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REWIND: International Business News #35

Posted on September 7th, 2012 | Author:

  • In a cross BRIC-deal, Chinese personal computer maker, Lenovo Group will buy Brazil-based Digibras, a consumer electronics maker.  While the deal will certainly expand Lenovo’s product line to include electronics, such as phones, tablets, and televisions, it will more importantly deepen the company’s presence in Brazil.  Lenovo is already a leader in PCs in China and India;  Brazil, however, is one of the top global PC markets, and with a growing middle class, that market size is likely to increase.  Lenovo is expecting that through the purchase of Digibras for $147 million, it will gain a significant foothold in that market.
  • The European Central Bank took a decisive step towards its role as a lender of last resort this week.  ECB chief Mario Draghi stated the bank was committed to buying a potentially unlimited number of sovereign bonds with maturities of between one and three years.  In response, of course, the issuing country would have to agree to implement a fiscal adjustment program as prescribed by the European Stability Mechanism.  In addition, the ECB has indicated it would not seek senior credit status, meaning that it would not insist on being paid before other creditors in the event of default. The announcement has been met with a positive response as yields on bonds in Spain and Italy dropped from 6.09% from 6.41%, and to 5.36% from 5.51% respectively.
  • The U.S. Second Circuit Court of Appeals has weighed in on one of the most high profile trademark litigation cases in recent history.  The Court found in favor of Christian Louboutin SA, who brought suit to stop competitor Yves Saint Laurent from selling shoes made with a red sole, noting that that Louboutin had the right to protect the trademark for its red soles. That protection is somewhat limited however, as the Court found that the red soles were a distinctive mark of Louboutin only on shoes where the “upper” part of the shoe was a different color than the sole; competitors would still be allowed to sell shoes with red soles on monochromatic shoes.
  • The World Bank announced the appointment of Kaushik Basu, its new Chief Economist.  Mr. Basu is a former chief economic advisor to the Indian Ministry of Finance and more recently, a Cornell University economist.  The appointment is significant as it suggests a responsiveness of the World Bank to the developing world’s calls for greater representation in the organization.  Basu is the first Indian appointed chief economist, and the second from the developing world, following the appointment of his predecessor, Justin Yifu Lin of China.
  • The U.S. Federal District Court sitting in Manhattan has approved a settlement between the Department of Justice and three e-book publishers.  The Justice Department alleged that the publishers, Hachette, HarperCollins, and Simon & Schuster, had colluded to fix the retail prices of e-books, limiting competition among the publishers.  Many have criticized the settlement, stating that the publishers’ practices actually increase competition in the marketplace; now, many suggest that Amazon will retain its dominance in the market, forcing other publishers to adjust their behavior to remain competitive.  The settlement also calls for the three publishers to end their contracts with Apple, also named a party to the price-fixing conspiracy.