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   DealBook: Rupert Murdoch’s tax break
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   Also, the debt limit battle goes into overdrive.
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             April 20, 2023
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              Good morning. In today’s newsletter: Why Fox News’s hefty payout to Dominion may not be so mega after all; what’s next in Washington’s debt ceiling standoff; and E.U. antitrust investigators take on the fashion industry. (Was this newsletter forwarded to you?
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                  The Dominion settlement deal may not cost Rupert Murdoch’s media empire all that much.
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             How Fox’s burden got even lighter
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             Fox News’s $787.5 million payout to settle wide-ranging defamation claims by Dominion Voting Systems is still the talk of the town, including the size of that sum.
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             But more evidence suggests that the eye-popping number — which Dominion and its owner still claim as a win — might not be as costly to Rupert Murdoch’s media empire as it might seem. Fox’s stock has barely budged since the deal was announced on Tuesday.
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              Fox can take a tax deduction from the settlement,
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             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              Lever News reports
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             . U.S. tax law allows companies to write off at least some portion of settlement fees as part of the cost of doing business. (There are some exceptions, including for cases involving accusations of sexual harassment or abuse with nondisclosure agreements; Fox News has paid out settlements involving those in the past.)
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             It is unclear how much Fox will save, though a spokesman confirmed that tax deductibility is at play. Lever News estimated that the company could reap as much as $213 million in tax savings.
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              That’s likely to further infuriate Fox critics,
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             who already thought that Murdoch and his company
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              got off better than expected
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             . DealBook questioned yesterday whether much will change at Fox News post-settlement, given that the network won’t have to make an on-air apology or suffer potentially embarrassing public testimony by Murdoch or stars like Tucker Carlson.
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             In fact, according to the media commentator Brian Stelter, Donald Trump — whose baseless claims of election fraud related to Dominion’s lawsuit — is set to
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              appear on Fox News
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             next week.
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              Meanwhile, Dominion’s owner is still claiming injury.
             </span>
             Staple Street Capital, which bought a majority stake in the voting machine maker for just $38.3 million in 2018, stands to make an
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              astounding 1,500 percent return
             </a>
             on that deal. But while Dominion may stand to gain new business now that Fox News has admitted to airing some false claims against it, Staple Street executives say the company still “has been
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              irreparably damaged and harmed
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             ” by the situation.
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             That said, Dominion isn’t done with court fights: It’s
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              suing others
             </a>
             who accused it of electoral wrongdoing, including the news media outlet Newsmax and the MyPillow founder Mike Lindell.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              How the settlement got done:
             </span>
             Both
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              The Washington Post
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             and
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              The Wall Street Journal
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             spoke with Jerry Roscoe, the mediator who negotiated at the 11th hour the settlement that hadn’t seemed possible for months. Roscoe held, by his count, some 50 conversations with Fox and Dominion representatives — all during a vacation in Romania, including some conducted while he was on a bus or a boat.
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             “Everyone on the tour bus was wondering why this obnoxious guy was on the phone all the time,” he told The Journal.
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              Tesla’s stock price tumbles amid price cuts.
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             Shares in the electric carmaker are down over 7 percent in premarket trading after it reported that
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              first-quarter profit fell
             </a>
             24 percent year on year. The culprit was a price-cutting campaign to defend market share against surging competitors, though Elon Musk noted that Tesla’s price margins remained among the highest in the industry.
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              Janet Yellen is expected to warn China about “unfair” economic policies.
             </span>
             In a
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              speech today
             </a>
             , the Treasury secretary is poised to call for a “constructive and fair” economic relationship with China. But while Yellen is aiming to repair strained ties with Beijing — she will probably say Washington isn’t seeking to stifle Chinese growth — she is likely to reiterate America’s concerns about security.
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              The U.S. economy is holding largely steady.
             </span>
             Data from the
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              Fed’s latest beige book
             </a>
             of surveys, published yesterday, shows that economic activity didn’t change much after Silicon Valley Bank’s collapse, while price inflation eased a little. The latest batch of information suggests that the Fed isn’t going to deviate from its current course on interest rates.
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              Microsoft plans to drop Twitter from its ad platform.
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             The tech giant said that users of Microsoft Advertising would not be able to
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              manage their Twitter accounts
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             via the service starting next week, citing sharply increased prices to use the social network’s A.P.I., the technical gateway to its content.
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              An abortion pill maker sues the F.D.A. to protect access to its drug.
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             GenBioPro, which produces the generic version of mifepristone, is seeking to
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              block the agency from complying
             </a>
             with any future court orders to take the medication off the market. Meanwhile, the Supreme Court
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              extended a pause
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             on a lower court’s ruling to limit access to mifepristone to Friday while it considers the case.
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             The clock ticks on a debt deal
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             House Republicans hope to vote
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              as soon as next week
             </a>
             on Speaker Kevin McCarthy’s debt limit plan. Released yesterday, the proposal would raise the borrowing cap by $1.5 trillion or suspend it through March, potentially pushing the so-called X-date — when the government would run out of money to pay its bills — to the middle of the presidential primary season.
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              The market is closely watching McCarthy’s long-shot bill.
             </span>
             Wall Street pros vividly remember 2011 when a monthslong debt ceiling battle between the Republican-controlled House and the Obama administration sent the stock market plunging and borrowing costs soaring on fears that the country would default on its debts.
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             The 2023 version of this fight is playing out against the backdrop of a smoldering banking crisis, growing recession fears and sky-high inflation. “A debt ceiling fight this year would likely increase the effects of the economic slowdown and even pull forward recession timing,” said
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              Lauren Goodwin
             </a>
             , a director of portfolio strategy at New York Life Investments.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              What’s in the bill?
             </span>
             It would maintain discretionary spending at 2022 fiscal year levels, add conditions to assistance programs like food stamps and claw back the funding on high-profile Democratic-backed initiatives like enhanced I.R.S. enforcement funding and student loan forgiveness. Unsurprisingly, the bill is viewed as
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              dead on arrival
             </a>
             in a Democratic-controlled Senate.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Democrats are banking on Republican disarray.
             </span>
             “House Republicans are in chaos and do not have a unified agenda,” Representative Brendan F. Boyle, Democrat of Pennsylvania and a ranking member of the House Budget Committee, told DealBook. But with McCarthy’s bill now in play — as well as a compromise framework introduced yesterday by the bipartisan
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              Problem Solvers Caucus
             </a>
             — and the debt limit deadline fast approaching, Democrats may find themselves pressed to compromise.
            </p>
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              How far out is the X-date?
             </span>
             If no deal is reached, it would come
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
             </span>
             as early as the first half of June, Goldman Sachs researchers calculated this week after reviewing “weak tax collections so far in April.” (The X-date target, which just a week ago was assumed to be arriving in August, may change again as more tax-collection data comes in.) The tighter time frame could persuade reluctant Republicans to seek a stopgap measure to buy more time. But even there, the Goldman researchers are skeptical. “Voting to raise the debt limit twice is harder than voting once,” the researchers, Alec Phillips and Tim Krupa, wrote in a note.
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             Based on how far apart the parties are now, voting once will be tough enough.
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            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             “At no moment did he tell me, ‘I must prepare my children for my succession.’”
            </h2>
           </td>
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         </tbody>
        </table>
       </div>
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-style:italic;font-size:inherit">
              —
             </span>
             <span style="font-style:italic;font-size:inherit">
              <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
               Sidney Toledano
              </a>
             </span>
             <span style="font-style:italic;font-size:inherit">
              , the former head of Christian Dior, referring to Bernard Arnault amid questions about which of the French billionaire’s children will take over as chief of the luxury goods conglomerate LVMH.
             </span>
            </p>
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            <h2 class="css-12n1aic" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             Fashion’s out of style with E.U. regulators
            </h2>
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             Between glossy runway shows and dressing stars for the red carpet, Gucci is a company well accustomed to the glare of the spotlight. This week, however, that attention might have felt less comfortable after its Italian offices were raided by European Union antitrust officials.
            </p>
           </td>
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The unannounced inspection was the latest in a series of regulatory actions
             </span>
             , writes The Times’s Elizabeth Paton for DealBook, as antitrust officials ratchet up scrutiny of the fashion industry over possible anti-competitive practices.
            </p>
           </td>
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             In March, the European Commission, the bloc’s executive arm, carried out investigations into several beauty and fragrance companies linked to the supply of fragrance ingredients.
            </p>
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             Last year, some fashion houses were raided in connection with
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              sustainability targets
             </a>
             developed by the industry, including changes in sales periods and discounting strategies that regulators later deemed as potential violations of competition law.
            </p>
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             Pierre Cardin and the German clothing maker Ahlers
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              have faced scrutiny
             </a>
             over licensing and distribution deals that may have breached rules on cross-border sales.
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              The heightened attention came after a period of “relative calm,”
             </span>
             Greenberg Traurig, a law firm, said
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              in a note
             </a>
             . The firm added that the raids underlined the European Commission’s increasing focus on enforcement in the fashion sector after the coronavirus pandemic and urged companies to review business practices to “ensure they are not running afoul of E.U. antitrust and anti-competition regulations.”
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Kering, Gucci’s parent company, said it was “cooperating”
             </span>
             with regulators yesterday. The Commission
             <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              said in a statement
             </a>
             a day earlier that it was looking into the activities of multiple fashion companies based in several member states and that it had also sent out requests for information to other undisclosed brands.
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             “The Commission has concerns that the companies concerned may have violated E.U. antitrust rules that prohibit cartels and restrictive business practices including certain horizontal and vertical restrictions,” it said.
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             Penalties for companies could include fines of up to 10 percent of their global turnover.
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            <h3 class="css-132hdgt" style="color:#000;font:700 16px/24px arial,sans-serif;margin:8px 0 25px 0;letter-spacing:.2px">
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              <span style="font-size:17px;line-height:25px">
               Credit Suisse is
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                suing SoftBank for $440 million
               </a>
               in a London court over the collapse of the supply finance lender Greensill Capital. (Reuters)
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               HSBC
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                rejected a push by Ping An
               </a>
               , the Chinese insurer and its biggest shareholder, to spin off its Asian operations. (Reuters)
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               The hedge fund billionaire Ray Dalio plans to
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                open a family office in Abu Dhabi
               </a>
               . (Bloomberg)
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               In I.P.O. news: The Chinese chip maker ChangXin Memory Technology plans to list in Shanghai and seek
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                a valuation of more than $14.5 billion
               </a>
               , and SeatGeek, a competitor to Ticketmaster, has
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                confidentially filed to go public
               </a>
               . (Bloomberg, Sportico)
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              Policy
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              <span style="font-size:17px;line-height:25px">
               Julie Su, President Biden’s pick for labor secretary who has been in the role since March in an acting capacity,
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                faces an uphill battle
               </a>
               in her Senate confirmation hearing today. (CNN)
              </span>
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              <span style="font-size:17px;line-height:25px">
               Microsoft and Apple are among the tech firms lobbying
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                to narrow the scope
               </a>
               of a Senate bill that could ban TikTok in the U.S. (Bloomberg)
              </span>
             </li>
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              Best of the rest
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              <span style="font-size:17px;line-height:25px">
               “Climate Change Thaws World’s
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Northernmost Research Station
               </a>
               .” (Reuters)
              </span>
             </li>
             <li class="css-11scvta" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Wikipedia and an online exchange of pirated e-books are among the most popular websites that A.I.-powered chatbots use
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                to sound smart
               </a>
               . (WaPo)
              </span>
             </li>
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              <span style="font-size:17px;line-height:25px">
               After its failed split, EY faces the threat from rivals looking
               <a class="css-5nb5nb" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                to poach disgruntled staff members
               </a>
               . (WSJ)
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