Good morning. A Justice Department policy shift around the disclosure of possible wrongdoing uncovered in mergers and acquisitions reinforces the need for buyers to dive deep into a target’s compliance efforts, both before and after a deal closes, corporate advisers said.

• 'Safe harbor' for one year: Under a new policy announced in October, an acquiring company that discloses potential wrongdoing at a company being acquired within six months of either side of the deal closing date—and fully cooperates and fixes the underlying problems within a year of closing—can presume it won’t be prosecuted by the Justice Department. The new policy’s one-year “safe harbor” provision will likely encourage acquirers to increase both the amount and speed of deal due diligence.
   
• Need for speed: “Time kills deals. And you don’t get the chance necessarily, particularly in a competitive process, to drill down as much as you might otherwise like,” said Tim FitzSimons, a partner in King & Spalding’s corporate, finance and investments practice. “You might risk losing the deal. So it will put pressure on diligence.”
   
• Post-close focus: The period after a deal closes will be particularly important for acquirers to uncover any problems that need to be reported to the Justice Department.
   
• Due diligence investment: “I think we’re going to see that companies will invest as much in due diligence after an acquisition closes [as before],” said Justin Weitz, a partner at law firm Morgan Lewis who spent nearly a decade at the Justice Department’s criminal division. “Because if they feel they have the timeline to clean up compliance, I think there will be a greater investment in both compliance and due diligence to try and integrate a company quickly and to try to see if there’s any skeletons in the closet.”

Tesla prevails in one of first trials over Autopilot’s role in a fatal crash.

Tesla has prevailed in one of the first U.S. trials over the involvement of its Autopilot system in a fatal crash.

Court findings. A Southern California jury on Tuesday found there wasn’t a manufacturing defect in the advanced driver-assistance system of a Tesla that veered off an interstate and hit a tree outside of Los Angeles in 2019. The driver ultimately died of injuries suffered in the crash.

The verdict, which follows a monthlong trial in Riverside County Superior Court, amounts to a reputational win for Tesla in litigation over Autopilot.

GE Healthcare discloses potential foreign bribery violations in China.

General Electric spinoff GE HealthCare Technologies said it reported potential foreign bribery violations in some of its operations in China to U.S. regulators.

GE HealthCare found “tender irregularities and other potential violations” of the Foreign Corrupt Practices Act related to its activities in some Chinese provinces, according to a quarterly report filed by the company with the Securities and Exchange Commission on Tuesday.

• Executives at large public companies are concerned about the Financial Accounting Standards Board’s plan requiring them to further break down labor and other operating expenses that appear on their income statements, with some saying it would impose significant costs and not aid their investors.
   
• Match Group and Alphabet-unit Google reached a binding term sheet for a settlement regarding their claims against each other in their legal battle.
   
• Senate Democrats intensified their investigation into the ethics of Supreme Court justices, announcing plans to subpoena documents from three wealthy figures who helped provide trips to Justices Clarence Thomas and Samuel Alito.
   
• A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.
   
• Sam Bankman-Fried’s lawyers rested their case Tuesday after seeking to rehabilitate the FTX founder’s credibility from the prosecutors’ two-day grilling.

U.S. and China are smoothing ties—but military frictions still chafe.

Tensions between the U.S. and Chinese militaries continue to simmer even as their leaders prepare for a likely summit in the coming weeks, a sign of the difficulties the two global powers face in managing one of the most sensitive aspects of their relationship.

Tensions on display. The discord occupied center stage this week at a security conference in Beijing, where a top Chinese general took veiled swipes at Washington’s foreign policy and military posture, characterizing them as grave threats to peace and stability around the world as wars rage in Ukraine and Gaza.

• China’s Economy Shows Fresh Signs of Slowing
• Chinese Laser Sensor Maker Targeted as Tech Trade War Spreads

The U.S. and European economies are diverging.

The gap between the U.S. and European economies is widening, with growth and inflation on different trajectories as the fallout from the war in Ukraine weighs on Europe’s prospects.

Economic split screen. The European Union’s statistics agency Tuesday said the combined gross domestic product of the eurozone’s 20 members fell by an annualized 0.4% in the three months through September, having increased by 0.6% in the previous quarter. This is a stark contrast with the 4.9% rate of annualized growth recorded by the U.S. during the same period, more than double the pace of growth in the previous quarter.

• American workers are still commanding big pay raises, though not quite as beefy as last year. That is good news for workers but a potential complication for the Federal Reserve’s fight to lower inflation.
   
• Commercial real-estate lending is shrinking to historically low levels, threatening a rise in defaults on expiring debt and a sharp decline in new construction of warehouses, apartments and other property types.
   
• Small businesses, from caterers to studio services, are suffering from prolonged work stoppages caused by the Hollywood strikes. 
   
• There’s some good news about flu season this year. Doctors and scientists don’t expect the worst.

Kelly joined Finra in 2014 and also served as its acting head of enforcement from February through August. Finra said it will search for a replacement.

• Israeli airstrikes rocked a densely populated area north of Gaza City on Tuesday, flattening entire apartment blocks, leaving deep craters and causing hundreds of casualties, according to hospital officials, in what the Israeli military said were strikes targeting Hamas infrastructure and militants.
   
• Closing arguments in the trial of FTX founder Sam Bankman-Fried will begin Wednesday, as Bankman-Fried wrapped up his time on the witness stand after three days of testimony.
   
• WeWork is planning to file for bankruptcy as early as next week, according to people familiar with the matter.
   
• House Speaker Mike Johnson (R., La.) is on a collision course with the Senate over a plan to immediately fund aid for Israel but not Ukraine.

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