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First Move with Julia Chatterley
Andrew Bailey Named New Bank Of England Governor; Americans Give The Economy High Marks On CNN Poll; British Parliament Is Set To Vote On Boris Johnson's Brexit Deal. Aired 9-10a ET
Aired December 20, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:14]
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Live from New York, I'm Zain Asher sitting in for my colleague, Julia Chatterley and here is what you need to
know.
Wrapping up Brexit for Christmas. The British Parliament is about to vote on Boris Johnson's Brexit deal.
And landing in theaters. Disney's highly anticipated "Star Wars" movie, "The Rise Of Skywalker" is finally here.
And hitting a snag. Boeing's new spaceship designed for NASA astronauts is suffering a problem.
It is Friday, my friends and this is FIRST MOVE.
All right, welcome to FIRST MOVE, everyone. I'm Zain Asher. It is so good to have you with us as we wrap up the last full week of trading on Wall
Street for 2019.
U.S. stocks begins today's sessions at all-time highs. Let's take a look here. Futures are pointing to fresh records in early trading as your
yearend rally continues. Futures of the Dow are up 45 points or so. The NASDAQ has risen for seven straight sessions and tech stocks look set to
continue their winning streak in early trading today.
It has been a solid year of gains so far for all the major U.S. indices. The Dow is up 21 percent since January. The S&P has risen 27 percent.
Tech stocks have been the biggest gainers overall. You see there, the NASDAQ up by 33 percent, almost 34 percent, I should say.
European stocks remain near record highs as well today. U.K. stocks are trading mostly higher as the British Parliament gets that for that historic
vote on Brexit.
Brexit is sure to be one of the key market and geopolitical stories of 2020 and we will monitor the action in the Parliament throughout today's show.
Brexit isn't the only big story coming out of the U.K. today. We have changing of the guard at the Bank of England and where we begin today's
drivers. Andrew Bailey has been appointed as the next Bank of England Governor. He will take over the top job from Mark Carney in March. Hadas
Gold joins us live now.
So, Hadas, just walk us through who exactly Bailey is. He has been described as a safe pair of hands. And just talk to us a bit more about
his background as a regulator at the F.C.A.
HADAS GOLD, CNN BUSINESS REPORTER: Yes, so Andrew Bailey has been with the bank since the 1980s or so. He is 60 years old. He will be the 121st
Governor of the Bank of England. Of course, he takes over from Mark Carney who was asked to extend his reign three times because of all the
uncertainty around Brexit.
But now, Andrew Bailey will take over in March and as you said, he is seen as experienced and steady. He comes to this job as the head of the
Financial Conduct Authority, which is, of course, the regulator, somebody who has been very busy in the last few years.
And he was also previously the Chief Executive for the Prudential Regulatory Authority, which is another part of the U.K. Central Bank. So
he has a lot of experience within the operation.
He is seen as a safe person, not any sort of Maverick, somebody with a steady hand. I have seen some reports that part of the search into who
should be the next Governor of the Bank of England had to do with their positions on Brexit and that some other candidates actually were discounted
because they came out against Brexit. We haven't seen such comments coming from Andrew Bailey.
There has been some criticism of him in how he has led the F.C.A. over the years, especially regarding the Royal Bank of Scotland. And also, people
aren't really sure how to take him. They don't know whether he is a hawk or a dove. He has never sat on the committee that set the interest rates.
But interestingly enough, one of the other criticism about him is not so much about him personally, but the decision to choose him is that he is a
he. There are more people on the committee that sets interest rates who are named Andrew now than there are women.
But Andrew Bailey comes in at a very important and sensitive time, of course for the bank with Brexit coming up, and also just in the last 24
hours, we heard the news about that audio hack where hedge fund managers were getting almost an eight-second ahead of everybody else when it came to
press conferences from the Bank of England and how that managed to get out.
Actually, that was referred to the F.C.A. under Andrew Bailey, and so there is a lot for him to do in his first few months as the head of the Bank of
England.
ASHER: Yes, you and I were talking about that story in detail yesterday. So just talk -- I mean, I know that Mark Carney is going to be staying on
until March. He is going to be going through this transition period to help Bailey, but just walk us through what Carney's legacy is going to be.
He joined in 2013 and his entire stay at the Bank of England has obviously been shaped by the uncertainty surrounding Brexit after the 2016
referendum.
[09:05:00]
GOLD: Yes, the uncertainties surrounding Brexit and trying to lead the bank through, and of course the fact that he was asked to stay on three
times. He was supposed to leave in 2018, and then he ended up staying on three more times longer because of Brexit.
And it will be very important for the government here, for Boris Johnson to have somebody leading the Bank of England who is on the same page as they
are. And I think that is part of why Andrew Bailey was chosen. He is not seen as any sort of Maverick, somebody who is going to shake things up.
Sort of a steady hand to see them through, but somebody who is not necessarily against or at least has not spoken publicly against Brexit
because there is a lot at stake here.
We do -- we are still facing that cliff edge of a December 2020 departure on WTO terms without any sort of trade deals with the E.U. or with other
countries. That's a lot on the plate, something that the bank -- that the Governor of the Bank of England is going to have to be working closely with
the government on.
ASHER: All right, Hadas Gold live for us. Thank you so much. All right. Call it the gift that keeps on giving. The U.S. and China signed off on
that Phase 1 trade deal one week ago and U.S. stocks have been rising to records ever since.
In the meantime, the North American trade deal looks all but certain to be signed into law early next year and a brand new CNN poll shows the U.S.
economy is getting high marks from Americans.
Christine Romans joins us live now. So, Christine, just in terms of that poll, we know that 76 percent -- 76 percent rate of Americans, rather, rate
the economy in favorable terms. You think about just how strong the U.S. consumer is, you think about unemployment being as low as it is in this
country. And really stocks, we have just been talking this morning about stocks being at record highs.
What does that mean for President Trump going into the election next year?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: It means the economy is an advantage for the President, no question. Look, and I kind
of take a longer view on this, Zain, too. I feel like time heals all wounds and 10 years after the Great Recession, Americans today finally
believe that the economy is good.
Those numbers that you just showed are the best since February 2001, the best share of Americans believing the economy is good since 2001. That's
really remarkable. Back then, it was 80 percent felt like it was good.
And remember that turned out to be a bubble, by the way, too. So keep that in mind there. But you have two things here. You have time. You also
have a President with a bullish megaphone that he uses a lot.
You know, so much of market psychology and consumer psychology is confidence, and this President has a surplus of confidence, right? Ten
years into the recovery, the President takes credit for what's happening and he keeps telling people things are good, things are good, things are
good.
You know, we have a trade war with China that is simmering, but not boiling heading into the end of the year. You're right about the Fed rate cuts,
and S&P 500 that's up 27 percent this year.
So a lot of things kind of lining up to say this is a solid end of the year and on a steady footing for next year. We learned this morning that the
economic growth rate in this country is just 2.1 percent. That's fine. That's fine. It's not the three, four, five, six percent the President
promised that his rollbacks of regulations and his tax cuts would foster, right? But it is fine and it's a fine footing heading into next year's --
Zain.
ASHER: And Treasury Secretary, Steve Mnuchin talks about the Phase 1 trade deal between the U.S. and China being signed early next year. Why is the
market okay? Why has the market accepted the sort of piecemeal trade agreement instead of a full-on trade agreement between the U.S. and China
that you know, goes on and fits and starts? Why is that okay?
ROMANS: It's okay that it's not escalating anymore. And that's what they're so happy about. That you don't have the December tariffs that the
President threatened. They rolled back a little bit of September tariffs, cut the tariffs rates on those. They're happy about the Ag purchases.
But I think you're right to point out, Zain that there could be some real risk into next year. People around the trade discussions in the trade
world have been saying that they're not sure when, where and if they'll be assigning because the Chinese don't want to look as if they gave up too
much and didn't give enough. They have their own internal politics to be concerned about.
We have seen the title pages, the names of the title pages, but we haven't seen the text yet of this agreement. So it seems as though there's work to
be done. Although, Robert Lighthizer is an honorable person. Both sides say that they've been -- the USMCA talk in particular, they say this is an
honorable guy, a fair negotiator. And he says that that deal is done and will get done early next year.
But all of the real hard stuff has been left, right? I mean, this was the low hanging fruit that was picked and it took almost two years to do it.
So there's still is a lot of work and I would say a lot of risk in the U.S.-China relationship next year.
ASHER: All right, Christine Romans live for us. Thank you so much.
ROMANS: You're welcome.
ASHER: Disney is hoping to add one more billion dollar hit to stash of six this year and is looking for it in a galaxy that is far, far away. The
final installment of "Star Wars: The Rise of Skywalker" is out today here in the United States.
The question is, is the force strong with this one? Let's bring in Frank Pallotta. So Frank, you've actually seen it. What are your thoughts?
FRANK PALLOTTA, CNN MEDIA REPORTER: I did. I thought it was an enjoyable time. The critics do not agree.
ASHER: No.
PALLOTTA: It has a 58 percent score on Rotten Tomatoes. That's one of the worst scores for a "Star Wars" film, one of the worst since "The Phantom
Menace" in 1999.
[09:10:12]
PALLOTTA: But I think it's an enjoyable movie, a nice two-hour movie. But you also have to understand there's a difference between movie that is
enjoyable and fine and a movie that is good. I think this is closer to the enjoyable and fine aspect.
ASHER: So does it even matter for Disney, do you think?
PALLOTTA: I don't think so, and that's for two reasons. One, this brand has such a fervent fan base, that I think they'll show up no matter if it
was a zero percent score. I think they want to see how this movie is going to end. This is billed as the final conclusion of the Skywalker saga, the
ninth film in this long series dating back to 1977.
Disney has it projected to make around $160 million, but that's on the low end. Most box office analysts have it from $175 million to a little bit
more than $200 million. That's where I think it'll end up.
And the second reason that it doesn't it really truly matter how much is movie makes this weekend is because Disney has had an amazing year. This
is just really the icing on the cake. As you said, this will likely be the seventh billion dollar film for the movie itself, and if the movie doesn't
really work out, we have about three more years until the next one, and we have hits like "The Mandalorian" on Disney Plus, the streaming service.
ASHER: Frank Pallotta, live for us. Thank you so much.
Okay, so these are the stories making headlines around the world. Congress is heading home for the holidays leaving a timeline for President Trump's
impeachment trial up in the air. House Majority Leader Nancy Pelosi is refusing to transmit the Articles of Impeachment to the Senate citing
concerns that there won't be a fair trial under Senate Majority Leader Mitch McConnell.
And the U.S. Democrats will only attack at the latest presidential debate. One of the more contentious issues was that of fundraising and big money
donors. The topic fueling this fiery exchange between Senator Elizabeth Warren and Mayor Pete Buttigieg.
All right. And the U.K. Parliament is set to vote on the European Union Withdrawal Bill as a key part of the Brexit process. If the Bill passes is
it is expected to do, it clears the way for Prime Minister Boris Johnson to take the U.K. out of the E.U. by January 31st.
All right, still to come here on FIRST MOVE, the Amazon jungle. We bring you an exclusive investigation into the e-commerce giant's frightening
wealth of fakes. That story next.
(COMMERCIAL BREAK)
[09:15:39]
ASHER: All right, news just in. The Buckingham Palace says that Prince Philip has been admitted to hospital. The Palace says the 98-year-old is
being treated for a preexisting condition. The husband of Queen Elizabeth is being kept under observation at the hospital in London. We will bring
you more on this story as and when we get it.
All right, let's take a look at another check of the markets. Futures have actually strengthened a bit over the past hour or so. It's now looking
like a modestly higher open. Tech stocks are set to rise about a quarter of a percent, and all the major averages are poised to rise to new records.
Crude oil is a little changed right now. But Brent has been on track to rise for the seventh straight session. It is sitting near three-month
highs. Crude has risen on hopes that the just completed U.S.-China trade deal, at least Phase 1 of it will boost global growth.
Christopher Smart joins us live now. He is the Chief Global Strategist at the Barings Investment Institute. Thank you so much for joining us. So
this bull market, Christopher is very, very old. What are your thoughts on how much room it has to run and the likelihood or not of a recession going
into next year or the year after?
CHRISTOPHER SMART, CHIEF GLOBAL STRATEGIST, BARINGS INVESTMENT INSTITUTE: I think if we remember back to last December, it sure is a big contrast.
Last year, I think we thought the world was coming unglued, or at least markets were certainly coming unglued. And you compare that to this year
where the consensus is, we're headed for a year of slow growth, low inflation and some accommodation from Central Banks which were all sort of
pulling in the right direction. ' I think the difficulty for investors is that it has that ring of the old cowboy movies, is that it's a little too quiet out there and the picture is
a little too good. Particularly when you look at how markets have run over the last month. You know, if we've had the S&P, you know, unless something
terrible happens next week, it will be up 27 to 28 percent for the year.
Good numbers in Europe and China. Even Japan is up in the high teens, I think this year. So the dilemma for investors is how much of that is
already priced in and what are the risks that remain on the horizon for next year.
ASHER: Risks possibly being the trade deal. Obviously, Steve Mnuchin has come out and said that the Phase 1 trade deal between the U.S. and China
will likely be signed early next year. But that doesn't mean that trade tensions are going to go away, in fact, far from it.
SMART: No, indeed. I think, you know, the U.S.-China relationship is going to define a lot of what goes on in the global economy for years and
maybe decades to come, and it's going to be a very difficult and contentious relationship.
What we've seen this month, we think -- we haven't seen the text of the deal yet -- but that both sides have decided to refrain from escalation in
the near term. And that is obviously a relief to markets.
But the threat of tariffs of other sanctions, all of the issues surrounding the tech supply chains on both sides, those remain and indeed I think, may
even become more complex to arrange, to resolve or to engage on just because the feelings on both sides are so bruised and the leverage is so
limited on the U.S. side.
If we take tariffs off now for example, what is it that we have to offer either as a carrot or a stick for the Chinese to move forward on reforms
that we think are important for the long run.
ASHER: The fact that Brexit is now, I mean, all but a certainty. The UK is going to leave the E.U. on January 31st next year. What does that mean
-- I mean, after so much uncertainty over the past several years, what does that mean for the outlook of Europe going forward, do you think?
SMART: I think for the U.K., it's obviously been a very tumultuous and painful debate over the last couple of years. But I think for those of us
who look at it from the outside, the relationship between Britain and the European Union is unlikely to change dramatically over the next several
years.
I think it will be very much the way it has been, maybe with a lot more expense or complex legal mechanisms that businesses will have to create in
order to cross the two divides, but I think the regulatory arrangements within Britain will have to remain aligned with the European Union in order
for that market to continue to function the way it has over the last several years.
So I think politically, you know, it's probably a good thing that the decision is made, that it is passed and that the U.K. can get back to the
thinking about the broader issues that it has to confront as it reforms its economy and moves forward.
[09:20:16]
ASHER: We just had a poll that I was just speaking about with another correspondent, Christine Romans, 76 percent of Americans actually see the
economy as favorable right now. What sort of impact do you think that will have on next year's elections? And what sort of impact will the elections
have on the economy?
SMART: Well, of course, you know, Americans are congenitally optimistic. I think it's something in the water or in our blood or, you know, we're
always ready for a brighter future. We're always ready to spend a little bit more on our credit cards than we could probably afford.
I think, we obviously see very strong numbers for the consumer. You mentioned those. We just had a good consumption -- personal consumption
number out this morning, which was very positive.
I think the good news in the stock market, the good news in the housing market will all feed through into that optimism. I think it is a big
question. Generally, it has been the case that good economic news and strong consumer sentiment benefits the incumbent in the White House and
that has always been the case.
I think what is different this time is that this particular incumbent still has very low -- historically low personal approval ratings across the
board, and so the question will be whether voters opt for traditional response as what they always have had, or whether this is a different
moment in time and I think that's what we'll all be watching.
ASHER: All right, Christopher Smart live for us there. Thank you so much. All right, still to come here on FIRST MOVE, Boeing's spacecraft has made
it into orbit, but it's in the wrong place. I'll explain the details after the break.
(COMMERCIAL BREAK)
ASHER: Boeing successfully launched an unmanned spacecraft into orbit this morning, however, the Skyliner spaceship encountered complications shortly
after launch. The craft was supposed to reorient towards the International Space Station about half an hour after takeoff. But that process went
south slightly.
The spaceship is now off the orbit that would have put it on course to reach the International Space Station on Saturday morning. The mission was
supposed to be the final major test before the Starliner was clear to fly NASA's astronauts.
Nike has seen its earnings sprint past the finish line as it beat expectation this quarter, but disappointing North America sales hit shares
overnight. So Paul La Monica is joining us live now. So Paul, just walk us through this. They did well just in terms of overall revenue and sales.
But specifically, they struggled or they missed ever so slightly, I should say, in North America. Why was that?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, sales were still up in North America, but they were just slightly below forecast and Zain, I think that
investors need to definitely put everything in perspective here.
Nike has had an amazing year. This is a stock that's up about 35 percent or so. Not far from a record high. So this is just a mild blip on an
otherwise great quarter because earnings and revenue did beat forecast.
[09:25:07]
LA MONICA: You mentioned China, despite concerns about the trade war and Hong Kong protests, China's sales were up nearly 25 percent from a year
ago. So this is a company that is obviously doing extremely well right now and about to undergo a pretty significant management transition because
Mark Parker is going to be stepping down as CEO. He will remain the Executive Chairman, but he is handing over the reins or the shoes as they
were to John Donahoe, a Board member that used to be the CEO of eBay, and he is now going to take over Nike.
ASHER: So in terms of online sales, more specifically, how has Nike done especially just given that we had a Black Friday, just --
LA MONICA: Yes. Nike has done a pretty good job of morphing to a digital strategy. They have the SNKRS, the sneakers app that has become pretty
popular with younger users and that is something that they're going to be driving I think more traffic to and getting more revenue from, as you know,
the years go on.
Because obviously any retail company and consumer products company has to have a mobile and online strategy. And I think Nike has been pretty adept
at getting its online strategy into place, and it's doing pretty well. It's been a very big success for the company so far.
ASHER: All right. Paul La Monica live for us there. Thank you so much. Appreciate it.
Okay, so up next, getting Brexit done. U.K. lawmakers look set to pass Boris Johnson's deal in their last session before the Christmas break. We
will bring you live coverage after this.
(COMMERCIAL BREAK)
[09:30:00]
ASHER: Welcome back to FIRST MOVE. I am Zain Asher. What you just heard there was the opening bell on Wall Street on this Friday. As expected,
we've got a higher open for stocks on this last trading day of the week.
Stocks are rising to new records and are set to post their fourth straight week of gains. Before the bell, we got a final look at how the economy did
in the third quarter. GDP rose 2.1 percent. That is unchanged from a previous reading. That said, consumer spending came in stronger than
previous estimates as well. Corporate profits came in weaker.
The latest reading from the Atlanta Fed shows GDP growth in the current quarter trending at around two percent as well as.
Let's get a check of the Global Movers. Nike shares are falling as we've been reporting. Earnings and revenues beat expectations, but the key issue
for them was North American sales came in a bit weaker than expected.
That said, the company's Jordan brand remains a slam dunk. The popular line of shoes and athletic wear had its first ever $1 billion quarter.
Tesla's big December rally shows no signs of slowing. Shares of the electric car company are in record territory for a third straight session.
Shares have risen more than 50 percent since posting it surprise third quarter profit in October.
And shares of Carmax are trading lower. The auto retailer is reporting better than expected third quarter sales numbers, but earnings came in
weaker than expected. Carmax is blaming higher ad costs for its weak profit performance.
As we speak, U.K. lawmakers are voting on the Prime Minister's Brexit deal after an election that delivered Boris Johnson a majority in the House of
Commons. It looks pretty much certain that it will pass.
Nic Robertson is joining us live now. So Nic, just walk us through what's in this bill, especially when compared to previous iterations.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, I think the big headline thing that most people are pointing towards the biggest change is
that what Boris Johnson is saying, so for the next phase of Brexit, the negotiating the future trade deal with the European Union here is going to
-- and this bill will do it -- will start to enshrine it in law that there'll be no extension on that next phase and also this Withdrawal
Agreement Bill also removes past legislation that has been used for extensions.
Now, that's -- it's sort of seen as a tidying up act. But the clear message here is from the Prime Minister and will become more than a
message, it will become a legal certainty, because this is expected to pass. That the Prime Minister is setting himself essentially 11 months to
negotiate what we've heard from opposition MPs today saying is way too short of a time to negotiate a trade deal with the European Union.
But the Prime Minister, as we saw him already, he will use this deadline to focus minds and get the deal done, and this will be by the end of December
next year and I think that's the biggest headline. There's been concerns that legislation has been taken out of the bill that would enshrine some
workers' rights.
ASHER: All right, Nic, just standby there. Let's listen in.
LINDSAY HOYLE, SPEAKER, HOUSE OF COMMONS: Order. Order.
UNIDENTIFIED MALE: The ayes to the right, 358. The no's to the left, 234.
HOYLE: The ayes to the right were 358, the no's to the left were 234. So the ayes have it. The ayes have it.
Program motion moved formally.
UNIDENTIFIED MALE: I beg to move.
HOYLE: The question is as on the order papers, have any of them have opinion, say aye.
AUDIENCE: Aye.
HOYLE: The contrary, no?
AUDIENCE: No.
HOYLE: Division.
ROBERTSON: So it all sounds unruly, but the very clear decision there, the majority that Boris Johnson had of 80 very clearly ruling in favor of this
Brexit vote, of course, further deliberation and further -- another reading goes to further scrutiny at this stage in additional sessions.
But I think what's most striking here is -- and I think there was a sort of a -- you could hear almost a pause, a quiet pause, in the chamber there as
the numbers were announced because the ayes, those voting for it were 358. The Conservative Party has 365 MPs.
[09:35:04]
ROBERTSON: The Prime Minister and the understanding was had the full support of all Conservative MPs before they even stood in this election,
that they would support the Withdrawal Agreement Bill.
The implication here is that not all Conservative MPs have voted in favor of the bill. Now, we'll get the details on that over the next few minutes
to see who has voted, who has voted aye and who has voted no.
Interesting as well, there's clearly been a number of abstentions here. Six hundred and fifty potential votes minus 11. So clearly, a number of
people have chosen not to vote. And I think it's going to be very interesting as well to see the breakdown of who has chosen not to vote and
figure out why, and also those who have voted no.
The large number of Scottish MPs, it appears all the Northern Irish MPs will have voted no in this or abstained.
So this is perhaps, a slightly troubling sign for the Prime Minister that he doesn't have all of his new MPs in line, perhaps we're going to learn a
little bit more about that as we as we get into further discussion in Parliament here.
ASHER: And Nic, just in terms of next year, we know that the pressure is on for the Prime Minister in terms of securing a deal in the next 11
months. What have the E.U. said about that strict, tight timeline?
ROBERTSON: Well, Michel Barnier, the Chief Negotiator for the European Union has said very clearly that he thinks that's too short a period. And,
you know, that's what the critics in the opposition parties are laying at the Prime Minister's door right now.
ASHER: Nic, if you could standby, so we can listen in. All right, so Nic, just walk us through what the key priorities will be as we enter into the
implementation period. What are your thoughts on that?
ROBERTSON: Well, so there's -- the period now having agreed to the Withdrawal Agreement Bill, now there comes the process through Parliament
of turning it into legislation that the Prime Minister says he will get done by the 31st of December -- 31st of January, rather, than next year.
And that doesn't seem to be too ambitious.
Again, he has the majority to get the votes. And I think that month period is broadly accepted as long enough. We know that there's going to be a
Brexit budget into February that will be important for the government.
Most important though will be this upcoming negotiation and the argument that the government has been making is that on this, if you sort of unpack
the future trade relationship, much of it is sort of already seen as ready to go. That there are only a relatively small number of areas where
agreement has to be struck.
However, these will be substantial, and that's where the critics comment that as Britain moves away from regulatory alignment with the European
Union, therefore it's not going to be as easy to trade across these borders that have until now been open.
So how the mechanics and the decisions there take place, that's going to be the sort of critical area for the Prime Minister. And it's also very
clear, he is going to face a lot of internal pushback, particularly from Northern Ireland, and particularly from Scotland.
But the coming year will be absolutely critical for the Prime Minister. He will be judged on the success of his negotiation over that period with the
European Union, but he is also going to be judged internally on all the other commitments he made during the election.
ASHER: All right. Nic Robertson, live for us there. Thank you so much.
All right, coming up here on FIRST MOVE. Our special investigation into counterfeit on Amazon. Copycat products that could be endangering the
children who use them. That's next.
(COMMERCIAL BREAK)
[09:42:03]
ASHER: A car seat that fractured on impact. Infant sleep sacks with zippers falling off. Toy putty with dangerously strong magnets. In a
months' long investigation, CNN found fake and dangerous baby products are turning up for sale on Amazon, the world's largest e-commerce site. Clare
Sebastian has more.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): In a simulated 30 mile per hour collision, this infant car seat lurches forward and
fractures near the seatbelt part, sending shards of plastic into the air failing a standard test required under U.S. Federal Safety Regulations.
This is where we bought that car seat. On Amazon. Part of an alarming trend. Copycat or counterfeit versions of popular children's products
turning up for sale, unchecked, unregulated, and in this case, potentially unsafe.
The seat we purchased is designed to look like a Doona, a sought after brand of car seat that folds out into a stroller. The Amazon listing even
used some of Doona's own promotional images, and it's about $200.00 cheaper than the real thing.
Two pediatricians who watched this video told us a child in the seat would have been at serious risk of head and neck injuries. We also showed the
results to Doona.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: It's unbelievable to see how a product that looks very much like ours performs completely different in a crash test.
(END VIDEO CLIP)
SEBASTIAN (voice over): We did put a genuine Doona through the exact same crash test in the same lab. It remained intact meeting Federal standards.
Doona says this isn't just an Amazon problem. It's been working with various e-commerce platforms for more than two years now to take down
counterfeit products.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We've taken down just this year more than 40 pages, which had infringing products or fake products just on the Amazon platform
alone.
And if you assume that each one of these pages is out for, you know, three to seven days, then you're talking about a good period of the year in which
fake products, dangerous products are being sold on Amazon.
(END VIDEO CLIP)
SEBASTIAN (voice over): Shortly after we purchased the fake car seats in October, the Amazon listing was taken down.
SEBASTIAN (on camera): After seeing our crash test report, Amazon e-mailed customers who had bought the product urging them to stop using it
immediately and offering a full refund.
We reached the seller, a company based in China called Strollex by phone, a man who refused to identify himself told us quote, "My products are safe,"
and then refused to answer any more questions.
SEBASTIAN (voice over): An Amazon spokesperson told us, "Safety is a top priority at Amazon. We require all products offered in our store to comply
with applicable laws and regulations and have developed industry-leading tools to prevent unsafe or non-compliant products from being listed in our
stores."
Amazon says they regularly contact sellers requesting safety documentation. However, they would not confirm whether they requested those documents
before a product is first listed on the platform.
SEBASTIAN (on camera): We've spoken to seven different baby and children's brands selling on Amazon, all of whom tell us they face a constant game of
whack-a-mole when it comes to counterfeit and copycat versions of their products on the site, and it's hurting their businesses.
[09:45:06]
SEBASTIAN (on camera): Several of them also tell us they have safety concerns.
SEBASTIAN (voice over): The U.S. distributor of these popular infant swaddles told us one customer contacted them about a fake - that the
zippers were falling off -- a serious choking hazard for an infant.
The manufacture of this white noise machine, the babyshusher designed to help infants sleep, since they have had multiple complaints from customers
who it turned out had bought fakes. One customer bought the product last year told us it fell apart when she tried to change the battery.
Amazon says they strictly prohibit counterfeits and told us, these are isolated incidents. They're investigating and will take appropriate action
against the sellers involved.
SEBASTIAN (on camera): Part of the issue is that consumers look at Amazon as a trusted retailer. But most of the items sold on Amazon are not
actually sold by Amazon. In 2018, fifty eight percent of the company's sales came from third-party sellers and in categories, including toys and
baby products you don't even need specific approval from Amazon to list your products on the site and start selling.
SEBASTIAN (voice over): Amazon has stepped up its efforts against counterfeits. In 2017, they introduced the Brand Registry, a free program,
which allows companies to register logos and other trademarked items to help detect fakes.
They also have Transparency which requires companies to label each unit they produce with a unique code at the manufacturer's expense, which Amazon
will then track.
And earlier this year, they launched Project Zero which is a self-service tool for brands to remove counterfeits relying on artificial intelligence.
Sellers tell us it's not enough.
In Norristown, Pennsylvania, Aaron Muderick keeps a wall of shame of imitation and counterfeit versions of his popular putty purchased from
online platforms.
This one he says not only violated his thinking putty trademark, it's also potentially dangerous.
(BEGIN VIDEO CLIP)
AARON MUDERICK, FOUNDER, CRAZY AARON'S: This is the bad one. There it is.
SEBASTIAN: Oh my goodness.
MUDERICK: So you could see how easily that could be ingested. And it's extremely powerful.
SEBASTIAN: And this is banned in the U.S.
MUDERICK: It's banned worldwide.
(END VIDEO CLIP)
SEBASTIAN (voice over): And Crazy Aaron's fighting fakes and copycats is now part of the cost of doing business. Lily who runs their reception also
spends 15 to 20 hours a week policing Amazon and other e-commerce platforms for violations.
(BEGIN VIDEO CLIP)
MUDERICK: So with Amazon, you don't really speak directly to a person, you submit a form. And generally, we would submit a form that said, this is a
clear trademark violation, and they would respond and they would take it down, but then it just be appears.
(END VIDEO CLIP)
SEBASTIAN (voice over): And they can't afford to let that happen. Muderick estimates copycat versions of his products on e-commerce platforms
have shaved between 10 and 30 percent of his sales.
Amazon says it works hard to support the small and medium-sized businesses selling on its platform. However, it also told us, quote, "Sellers are
responsible for meeting Amazon's high bar for product quality." And that's significant.
(BEGIN VIDEO CLIP)
JASON DRANGEL, INTELLECTUAL PROPERTY LAWYER: There's a case called Tiffany v. eBay, which basically establish that, you know, platform sellers are
sort of have a safe harbor and are not liable for infringement.
(END VIDEO CLIP)
SEBASTIAN (voice over): In 2010, an appeals court ruled eBay was not responsible for the third-party sellers of ring fake Tiffany products on
its platform because they didn't see or inspect the products being sold.
(BEGIN VIDEO CLIP)
DRANGEL: The platforms that exists now, basically control the products. They understand the products coming from a specific country, from a
specific seller located in China. It's a different world.
This is an authentic Baby Shark product.
(END VIDEO CLIP)
SEBASTIAN (voice over): Jason Drangel has been working with the toy industry on counterfeiting cases for 15 years. He now represents some of
the biggest toy companies in the U.S. and deals regularly with online platforms.
(BEGIN VIDEO CLIP)
SEBASTIAN (on camera): Are you worried that it's going to take a serious incident of a child getting injured for something to really be done about
this?
DRANGEL: Yes, I mean, I'm actually shocked it hasn't happened already given the severity of the problem.
(END VIDEO CLIP)
SEBASTIAN (voice over): Consumers can also do their part.
(BEGIN VIDEO CLIP)
DRANGEL: For the most part, if you are buying products on platform and the price is too good to be true, it's too good to be true.
(END VIDEO CLIP)
SEBASTIAN (voice over): Look closely at who is selling something. On Amazon, the seller's name is not here, it's here. In this case, Piccolino
Baby is an authorized seller of Doona. But if you're not sure if the seller is authorized, contact the manufacturer to check.
And once the product is delivered, stay vigilant.
SEBASTIAN (on camera): There's a lot of tape.
UNIDENTIFIED FEMALE: A lot of tape.
SEBASTIAN (voice over): Even before crash testing our car seat, we had Alisa Baer, a pediatrician and car seat expert take a closer look.
(BEGIN VIDEO CLIP)
ALISA BAER, CHILD PASSENGER SAFETY INSTRUCTOR: Finding the instructions in a language that's not appropriate for the country where it's being sent, so
this appears to be Chinese.
SEBASTIAN: Definitely.
BAER: That would be a red flag. If you look here it says, aiways, not always.
(END VIDEO CLIP)
SEBASTIAN (on camera): One of the brands we spoke to are still selling their products on Amazon. Many have told us the company's dominance over
online retail means they simply can't afford not to. And as e-commerce provides a global opportunity for their brands, it has also created a
dangerous loophole for fakes.
Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
[09:50:10]
ASHER: Great reporting by our Clare Sebastian there. All right, still to come, we will give you a bit more detail on that Withdrawal Agreement Bill
that was just voted in Parliament with our Nic Robertson after the break.
(COMMERCIAL BREAK)
HOYLE: Order. Order.
UNIDENTIFIED MALE: The ayes to the right, 358. The no's to the left, 234.
HOYLE: The ayes to the right were 358. The no's to the left were 234. So the ayes have it. The ayes have it.
ASHER: Moments ago, the new U.K. Parliament approved the Prime Minister's Brexit deal by a decisive majority. Nic Robertson joins us live now.
So Nic, just walk us through what's next in terms of this Bill facing a bit more scrutiny in the House of Lords.
ROBERTSON: Yes, it'll go through the third reading, if you will. It'll go to the House of Lords. It will get further scrutiny in the Commons. There
may be suggestions of amendments put forward. This will get further discussion today, but it is going to go into January, another three days
are set aside in early January to discuss the Withdrawal Agreement Bill.
But I think everyone expects at this stage, the government has such a significant majority that this passed easily, just now. This is really a
big victory for Boris Johnson not just the election, but this was what comes with an election with a landslide with the magnitude that the
Conservatives got.
So I don't think anyone is worried now that as it goes through its next stages that there's going to be anything that's going to trip it up.
Obviously, it's not done till it's done. But you heard, just in the clip we were playing at the top, in the last sort of comments off camera, if you
will, in the back of the net, you know, British sort of soccer reference there. The goal is scored and really that that's it in essence. Yes, it
will go to for further reading. But no one is expecting it to fall down at that reading.
ASHER: And just in terms of some of the changes that were made here, we know that some of the previous concessions were removed from this,
particularly with there being now less parliamentary scrutiny and now the government being able to negotiate with the E.U. without necessarily sort
of interference by U.K. lawmakers. Just walk us through some of the concessions that were removed here.
ROBERTSON: One of the parts about negotiating the future relationship with the European Union, the current deadline to get that done is December next
year, 31st of December 2020.
[09:55:11]
ROBERTSON: But part of the agreement with the European Union on negotiating that was that Parliament or the European Union could decide in
the summer of next year to extend that period, to extend the period of negotiation and what Boris Johnson has done now is to put that into law
that that can't happen, that there will be no extension.
And of course, this is what plagued Theresa May, the previous Prime Minister and plagued him as he tried to, you know, negotiate the first
phase of the Brexit deal with the Withdrawal Agreement Bill that was, you know, that Parliament stopped him working to the timetable he wanted and is
now going to make it impossible for Parliament to do that -- deny them that level of scrutiny or control in essence.
And it is been criticized, he was criticized by the Shadow Brexit Minister, Keir Starmer from the Labour Party saying that this was -- this was too
short a period of time.
ASHER: All right, Nic Robertson, live for us there. Thank you so much. And we'll have much more this next hour.
That's it for the show. Thank you so much for watching. I'm Zain Asher. Lynda Kincaid will have more on the Brexit vote after the break.
(COMMERCIAL BREAK)
END
