In the news: Apple receives a patent violation ruling, labor groups criticize Disney for its suppliers' working conditions and the CSRC gets tough on IPOs

Labor groups criticize Disney

Chinese labor groups have criticized Walt Disney Co over conditions at a small number of its local suppliers, emphasizing long hours and low wages, high injury rates due to old machinery and lack of training and protective equipment, and health risks from exposure to chemicals and dust, as well as inadequate audits of working conditions. Disney opened its $5.5 billion theme park in Shanghai on Thursday, and said it would take any labor regulation violations seriously and investigate any allegations against its suppliers. Our sibling publication The American Lawyer has covered some of the headaches Disney is experiencing back home in the U.S., and the company's working up to the China debut of its Magic Kingdom—a complex contract with state-owned Shanghai Shendi Group that required Disney to hand over 57% of the venture—has added to the workload. MNCs in China have little control over the operations of their local partners and suppliers, which are independent businesses themselves. The growing concern and unrest over work safety and labor conditions, however, do call for an increased focus on compliance. Media labeling and potential reputational damage make MNCs take responsibility for their business partners as well. Disney has said it will assist these facilities in remediation efforts and comply with regulations.

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CSRC further tightens IPO rules

The China Securities Regulatory Commission (CSRC) has tightened the scrutiny on initial public offerings (IPOs), vowing to eliminate any unqualified new share issues by companies. It terminated its review of 17 IPO applications submitted between January and May, for reasons including unclear shareholder capital origins, incomplete information disclosure and substantial profit decline or losses. The CSRC will look into IPO fraud by companies that attempt to whitewash their financial accounts to gain approval and fail to provide proper information to investors, a spokesman for the regulator said. The CSRC has delayed the launch of the registration-based IPO mechanism, which will replace the existing approval procedure, and it has a lot to get in order before rolling out a truly market-oriented stock market. On Friday it updated rules for listed firms' asset restructurings to regulate backdoor listings, a move aimed at decreasing speculative trading of shell companies. The new regulations also extend the stock lockup period for new shareholders to 24 months and ban listed companies with any violations in the past three years from selling assets. The measures help, but it's important to bear in mind that 90% of China's stock investors are individuals, compared with 10% in the U.S., making it a much more volatile market.

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Beijing IP Office rules against Apple

The Beijing Intellectual Property Office has slapped Apple Inc. with a patent violation on the iPhone 6 and iPhone 6 Plus, ruling in favor of a small local company. The IP office said on Friday the two iPhone models infringe on design patent rights due to similarities to Shenzhen Baili's 100C phone. Apple said it has appealed an administrative order from a regional patent tribunal in Beijing that is pending review by the Beijing IP court. Many have jumped on the move as another big setback for Cupertino, California-based Apple, especially as it follows regulators blocking the iTunes book and movie services in April, and the Beijing court allowing a local accessories maker to continue using the iPhone trademark for its leather purses last month. All of Apple's iPhones are still available for sale in China, and though this is an administrative order (and only covers Beijing), many court decisions that have ruled in favor of local companies against MNCs have been overturned at higher levels.

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Labor groups criticize Disney

Chinese labor groups have criticized Walt Disney Co over conditions at a small number of its local suppliers, emphasizing long hours and low wages, high injury rates due to old machinery and lack of training and protective equipment, and health risks from exposure to chemicals and dust, as well as inadequate audits of working conditions. Disney opened its $5.5 billion theme park in Shanghai on Thursday, and said it would take any labor regulation violations seriously and investigate any allegations against its suppliers. Our sibling publication The American Lawyer has covered some of the headaches Disney is experiencing back home in the U.S., and the company's working up to the China debut of its Magic Kingdom—a complex contract with state-owned Shanghai Shendi Group that required Disney to hand over 57% of the venture—has added to the workload. MNCs in China have little control over the operations of their local partners and suppliers, which are independent businesses themselves. The growing concern and unrest over work safety and labor conditions, however, do call for an increased focus on compliance. Media labeling and potential reputational damage make MNCs take responsibility for their business partners as well. Disney has said it will assist these facilities in remediation efforts and comply with regulations.

More from CLP:

Daimler in-house interview: Driving compliance forward
Corporate social insurance payments lowered
The best ways to handle large-scale layoffs
Why workers' insurance matters

CSRC further tightens IPO rules

The China Securities Regulatory Commission (CSRC) has tightened the scrutiny on initial public offerings (IPOs), vowing to eliminate any unqualified new share issues by companies. It terminated its review of 17 IPO applications submitted between January and May, for reasons including unclear shareholder capital origins, incomplete information disclosure and substantial profit decline or losses. The CSRC will look into IPO fraud by companies that attempt to whitewash their financial accounts to gain approval and fail to provide proper information to investors, a spokesman for the regulator said. The CSRC has delayed the launch of the registration-based IPO mechanism, which will replace the existing approval procedure, and it has a lot to get in order before rolling out a truly market-oriented stock market. On Friday it updated rules for listed firms' asset restructurings to regulate backdoor listings, a move aimed at decreasing speculative trading of shell companies. The new regulations also extend the stock lockup period for new shareholders to 24 months and ban listed companies with any violations in the past three years from selling assets. The measures help, but it's important to bear in mind that 90% of China's stock investors are individuals, compared with 10% in the U.S., making it a much more volatile market.

More from CLP:

Measures for the Administration of Material Asset Restructurings by Listed Companies
China overhauls cross-border financing regime
Opinion: China's financial markets enter global arena
Opinions on the Application of Articles 14 and 44 of the «Measures for the Administration of Material Asset Restructurings by Listed Companies»: Opinions on the Application of Securities and Futures Laws No.12