In this edition of The Briefing from Informed Choice on Wednesday 19th September 2018 – Supermarket merger investigation, pessimistic investors, Wild West bitcoin, credit card settlement, and dads teaching money habits.
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Supermarket merger investigation
A proposed merger between Sainsbury’s and Asda has been referred by the Competition and Markets Authority (CMA) for a further “in-depth investigation”. This follows the completion of a Phase 1 investigation into the merger, concluding it “raises sufficient concerns” to warrant a more in-depth review. The CMA is concerned that merging the two largest grocery retailers in the UK would result in overlapping stores in hundreds of areas, potentially resulting in higher prices or worse quality of service for customers. Their Phase 2 investigation will therefore be a more in-depth review into the impact of the merger, led by an independent inquiry group. Members of the public and other stakeholders will be asked for their views as part of the investigation, which is due to be completed by 5th March 2019.
Andrea Coscelli, chief executive of the CMA, said:
About £190bn is spent each year on food and groceries in the UK so it’s vital to find out if the millions of people who shop in supermarkets could lose out as a result of this deal.
We will carry out a thorough investigation to find out if this merger could lead to higher prices or a worse quality of service for shoppers and will not allow it to go ahead unless any concerns we find are fully dealt with.
Pessimistic investors
Investors are their most pessimistic about the outlook for the global economy since the height of the European sovereign debt crisis. The latest Bank of America Merrill Lynch Fund Manager Survey for September shows a net 24% of investment managers expect global growth to slow during the next year. This is up from a net 7% expecting the same a month earlier. Fund managers are worried about an escalating trade war between the US and China, as well as a general slowdown in China and tightening of monetary policy from central banks. It means pessimism about the global economy has reached its highest level since December 2011, reflected in portfolio movements including the highest allocation to cash in 18 months, at an average of 5.1%.
Michael Hartnett, chief investment strategist of BofAML, said in a statement:
Investors are holding on to more cash, telling us they are bearish growth and bullish US decoupling. Fund managers are signalling that they are starting to price in a hawkish Fed.
Wild West bitcoin
An influential committee of MPs have concluded bitcoin and other cryptocurrencies are a ‘Wild West industry’ and must be regulated for consumer protection. The Treasury Committee identified issues including volatile prices, minimal consumer protection, lack of online security, and use for money laundering. Rather than refer to the instruments as ‘crypto-currencies’, the committee believes their lack of functionality as a currency means they should be called ‘crypto-assets’ instead. It is calling for the city regulator, the Financial Conduct Authority, to regulate them in the future. The committee said:
Crypto-asset investors are currently afforded very little protection from the litany of risks. Namely, there are no formal mechanisms for consumer redress, nor compensation.
Credit card settlement
A number of US banks have agreed to a $6.2bn settlement in a long running case brought by merchants over the fees charged when accepting card payments. Visa, Mastercard, JPMorgan Chase & Co, Citigroup and Bank of America and other banks were part of the settlement agreement. It follows a previously reached settlement of $7.25bn between Visa, Mastercard and merchants in the case, that was subsequently thrown out by a Federal appeals court in 2016. The US Supreme Court last year refused to revive the original settlement deal. It represents the largest all-cash antitrust settlement in the US, although its value was reduced to $5.7bn after around 8,000 retailers opted out. Around 12 million retailers were originally represented by the lawsuit, which accused credit card companies of violating federal antitrust laws by forcing merchants to pay swipe fees and preventing them from directing customers towards other forms of payment.
Dads teaching money habits
Dads are using their passion for tech and gadgetry to help nurture good money habits in their offspring. They are twice as likely as mums to use technology and games to teach their children lessons about money, according to new research from Foresters Friendly Society. The findings reveal that 29% of dads encourage their children to participate in their online and mobile banking activities to help them develop their financial skill-set. By contrast, just 15% of mums are switched on to using tech as a teaching aid. They are also capitalising on children’s love of video games to help build up their kids’ financial confidence, with 23% of fathers opting to use games and videos in the teaching process. This compares to just 9% of mums.
Paul Osborn, Chief Executive for Foresters Friendly Society, said:
Money habits start to become established by the age of seven, so it’s important to supplement regular conversations about money-saving with real life practice. Embracing digital technology and video games is certainly a fun and simple way of getting those important life lessons across but there are many other ways to do this, such as rewarding tasks with pocket money or setting up piggy banks.
Saving early and regularly is a great habit to get in to, but it’s also a crucial life lesson and often required to safeguard children’s futures. There is a range of saving vehicles available today, for example, the flexibility of the Junior ISA means children can save up for birthdays or Christmas spends and know their money is being kept safe. It also offers a simple, tax-efficient way to invest for your offspring’s’ tomorrow – a great way to give them a helping hand when the time comes.
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