Strike for Day Seeks to Raise Fast-Food Pay

From New York to several Midwestern cities, thousands of fast-food workers have been holding one-day strikes during peak mealtimes, quickly drawing national attention to their demands for much higher wages.

What began in Manhattan eight months ago first spread to Chicago and Washington and this week has hit St. Louis, Kansas City, Detroit and Flint, Mich. On Wednesday alone, workers picketed McDonald’s, Taco Bell, Popeye’s and Long John Silver’s restaurants in those cities with an ambitious agenda: pay of $15 an hour, twice what many now earn.

These strikes, which are planned for Milwaukee on Thursday, carry the flavor of Occupy Wall Street protests and are far different from traditional unionization efforts that generally focus on a single workplace. The national campaign, underwritten with millions of dollars from the Service Employees International Union, aims to mobilize workers — all at once — in numerous cities at hundreds of restaurants from two dozen chains.

None of the nation’s 200,000-plus fast-food restaurants are unionized.

The strategists know they want to achieve a $15 wage, but they seem to be ad-libbing on ways to get there. Perhaps they will seek to unionize workers at dozens of restaurants, although some labor leaders scoff at that idea because the turnover rate among fast-food employees is about 75 percent a year. Or the strategists and strikers might press city councils to enact a special “living wage” for fast-food restaurants. Or perhaps by continually disrupting the fast-food marketplace from counter to counter across the country, they can get McDonald’s, KFC and others to raise wages to end the ruckus. The protests’ organizers acknowledge that yet another goal is to push Congress to raise the federal minimum wage and pressure state legislatures to raise the state minimums.

“These companies aren’t magically going to make our lives better,” said Terrance Wise, who earns $9.30 an hour after working for eight years at a Burger King in Kansas City, plus $7.40 an hour at his second job at Pizza Hut. “We can sit back and stay silent and continue to live in poverty or, on the other hand, we can step out and say something and let it be known that we need help.”

In explaining why her union is pouring dozens of organizers and significant sums into the effort, Mary Kay Henry, the S.E.I.U. president, said, “Our union’s members think that economic inequality is the No. 1 problem our nation needs to solve. We think it’s important to back low-wage workers who are willing to stand up and have the courage to strike to make the case that the economy is creating jobs that people can’t support their families on.”

The protests in Detroit on Wednesday had a particularly poignant backdrop, given that the city has declared bankruptcy. Dozens of workers, joined by members of various unions and community groups, picketed in front of McDonald’s and Taco Bell, shouting chants like, “Hey, hey, ho, ho, $7.40 has got to go” — the amount per hour many of them are paid.

Restaurant industry officials say the strikers’ demand for $15 an hour is ludicrous because it amounts to more than twice the federal minimum wage. (The median pay for fast-food workers nationwide is $9.05 an hour.) Industry officials say a $15 wage might drive many restaurants out of business and cause restaurant owners to hire fewer workers and replace some with automation — perhaps by using more computerized gadgets where customers punch in the orders themselves.

Scott DeFife, executive vice president of the National Restaurant Association, said the one-day walkouts were not really strikes, but rather public-relations-minded protests that have caused very few restaurants to close.

“It is an effort to demonize the entire industry in order to make some organizing and political points,” he said, adding that only a small percentage of restaurant jobs pay the minimum wage. He said most of those positions were held by workers younger than 25.

Jaclyn Trop contributed reporting.

Self-Finance or Raise Money? A Quandary for Start-Ups

But while Mr. Stanek and Mr. Moore went after roughly the same market at roughly the same time, they differed in one critical aspect: how they financed their dreams. One quickly raised more than $50 million, while the other mostly self-financed, thus creating a rare opportunity to assess the difference venture capital can make and bring new perspective to an age-old debate.

When Mr. Stanek, a Czech entrepreneur, founded GoodData in San Francisco in 2007, he already had plenty of experience with venture capital. He had sold a venture-backed software development tools company, NetBeans, to Sun Microsystems in 1999 for a little more than $10 million. And in 2006, he sold Systinet, a Web-service company, to Mercury Interactive for $105 million.

After financing the first year of GoodData’s software development with several hundred thousand dollars from his Systinet sale, Mr. Stanek began to seek investors. Eventually, he brought in $53.5 million from the likes of O’Reilly AlphaTech Ventures and Andreessen Horowitz. “We spent three years building a product and we are still building big pieces. That was funded by the V.C.’s and myself,” said Mr. Stanek, 47. “It’s like the printing business. I have to spend money on my printing machine. There’s an initial large investment, and then once you have the printing press running, it’s very predictable. So if we wanted to create a dominant large company, we didn’t have a choice.”

By contrast, before starting RJMetrics, the co-founders, Robert Moore and Jake Stein, worked as junior analysts at a New York venture capital firm, Insight Venture Partners, where they came across entrepreneurs who had built profitable businesses without a lot of capital and put off fund-raising as long as possible. “What happens in those situations is those entrepreneurs do extremely well personally,” said Mr. Moore, 29.

When they started RJMetrics in late 2008, Mr. Moore and Mr. Stein invested $10,000 of their own money. Mr. Moore wrote the first version of the company’s software in his attic in Collingswood, N.J. They did not hire their first employee until 2010, and they moved to an office in Philadelphia, where costs are far less than in New York or San Francisco.

By the time they did raise some money, in early 2012, they had 100 customers and annual revenue of about $1 million. “That put us in excellent negotiating position, because we had a proof point that other companies at our stage didn’t have,” Mr. Moore said. The owners raised $1.2 million, almost all from RJMetrics customers.

The two approaches have created very different companies. RJMetrics signed its first paying customer to a rudimentary prototype just three months after it started. To build revenue, it had to hope for good word of mouth (which it got) because it did not have a sales staff. But bootstrapping, or self-financing, did allow the founders to keep a large percentage of the company’s equity and to avoid the distortion that can come from having money and the demanding investors who supply it.

The venture capital industry views bootstrapping in the face of a big market opportunity as false economy. John O’Farrell, a partner at Andreessen Horowitz, said that it generally took an investment of $75 million to take a software company from start-up to initial public offering. “If you want to capture a big open market, you want to bring in money to grab land,” he said. “If you bootstrap, the tendency is to try to get profitable early so you don’t need to put in more money, but you end up missing a big opportunity.”

GoodData’s war chest allowed Mr. Stanek to staff up for the land grab. The company now has about 250 employees, half dedicated to the product and half charged with sales and marketing. RJMetrics, on the other hand, has 26 employees, more than half of them working in product development and only four on sales and marketing. The company’s first director of marketing started in February.

Inevitably, the companies have gravitated toward different markets. While RJMetrics has gone after small and midsize companies, GoodData has pursued Fortune 2000 clients that demand robust products and have the money to pay for them. RJMetrics had about $1 million in revenue in 2011 and about $2 million in 2012, according to Mr. Moore. Mr. Stanek declined to specify his company’s revenue, but he noted that last year GoodData signed 42 contracts that were each worth more than $100,000 a year, which would suggest an annual run rate of at least $4 million.

DealBook: Commerzbank to Raise $3.2 Billion in New Capital

Fabrizio Bensch/ReutersA branch of Commerzbank in Berlin.

LONDON – European banks have gone on a capital-raising binge.

Commerzbank of Germany, the latest entrant, began a heavily-discounted effort on Tuesday to raise 2.5 billion euros ($3.2 billion) in new capital.

The push by Commerzbank follows similar moves by other European lenders, which have come under growing regulatory pressure to increase capital reserves to protect against future financial shocks.

Despite a series of stress tests on the Continent’s largest financial institutions, investors have remained wary of the firms’ continued exposure to risky loans and sputtering economies like Spain and Greece.

Regulators have also pushed banks to shed unprofitable assets and protect against rising delinquent loans, and a proposed banking union for the euro zone is expected to lead to even greater scrutiny of balance sheets. Authorities want to ensure that banks meet stringent capital requirements outlined in new rules known as Basel III.

Under the rules, which are to come into force by 2019, firms must achieve a 7 percent core Tier 1 ratio, a measure of an institution’s financial health. Banks considered to be systemically important must hold an additional 1 to 2.5 percent in reserve.

As a result, banks have been pulling out all the stops to meet the capital demands. Last month, Deutsche Bank raised almost 3 billion euros through a rights issue specifically intended to improve its capital buffers.

The British bank Barclays has issued a number of contingent capital instruments – known as CoCos – that will wipe out investors if the firm’s core Tier 1 ratio falls below a certain level. A number of other banks, including Credit Suisse and BBVA of Spain, also have raised capital by this method.

The Swiss bank UBS, which announced a major restructuring last year, has a 10.1 percent core Tier 1 ratio. That is currently the highest figure among Europe’s largest banks, according to the data provider SNL Financial. Other big banks, including Deutsche Bank and HSBC, have ratios above 9.5 percent.

For Commerzbank, whose current core Tier 1 capital ratio of 7.5 percent is expected rise to 8.4 percent after its capital-raising effort is completed, the new funds will help to repay an 18 billion euro government bailout the firm received in 2009.

“The transaction marks the beginning of the federal government’s exit from Commerzbank,” the bank said in a statement. “The capital structure of the bank is improving considerably.”

The offering – the bank’s fifth since 2010 – allows investors to buy 20 shares at 4.50 euros apiece for every 21 shares they already hold. The price represents a discount of about 55 percent on Commerzbank’s closing share price on Monday. The bank’s shares fell 3.8 percent in afternoon trading in Frankfurt on Tuesday.

As part of the deal, Commerzbank is reportedly in talks to sell 5.7 billion euros of British property loans to the American bank Wells Fargo and the investment firm Lone Star.

More capital-raising moves are expected. British banks, for example, must raise a combined £25 billion ($38 billion) by the end of the year, according to local regulators. That includes potentially raising up to £1.8 billion, according to banking analysts at Barclays, for the small British lender Co-Operative Banking Group, which was downgraded to junk status last week by the credit rating agency Moody’s Investors Service over concerns about an increase in delinquent loans.

Commerzbank, Deutsche Bank, Citigroup and HSBC are the book-runners for Commerzbank’s capital-raising effort, which the bank said would close on May 28.

Criminal Practice: Defense Counsel Raise Questions About Indicting Grand Juries

With the return of the indicting grand jury to Pennsylvania last week for cases involving witness intimidation, defense attorneys are raising concerns that the grand jury process provides much less protection for defendants, while prosecutors say that indicting grand juries are necessary to protect witnesses facing the threat of harm or even death if they testify about homicides and other serious crimes.

Tentative Accord Reached to Raise Taxes on Wealthy

While the Senate moved toward a vote on legislation to avoid the so-called fiscal cliff, the House was not going to consider any deal until Tuesday afternoon at the earliest, meaning that a combination of tax increases and spending cuts would go into effect as 2013 began. If Congress acts quickly and sends the legislation to President Obama, the economic impact could still be very limited.

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $250,000, a clear win for President Obama, who campaigned on higher taxes for the wealthy.

“Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans,” Mr. Obama said at a hastily arranged news briefing, with middle-income onlookers cheering behind him. “Obviously, the agreement that’s currently being discussed would raise those rates and raise them permanently.”

Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost.

As negotiators tied up the last points of dispute, officials said that the two top Democrats on Capitol Hill — Senator Harry Reid of Nevada and Representative Nancy Pelosi of California — had signed off on the agreement. In an effort to win over other Democrats uneasy with the proposal, Vice President Joseph R. Biden Jr., who had bargained directly with Republican leaders, traveled to the Capitol on Monday night for a 90-minute meeting with his former Senate colleagues.

“I feel very, very good,” Mr. Biden said after the meeting. “I think we’ll get a very good vote.”

In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue. Those cuts begin to go into force on Wednesday, and that deadline, too, might be missed before Congress approves the legislation.

To secure votes, Mr. Reid also told Democrats the legislation would cancel a pending congressional pay raise — putting opponents in the politically difficult position of supporting a raise — and extend an expiring dairy policy that would have seen the price of milk double in some parts of the country.

Anticipating Senate approval of the deal, Speaker John A. Boehner late Monday said the House would “honor its commitment to consider the Senate agreement if it is passed. Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation.”

The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes would continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the “pause” on pending cuts is up. Then in late March, a law financing the government expires.

And the new deal does nothing to address the big issues that Mr. Obama and Mr. Boehner hoped to deal with in their failed “grand bargain” talks two weeks ago: booming entitlement spending and a tax code so complex that few defend it anymore.

Jennifer Steinhauer and Robert Pear contributed reporting.

Tentative Accord Reached to Raise Taxes on Wealthy

While some senators pushed for a quick vote on legislation to avoid the so-called fiscal cliff, the House was not expected to consider any deal until Tuesday at the earliest, meaning that a combination of tax increases and spending cuts would go into effect in the first days of 2013. If Congress acts quickly and sends a deal to President Obama, the economic impact could still be very limited.

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $200,000, a clear win for President Obama, who campaigned on higher taxes for the wealthy.

“Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously, the agreement that’s currently being discussed would raise those rates and raise them permanently,” Mr. Obama crowed at a hastily arranged news briefing, with middle-income onlookers cheering behind him.

In a  development that pushed lawmakers closer to a resolution, Senate Republicans said negotiators also agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue. Those cuts begin to go into force on Wednesday Jan. 2, and that deadline too might be missed before Congress approves the deal.

The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes will continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the “pause” on pending cuts is up. Then in late March, a temporary law financing the government expires.

And the new deal does nothing to address the big issues that President Obama and Speaker John A. Boehner hoped to deal with in their failed “grand bargain” talks two weeks ago: booming entitlement spending and a tax code so complex few defend it anymore.

Though the tentative deal had a chance of success, it landed with a thud on Capitol Hill. Republicans accused the White House of “moving the goal posts” by demanding still more tax increases to help shut off across-the-board spending cuts beyond the two-month pause. Democrats were incredulous that the president had ultimately agreed to around $600 billion in new tax revenue over 10 years when even Mr. Boehner had promised $800 billion. But the White House said it had also won concessions on unemployment insurance and the inheritance tax among other wins.

Still, Democrats openly worried that if Mr. Obama could not drive a harder bargain when he holds most of the cards, he will give up still more Democratic priorities in the coming weeks, when hard deadlines will raise the prospects of a government default first, then a government shutdown. In both instances, conservative Republicans are more willing to breach the deadlines than in this case, when conservatives cringed at the prospects of huge tax increases.

“I just don’t think Obama’s negotiated very well,” said Senator Tom Harkin, Democrat of Iowa.

But as night fell over Washington on New Year’s Eve, senators seemed worn down and resigned. “Everybody by this time is angry, but sooner or later this has to be resolved,” said Senator Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee.

Jennifer Steinhauer and Robert Pear contributed reporting.

Common Sense: Apple’s Map App Could Raise Antitrust Concerns

These milestones were reached with the steady hand of Timothy D. Cook at Apple’s helm, but they seem inseparable from Mr. Jobs. They are the result of initiatives begun during his tenure and, in many ways, reflect his personality — one that was perfectionist, competitive, driven and controlling.

Those qualities have remained on display at Apple in the year since his death, most recently in the decision to substitute Apple mapping software for rival Google’s in the iPhone 5 and the new iOS 6 operating system, as well as allegations that Apple and book producers conspired to control the price of e-books.

Apple hasn’t fully explained its decision to replace Google’s maps, but it probably reflects the evolution of the Apple-Google relationship from close allies to fierce competitors, a process that began well before Mr. Jobs’s death. Apple also hasn’t indicated whether it was carrying out Mr. Jobs’s wishes, but the decision seems consistent with his “compulsion for Apple to have end-to-end control of every product that it made,” as Walter Isaacson put it in his book “Steve Jobs.”

Apple’s use of its own mapping technology in the iPhone appears to be a textbook case of what’s known as a tying arrangement, sometimes referred to as “bundling.” In a tying arrangement, the purchase of one good or service (in this case the iPhone) is conditioned on the purchase or use of a second (Apple maps).

To the degree that tying arrangements extend the control of a dominant producer, they may violate antitrust laws. Probably the best-known example was Microsoft’s attempt to bundle its Internet Explorer browser on Windows software, to the disadvantage of Netscape, a rival browser, despite complaints that Explorer was initially an inferior product. This was the linchpin of the government’s 1998 antitrust case against Microsoft. E-mails were introduced as evidence in which Microsoft executives indiscreetly stated their intentions to “smother,” “extinguish” and “cut off Netscape’s air supply” by bundling Explorer with Windows.

Among other findings, the judge ruled that Microsoft had engaged in an illegal tying arrangement. The outcome of the case kept the door open to competition in the browser market. Today, the once-dominant Internet Explorer faces stiff competition from rivals like Mozilla Firefox and Google Chrome. Microsoft’s settlement came too late for Netscape’s browser, which was no longer being developed or supported after 2007. But Firefox traces its lineage to Netscape’s source code.

Could Apple’s map suffer a similar fate?

Early users searched for locations and got nonsensical results. Mad magazine ran a parody of the famous Saul Steinberg New Yorker cover of the world seen from Ninth Avenue “now using Apple Maps,” in which the Hudson was the Sea of Galilee and other landmarks were ludicrously misidentified.

Mr. Cook swiftly tried to contain the damage. “Everything we do at Apple is aimed at making our products the best in the world. We know that you expect that from us, and we will keep working nonstop until Maps lives up to the same incredibly high standard,” he said a week ago.

Would Mr. Jobs have been so quick to apologize? Perhaps not. He was famously resistant to the idea after complaints about the iPhone 4’s antenna, and the Apple “genius” manual instructs employees never to apologize for the quality of Apple technology.

Bundling its maps with the iPhone 5 may yet prove to be a strategic blunder for Apple, but it may nonetheless skirt the boundaries of the antitrust laws that tripped up Microsoft. “There’s no antitrust theory under which vertically integrating into an inferior component is considered anticompetitive,” Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law, told me. That’s because the problem is considered self-correcting by market forces. “There have been lots of complaints about tying arrangements involving inferior products. But ordinarily, incorporating an inferior product doesn’t increase your market share, because consumers leave for a better product. It’s not a promising strategy,” Professor Hovenkamp said. The danger for Apple is that customers will choose an Android phone with a superior Google Maps application rather than an iPhone.

An exception is when a monopolist does it, which is what happened with Microsoft. If a consumer used Microsoft Windows, the dominant software, Explorer was installed by default. “This arose with Microsoft because back then Explorer was considered inferior and quirky,” Professor Hovenkamp said. “But that wasn’t why it was a violation. It’s because consumers had no choice.” By contrast, Apple’s iOS isn’t the dominant smartphone operating system. Apple’s software has captured 17 percent of the global smartphone market, compared with 68 percent for Google’s Android. Apple users who want Google maps can readily switch to an Android phone. “Most tying arrangement cases have involved firms with close to 100 percent market shares,” Professor Hovenkamp noted.

The real test will be whether Apple makes rival mapping apps readily available for downloading on its iPhones. In his apology, Mr. Cook suggested that iPhone users try alternatives, and even suggested using Google maps by going to Google’s Web site. Google said it was working on a map application for the iPhone.

From an antitrust perspective, the e-books controversy is more serious. United States antitrust authorities have accused Apple of conspiring with major book publishers to raise e-book prices, and Apple offered to settle a European investigation into the same practices. The Justice Department cited a passage in Mr. Isaacson’s book in which Mr. Jobs called the strategy an “aikido move,” referring to the Japanese martial art, and said, “We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.”

The charges describe a classic price-fixing arrangement, “which is presumptively illegal,” Professor Hovenkamp said. “Everybody wants market dominance, not just Apple. But it’s how you go about it. You can’t go out and fix prices.” Apple has denied the charges, and a trial has been set for next year.

Mr. Cook’s challenge has always been to guide Apple out of the shadow of its visionary and charismatic founder. Can he encourage Mr. Jobs’s competitive zeal and drive for perfection while distancing Apple from Mr. Jobs’s potentially damaging — even unlawful — need to dominate and control? “Historically, Apple hasn’t been very sensitive to antitrust issues,” Professor Hovenkamp said.

There’s no quarreling with Apple’s extraordinary success, and Mr. Jobs’s obsession with controlling all aspects of Apple’s products clearly paid off for its customers and shareholders. It proved to be the right strategy for the time. But competition in smartphones and Apple’s other efforts has intensified in the year since Mr. Jobs died, and Apple may not be able to continue blindly down that path. With his swift apology for the imperfections of Apple’s maps, Mr. Cook seems to have taken a step in the right direction. If he also settles the e-books case and makes Google’s and other map applications readily available to iPhone users, he’d be signaling a clear break from the past and encouraging Apple to embrace, rather than stifle, competition.

This article has been revised to reflect the following correction:

Correction: October 5, 2012

An earlier version of this column referred incorrectly to a case in which Microsoft resolved anticompetitive concerns by agreeing to offer users a choice of browser. The agreement was part of a 2009 settlement of a European antitrust case, not the United States government's 1998 antitrust case.