to get, the meat industry is hoping to come away better off than the dairy industry has fared with alternatives. Companies and related interests in other states should start preparing for similar laws and lawsuits, as this fight is only just starting.

Here’s What You Need To Know

As we gear up for July Fourth, we know everyone is busy planning for events that are sure to be full of loved ones, parades and fireworks, and grilling to celebrate freedom and our great nation. Besides pausing to reflect on those who have given their lives to secure this freedom throughout our nation’s history – and those who continue to do so – many Americans will also make big trips to the grocery store, as Americans spend a total of $6.8 billion dollars on food to fuel their Independence Day festivities.

Whether grilling burgers, hotdogs, or something else, cookouts are integral to Fourth of July celebrations. This year, however, is likely to include more plant-based “meat” alternatives on the grill than ever before. From people looking for healthier options to those abstaining from meat for moral, environmental, or religious reasons, more consumers are choosing to become “lessetarians.” In this special holiday edition of TL;DR, we explore the popular rise of plant-based meat and what it will mean for consumers, businesses, and regulators alike.

• Plant-Based Meat Rising: There are many more plant-based options than there were a few years ago, and they seem to have arrived in a big way. Beyond Meat’s blockbuster IPO in May proved to the world just how popular these plant-based meats have become. The company and its main rival Impossible Foods, backed by Bill Gates, are even facing supply shortages due to surges in demand. Impossible Burgers will be sold in at least 17,000 restaurants by the end of the year thanks to its partnership deal with Burger King. Other fast food chains such as White Castle and TGI Fridays are also looking to cash in on this trend, and food giants such as Nestlé and Tyson Foods are launching their own lines of alternative proteins targeted to these “lessertarians.”
   
• What Are Some Key Consequences Of This Trend? The growth of this industry will create consequences extending far beyond grocery store aisles. As we have discussed in a previous edition of TL;DR, the meat industry faces regulatory and public affairs challenges from environmentalists and health advocates. Now cattlemen and meat producers face competition from these alternatives. They need to figure out a plan for long-term relevance if Americans continue to eat less and less meat. The biggest consequence, however, may focus on the regulatory environment that has not yet fully grasped how to treat these new types of products. As alternatives have made their way into the meat aisle in what Beyond Meat calls an “absolutely critical” move, the USDA and FDA must come together to outline a framework to regulate these new products and determine just what exactly can be labeled as meat. Count on interests on both sides of this debate to invest heavily on influencing that framework.
   
• How Is The Meat Industry Responding? With these new developments, the meat industry is working with government agencies to protect their market. Cattlemen are attempting to persuade federal officials to closely regulate meat alternatives, and meat lobbyists are working to restrict the use of the word “meat” in similar plays that the dairy industry has used with milk alternatives. The meat industry has found success in some of its regulation efforts, as in 2018 the FDA expressed concern over a key ingredient in Impossible Foods that is linked with the formation of carcinogens in the gut, and raises broader discussion in the public arena that what is billed as a healthy option is in reality a very processed food.
   
• What Does The Future Hold? While these public policy fights will continue, with the competing industries seeking to influence future changes to the regulatory framework to their advantage, there may increasingly be upcoming fights within the plant-based sector itself. Many large companies see plant-based alternatives as a major growth opportunity (including some meat companies), and we can expect other startups to break into the market, as Beyond Meat and Impossible Foods cannot expect to hold onto their duopolistic grip forever. With increased competition, we can also expect lower prices, which could bring down costs for consumers and cause other companies to enter the market. Should this come to pass, we can speculate that “Big Plant-Based Meat” may act like legacy companies in other spaces by lobbying to increase regulation on its less mature competitors, and thereby leverage the hand of government to frustrate the growth of its competition.

While the Coney Island hot dog eating competition will likely not see a switch to any plant-based dogs in the near future, Americans should still expect to see a growing number of meat alternatives pop up in restaurants, grocery stores, and cookout spreads over the coming years. This means that although there are more meat alternatives than ever before, the beef between the meat industry and plant-based companies – and that within the latter space between competitors – is only just beginning.

Happy Fourth of July from all of us here at Delve.

Here’s What You Need To Know

Last week, voters across the European Union (EU) went to the polls to select their preferences for the bloc’s parliament. While readers in the United States may feel that the events across the pond have little or no bearing on the day-to-day operations of their company and the policy and regulatory issues important to it, the results of the EU elections could not only impact your interests now (particularly if your firm does business in Europe) but also foreshadow key trends that may appear stateside in the near future.

To help you prepare for the implications as the dust settles and a new EU emerges, here’s what the EU elections mean for your business interests:

• First, What Are The EU Elections? The EU elections occur every five years for citizens of EU Member States to choose their representatives in the 751-seat European Parliament, which gives them a say in the political debate and decision-making process at the EU level. The European Parliament is the second-largest democratic legislature in the world after India. For a supranational organization that regulates key policies ranging from data protection and privacy to immigration to trade and more, and with five-year terms for the elected Members of the European Parliament (MEPs) in which major unforeseen developments can unfold and need to be dealt with, the makeup of the body is crucial to influencing the policy outcomes that will follow in the near-term for both the EU and its Member States.
   
• The Pro-Business Middle Cedes Ground To The Populist Extremes: Approximately 50% of voters turned out in the bloc’s 28 countries (a 20-year high), and instead of the fear of many that the elections would result in a surge of far-right populists, the results were more “complicated.” Overall, there was a rise in the populist extremes with some countries seeing Eurosceptic parties gain ground to the detriment of more establishment parties such as in France, Italy and the U.K. In others, Greens and Socialists – just as the nationalist parties gained influence from the erosion of the traditional center-right parties – had strong showings, such as in Germany and Spain, to the detriment of the traditional center-right parties. For businesses, populist pressures from both ends of the political spectrum portend increased political risks from parties looking to deliver for their bases of support.
   
• Tech Is In The Crosshairs: Among the first targets for the new EU parliament may be the tech industry, which unites populist critics from the left and right in their desire to see more regulation. Indeed, EU commissioner for competition Margrethe Vestager – who has called to regulate and hold Big Tech accountable – is attracting broad support from across the political divide and could become the EU’s first female president. Should this come to pass, she could surely leverage her experience to elevate and implement tech regulation matters on the EU’s policy priorities. Coupled with the U.S. government’s gearing up for an antitrust probe of tech giants, companies in this space are facing risks from both sides of the Atlantic.  
   
• Broad Regulatory Levers May Shape Health Care Policy: Pharmaceutical companies and chemical manufacturers (and industry more broadly) are expected to face greater pressure from the new European Parliament. This could likely include a focus on lowering costs of medicines through coercive regulation, as well as attacks to weaken intellectual property rights. In addition, with victories by the Greens and others on the populist left, it is expected that there will be greater ties between environmental and public health issues to implement policies that explicitly target industrial farming, chemical producers, the energy industry, and the pharmaceutical sector in the name of improving health.
   
• How Is The Outlook For Financial Services? With more chaos and more populists from both the left and the right in the EU Parliament, the financial sector can anticipate more uncertainty when it comes to the impacts they face from the policy and regulatory environment. The waning influence of the traditional centrist parties to ambitious newcomers ensures it. While calls for divestment from fossil fuels will continue to persist (and even grow stronger) and new regulations on industries and trade will require businesses to adapt, a range of other reforms and institutional adjustments, from financial literacy to transparency in financial products to post-Brexit rebalances, will need to be addressed and will almost immediately put pressure on companies also.

A common pattern we’ve noticed in the monitoring and analysis work we’ve done for our clients is that policies and regulatory frameworks pushed by influencers and stakeholders in continental Europe that take hold in the EU often make their way to other industrialized democracies, such as Canada, and then attempt to gain influence in the U.S. Because of this pattern, anticipating these trends stemming from the EU elections and other challenges will help companies operating globally navigate this uncertainty well and gain a competitive advantage. For those proactive firms focused on their businesses in the United States, this provides an opportunity to better stay ahead of developments that may be impacting operations domestically in the near future.

News You Can Use

POLITICS DRIVING DEALS

You may have heard rumblings that French automaker Renault is considering merging with Fiat Chrysler—a rumor that caught many in the auto industry by surprise. But what if we told you the proposed merger is extremely politically calculated? By merging, Renault and Fiat Chrysler hope that their increased size will reduce the cost of complying with government mandates that require increasing electric-car production and improvements in battery technology.

Due to the added costs of compliance, many automakers (think: Toyota and Suzuki) have combined forces to take on Uncle Sam. Additionally, merging could allow Renault to avoid 25% tariffs on foreign autos that President Donald Trump has repeatably threatened. The potential Renault-Fiat Chrysler tie up is yet another example of politics and regulations driving companies in different industries to pursue mergers. And the result, of course, is less competition.

TROUBLE IN Y’ALLYWOOD

Netflix announced it will reconsider its “entire investment” in Georgia if a recently passed state law restricting abortion takes effect and has teamed up with the ACLU to fight the legislation in court. Georgia has recently become a hub for the film and TV industries and is the home of hit Netflix TV shows “Stranger Things” and “Ozark.” In fact, more than 450 film and TV projects were shot in Georgia last year, leading to over $4.5 billion in wages for an overall economic impact of $9.5 billion.

Prominent Hollywood stars such as Alyssa Milano, Amy Schumer, and Jason Bateman have already said they will “boycott Georgia” if the “heartbeat bill” goes into effect. It looks like Georgia could become the latest victim of America’s “boycott wars,” where people will gladly boycott a state or business over political differences. Netflix will keep filming in Georgia for now, but states and companies must realize it can only take a few activists to change the equation.

CRYPTO-MANIA

Representative Eric Swalwell (D-CA) recently became the second 2020 presidential candidate to begin accepting cryptocurrency donations, joining fellow presidential hopeful Andrew Yang. You read that right—presidential candidates are now accepting donations that cannot be traced back to the donor. Swalwell, who has been a fixture on cable news attacking the Trump campaign as “criminal” because of investigations into its inauguration spending, defended his campaign’s decision to accept difficult-to-track cryptocurrencies in a video claiming, “Government has to keep up with the times and the times have changed.”

Currently the cryptocurrency market in the U.S. is under very little oversight, but that could all change soon. Many U.S. regulators have called for a federal framework to oversee bitcoin and as more candidates accept cryptocurrency donations, Congress may be under increased pressure to act. For now, government transparency advocates and the public should be alarmed, and the cryptocurrency industry should worry about their reputational risk if foreign or corrupt sources use their systems to fund campaign activities illegally.

BRING ON THE VIRTUE SIGNALING

By now many of us have already weighed in on the “paper straw debate,” but what about Goldman Sachs’ decision to banish paper cups or candy-maker Mondelez’s efforts to make all wrappers recyclable by 2025? It seems that many companies are spearheading initiatives that, in the words of The Wall Street Journal’s Allysia Finley, are “costly and often counterproductive.” But why? Some would argue that they are trying to show employees, customers, and shareholders that they care about the environment.

Yet, there’s little evidence that these gestures benefit anyone or the environment – plastic straws only account for about 0.025% of the eight million tons of plastic that flow annually into the ocean (most of it from five countries in Asia). Companies not wanting to appease activists and shareholders citing environmental concerns could proactively message with these facts to illustrate the little impact such gestures have, to say nothing of the negative consequences “costly and often counterproductive” green initiatives can have on jobs.

Here’s What You Need To Know

Well, it’s that time of year again: Tax Day. As if that weren’t reason enough to trade political barbs from both sides of the partisan divide, the 2018 tax year is the first year that Republicans’ Tax Cuts and Jobs Act is fully in effect. As we wrote in our November 2017 analysis of the then-just-unveiled legislation that would become the tax law, even before the policy specifics were released the package was being slammed by opponents with false claims, which have only become more prevalent in the public arena as part of a “sustained and misleading effort … to brand [the tax law] as a broad middle-class tax increase.”

Much of the blistering, negative coverage on the effects of the law are false and the result of a well-orchestrated messaging campaign that convinced people “Trump raised their taxes.” This dominant narrative obfuscates the reality that caused The New York Times to implore its readers to “face it,” they likely received a tax cut. Meanwhile, a prominent journalist at Vox, which declares its aim to “candidly shepherd audiences through politics and policy,” was a bit too candid, when he praised the “messaging success” of  “progressive groups [who] did a really good job of convincing people that Trump raised their taxes when the facts say a clear majority got a tax cut.” So, in an effort to clear up the confusion, here are some key facts on what the tax law has actually done:

• First, Owing The Federal Government Money Doesn’t Mean Your Taxes Went Up: If your refund was less compared to prior years, or even if you owed money to the U.S. Treasury, that does not mean your taxes increased. As part of the new law, the Internal Revenue Service changed the withholding tables in December 2017 to reduce the amount of income tax employers deducted from paychecks. Throughout 2018, about 90 percent of American workers received bigger paychecks, yet one in five taxpayers did not adjust their W-4 forms to reflect this change in take-home pay, resulting in money being owed to the Treasury. Perspective is critical when hearing messaging from politicians and the media claiming people are getting less of a “refund,” not only because the federal government has no money of its own and is fully dependent on the hard-earned dollars of taxpayers for its expenditures in the first place, but because IRS data shows that individual tax refunds for 2018 on average were down only 1.1 percent – or $31 (not to mention what every CPA knows: tax refunds are bad). Ironically, the sources of such attacks are often the same political actors who called savings of thousands of dollars per year for middle-class families, or worker bonuses that were enabled by the law, “crumbs.”
   
• Most Americans Got A Tax Break: An analysis by the nonpartisan Tax Policy Center determined that 65 percent of Americans will pay less taxes because of the 2017 law, with six percent paying more, and the rest seeing little change. As The New York Times notes, studies (from nonpartisan ones to left-leaning think tanks) consistently show the law cutting taxes for most Americans. However, only 17 percent of Americans believe their taxes went down because of the law, while a plurality thinks their taxes have gone up – though not even one in ten households actually paid more. To reiterate the facts on tax reform we discussed in 2017, many concerns and narratives against the law focus on “which deductions are being eliminated or capped,” even though this focus is misguided because by simplifying and reducing the tax brackets, broadening the tax base, doubling the standard deduction, eliminating the Alternative Minimum Tax, and expanding the child tax credit, among other provisions, the large majority of taxpayers are seeing their tax liability go down. This reality held true even in high-cost, high-tax, blue states that worried about capping the deduction of state and local taxes (SALT) at $10,000. New York Governor Andrew Cuomo, a vociferous opponent of the tax law and the SALT deduction cap, paid less in federal income taxes last year thanks to the law he has attacked.
   
• Federal Revenues Hit An All-Time High In 2018:  Another key attack leveled against the law suggested that instead of increasing tax revenues by invigorating the economy and broadening the tax base, the law would increase the deficit and require the U.S. to take on more debt. However, individual income tax revenues climbed 6 percent in fiscal year 2018, up $14 billion dollars from the prior year, for an all-time high of $1.7 trillion. The only revenue category that was lower was corporate income taxes, which were down a substantial 31 percent. But, focusing on this decrease loses the forest through the trees because overall federal revenues were 0.5 percent higher than the previous fiscal year, a key fact contrary to partisan messaging, to say nothing of the benefits that people received from tax law-enabled bonuses or in the form of investments and retirement plans.
   
• The Overwhelming Majority Of Filers Will Get More Relief In 2019: The benefits from the law are not going away for the 2019 tax year. A report from Congress’s Joint Committee on Taxation (JCT) shows the overwhelming majority of filers will receive relief and that the law will provide tax cuts at every income level—including larger payouts in refundable credits even for people who pay no income taxes. Examining the JCT data, the Tax Foundation’s Scott Eastman noted that in 2019, the Trump tax law “will reduce aggregate tax liabilities across all income groups by an estimated $259 billion relative to prior law. For example, the group of taxpayers making between $30,000 and $40,000 in 2019 will pay an estimated $5.4 billion less, a 13.5 percent reduction compared to prior law.” Such statistics don’t include the benefits in job and wage gains resulting from the corporate income tax cut, which triggered a spike in business investment and a full employment economy.

An MSNBC report examining why some taxpayers are angry despite paying less in taxes noted, “psychologically, people feel the loss” of the smaller refund or bill from the IRS “so much more.” (For a psychology parallel, see the backlash from Apple’s generous giveaway of a free U2 album in 2014). The above facts, then, can be used not only to push back on false and misleading claims about the new tax law – of which there is a seemingly endless supply – but to help you and others you know feel better about their check, or bill, from Uncle Sam this year.

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VETTING THE VESTS

Wall Street was well on its way to trading power suits for fleece vests as its uniform du jour, but its chief supplier is now refusing their business. Patagonia, which makes power vests that have become a staple in closets of “finance bros” everywhere, is putting stricter guidelines on its corporate sales program, restricting which companies can buy its corporate logo vests. In accordance with Patagonia’s mission “to save our home planet,” the company will now only partner with B corps and “mission-driven companies that prioritize the planet.” In a statement about this change, Patagonia singled out oil and mining companies, political-affiliated and religious organizations, food groups, and financial institutions as becoming customers non grata.

Patagonia’s latest move is yet another example of corporate activism and the politicization of the business world that will ensnare unsuspecting companies in political risk, not only because of engaging in public policy debates, but even because of their desire to offer employees a branded vest. Whether employees prefer a vest made of hemp or filled with down from geese certified to not be live-plucked or force-fed, it seems that even a decision as personal as this will require executives to think through the negative consequences of political risk to their companies.

AN INCONVENIENT ANTI-PLASTIC TRUTH 

As the war against plastic bags rages on, the Foundation for Economic Education found that plastic’s replacements may actually cause even more harm to the environment. A study found that reusable bags must be used 131 times before it has a smaller global warming impact than a lightweight plastic bag used once. Reusable cotton bags create their own environmental damage, requiring energy, land, fertilizer, and pesticides to create the cotton. Reports have also found that they are “a breeding ground” for airborne illnesses due to harmful bacteria that thrive in the bags unless washed after every use (requiring water and detergents).

While the war on plastic continues to be an easy way to virtue-signal among environmentalists, it is important to remember the costs and benefits of a situation and weigh all the facts available – even and especially if they are inconvenient.

EYES ON THE ROAD

Our homes are watching us, and now our cars are, too. A late model car can generate about 4,000 gigabytes of data a day, which includes not only vehicle performance but also personal information including your weight, music preferences, restaurants, and other places you visit.

While this data is collected and wirelessly transmitted to the vehicle’s manufacturer, there is no legislation or clear ownership over this data – which consulting firm McKinsey estimates could be worth $750 billion by 2030. Therefore, privacy advocates, vehicle owners, non-owners who use vehicles, and third-parties such as auto repair shops all have another major public policy issue on their hands as the auto industry continues to undergo rapid technological advances.

COUNTERING CHINA’S EXPANDING BELT

The U.S. is taking a new approach to foreign diplomacy and its effort to counter Chinese influence around the world in acting as an economic advisor and dealmaker for developing countries. The U.S. Agency for International Development (USAID) led a pilot program in Myanmar to help the country renegotiate terms for a port built by China in the country as part of its multibillion-dollar Belt and Road Initiative to spread Chinese influence and infrastructure  around the world.

By working with officials to inspect contracts, flag concerning provisions, and highlight areas where better terms could be had, USAID helped Myanmar officials renegotiate the scope of the project and reduce the country’s future debt obligations – a program the U.S. hopes to replicate with other countries to counter China’s growing influence. As the negotiations for a U.S.-China trade deal continue, these impactful efforts to counter China’s expanding influence may provide added leverage in the home stretch. The program is also a reminder to China of a lesson the U.S. learned in the last century with the Panama Canal: such investments do not always guarantee a favorable future political environment for the lender.