French detention of Telegram billionaire extended amid criminal investigation — Capital Brief

Good morning. Here’s what happened overnight and what you need to know today.

1.

Detention extended: French prosecutors said the arrest of billionaire Telegram founder Pavel Durov was part of an investigation into criminal activity on the messaging platform, including child pornography, drug trafficking, money laundering and lack of cooperation with law enforcement. Durov, 39, a native of Russia, is being questioned by investigators as part of the ongoing court case. His pretrial detention was extended by an investigating judge on Sunday and could last up to 96 hours (until August 28, 2024), prosecutors said. The investigation is being led by cybercrime and anti-fraud specialists. The arrest has sparked a debate about free speech online, with President Emmanuel Macron rejecting allegations of censorship and political interference in a social media post. Telegram has denied allegations that its platform facilitates illegal activities such as terrorism, fraud and child exploitation. (Statement from prosecutor)(The New York Times)

2.

Challenging ride: Canada will impose a 100% tariff on Chinese electric vehicles and a 25% surcharge on imported steel and aluminum from China, echoing recent moves by the U.S. and EU and escalating trade tensions between the Asian country and the West. “China doesn’t play by the same rules,” Prime Minister Justin Trudeau said. Canada could expand tariffs on chips, solar cells, batteries and critical minerals to bolster its electric vehicle supply chain. It also announced “intentions” to limit zero-emission vehicle incentives to products from countries with free trade agreements. The tariffs on electric vehicles will take effect on Oct. 1, with the surcharge on steel and aluminum starting Oct. 15. Tesla shares fell as much as 4% on Monday amid concerns about higher costs of shifting exports from the U.S. to Canada. (Capital Brief) (Canada statement)

3.

Oil price rises: Crude oil prices rose amid geopolitical tensions and production disruptions. Brent crude futures rose over 5% to above $81.5 a barrel after oil production was halted in Libya, where a power struggle between eastern and western governments intensified. Libya’s eastern government declared force majeure and ordered the closure of all oil fields and a halt to production and exports, amid a dispute over control of the central bank with the internationally recognized government in Tripoli. The country has Africa’s largest known crude reserves. “These are ‘real’ barrels that could be lost, so the physical market would be tight as long as it lasts,” Giovanni Staunovo, a commodity analyst at UBS, told Bloomberg. The deepening conflict between Israel and Lebanon’s Hezbollah and attacks by Houthi rebels in the Red Sea added to the turmoil in global oil markets. (Capital Brief)(Reuters)

4.

AI Tags: OpenAI is supporting a California bill that would require tech companies to label AI-generated content ranging from harmless memes to deepfakes aimed at spreading misinformation for political purposes. California’s bill, AB 3211, authored by Democratic Rep. Buffy Wicks, passed the House by a vote of 62-0 and is now set to be voted on in the Senate before being sent to Gov. Gavin Newsom by Sept. 30. The push for transparency, including watermarking AI content, is particularly relevant given the number of global elections this year. OpenAI’s support contrasts with its opposition to another AI-related bill, SB 1047, which would require security testing of AI models. California lawmakers have proposed 65 AI-related bills this year, but many of them have stalled. (Reuters)

5.

Data transfer: Uber was fined 290 million euros ($477.73 million) by the Dutch Data Protection Authority (DPA) for transferring personal data of European taxi drivers to the United States, in violation of EU rules. Uber has stopped this practice and said it would appeal the “unjustified” decision and impose an “extraordinary fine.” The regulatory action was initially triggered by a complaint from nearly 200 taxi drivers in France to the country’s data protection authority, but the DPA took on the case because Uber’s European headquarters are in the Netherlands. “In Europe, the General Data Protection Regulation (GDPR) protects people’s fundamental rights by requiring companies and governments to handle personal data with due care,” said DPA chairman Aleid Wolfsen. “But unfortunately, outside Europe, this is not a given. Therefore, companies are generally required to take additional measures when storing personal data of Europeans outside the European Union.” (DPA)

6.

Sino-exit: IBM is reportedly shutting down most of its research and development operations in China, affecting over 1,000 jobs in several cities, including Beijing and Shanghai. According to Chinese media outlet Jiemian, IBM executive Jack Hergenrother informed employees of the cuts during a virtual meeting on Monday. He explained that IBM’s infrastructure business in China is shrinking due to intense competition and that the company is shifting its R&D efforts to be closer to customers outside the country. The move follows a number of U.S. companies pulling out of China amid rising geopolitical tensions between Washington and Beijing. IBM’s decision also follows a nearly 20% decline in revenue in the Asian country in 2023. IBM’s Chinese rivals have benefited from government policies that favor domestic technology providers, further shrinking IBM’s market share. IBM has not commented on the reports. (Capital Brief)(The Wall Street Journal)(FT)

7.

Temu disappointed: Shares of PDD Holdings, Temu’s Chinese parent company, plunged 28.51% in New York on Monday. The decline followed disappointing quarterly earnings and outlook. Revenue reached 97.06 billion yuan ($20 billion), below analysts’ forecast of 100 billion yuan. The company also warned of potential profitability hits as it planned investments to support a “sustainable ecosystem.” Net profit rose 144% to 32 billion yuan, but the company said “revenue growth will inevitably come under pressure due to intensified competition and external challenges.” Traders are protesting PDD’s fines and accusing Temu — which also faces regulatory scrutiny in the U.S., Europe and other countries — of withholding sales revenue. PDD said it would cut transaction fees by 10 billion yuan next year to support “high-quality” merchants, while vowing to “tackle” “low-quality” merchants. (Capital Brief) (Nikkei)

8.

Energy transition: New Zealand’s new center-right government led by Prime Minister Christopher Luxon plans to lift a 2018 ban on offshore oil and gas exploration outside the Taranaki region by year-end. The move is expected to spur investment in the oil and gas sector as prices soar. A drop in natural gas production – down 12.5% ​​in 2023 and a further 27.8% in early 2024 – has led to a nationwide energy shortage, the government said. New Zealand also plans to reduce regulatory hurdles to importing liquefied natural gas and speed up renewable energy projects, aiming for a one-year permitting process and to initiate permits for offshore energy feasibility by 2025. Greenpeace condemned the decisions to explore for gas and import liquefied natural gas as “climate denial,” calling them an insult to Pacific island nations grappling with rising sea levels due to climate change. (Reuters)