Fast 3: Gina v Albemarle | AI Deep Fakes | Is Amazon ripping off small businesses?

Sascha: [00:00:02] Welcome to The Dive, the podcast that asks Who said business news needs to be all business? I'm your host, Sascha Kelly. It's a new week and we're hitting the decks with a fast three. The stories that have had us chatting in the equity rates office. Alec is digging into the reporting coming out of the recent Amazon antitrust lawsuit. Alf is going to get me up to speed on the AI deep fakes plaguing celebrities. But first, Bryce is going to dive into the stoush over line town resources between Australia's richest person and an American chemicals giant. It's Monday, the 23rd of October, and today I want to know what's getting us talking here at Equity Mates. As I said, the first story today I'm going to dig into with my colleague and the co-founder here at Equity Mates, it's Bryce Leske. Bryce. Welcome back to the dive. 

Bryce: [00:00:51] Thank you, Sascha. Good to be here.

Sascha: [00:00:53] Well, we've just seen a fight over one of Australia's emerging mining giants, Liontown Resources. First of all, who is Liontown? 

Bryce: [00:01:01] Yes, love a good corporate battle. Sascha. Lion Tan is a lithium miner. They controlled two major lithium deposits in Western Australia, with the first production set for mid 20 and 24 from its flagship Kathleen Valley project, which is among the world's largest and highest grade. Hardrock lithium deposits. The Cathleen Valley will be a significant source of Spodumene, which is the precursor material refined into lithium for batteries. Now, Lion Town is also attractive as it has supply deals with Ford Motor, Tesla and the battery unit of South Korea's LG Chemical. 

Sascha: [00:01:37] Some big deals in the works there, Bryce. Now, lithium prices are actually down about.

Audio Clip: [00:01:41] 65% so far this year. So maybe that takes the heat off a little bit. But experts do say we could face a global shortage as soon as 2025. 

Bryce: [00:01:49] Their fortunes have tracked lithium demand. They listed on the ASX in 2006 at $0.20 in 2008 when it dropped to $0.02. Since then it has absolutely exploded. The share price is now sitting at 2.80. 

Sascha: [00:02:05] Wow. And we've covered this in some of our episodes already this year, but securing lithium supplies has become even more important. 

Bryce: [00:02:13] Yeah, lithium is in hot demand for electric vehicle batteries. Projects in countries like Australia have become more attractive because the other major producer, Chile, detailed in April a plan to nationalise its industry.

Sascha: [00:02:26] So Bryce then left Albemarle and they've been stalking Liontown for some time. 

Bryce: [00:02:33] Yes, it's been a fascinating story to watch. Albemarle is a US chemicals giant. They are an American speciality chemicals manufacturing company based in Charlotte, North Carolina. And as of 2020, Albemarle was the largest producer of lithium for electric vehicle batteries in the world. Okay. Are they more of a processor than a miner? But like everyone else in the space, they're really focussed on securing the supply. And that might include moving up the production chain into mining. So here's where the story is at A year ago, Line Town was trading at about a dollar 50. In October 2022, Albemarle through a bid for line town at 2.20 a share. The price for line Town ran up to 2.20 in early November, but the bid was rejected and the share price fell back down. In March 2023, the share price was back to around a dollar 50. However, Albemarle sent a private bid to the company at 2.35, which was again rejected from the management. Albemarle didn't stop there, though. They then lobbed a public bid at $2.50 a share in late March. Again, Liontown rejects as it's too low. Albemarle then comes back and increases its bid on the 1st of September to 2.62. Then on the 4th of September, up to $3 a share, which valued the company at $6.6 billion. 

Sascha: [00:04:01] So a great timeline there for us. The deal's about to be done. Albemarle is just been staking it higher and higher and then couldn't have a saga without an entry of another character, which is Australia's richest person, Gina Rinehart. She walks in.

Audio Clip: [00:04:16] Hancock's been vigorously buying lines and shares almost 48 million of them yesterday at an average price of $3. And whether Gina Rinehart's trying to launch her own takeover of the lithium player, that's yet to be revealed. But what is clear is that a shareholding is close enough to a point where it can disrupt Albemarle takeover? 

Bryce: [00:04:35] Yes, well, the deal was very far down the line. I think they were at the point of doing due diligence. But then Mrs. Rinehart's Hancock Prospecting went on a $1.3 billion spending spree, buying up Lion Town shares over the past six months. She started quite slowly, but then in the final stages, the last couple of months really upped the ante to the point where she ended up acquiring a total of 19. 2.9% of Lyon Town as of last week. 

Sascha: [00:05:04] Why would you stop it? 19.9 Doesn't 20 just seem like a round up for the sake of it, right?

Bryce: [00:05:11] Yes, good question. 20% is the trigger at which point you have to make a mandatory acquisition offer. So 19.9 gives you a level of control within the company. She became the single largest investor with enough clout and enough voting block to essentially block any shareholder vote on the deal. 

Sascha: [00:05:32] So that's the interesting thing you say there, Bryce. Does she actually want to buy one town or does she just want to be in the way? 

Bryce: [00:05:39] Well, I mean, she hasn't publicly come out and gone, Hey, guys, here's my plan. This is what I'm going to do. But it's obvious that Gina wants to be involved in and access to the lithium assets that line town have. She has the ability to use her shareholding to get in the same room as Albemarle and to deal with them. She hasn't been, as I said, public about it. We don't really know. But she's now in a position where she can block a deal, where she can bargain for some of the assets. She's right in the middle of this. [00:06:09][29.4]

Sascha: [00:06:09] Yeah, but Albemarle have in the meantime decided it's all too much and they've pulled out completely. 

Bryce: [00:06:16] Yeah. Devastating news for Lyon Town. They said in a statement last week that Albemarle has now advised that it has withdrawn its indicative proposal and that it will not be proceeding with its proposed acquisition of Liontown. Its decision to withdraw its proposal was due to the growing complexities associated with executing the transaction, i.e. dealing with Gina. 

Sascha: [00:06:37] Yeah, I'm like, Don't you love corporate steak growing complexities? It's just like a monica Feel like you've come in, you've stuffed it all up. Weren't these billionaires like go away? So I guess the big question is what next? What happens now?

Bryce: [00:06:52] Well, Leon Town will be out of a trading halt by the time that this episode airs. The share price will fall. You would imagine back towards that dollar 50 range where it was before all of this happened. And the management team have indicated that they're just going to get back to business, building the mines and getting on with it Before Leon Town gets its Cathleen Valley project into production. It requires 450 million of funding in the near term as part of a larger 950 million needed to cover the project's capital costs. So it will be selling shares to raise capital, but expect more acquisition offers in the future, although potential acquirers will be wary as long as Gina maintains her 19.9% shareholding. The assets that they've got and the demand for lithium is obviously something that's going to keep it an attractive acquisition target.

Sascha: [00:07:40] Interesting story. Thanks for getting me up to speed, Bryce. 

Bryce: [00:07:42] No worries. Watch this space. 

Audio Clip: [00:07:47] Well, remember how much a polar bear weighs? Polar bear. He said enough to break the ice. 

Sascha: [00:07:59] A next story today. I'm joined by my colleague here at equity mates. It's Alf Eddy. Alf is here to tell me all about those eerily lifelike deep fakes that are circling the internet and often bearing the resemblance of celebrities. Alf, welcome to the dive. 

Alf: [00:08:15] Thanks, Sascha.

Sascha: [00:08:16] First of all, can you give me the definition of what a deepfake is before we get into the rest of this condor? 

Alf: [00:08:22] All right, so your question is, what's a deep fake? So I think most of our audience would have come across one at some point. Maybe they didn't realise at the time. I remember for me the first one I saw that I can remember, it was quite striking at the time was a Tom Cruise impersonator. He teamed up with a visual effects artist to make a really convincing, I guess, Tom Cruise impression, but it's using like part of Tom Cruise's face on top of this actor. It sort of has an uncanny valley feel to it. It's quite disturbing, really. So what are deep fakes? They're digital manipulations or forgeries of audio, video or images created using deep learning algorithms so they utilise A.I. to replace one's likeness or voice with the others, often resulting in highly convincing and deceptive content. They've recently raised concerns around their potential for spreading misinformation, fraud and privacy breaches. 

Sascha: [00:09:16] Okay, so as both of us have said, we've seen deep fakes around for a while now, but it's starting to make headlines because of these celebrities who are being caught up in some of these examples. 

Alf: [00:09:28] Yeah, that's right. So two recent examples, Tom Hanks and Mr. Beast promoting products online. So I think we've done an episode on Mr. Beast before, so you might be aware of who he is. So I'll start with Tom Hanks. So Tom Hanks shared an Instagram quote B, where there's a video out there promoting some dental plan with an AI version of me. I have nothing to do with it. Couldn't find the clip of this one, but go to his Instagram if you want to see it.

Sascha: [00:09:52] Not necessarily the man I associate with great dental plans, but there you go. Everyone's got to make a sale. 

Alf: [00:09:59] It's bizarre, isn't it? And then the second one, Mr. Bass. So Tik Tok ran an ad featuring a deepfake of Mr. Bass offering 10,000 iPhone 15 pros for $2 each. 

Audio Clip: [00:10:11] If you're watching this video, you're one of the 10,000 lucky people who will get an iPhone 15 pro for just $2. I'm Mr. Beast, and I'm doing the world's largest iPhone 15 giveaway. Click the link below to claim yours now.

Alf: [00:10:24] So Mr. Bass, whose real name is Jemmy Donaldson, confirmed the ad wasn't real. And he said, quote, Lots of people are getting this deep fake scam of me. Are social media platforms ready to handle the rise of deep fakes? This is a serious problem. Elon Musk and Leo DiCaprio have also run into similar challenges. 

Sascha: [00:10:42] Okay, so Alf, I'm not any of those people, but I am seeing this content. How worried should I be? And just how easy is it to make one of these deep fakes?

Alf: [00:10:54] So the thinking is it's going to get worse as technology improves and becomes more widely available. I've created a A.I. voice clone that I can show you here for an example. Yeah, which might get you thinking. 

Sascha: [00:11:06] Hello? Sascha, it's you, Sascha. This is an example of A.I. voice cloning, demonstrating how easily synthetic media can replicate your voice. The advancements in AI allow for precise replication of your tone and speech patterns. While this has positive applications like aiding those with speech disabilities, it also raises ethical concerns about deepfakes and A.I. manipulation. In this age of blurred reality and the digital realm, it's crucial to use AI responsibly for the betterment of society without compromising trust and authenticity. Here are your thoughts on hearing your own voice through artificial intelligence. It's a glimpse into the possibilities and challenges of our AI driven future. That's terrifying ALF, and it's also made me very self-conscious about the pauses that I have in my sentences that the AI machine is, I'm sorry, really high, and then I'm going really low and then stopping in really strange spots of my sentences. That's really terrifying. So, Alf, I mean, how long did that take you to make? 

Alf: [00:12:07] So it took me a few minutes to download a previous clip of your voice and then it cloned it in another few minutes. And then I came up with the text and then about another few minutes. So about 10 minutes in total, I'd say that's terrifying. So a quote from Henry Edgar, an academic researcher and expert in generative AI, said Realism, efficiency and accessibility or democratisation means that this is essentially in the hands of everyday people. It really is a quite profound moment and this really is the tip of the iceberg. 

Sascha: [00:12:38] Yeah, absolutely. So Alf, what are politicians and tech companies doing to stop this? Because there's no way I can't stop you cloning my voice. Is there anything anyone can do? 

Alf: [00:12:49] So it really is a problem. There's no sure fire way of knowing if content is air generated or not. So that's the crux of the issue. So last month, tech. Hope released a new tool to help creators label air content and said it would start testing ways to label air content automatically. So I think that's really where these platforms need to get to. US lawmakers are questioning Mehta and Twitter ahead of the 2024 U.S. presidential election about AI and how it's going to play into that election. So Google was the first big tech company to say it would impose new labels on deceptive air generated political ads that could fake a candidate's voice or actions. A.I. generated ads are actually already a part of the 2024 election, including one ad by the Republican National Committee in April meant to show the future of the US if President Joe Biden is re-elected. It employed fake but realistic photos showing boarded up storefronts and military patrols in the streets and waves of immigrants creating panic. So A.I. is already playing a role in the 2024 U.S. election.

Sascha: [00:13:55] Absolutely terrifying. Else but definitely one to watch and one I think we're going to talk about again. Thanks so much for joining me today. 

Alf: [00:14:01] Thanks, Sascha. 

Sascha: [00:14:02] We're going to take a quick break. When we get back. I'm joined by Alec, who's going to tell me all about the antitrust lawsuit targeting Amazon, why they're alleging that they're ripping off third party sellers. Stay around.

Audio Clip: [00:14:21] The Federal Trade Commission and 17 states are accusing Amazon of anti-competitive behaviour. 

Audio Clip: [00:14:27] This highly anticipated lawsuit claims the retail giant has an illegal monopoly over online retail.

Sascha: [00:14:34] Welcome back to the Dive. For our third story today, I'm joined by my colleague and the co-founder of Equity Mates. It's Alec Renehan. Alec, you're here to tell me all about what's happening with this Amazon antitrust lawsuit. Amazon sellers? Well, they say that they've been making a really good living until Amazon figured it out. This is the core of this information that's coming out in a recent antitrust lawsuit filed against Amazon in the United States. 

Alec: [00:15:02] That's right. Sascha, stop the presses. Breaking news, large retailer screwing suppliers. 

Sascha: [00:15:09] Who would have thought is to.

Alec: [00:15:10] Me, seems to be a tale as old as time. But it's particularly relevant right now in the Amazon antitrust lawsuit. So America's Federal Trade Commission and 17 American states have joined together and have filed a lawsuit against Amazon. Now in news, it surprises no one. Amazon dominates online retail in the United States. It covers more than 40% of online shopping. And around two thirds of American adults subscribe to Amazon Prime. It is Amazon and daylight second. 

Sascha: [00:15:47] Yeah.

Alec: [00:15:47] And the lawsuit that the FTC and the 17 states have brought against Amazon alleges that Amazon have illegally used this market power to stamp out rivals, which ultimately hurts consumers.

Sascha: [00:16:01] And one way Amazon is alleged to have done this is to monitor third party sellers on that website, those sellers that list products on Amazon and use Amazon's warehouse and logistics services. But then Amazon creates their own versions of these best selling third party products. 

Alec: [00:16:18] Yeah, that's right. Now, NPR over in the United States have profiled one company, Top Shelf Brands, and it really, I guess, tells the story of these allegations. So Douglas Mercer owned a barbershop. He had too many supplies. And so he started selling barbershop supplies on Amazon in 2014. Soon after that part time hustle became his full time business. Top shelf Brands. Within a couple of years, he had more than 40 employees around four warehouses and says he was bringing in $10 million in revenue. Pretty amazing story. A couple of years later, he says, was up to $25 million in revenue. Wow. So these third party sellers were making, you know, building serious businesses on the back of Amazon's platform and distribution. But then it all started to turn in 2018, Sascha. Amazon started listing its own hair and beauty products, which were appearing ahead of top shelf brands in Amazon's search results. By 2022, top shelf Brands was bankrupt, Its employees laid off and its warehouses shuttered. 

Sascha: [00:17:26] What a rollercoaster from 2014 to 2022. Going through all of that, it's not just that Amazon is competing with its third party sellers, it's that Amazon actually has advantages that some would consider unfair. 

Alec: [00:17:41] Yeah, that's right. There's nothing illegal with a retailer having an own brand and competing with third party sellers. You see that across the retail landscape. The challenge and I guess where this lawsuit has come from is that, yeah, Amazon is acting allegedly unfairly. NPR have looked at another small third party seller in the U.S. This one is called Snob Foods based in Alabama. 

Sascha: [00:18:07] Great name. Yeah. 

Alec: [00:18:09] It sells pantry items like hot sauce, barbecue sauce and mixed spices. One hot sauce that snob Foods sells is a Valentina brand hot sauce. I can't say I know my hot sauces that well, but it seems pretty popular. They'd been selling it for more than a decade. Amazon realised that it was selling pretty well, so Amazon then started selling it as well. Amazon could sell it cheaper. They could put it on the top of search queries and importantly, they wouldn't have to pay the fees for shipping and delivery that Snob foods would have to pay. Because Amazon owns their network, they don't have to charge themselves. When snob Foods looked at the fees it was paying for quote unquote optional services to Amazon question about how optional they are, you know appearing high up in search results. Warehousing them in Amazon warehouses and being shipped by Amazon. Snob Foods said that at least half of what they earn on the platform goes to Amazon. But perhaps more importantly for this lawsuit, they also said that if they tried to sell a product. For a lower price on another platform, including their own website. Amazon could yank their listing or just bury their product in Amazon's search results. 

Sascha: [00:19:29] Wow. And this is an example of just one way that the FTC is claiming Amazon abused its market power allegedly. What did Amazon say in its response to this? Because surely they have something to say. 

Alec: [00:19:44] Yeah. We should be clear that for every example that the media will bring of a company that's had a bad experience as a third party seller, Amazon will be able to bring a story of a company that's had a great experience. And so we haven't seen those stories bubble up in the media yet, but they definitely exist and we'll see them as this trial moves its way through the courts. But in response to this story from NPR, Amazon said in an emailed statement that the FTC's lawsuit is, quote, wrong on the facts and the law. They said that third party sellers account for more than 60% of its US sales and that these sellers are engaging with their store more than ever before. Amazon also added that these sellers, quote, purchase optional services from Amazon because they provide more value than they can get elsewhere. 

Sascha: [00:20:33] Hmm. I'm not sure whether that completely quashes my thoughts about those two examples, but it's certainly a very strong response. And I like when we were talking about this story in the content, meaning you thought it was important to point out that Amazon's playbook here is not you. This is a play that bricks and mortar retailers have been running for years. 

Alec: [00:20:55] Yeah, that's right. Wal-Mart, Kroger in the US, Coles Woollies here in Australia. Retailers, supermarkets in particular around the world have owned the supermarket shelves, which is the equivalent of Amazon Icons platform. But then they've also created private label products to compete with their branded suppliers. Woolworths realises that canned fruit is doing really well and then they create their own Woolworths brand canned fruit to compete with SPC and the other brands. It is a tale as old as time. And Amazon is really just running that same playbook, but in an online space. And it's not like these supermarkets haven't been without controversy and court cases and allegations. We just did a cursory Google search of Walmart. And just on the first page of the search results, they've been sued by Deckers, Crocs, Yeti vans, even the University of California for their private label products. And that's literally just a one minute Google search. Like this is a controversial practice both in bricks and mortar retail and online retail. But the way that the bricks and mortar retailers have avoided this level of case like Amazon is facing is it's always been sort of isolated to disputes with their suppliers. Has it been like a broad you've got an illegal monopoly and you're misusing your market power, which is what the allegation is here against Amazon. So it's a higher burden for the government to have to prove here. And it's a case that I think the world will be watching pretty closely. 

Sascha: [00:22:34] Couldn't have said it better myself, but Alec, I do always enjoy it when we get you back to your retail roots and go back into one of those stories. So thanks for sharing that with us today. 

Alec: [00:22:42] Thanks, Sascha.

Sascha: [00:22:43] And that's all we have time for today. Thanks for joining us on the dive. If you're enjoying the shark, jump in your podcast player. Give us a five star review. It means the world to us. I'm going to be back in your feed on Wednesday. Until then.