Raphael Stevens

Lawmakers are ramping up their scrutiny of Chinese-founded fast fashion company Shein after it confidentially filed to go public.
Rep. Blaine Luetkemeyer called on the SEC to prevent Shein from going public, and if it doesn’t, he suggested legislation that would bar it from trading.
Lawmakers are concerned that Shein is using forced labor in its supply chain and exploiting U.S. trade laws.

A Shein Group Ltd. pop-up store inside a Forever-21 store in the Times Square neighborhood of New York, US, on Friday, Nov. 10, 2023. 
Yuki Iwamura | Bloomberg | Getty Images

Lawmakers are ramping up their scrutiny of Shein after it confidentially filed to go public last week.
One congressman who sits on a key committee is even threatening to pursue legislation to bar the retailer from trading if the U.S. Securities and Exchange Commission doesn’t reject its application.

Rep. Blaine Luetkemeyer, R-Mo., issued a video address Tuesday saying Shein “warrants extreme caution from regulators, customers and investors” as the fast-fashion powerhouse sets the stage to start trading on U.S. exchanges as soon as next year. 
In an interview with CNBC, he contended the SEC needs to “do their job” and prevent Shein from trading on U.S. exchanges because of allegations the retailer uses forced labor and exploits U.S. trade laws. 
“Urge the SEC to apply maximum scrutiny to Shein’s business and management before letting it anywhere near our capital markets,” Luetkemeyer said in the video, viewed by CNBC. 
“Accessing U.S. markets and capital is a privilege and we rely on the SEC to root out undeserving companies,” he added. “I sincerely hope the officials at the commission will review Shein to ensure American capital does not fund crimes against humanity.”

Luetkemeyer suggested to CNBC that Congress could take a number of other actions to crack down on Shein if the SEC allows its public offering to move forward. They include legislation that would block Shein from trading in the U.S. or bar its shipments from coming into the country. 

“Everything’s on the table, let’s put it that way, and I think we’ll see what action Shein wants to engage in,” said Luetkemeyer. 
Luetkemeyer sits on the newly formed and GOP-controlled House Select Committee on the Chinese Communist Party. A legislative aide told CNBC the committee’s chairman, Rep. Mike Gallagher, R-Wisc., “share’s Rep. Luetkemeyer’s concerns about companies gaining the benefits of America’s capital markets despite clear and present concerns about human rights abuses and national security risks.” Gallagher is also interested in pursuing reforms to the trade loophole known as the de minimis provision and expanding enforcement of the Uyghur Forced Labor Prevention Act, the aide said.
The committee is investigating Shein over its use of forced labor and de minimis — probes that are ongoing, Luetkemeyer said.
Under the de minimis provision, packages valued under $800 are not charged import duties and aren’t subject to the same oversight from U.S. customs, which is tasked with screening packages to ensure items from banned regions don’t come into the country.
Shein often ships its products directly to American consumers through its network of Chinese suppliers, which allows it to typically avoid that oversight. The company has said it supports de minimis reform but has not detailed what those changes should look like.
“We want to make sure that we get to the bottom of this and expose what’s going on, and document it in a way that the SEC can’t ignore,” said Luetkemeyer. 
The SEC told CNBC it doesn’t comment on individual entities. 
The Republican’s push to bar Shein from trading in the U.S. comes as lawmakers from both parties ramp up their criticism of the Chinese-founded retailer. Rep. Jennifer Wexton, D-Va., also called for more scrutiny of Shein. She said in a statement last week that lawmakers “must take action to hold Shein accountable” because products made from forced labor “have no place in the American marketplace.”
While the IPO filing has sparked more scrutiny of Shein, it is unclear whether the full Republican-controlled House, or the Democratic-held Senate, would have enough support to pass a bill restricting the company’s ability to trade or do business in the U.S. Luetkemeyer said the concerns around Shein are “not partisan” issues, and he expects legislative action against the company would have wide support.
Last week, people familiar with the matter said Shein has confidentially filed to go public in the U.S. and could be ready to start trading next year. 
The company, last valued at $66 billion, has enjoyed a meteoric rise in recent years, but it’s facing increasing scrutiny from lawmakers who suspect the company is able to offer its low prices because it uses forced labor and exploits de minimis. It has spent the better part of a year on a charm offensive in an effort to reverse those narratives and win over regulators and Wall Street.
Shein has said in the past that its inventory-light business model and its ability to spot burgeoning trends drive its low prices. But it has acknowledged that some of its raw materials have come from banned regions known for forced labor.  
“SHEIN has a zero-tolerance policy for forced labor. We take visibility across our entire supply chain seriously, and we are committed to respecting human rights. To comply with U.S. law, we require our contract manufacturers to only source cotton from approved regions. As of November 2023, only 1.7% of our cotton tested positive for unapproved cotton,” a Shein spokesperson told CNBC.
“According to global supply chain tracing firm Oritain, these amounts are much lower than the industry average of 14%,” the spokesperson added. “In infrequent cases when cotton from unapproved regions is detected, we take immediate action such as suspending production, halting shipments to the United States and removing U.S. product listings.” 
When asked if those shipments are also halted and removed from product listings in other parts of the world, a Shein spokesperson said “our policy is to comply with the customs and import laws of the countries in which we operate.”
The U.S. has banned the import of cotton and other products made in Xinjiang, China, since 2021 because of evidence of genocide, torture and forced labor against the Uyghur ethnic group in the region. Other countries have not yet implemented the same kind of regulations. 
— CNBC’s Chelsey Cox contributed to this report. More

McDonald’s is holding an investor meeting on Wednesday.
The fast-food giant is expected to discuss its recent corporate restructuring, accelerated expansion plans and digital strategy.
Shares of McDonald’s have risen just 8% this year, trailing the S&P 500’s 19% gains.

French fries arranged at a McDonald’s Corp. fast food restaurant in Louisville, Kentucky, U.S., on Friday, Oct. 22, 2021.
Luke Sharrett | Bloomberg | Getty Images

McDonald’s is expected to share new details about its accelerated expansion plans, a new spinoff brand called CosMc’s and digital strategy at its investor day on Wednesday.
At its last investor presentation three years ago, McDonald’s rolled out a strategy that planned to grow sales by improving and marketing its core menu items, launching a loyalty program, and leaning into chicken and coffee. The company also projected mid-single-digit sales growth in 2021 and 2022.

Wall Street analysts aren’t expecting any major shifts in strategy, but they are predicting that McDonald’s will release another near-term forecast for sales growth and new unit development during Wednesday’s presentation.
However, the company’s predictions may be conservative, given business leaders’ and experts’ worries about the economy. Although inflation has cooled, consumers are still watching their wallets. Fast-food chains like McDonald’s typically outperform the broader restaurant industry during economic downturns.
McDonald’s stock has risen about 8% this year, trailing the S&P 500’s 19% gains. Shares of the company, which has a market value of about $207 billion, have struggled as investors worry about sales potentially weakening because of the economy and weight loss drugs.
Here’s what McDonald’s will likely address during its investor day:

Corporate restructuring

Earlier this year, the company announced it would be refocusing its priorities and accelerating restaurant expansion. Tied to that announcement, McDonald’s reorganized its corporate structure and laid off hundreds of workers.

CEO Chris Kempczinski said the restructuring was needed to streamline the organization and avoid silos. But since then, the company has shared relatively little information about how the restructuring will affect its decision-making and broader business.

Plans for its U.S. footprint

An illuminated lofo of McDonald’s corporation in front of an American flag in the storefront at Broadway avenue in New York City, USA. McDonalds is a multinational fast food chain with thousands or restaurants over the world with headquarters in Chicago Illinois. It is the world’s largest fast food restaurant chain famous for the burgers and fries. Manhattan, New York, USA on May 10, 2023 (Photo by Nicolas Economou/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images

Before the Covid pandemic, McDonald’s priorities for its U.S. stores dealt with remodels and store upgrades, like self-order kiosks. Then came lockdowns and a massive shift in how diners bought and ate their food. While some customers have returned to McDonald’s dining rooms, many others have maintained their new habits, like ordering on the McDonald’s app.  
The chain has already announced some small tweaks coming to U.S. restaurants. For example, it’s phasing out self-serve soda stations, which allowed customers to refill their soft drinks.
But McDonald’s also seems to have bigger plans in mind. The chain has already said it wants to accelerate its restaurant development in the U.S. to meet today’s higher demand for its Big Macs and McNuggets.
While the U.S. may seem saturated with McDonald’s locations, executives have said that its current footprint doesn’t reflect where consumers currently live, including the shift to the South and Southeast.
“Our footprint reflects what the population looked like probably 20 or 30 years ago,” Kempczinski said on the company’s conference call in July.
The chain is now also ready to experiment with fresh restaurant formats and features for those new locations. It opened a location in Texas that’s mostly automated. Executives have teased the launch of CosMc’s, a spinoff brand of small-format locations inspired by an old McDonaldland character. Some McDonald’s locations have also tested using artificial intelligence to take drive-thru orders.

Expansion abroad

McDonald’s plans to accelerate growth also include building more locations in its international operated markets, a segment that includes Canada, Germany, Australia and France. Kempczinski said in July that the growth in those markets has been “pretty anemic” compared with the opportunity available.  
McDonald’s also recently bought back a minority stake in its China business for a reported $1.8 billion. China is now the company’s second-largest market by number of locations, but investors will be looking for more on why McDonald’s did the deal and management’s long-term hopes for the market.

Technology

McDonald’s operates roughly 5% of its U.S. restaurants, giving the company little insight about who its customers are and what they want. But its growing digital business, from self-order kiosks to its mobile app, has given the company more access to its franchisees’ customer bases.
Take its loyalty program, for example. McDonald’s hadn’t launched its loyalty program nationwide at the time of its last investor day. Since then, the chain has shared some comments on the program, including that it drives a 15% increase in visits from members. But investors are eager to hear more about what McDonald’s has learned about its customers, how it plans to implement those takeaways and what other digital innovations could unlock.
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The free version of ChatGPT may provide inaccurate or incomplete responses — or no answer at all — to medication-related questions, according to research by pharmacists at Long Island University.
The study demonstrates that patients and health-care professionals should be cautious about relying on OpenAI’s viral chatbot for drug information and verify any of the responses with trusted sources, the study’s lead author said.
ChatGPT was widely seen as the fastest-growing consumer internet app of all time following its launch roughly a year ago, ushering in a breakout year for artificial intelligence.

Harun Ozalp | Anadolu | Getty Images

The free version of ChatGPT may provide inaccurate or incomplete responses — or no answer at all — to questions related to medications, which could potentially endanger patients who use OpenAI’s viral chatbot, a new study released Tuesday suggests.
Pharmacists at Long Island University who posed 39 questions to the free ChatGPT in May deemed that only 10 of the chatbot’s responses were “satisfactory” based on criteria they established. ChatGPT’s responses to the 29 other drug-related questions did not directly address the question asked, or were inaccurate, incomplete or both, the study said. 

The study indicates that patients and health-care professionals should be cautious about relying on ChatGPT for drug information and verify any of the responses from the chatbot with trusted sources, according to lead author Sara Grossman, an associate professor of pharmacy practice at LIU. For patients, that can be their doctor or a government-based medication information website such as the National Institutes of Health’s MedlinePlus, she said.
Grossman said the research did not require any funding.
ChatGPT was widely seen as the fastest-growing consumer internet app of all time following its launch roughly a year ago, which ushered in a breakout year for artificial intelligence. But along the way, the chatbot has also raised concerns about issues including fraud, intellectual property, discrimination and misinformation. 
Several studies have highlighted similar instances of erroneous responses from ChatGPT, and the Federal Trade Commission in July opened an investigation into the chatbot’s accuracy and consumer protections. 
In October, ChatGPT drew around 1.7 billion visits worldwide, according to one analysis. There is no data on how many users ask medical questions of the chatbot.

Notably, the free version of ChatGPT is limited to using data sets through September 2021 — meaning it could lack significant information in the rapidly changing medical landscape. It’s unclear how accurately the paid versions of ChatGPT, which began to use real-time internet browsing earlier this year, can now answer medication-related questions.  
Grossman acknowledged there’s a chance that a paid version of ChatGPT would have produced better study results. But she said that the research focused on the free version of the chatbot to replicate what more of the general population uses and can access. 
She added that the study provided only “one snapshot” of the chatbot’s performance from earlier this year. It’s possible that the free version of ChatGPT has improved and may produce better results if the researchers conducted a similar study now, she added.

ChatGPT study results

The study used real questions posed to Long Island University’s College of Pharmacy drug information service from January 2022 to April of this year. 
In May, pharmacists researched and answered 45 questions, which were then reviewed by a second researcher and used as the standard for accuracy against ChatGPT. Researchers excluded six questions because there was no literature available to provide a data-driven response. 
ChatGPT did not directly address 11 questions, according to the study. The chatbot also gave inaccurate responses to 10 questions, and wrong or incomplete answers to another 12. 
For each question, researchers asked ChatGPT to provide references in its response so that the information provided could be verified. However, the chatbot provided references in only eight responses, and each included sources that don’t exist.
One question asked ChatGPT about whether a drug interaction — or when one medication interferes with the effect of another when taken together — exists between Pfizer’s Covid antiviral pill Paxlovid and the blood-pressure-lowering medication verapamil.
ChatGPT indicated that no interactions had been reported for that combination of drugs. In reality, those medications have the potential to excessively lower blood pressure when taken together.  
“Without knowledge of this interaction, a patient may suffer from an unwanted and preventable side effect,” Grossman said. 
Grossman noted that U.S. regulators first authorized Paxlovid in December 2021. That’s a few months before the September 2021 data cutoff for the free version of ChatGPT, which means the chatbot has access to limited information on the drug. 
Still, Grossman called that a concern. Many Paxlovid users may not know the data is out of date, which leaves them vulnerable to receiving inaccurate information from ChatGPT. 
Another question asked ChatGPT how to convert doses between two different forms of the drug baclofen, which can treat muscle spasms. The first form was intrathecal, or when medication is injected directly into the spine, and the second form was oral. 
Grossman said her team found that there is no established conversion between the two forms of the drug and it differed in the various published cases they examined. She said it is “not a simple question.” 
But ChatGPT provided only one method for the dose conversion in response, which was not supported by evidence, along with an example of how to that conversion. Grossman said the example had a serious error: ChatGPT incorrectly displayed the intrathecal dose in milligrams instead of micrograms
Any health-care professional who follows that example to determine an appropriate dose conversion “would end up with a dose that’s 1,000 times less than it should be,” Grossman said. 
She added that patients who receive a far smaller dose of the medicine than they should be getting could experience a withdrawal effect, which can involve hallucinations and seizures More

Alaska Air agreed to buy Hawaiian Airlines for $1.9 billion in cash and debt.
The deal is subject to approval by federal regulators.
The Justice Department has taken a hard stance against mergers it views as anticompetitive.

An Alaska Airlines aircraft flies past the U.S. Capitol before landing at Reagan National Airport in Arlington, Virginia, U.S., January 24, 2022.
Joshua Roberts | Reuters

Alaska Air Group’s executives spent months working on its plan to buy rival Hawaiian Airlines. The airlines’ leaders will now spend many more trying to convince regulators the acquisition should go ahead.
It could be the latest in a string of challenges brought by President Joe Biden’s Justice Department against airline deals it views as anticompetitive.

The $1.9 billion cash and debt deal, announced Sunday, comes less than a year after the Justice Department sued to block another deal: JetBlue Airways’ $3.8 billion cash acquisition of budget carrier Spirit Airlines. The Justice Department argued that the purchase of Spirit would harm consumers in the form of higher fares if the budget airline is absorbed by JetBlue. Earlier this year, the Justice Department successfully broke up JetBlue’s partnership with American Airlines in the U.S. Northeast.
In both that limited alliance and the Spirit acquisition, JetBlue argued it needed to team up to better compete with larger rivals, and grow, when planes and pilots are in short supply.
More than a decade of airline mergers left four airlines — American, Delta, Southwest and United — in control of around 80% of U.S. airline capacity. Alaska has a more than 5% share of U.S. airlines’ capacity and Hawaiian has a less than 2% share, according to Cirium data.
The Alaska-Hawaiian deal comes as Hawaiian has faced a host of challenges including like the Maui wildfires, increased competition in Hawaii from Southwest and a slower recovery of some long-haul Asia routes.

Deal differences

The Alaska-Hawaiian and JetBlue-Spirit deals are different in approach, but the Alaska acquisition could still face hurdles with regulators.

For example, JetBlue plans to remodel Spirit’s tightly packed yellow planes to take out seats and bring on board more amenities like seat-back screens, while getting rid of the Spirit brand and model entirely. Alaska, meanwhile, said it plans to keep separate Hawaiian and Alaska brands, two carriers that are key to the far-flung states they serve.
That’s different from Alaska’s 2016 acquisition of Virgin America, when it spent years getting rid of Virgin’s branding and fleet of Airbus jets in favor of a streamlined Boeing airline.
The Justice Department declined to comment on the Alaska-Hawaii deal on Monday, but some experts said they expect a challenge from regulators.
“The starting point is one of skepticism,” said William Kovacic, a professor at the George Washington School of Law and a former chair of the Federal Trade Commission.
He said the Justice Department’s review of the deal will focus on where Hawaiian and Alaska compete and “consider how the two companies might have expanded service in different ways were it not for the merger itself.”
Alaska and Hawaiian executives have defended their deal, citing little overlap and the ability to expand their reach. The carriers’ CEOs said the deal will help them expand their networks, giving Alaska access to Hawaiian’s network in the Asia-Pacific region and expanding Hawaiian’s current reach with Alaska’s network throughout the U.S., for example.
“We’re confident that this is unique from others that are pursuing combinations,” Alaska CFO Shane Tackett said in an interview with CNBC. “We have very similar product offerings and we have very limited network overlap.” He said that the two carriers have about a 3% overlap with seats and 12 routes.
In the Justice Department’s lawsuit against the JetBlue-Spirit deal, “they really lean heavily on the catalyzing role that Spirit in particular, but that Spirit and JetBlue can play in the market,” said Samuel Engel, a lecturer at Boston University’s Questrom School of Business and senior vice president at consulting firm ICF. “I don’t think anyone has every argued that about Alaska and Hawaiian,” he added.
“That said, the posture of this administration has suggested there are not many mergers they would embrace,” he said.
Alaska and Hawaiian executives said they expect it to take 12 to 18 months to close the deal, a timeframe which would push it beyond next year’s presidential election and potentially into a new administration.
Hawaiian’s stock nearly tripled on Monday to $14.22 a share, though still below the proposed purchase price. Alaska’s shares lost 14.2% to end the day at $34.08. More