Top 10 Stories Sept. 4-8
1. Seeking Answers on Tire Recall: Congressional committees held hearings into deadly Firestone tire failures on Ford Explorers, and lawmakers of both parties concluded that the companies knew about problems and should have warned U.S. safety agencies earlier than they did. But the hearings shed no light on the root cause of the high-speed tire tread separation failures. Many lawmakers said the National Highway Traffic Safety Administration itself is due for a major overhaul that could broaden its powers and make it more accountable to consumers. Meanwhile, Atty. Gen. Janet Reno said the Justice Department will review the matter to determine if legal action is warranted against those deemed responsible.
(Ricardo Alonso-Zaldivar)]
2. Energy Continues Its Wild Ride: Futures prices for oil, natural gas and heating oil set records, and California retail gasoline prices jumped. Oil prices fell Friday--after a four-day streak of increases to prices not seen in a decade--on the hope that ministers of the Organization of Petroleum Exporting Countries, meeting today, might increase oil production more than the previously anticipated 500,000 barrels a day. Gov. Gray Davis signed legislation that put a cap on the electricity rates that the price-shocked residents of San Diego and south Orange County pay, as well as a bill that would shorten the approval process for some power plants. Crude oil fell to $33.63 a barrel Friday from Thursday’s $35.39 but was still up 2% from the previous week.
(Nancy Rivera Brooks)
3. MP3 Told to Pay Huge Damages: In a potentially devastating blow to MP3.com Inc., a federal judge ruled that the company willfully violated music copyrights and awarded Seagram Co.’s Universal Music Group at least $117 million in damages--believed to be the largest copyright infringement penalty in history. The San Diego online company was ordered to pay $25,000 for every Universal CD illegally posted on its My.MP3.com service, an amount that could total $117 million to $250 million in damages. Experts were surprised at the size of the penalty, which is likely to influence a copyright ruling next month involving the popular but controversial Internet service known as Napster.
4. Strike’s Impact at Issue: The nation’s top advertisers released figures affirming their stand that the longest strike by actors in Hollywood’s history is not slowing the pace of commercial production significantly. But the Screen Actors Guild and the American Federation of Television and Radio Artists dismissed the industry’s claim of business as usual. SAG pointed to industry figures showing a sharp drop in session fees paid to union actors as proof of member solidarity in the strike, and it questioned advertisers’ emphasis on the number of commercials produced. The two sides are scheduled to meet Wednesday to jump-start talks that broke off in July.
5. Ruling Clears Way for Generic Cancer Drug: A generic version of the cancer-fighting drug Taxol could be on the market within months after a federal judge’s ruling Wednesday that the courts don’t have jurisdiction in a patent-listing dispute between Bristol-Myers Squibb Co. and American BioScience Inc. The decision appears to free Ivax Corp. to produce a generic version of the drug, which is used to fight ovarian and breast cancer. Such a move would slash the cost of the drug in half. Santa Monica-based American BioScience plans an appeal. Meanwhile, the Federal Trade Commission is investigating whether Bristol-Myers and American BioScience colluded to block the Ivax drug.
(Jerry Hirsch)
6. Nationwide Class Action Sought: Tobacco companies could face a verdict higher than the massive $145 billion recently awarded in a case brought by Florida smokers if a bold and novel move by a flotilla of plaintiff attorneys succeeds. The attorneys asked a federal judge to create a nationwide class action to consolidate all punitive damage cases against the companies. The suit is particularly unusual in that it calls for punitive damages to go into a fund for public use rather than to individuals. Cigarette makers decried the suit as an attempt to gain a settlement through blackmail and scoffed at the notion that it could lead to a major resolution.
7. Infonet in Acquisition Talks: Infonet Services Corp. made headlines as word spread that the El Segundo data communications firm is in talks to buy Dutch rival Equant. Infonet, spun off from Computer Sciences Corp. in 1988, would triple in size with the purchase of Equant. However, both companies declined to comment on the merger rumors, and by the end of the week there were rumblings that France Telecom had rejoined the bidding for Equant. Equant and Infonet provide connections and services for corporate networks and the Internet, primarily to international firms.
(Elizabeth Douglass)
8. Trouble at Strouds, Restoration Hardware: Starkly underlining the tough conditions for small specialty retailers, linen supplier Strouds Inc. filed for Chapter 11 bankruptcy protection and Restoration Hardware Inc., a peddler of decorative and quirky home furnishings that’s also losing money, said it has hired an investment bank to explore strategic alternatives. Industry-based Strouds plans to close nine of its 70 stores in its reorganization as it continues to struggle against larger rivals that offer a broader range of merchandise. Restoration Hardware, based in Corte Madera, Calif., wouldn’t say whether it would consider a sale of the company.
9. CMGI Reverses Strategy: CMGI Inc. said it’s retrenching from the Internet investing that made the company a star on Nasdaq in the late 1990s, in an effort to stem losses and a falling stock price amid investor skittishness over “dot-com” companies. CMGI plans to sell off some companies and scrap billions of dollars in new capital investments in a consolidation it said will help investors see the firm as an operating company rather than an investment fund.
10. Theater Chain’s Bankruptcy Fight: In the opening salvo of a contentious bankruptcy battle, Edwards Theatres Circuit Inc.’s main lender accused the movie chain of shelling out lavish salaries and other payments to Edwards family members while the company’s financial condition deteriorated. Edwards called Bank of America’s allegations “scurrilous.” Edwards won court permission to continue using its daily proceeds for ongoing operations, including stocking its concession stands with snacks, despite Bank of America’s objections.
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See Monday’s Business section for a preview of next week’s events.
