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Greater use of artificial intelligence by companies fuels privacy concerns

Last month, millions of people across the world watched themselves swap places with actor Leonardo DiCaprio in the film Titanic — all it took was a photo of their face.

The Chinese app Zao went viral but soon sparked privacy concerns after users realised that they had no control over the pictures uploaded to a company specialising in image manipulation. Russia’s FaceApp, which allows users to age themselves dramatically, had raised similar fears a few weeks before.

“People seem to understand privacy risks more when a foreign country is involved,” says Adam Harvey, a technology researcher and privacy activist, pointing out that companies storing and analysing biometric data — such as facial traits, fingerprint, DNA or voice pattern — are multiplying.

Unlocking a phone with a quick glance or the touch of a finger, rather than a passcode, has become so popular that up to three in four smartphones shipped in 2019 are estimated to use some sort of biometric authentication, according to Counterpoint Research.

The use of fingerprint and facial recognition is also expanding beyond the tech sector, with car rental company Hertz and hotel chain Marriott International introducing it as a way for customers to identify themselves on some sites. However, users may be giving away more than they intend.

In return for convenience, customers give companies permission to process data that is so unique it can be used to identify someone. The speed at which companies are adopting the technology has raised questions over security and data protection.

Zak Doffman, chief executive of Digital Barriers, a company that sells surveillance technologies to defence and law enforcement agencies, called the growing commercial use of facial recognition and biometric authentication an overlooked threat to civil liberties.

Database safety is one risk. “It just takes one disgruntled employee to walk out with an external hard drive,” Mr Doffman says, and hackers target companies that hold valuable information.

Marriott was this summer fined almost £100m by the UK’s Information Commissioner’s Office after hackers had stolen identifying information, such as name, home address and passport number of hundreds of millions of guests. The hotel group declined to comment on its procedures to keep data, including biometrics, safe.

Apart from the risk of data breaches, Mr Doffman argued that too few people question a company’s commercial incentive when they agree to share their image, fingerprint or voice sample.

The growth of Internet of Things technology — like Amazon’s Alexa speakers that gather and share user data — will further help take biometric authentication mainstream, he says.

“We are so tied up with worrying about the surveillance state, but the challenge is actually coming from a different direction and there is not the same level of debate,” Mr Doffman adds.

Clear, the software company behind the biometric identification system used by Hertz, says it does not sell data belonging to its members.

However, less scrupulous businesses could offer “free” services in exchange for biometric data. “What many big tech companies, and increasingly governments, want to do with data are to link different databases,” says Paul Wiles, the UK’s biometrics commissioner who oversees public use of such information. “If you got biometrics, you got a unique identifier that you can use to follow a person through different databases if they all contain biometrics.”

This would, under the EU’s General Data Protection Regulation, require people to consent to their biometric data being shared with third parties, but critics have questioned whether people fully understand what terms and conditions they accept when using digital services.

Biometric data can also be used to protect a person’s identity. Sandra Peaston, director of research and development at the not-for-profit fraud prevention organisation Cifas, says biometric identification can help protect people from having their identities stolen.

Her organisation, which in 2018 recorded more than 189,000 cases of identify fraud in the UK, keeps a database of known imposters and shares this information with its members, which include banks such as Lloyds, Barclays and telecoms provider O2.

“Being able to say categorically that you are dealing with the right person is an avenue to cut down the ways of committing identity fraud,” Ms Peaston says.

But she did acknowledge that unlike a leaked password, the ramifications of stolen biometric data could be greater. Ms Peaston says: “You can change something that you know, but not something that you are.”

Stocks in Asia were mixed on Wednesday, with markets in a holding pattern awaiting the Federal Reserve’s policy decision. Treasuries ticked higher and the dollar was flat.

Share gauges in Tokyo ended little changed, while equities retreated in Hong Kong, Shanghai, Seoul and Sydney. European and American stock futures were flat. The S&P 500 Index on Tuesday edged back from a record high amid a raft of earnings in a lackluster session. The pound was flat after U.K. Prime Minister Boris Johnson won backing in Parliament for a Dec. 12 election.

US After Hours MAT +19%, MXIM +8%, ENPH -14%, CHRW -6%, YUMC / SYK -5% among notable earnings/guidance movers 

Nikkei -0.57% Hang Seng -0.46% CSI -0.48% Shanghai -0.46% Shenzen -0.86%

Eur$ 1.1115 CNH 7.0610 CNY 7.0615 JPY 108.85 GBP 1.2873 RUB 63.9375 CHF 0.9928 TRY 5.7661 WTI$ 55.22 -0.58%

S&P -0.10% EuroStoxx -0.11% Dax -0.26% SMI +0.17%

Macro :

- Alan Howard Steps Down as Hedge Fund CEO to Focus on Trading

- Quants Cut Stock Exposures to 2014 Low as S&P Crawled to Record

- Paul Tudor Jones, Steve Cohen Warn of Market Rout on Warren

- EU May Tighten Rules on Anti-Trust Cases for Internet Cos.: FT

Keep an eye on :

- AIR FP : Airbus 3Q Adj. Ebit Beats Estimates; Cuts Delivery, FCF Goals

- AMD US : AMD 3Q Computer And Graphics Rev. Beats Est.; Shares Rise 2.7%

- AM1 FH : Ahlstrom-Munksjo 3Q Net Sales Miss Lowest Est.; Seeks Savings

- AKE FP : Arkema 3Q Ebitda Beats Estimates; FY Guidance Confirmed

- ATO FP : Atos Sells About 14.7M Worldline Shares for EU53/Share

- ATO FP : Atos to Sell Worldline Shares, Issue Exchangeable Bonds

- BSLN SW : Basilea: Positive Preclinical Data on Derazantinib

- BATS LN : Juul to Cut Up to 15% of Staff, Facing Limits on E-Cig Sales

- BT/A LN : BT Set for Best Month in Ten Years on Overhaul, Domestic Boost

- BWO NO : BW Energy Revises Ruche Plan to Include Hibiscus Discovery

- SAN SM : Banco Santander Third Quarter Net Income Beats Estimates

- CLN SW : Clariant Third Quarter Adjusted Ebitda 1.5% Below Estimates

- CTEC LN : ConvaTec Keeps Expectations Unchanged

- CSGN SW : Credit Suisse Group Third Quarter Net Income Beats Estimates

- DAI GY : Trump White House Wants Direct Control Over Where Cars Are Made

- DLAR LN : De La Rue Sees Earnings Significantly Lower Than Market Views

- DBK GY : Deutsche Bank 3Q FIC Trading Rev. Falls 13%, Core Revenue Down

- DBK GY : Deutsche Bank’s DWS Beats Estimates With $6.9 Billion of Inflows

- DB1 GY : Deutsche Boerse in Buying Mood With $2.2 Billion in War Chest

- DIC GY : DIC Sees ‘Even Higher’ FFO in 4Q on Lower Property-Related Costs

- DRw3 GY : Draegerwerk 3Q Ebit EU9.3m, Confirms FY Outlook (1)

- DWS GY : DWS 3Q Net Inflows of EU6.2b Beat Estimates, Targets Confirmed

- EBS AV : Erste Third Quarter Net Income 2.4% Above Estimates

- EDP PL : EDP Unit Buys 50% Stake in 278 MW Solar Portfolio in U.S.

- EDPR PL : EDP Renovaveis to Invest $150m in a First Solar Portfolio

- EL FP : EssilorLuxottica 3Q Rev. Growth Ex-FX Beats Est.; Keeps FY View

- EKT SM : Euskaltel Names Iturbe as Non-Executive Chairman: Filing

- FCA IM : Fiat Chrysler, PSA Group Are Said to Explore Potential Merger

- FCA IM : Fiat Chrysler, Peugeot Confirm Talks on Merger

- FCT IM : Fincantieri Not Aware of EU Probing Chantiers Deal

- FPE GY : Fuchs Petrolub 9M Rev. Flat; Sees FY Sales, Ebit at Top of Views

- GLJ GY : Grenke 9M Net Income EU103 Mln, Confirms Net Profit Guidance (1)

- GVNV NA : GrandVision Sees FY Ebitda Growth Below Medium-Term Objective

- HEIJM NA : Heijmans Says Nitrogen Ruling Currently Has Limited Impact on FY

- HEX NO : Hexagon Composites Third Quarter Ebitda Beats Highest Estimate

- IFX GY : Chinese 3rd Parties Working on Cypress/Infineon Comment: DealRep

- KOG NO : Kongsberg Third Quarter Ebitda Beats Highest Estimate

- KRN GY : Krones 3Q Revenue Beats Highest Estimate; Confirms 2019 Views

- LSCC US : Lattice Semi 4Q Revenue View 3.8% Below Est.

- MAS MO : Masmovil Nine Month Adjusted Net EU84 Mln, -21% Y/y

- MOR GY : Morphosys Re-Mind Primary Endpoint Met

- MOWI NO : Mowi Third Quarter Ebit Misses Estimates

- NESN SW : Nestle Is Said to Weigh $1 Billion Sale of Local Chinese Brands

- NETB SS : NetEnt CEO ‘Hopes’ 3Q Was the Bottom Operationally: DI

- NOFI NO : Norwegian Finans Holding 3Q Net Income Beats Highest Est.

- NOVN SW : Novartis Says FDA Places Partial Hold on Certain AVXS-101 Trials

- NDA SS : Nordea CEO Vang-Jensen Has Bought 44,048 Shares in the Bank

- OCY NO : Ocean Yield Third Quarter Loss $63.2 Mln

- OR FP : L'Oreal Decade-High Sales Driven by Biggest Profit Hubs: React

- UG FP : Fiat Chrysler, PSA Group Are Said to Explore Potential Merger

- REC NO : REC Silicon 3Q Ebitda Loss $5.6 Mln Vs. Profit $0.5 Mln Q/q

- RIB GY : RIB Software Full Year Revenue Forecast Midpoint Meets Estimates

- SAN SM : Santander Overcomes Lackluster Europe With Latin America Gains

- SBRY LN : Matt Brittin to Step Down From Sainsbury’s Board: Sky News

- STAN LN : StanChart Beats on Revenue, Costs But Still Not Attractive: MS

- STCBV FH : Stockmann Third Quarter Net Sales Beat Highest Estimate

- SEV FP : Suez Sees Rev. Growth Towards Upper End of Guidance

- TEG GY : TAG Immobilien Keeps 2019 Views, Sees 2020 FFO EU168m-170m

- TGS NO : TGS Third Quarter Ebitda 2.4% Below Estimates

- FP FP : Total 3Q Adj. Net Income $3.02b, Est. $2.77b

- TUI LN : TUI Considers Exiting French Market: Les Echos

- VIV FP : Vivendi Files Lawsuit in the Netherlands Against Mediaset

- VOD LN : Vodafone Idea Seeks Debt Revamp as Losses Mount, Users Bolt

- VOW3 GY : Volkswagen Lowers Sales Outlook as Demand Decline Accelerates

- WCH GY : Wacker Chemie Risk-Reward Is Re-Balancing, Cut to Neutral: Citi

* Lufthansa Raised to Outperform at Bernstein

* Lufthansa, Norwegian Raised as Capacity Issues Recede: Bernstein

* Wartsila Gets Downgrade From Citi as Energy Visibility Worsens

One option for a combination, which would create a nearly $50 billion auto giant, is an all-share merger

Fiat Chrysler Automobiles FCAU 7.56% NV and Peugeot PUGOY 5.55% maker PSA Group of France are in talks over a potential combination, according to people familiar with the matter—a deal that could create a roughly $46 billion trans-Atlantic auto giant.

The merger pursuit comes as the world’s largest auto makers try to restructure their businesses as cost pressures mount and the global car market slows down after a period of heady growth.

Auto-industry consolidation has long been a perennial theme, especially in Europe, where a crowded marketplace and stringent tailpipe-emissions rules make it difficult to earn money. Auto makers are also under intense pressure to innovate with electric vehicles and self-driving technology, forcing collaboration between traditional rivals to share the investment load.

But in practice, consolidation has been far tougher to achieve because political concerns and power struggles often derail potential deals.

A possibility PSA and Fiat Chrysler are discussing, said one of the people familiar with the talks, is an all-share merger of equals. Peugeot Chief Executive Carlos Tavares would lead the combined auto maker as its CEO, while John Elkann, Fiat Chrysler chairman and the head of the Agnelli family, which controls the Italian-U.S. auto maker, would assume the same role at the new company, this person said.

Talks are fluid, one of these people said, and other options or terms could be considered. There is no guarantee that any final agreement will be reached.

The proposed combination comes months after Fiat Chrysler dropped an earlier offer to merge with Peugeot rival Renault SA RNO -0.57% of France. That deal fell apart after Fiat Chrysler failed to win the full backing of the French government, a big Renault shareholder, and Renault’s alliance partner Nissan Motor Co.

While Fiat Chrysler had earlier this year explored a potential tie-up with Peugeot, as previously reported by The Wall Street Journal, Mr. Elkann favored a deal with Renault, believing it delivered more synergies and a better geographic fit, people familiar with his thinking said.

After talks fell apart, Mr. Elkann left the door open for discussions to resume. But those prospects have dimmed in recent weeks with Renault and Nissan still trying to hash out a deal to restructure their global alliance and Renault recently firing its CEO. The French car maker is now in a search for a successor.

Meanwhile, pressure is mounting on Mr. Elkann, who also leads Exor NV, the holding company through which the Agnelli family holds a 29% stake in Fiat Chrysler.

Under Mr. Elkann, Exor has sought to diversify in recent years, aiming to trim reliance on Fiat Chrysler. Exor bought a reinsurance company in 2015 and owns 23% of luxury-sports-car maker Ferrari NV, among other investments.

Exor called a board meeting for Wednesday, according to a person familiar with the plans. PSA has also convened an extraordinary board meeting near Paris on Wednesday, according to people familiar with the matter.

Representatives for Fiat Chrysler, Peugeot and the Agnelli family declined to comment. Both Peugeot and Fiat Chrysler are major forces in Europe, so any proposed combination could face regulatory challenges.

Peugeot’s Chinese and French ownership stakes would likely draw attention in the U.S., where the Committee on Foreign Investment in the United States has looked closely at Chinese-related deal making involving U.S. companies and technology. The Trump administration has focused on U.S. manufacturing, including the auto industry—though the modest 12.2% stake that China’s state-run Dongfeng Motor Group Co. holds in Peugeot might not cause much alarm.

A combination, if achieved, would lift Peugeot and Fiat Chrysler in the auto industry’s global standing, offering them added scale and potential cost-cutting opportunities. The two companies together sold 8.7 million cars last year, which would have ranked their combination at No. 4, just ahead of General Motors Co. ’s 8.4 million vehicles sold.

There would still be some distance between a combined Fiat Chrysler-Peugeot and the world’s top three auto makers.

Volkswagen AG sold 10.8 million vehicles last year, about the same as the alliance between Renault, Nissan and Mitsubishi Motors Co. No. 3 Toyota Motor Corp. tallied 10.6 million vehicles.

Peugeot’s Mr. Tavares has been eager to expand in the U.S., where the French brand has been absent for almost three decades. He has outlined plans to eventually reintroduce the nameplate in the U.S., but a tie-up with Fiat Chrysler would bring with it wide access to the U.S. market. Fiat Chrysler dealers selling the popular Jeep and Ram brands could potentially offer Peugeot models as well.

As CEO of the combined auto maker, Mr. Tavares would bring a proven record as an operator. In 2017, he led the company in its acquisition of GM’s then-money-losing Opel division and has since restored it to profitability.

A deal would give Fiat Chrysler more exposure to Europe, where Peugeot sold 2.5 million vehicles last year, compared with one million for Fiat Chrysler. The Italian-American company, however, has tried in recent years to lessen its dependence on the Continent. A combined Fiat Chrysler-Peugeot would sell almost as many vehicles in Europe as Volkswagen, which leads the market with a 24% share.

The go-it-alone strategy would also be risky for Fiat Chrysler, which is struggling to absorb the higher costs of meeting Europe’s emissions requirements and invest in new technologies, such as electric and self-driving cars. Already, the Italian-American car company is facing stiff fines for failing to meet regulatory requirements and is heavily reliant on truck sales in North America at the same time the U.S. car market is cooling.

Deal could create a carmaker worth more than $47bn

The owner of French carmaker Peugeot is in talks with rival Fiat Chrysler Automobiles about a deal to merge with the Italian-American group and create a company with shares worth more than $47bn, according to people informed of the talks. 

The discussions mark an attempt by France’s PSA and its chief executive Carlos Tavares to take advantage of a failed combination earlier this year between FCA and rival French carmaker Renault. 

For FCA, a deal would mark the latest attempt to follow through on its belief the car industry is in desperate need of consolidation.

Under one iteration of a deal, PSA would combine with FCA in an all-stock merger that would see Mr Tavares run the business, while John Elkann — the scion of Italy’s Agnelli family, which controls FCA — would become its chairman, one person said. 

According to another person briefed on the matter, talks have been on and off throughout this year. They broke off during the attempted merger with Renault before beginning again more recently. 

Mr Tavares and Mr Elkann have personally been discussing the tie-up, and their discussions remain at an early stage, said the same person.

All of the people involved said there was no guarantee a deal would be reached.

New York-traded shares in FCA jumped more than 7 per cent following a report on the talks in the Wall Street Journal late on Tuesday. A spokesperson for PSA said the group “would not comment on market rumours”. FCA declined to comment.

This year shares in PSA have risen 38 per cent compared with barely 1 per cent for FCA. The French company has a market value of €23.6bn, equivalent to $26.2bn, while FCA’s sits at about $22bn.

The revived talks come months after FCA withdrew its proposal for a €33bn merger with Renault, just days after the original proposal was made. 

The deal fell apart in June after the French government, Renault’s largest shareholder with just over 15 per cent, held back its support — ostensibly since Renault’s alliance partner Nissan was not fully on board.

Analysts were positive that a deal to combine Peugeot and Fiat Chrysler was back on the table.

“Timing aside, there is clearly the potential for significant gross synergies [in the] €7bn range over 2021-2023,” wrote Arndt Ellinghorst at Evercore. He added that Mr Tavares has proven himself a highly effective turnround boss, citing Opel which PSA bought in 2017.

“FCA needs scale in Europe and PSA has no presence in the US, where FCA has market share for sale,” said Philippe Houchois, an autos analyst at Jefferies. “PSA also has the technology to help with FCA’s carbon emission issues.”

The French state’s 12 per cent stake in PSA was also “likely to prove less of a barrier than it did to a merger with Renault”, said Mr Houchois, in part since there would be no third party involved. 

Other analysts have suggested the French state would be reluctant to be seen as a block to another deal.

Sergio Marchionne, FCA’s longstanding chief executive, before his death last summer, argued for years for consolidation in the auto sector in the face of disruption from new technology and consumer saturation in his company’s home car markets.

He publicly pursued a tie-up with General Motors in 2015 but was rejected by Mary Barra, the US company’s chief executive.

The Agnelli and Peugeot families held talks a decade ago, before Fiat decided to pursue Chrysler.

Six-month investigation by messaging app shows wide misuse of Israeli company’s spyware

At least 100 journalists, human rights activists and political dissidents had their smartphones attacked by spyware that exploited a vulnerability in WhatsApp, according to the Facebook-owned messaging service.

The victims of the attack, which was first revealed by the Financial Times in May, were contacted by WhatsApp on Tuesday.

Their phones were targeted through WhatsApp’s call function by customers of the Israel-based NSO Group, which makes Pegasus, a spyware program. Once installed, Pegasus is designed to take over all of a phone’s functions.

WhatsApp told the FT it is filing a lawsuit in a US court that attributes the hack of its service to NSO. “This is the first time that an encrypted messaging provider is taking legal action against a private entity that has carried out this type of attack,” WhatsApp said.

The targets of attacks by NSO’s customers included politicians, prominent religious figures, lawyers and officials at humanitarian organisations fighting corruption and rights abuses, as well as people who have faced assassination attempts and violent threats.

WhatsApp said it spent six months investigating the breach, discovering that attackers had used its service to target about 1,400 phones over a two-week period this spring. In May it asked its 1.5bn users to update their apps in order to close the loophole.

NSO claims that Pegasus is sold only to law enforcement and intelligence agencies to prevent crime and terrorism. But WhatsApp, which worked with the University of Toronto’s Citizen Lab to identify victims, said a sizeable proportion of the targets were members of civil society, saying there had been an “unmistakable pattern of abuse” of the spyware.

“There is an unaccountable wild west of this kind of spyware and intrusion technology,” said John Scott-Railton, a senior researcher at Citizen Lab, which tracks digital surveillance. “If you equip repressive governments with the power to snoop like this it is almost a foregone conclusion that they will abuse this technology.”

WhatsApp worked with Citizen Lab to contact some of the targeted human rights activists and journalists to tell them that their phones may have been compromised by one of the entities using NSO’s spyware.

The spyware was transmitted even if a user did not answer the WhatsApp call. Missed calls were often wiped from call logs, leaving users unaware that their phone had been attacked. 

Customers using Pegasus can read all the messages and emails stored on an infected phone, listen to incoming or outgoing calls, and turn on its camera and microphone to record conversations. 

The WhatsApp investigation is the first large-scale glimpse into how NSO’s clients are able to use and misuse its spyware.

The company told potential investors earlier this year that it had sold Pegasus to at least 20 EU countries and that half of its 2018 revenues of $251m came from Middle East clients.

WhatsApp called for “strong legal oversight of cyber weapons used in this attack to ensure they are not used to violate the rights and freedoms people deserve wherever they are in the world”.

NSO has said it respects human rights unequivocally, and it conducts a thorough evaluation of the potential for misuse of its products by clients. This includes a review of a country’s past human rights record and governance standards.

It believes allegations of misuse of its products are based on “erroneous information”.

The NSO Group said in a statement: “In the strongest possible terms, we dispute today’s allegations and will vigorously fight them. Our technology is not designed or licensed for use against human rights activists and journalists.”

Since a leveraged buyout in February backed by London-based Novalpina Capital that valued NSO at $1bn, the company has rejected criticism that its clients abuse its software. NSO said in May it would introduce further reforms to prevent abuse.

David Kaye, the UN rapporteur on freedom of expression, wrote to Shalev Hulio, NSO’s chief executive, this month, saying its new policies were inadequate, especially regarding the investigation of rights abuses raised by whistleblowers.

“The record of NSO Group is troubling,” Mr Kaye told the FT. “Making matters worse, it’s activities are opaque, and subject to minimal, if any, government constraints. My hope is that allegations like these encourage governments to take strong regulatory action.”