The Wall Street Journal - 13.09.2019

© 2019 Dow Jones & Company. All Rights Reserved. ** THE WALL STREET JOURNAL. Friday, September 13, 2019 |B1

TECHNOLOGY: YAHOO JAPAN LOOKS FOR RETAIL LIFT WITH $3.7 BILLION DEAL B5

BUSINESS&FINANCE

AUTOS

Regulators step up

probe of Nissan’s

automatic-braking

systemB6

FINANCE

Square wants

to be a bank

but doesn’t want

to be taxed like oneB6

treat someone as a contractor

will need to prove that the per-

son is free from the company’s

control and direction, that the

work falls outside the organi-

zation’s usual business and

that the contractor works inde-

pendently in the type of work

being performed. By hiring

someone as an employee in-

stead of a contract worker,

companies would then be sub-

ject to payroll taxes, minimum-

wage laws, workers’ compensa-

tion claims and unemployment

insurance.

The legislation exempts nu-

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200 questions and demands

for records.

Many of the questions ap-

pear designed to solicit evi-

dence that theAlphabetInc.

unit engaged in anticompeti-

tive conduct in building up its

powerful position.

For instance, the subpoena

asks for information about

Google’s “business rationale”

for acquiring several of the

companies that have helped it

build up its advertising busi-

ness, including DoubleClick in

2008, AdMob in 2010 and Ad-

meld Inc. in 2011.

Another question asks

Google to explain its business

justification for prohibiting ri-

val data-management plat-

forms from operating on its

own ad networks.

Still another asks Google to

explain its “control or influ-

ence over” the AMP Project,

an open-source initiative to

standardize mobile website

design.

Google is also asked to ex-

plain its “business justification

for removing YouTube [adver-

tising] inventory from other

Ad Exchanges.”

Asked for a response,

Google referred to a blog post

by Kent Walker, its senior vice

president for global affairs,

last week.

“We have answered many

questions on these issues over

many years, in the United

States as well as overseas,

across many aspects of our

business, so this is not new for

us,” Mr. Walker wrote on Fri-

day. “The [Justice Depart-

ment] has asked us to provide

information about these past

investigations, and we expect

state attorneys general will

ask similar questions. We have

always worked constructively

with regulators and we will

continue to do so.”

In another blog post this

week, the company said com-

petition in the ad space is ro-

bust.

“To suggest that the ad

tech sector is lacking competi-

tion is simply not true,” it

said. “To the contrary, the in-

dustry is famously crowded.

There are thousands of com-

panies, large and small, work-

ing together and in competi-

tion with each other to power

digital advertising across the

web, each with different spe-

cialties and technologies.”

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WASHINGTON—A coalition
of state attorneys general is
zeroing in on Google Inc.’s
dominant presence in the digi-
tal-advertising market, accord-
ing to a civil subpoena.
The subpoena, sent by
Texas Attorney General Ken
Paxton, includes more than

BYJOHND.MCKINNON

Google Probe Targets Digital Ads

States seek evidence

search engine acted

anticompetitively to

build up business

pipe-welding school.

Meritize considers factors

such as improvement in grades

and signs that students chal-

lenged themselves, said Chief

Executive Chris Keaveney. The

firm, he said, is “essentially

proxying grit.”

Government officials at

times have encouraged or even

required changes to the infor-

mation in credit reports and

scores, reasoning they would

bring loans to deserving bor-

rowers who might not fit a tra-

ditional mold.

During the past few years,

lenders includingJPMorgan

Chase&Co.,CitigroupInc.,

American Express Co. and

Capital One FinancialCorp.

have been talking to FICO

about whether incorporating

new data into credit scores

could boost loan volume, ac-

cording to people familiar with

the matter.

Separately, lenders have been

askingExperianPLC for ways to

find new customers who are

more financially responsible

than their credit records sug-

gest, according to people famil-

iar with the matter.

The U.S. lending industry re-

volves around consumer data.

Lenders feed information on

their customers to credit-report-

ing firms Experian,EquifaxInc.

andTransUnion, which compile

lengthy dossiers on borrowers.

FICO scores condense the

data in those reports—such as

payment record and ratio of

credit-card spending limits to

owed balances—into a number

between 300 and 850.

While changes at individual

banks can affect slivers of con-

sumers, the changes made by

the credit industry affect a range

of Americans.

Last October, for example,

FICO said it had developed a

new score—UltraFICO—that fac-

tors in how applicants manage

the cash in their checking, sav-

ings and money-market ac-

counts.

The new score functions as a

sort of appeal. If an applicant’s

traditional FICO score falls

short, a lender can offer to have

the score recalculated. About

37% of FICO’s revenue comes

from the credit scores it sells.

TransUnion says it sells al-

ternative data to U.S. lenders

that can include whether con-

sumers subscribe to and pay

for magazines. “It’s an indicator

of stability,” said Mike Mon-

delli, senior vice president of

global data strategy.

Credit scores have been the

bedrock of consumer lending

for decades. Fair Isaac created

the FICO score in 1989, and

banks adopted it broadly in the

1990s.

Investors that buy securi-

tized consumer loans—sliced-

up pools of credit-card, auto

and mortgage debt—often rely

on FICO scores to assess their

risk. Critics say the changes

could make millions of borrow-

ers appear safer than they are,

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The way lenders decide who
can borrow money is undergo-
ing its biggest shift in a genera-
tion.
For decades, banks and other
financiers have relied primarily
on consumers’ borrowing his-
tory to make lending decisions.
Now, revenue-hungry companies
are considering metrics both
mundane and peculiar, like
whether applicants shop at dis-
count stores, subscribe to maga-
zines or pay their phone bills on
time.
Those experimenting with
new metrics range from big-
name banks like Goldman
Sachs GroupInc.,Ally Finan-
cialInc. andDiscover Finan-
cial Servicesto upstart finan-
cial-technology firms.
The changes are an about-
face for many banks, which
have spent much of the decade
since the financial crisis chas-
ing mostly ultra-creditworthy
customers. But that pool is only
so big.
The field of potential new
borrowers is huge: About 53
million U.S. adults don’t have
credit scores, according toFair
Isaac Corp., creator of the
widely used FICO scores. An
additional 56 million have sub-
prime scores. Some have a
checkered borrowing history or
high debt loads. But others,
banks point out, just don’t have
traditional borrowing back-
grounds, often because they are
new to the U.S. or pay for most
expenses with cash.
Despite some signs that the
economy is strong, such as low
unemployment,itis also show-
ing symptoms of wear. U.S.
consumer debt is higher than
ever, with many Americans
forced to borrow to keep up
with rising costs for cars, col-
lege, housing and medical care.
Christina Segura, 24 years
old, had a low credit score from
unpaid medical debts when she
applied for financing from fin-
tech startupMeritize. But the
company, which funds higher
education and skills-based
training, used her high-school
transcript to approve her for
loans totaling $9,000 to attend

BYANNAMARIAANDRIOTIS

Lenders Tap New Tools to Evaluate Borrowers

*Figures are for April of each year. Totals don’t add to 100% due to rounding.

†Figures are for approximate number of consumers with credit scores below 650.

‡’Limited history’ refers to people with four or fewer accounts on their Experian report. ‘Credit cards’ excludes store-only cards.

Sources: Fair Isaac Corp. (score distribution, average score, number with subprime scores); Experian (loans)

2005

0

2005 2019

’10 ’15 ’19

22.3%

20.7

16.2

12.5

9.3

7.8

6.8

4.3

16.2%

20.4

16.5

13.1

10.0

8.7

8.1

6.8

FICO score distribution* Average FICO score

Number of U.S. consumers

with subprime credit scores†

Loans extended to U.S.

consumers with limited or

no credit histories, yearly‡

Autoloans

andleases

Creditcards

Personalloans

100%

300-499

500-549

550-599

600-649

650-699

700-749

750-799

800-850

SCORERANGE:

80

50

60

70

million

SUBPRIME

710

680

690

700

2008 ’19

2008 ’19

$100

0

25

50

75

billion

2008 ’18

INSIDE

A landmark California em-

ployment bill that passed

Wednesday could have implica-

tions for companies and free-

lance contractors in fields far

beyond technology and ride-

hailing.

The legislation, intended to

force employers to reclassify

some contract workers as em-

ployees, threatens to upend the

business models of companies

such as Uber Technologies

Inc. andLyftInc., which rely

on gig workers as drivers. But

it might also reshape work in

professions including construc-

tion, trucking, adult entertain-

ment and more.

“It will give a lot of employ-

ers pause,” says Veena Dubal,

associate professor of law at

the University of California,

Hastings, who adds that the

bill “creates a presumption of

employee status.”

Employers that want to

BYCHIPCUTTER

California Bill Ripples Beyond

Uber and Technology Sector

California winemakers work with contractors to transport grapes.

ERIC RISBERG/ASSOCIATED PRESS

OxyContin makerPurdue

Pharma LP canceled plans

earlier this year to launch a

foundation to fund opioid-ad-

diction treatment and research

as the company rethought its

strategy amid hundreds of

lawsuits and a possible bank-

ruptcy filing.

Purdue staff pitched the

foundation concept several

years ago, and the drug-

maker’s owners and executives

spent several months develop-

ing the latest version, accord-

ing to people familiar with the

matter and internal company

emails viewed by The Wall

Street Journal.

Under the plans, Purdue

and the Sackler family that

owns the Stamford, Conn.-

based company were each to

contribute $50 million apiece

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BYJAREDS.HOPKINS

Purdue

Ditched Plan

For Addiction

Nonprofit

lobby the Trump administra-

tion to make an exception for

one or both of those flavors,

arguing that if Juul’s goal is to

convert cigarette smokers, it

should offer an option for

smokers of menthols, accord-

ing to one of the people.

FDA officials in the past

had expressed reluctance to

restrict sales of menthol-fla-

vored vaping products, saying

that they represent a less-

harmful alternative for smok-

ers of combustible menthol

cigarettes.

On Wednesday, Alex Azar,

the secretary of Health and

Human Services, cited prelimi-

nary data from a federal sur-

vey showing that the popular-

ity of mint and menthol e-

cigarettes had surged this year

among teens. Nearly 28% of

high-school students surveyed

this year reported vaping at

least once in the past 30 days,

up from 21% last year, accord-

ing to the data.

The FDA’s plan is to pull ev-

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Juul LabsInc. is debating
internally whether to embrace
or push back on part of the
Trump administration’s plan
to pull most e-cigarettes from
the market, according to peo-
ple familiar with the matter.
The policy—affecting sweet
and fruity vaping products
along with mint and men-
thol—would be a crippling hit
to the startup, which gener-
ates more than 80% of its
sales from flavors that would
be banned. But Juul insiders
agree that the move could
help curb underage vaping and
avert an even bigger threat to
the market-leading e-cigarette
maker: the possibility that the
Food and Drug Administration
could take Juul off the market
altogether.
Though the company has
decided to support a ban on
most flavors, there remains a
point of disagreement around
menthol and mint. Some in-
side the company want to

BYJENNIFERMALONEY

Juul Weighs Response

To E-Cigarette Ban

WeWork’s parent has cho-

sen to list its shares onNasdaq

Inc. and plans sweeping

changes in its governance as

the shared-workspace provider

speeds up preparations for its

initial public offering amid

tepid interest from investors.

The moves are part of a

plan by We Co., as the com-

pany is officially known, to be-

gin marketing the shares to

investors next week ahead of a

trading debut the week of

Sept. 23, people familiar with

the matter said.

The company is expected to

set a preliminary price range

by next week and We and its

advisers are targeting a valua-

tion that could fall below $20

billion, as The Wall Street

Journal has reported. That is

below the $47 billion valua-

tion set in a funding round

this year, reflecting skepticism

of the company’s governance

and its ability to reverse steep

losses.

We co-founder and Chief Ex-

ecutive Adam Neumann con-

trols a majority of the com-

pany’s voting rights through

special shares whose potency

was recently enhanced.

His wife, Rebekah Neumann,

also a We co-founder, is one of

three people designated to

serve on a committee that

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BYMAUREENFARRELL

ANDCORRIEDRIEBUSCH

WeWork’s

Parent

To List on

Nasdaq