Gap Rewards Customers for Shopping at Amazon and Target

Like the old Macy’s and Gimbels department stores from Miracle on 34th Street that had employees send away customers to shop at their competitor’s stores, Gap (NYSE: GPS) is experimenting with rewarding holders of its Visa Signature credit card if they shop at Amazon.com (NASDAQ: AMZN) or Target (NYSE: TGT).

While many branded credit cards offer cash back on purchases made at a variety of merchants, the Gap promotion seems unique in that it is pushing its customers to shop at two of its competitors.

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An essential difference

During the months of October and November, Gap customers can earn 10 points for every $1 spent on “everyday essentials” at either Amazon or Target while earning three points for every dollar spent at stores other than its own Gap, Old Navy, Banana Republic, and Athleta chains, according to RetailWire. Gap customers typically earn five points for every dollar spent at its own brands, so it is definitely incentivizing cardholders to visit Amazon and Target.

The catch is the promotion seems limited to everyday essentials, typically things like soap, body wash, toothpaste, etc., not clothing. Target recently launched a new line of products that fits into this category called Smartly, some 70 low-cost products that cover not only personal care items but also household goods like paper plates, toilet paper, and laundry detergent.

Gap may be hoping its customers will go to these other retailers to stock up on goods that it doesn’t sell, and then come back at Christmas to use the points to purchase Gap clothing.

But there is risk that, while shopping for moisturizer and shaving cream on Amazon, customers will also check out the e-commerce giant’s selection of jeans, khakis, T-shirts, and other clothing items.

It’s a bold strategy. We’ll see if it pays off for them.

Looking for a spark

Gap’s performance has been mixed, with strong sales at Old Navy but the namesake Gap stores continuing to be weak. Second-quarter revenue and earnings actually beat analyst expectations, posting a 7.5% increase in sales to $4.09 billion and a near-12% jump in per-share profits to $0.76, but overall comparable-store sales came in at a lackluster 2% gain.

That was predicated on the 5% increase seen at Old Navy and a 2% bump at Banana Republic, but Gap stores tumbled 5% from the year-ago period, which was an awful performance considering in 2017 comps had already set the bar low, with same-store sales falling 1%. Since Gap couldn’t step over that easy hurdle, it’s a signal that its position is in trouble. CEO Art Peck may say that the worst is behind them with the Gap brand, but it hasn’t shown that to be the case yet.

This may be why Gap is trying this “bold strategy.” Consumers are already shopping at Amazon and Target, and recognizing this by piggybacking on it could be the next best way to capitalize on that reality.

Sales at Amazon surged 39% last quarter to $53 billion while Target sales were up 7% to almost $18 billion, but it had strong comps growth, too, up 6.5% on an “unprecedented” 6.4% surge in traffic. By limiting customers to a narrow selection of merchandise they’re probably already buying at those retailers anyway, Gap may just get them to come back to its stores to use the points they’ve collected and boost its sales as well.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

Minnesota frozen food company recalls pork, chicken products

Authorities say a Minnesota frozen food and packing company is recalling more than 212,000 pounds of ready-to-eat pork and chicken products that contain vegetables that might be contaminated with salmonella and listeria.

The Agriculture Department said in a release issued Friday that Buddy’s Kitchen Inc. of Burnsville produced the products between Oct 19, 2017, and Oct. 9, 2018. The items were shipped to Arizona, California, Georgia, Illinois, Minnesota, Missouri and New Jersey. They have the number “P-4226” inside the USDA mark of inspection.

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The problem was discovered by Buddy’s vegetable supplier. The USDA says no adverse reactions to the products have been reported. Consumers are urged not to eat the products.

Salmonella can cause abdominal cramps and fever. Listeria can cause fever, muscle aches, headache, stiff neck, confusion loss of balance and convulsions.

1 Top Stock to Buy Amid October’s Turbulent Market

A return of volatility jolted the market this month. In the past three weeks alone, stocks have tumbled about 5%, which has many investors unnerved.

But sell-offs like this are often excellent times to buy great stocks for the long haul. One top option to consider amid the current turbulence is Magellan Midstream Partners (NYSE: MMP), which has lost more than 5% of its value in the past few weeks. Because of that, investors can get an even better starting price on one of the top master limited partnerships (MLPs), potentially setting themselves up to earn market-beating returns in the coming years.

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A great business for a lower price

Magellan Midstream Partners has one of the strongest financial profiles in the midstream sector. The company boasts one of the top credit ratings among MLPs thanks in part to its low leverage ratio, which at 3.4 times is well below the roughly 4.0 comfort level of most of its peers.

Meanwhile, the company operates a solid portfolio of midstream assets, including the country’s longest pipeline system for refined petroleum products, which moves 1.4 million barrels of gasoline and diesel per day to keep our economy running. These assets provide the company with steady cash flow because it has secured long-term contracts with customers for the capacity it owns. This ensures that it gets paid in good times and bad. Because of that, Magellan Midstream has high confidence that it will be able to generate $1.05 billion in cash flow this year.

That’s more than enough money to continue paying its lucrative distribution to investors, which now yields 5.9% after the recent sell-off. Overall, the company covers that payout with cash flow by a comfortable 1.2 times. This leaves Magellan with enough excess cash that, when combined with its strong balance sheet, gives it the funds to continue expanding its portfolio of midstream assets.

Ample upside ahead

Magellan Midstream Partners is investing $2.5 billion on a variety of projects to expand its footprint. One of the largest is a joint venture with refiner Valero Energy (NYSE: VLO) to build a new marine terminal in Pasadena, Texas. The partners are investing $410 million on a two-phase project to construct storage and dock capacity at the site, as well as connect it to a couple of Valero’s refineries in the area. The first phase should come on line this January, while the second should follow a year later.

Magellan and Valero are working on another project to boost the flow of refined products in the central part of the country. The $425 million expansion project should be in service by the middle of next year.

Meanwhile, Magellan, Energy Transfer Partners (NYSE: ETP), MPLX, and Delek US Holdings are moving forward with a large-scale oil pipeline out of the Permian Basin. The 600-mile pipeline will flow into both Energy Transfer’s Nederland, Texas, terminal as well as Magellan’s East Houston terminal. The pipeline will help solve that region’s current pipeline issues when it comes on line in the middle of 2020.

These projects give Magellan the confidence that it can grow its high-yielding distribution to investors by 5% to 8% in 2019 and 2020, which is on top of this year’s anticipated 8% increase. Meanwhile, the company has more than $500 million of additional expansion projects under development that it could build in the future, including the potential to more than double the size of its Pasadena Marine Terminal joint venture with Valero. Those future additions should give the company the fuel needed to continue growing its payout in the coming years.

Solid income and growth prospects for a lower price

Thanks to the market’s recent turbulence, investors now have the opportunity to buy Magellan Midstream at a lower price and lock in an even higher yield. That increases the odds that they can earn market-beating returns since the combination of the company’s near-6% yield and a high-single-digit growth rate suggests investors could make a total annual return in the low teens from here. That high return potential from such a low-risk investment makes it a top option to consider amid the current turmoil.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Magellan Midstream Partners. The Motley Fool has a disclosure policy.

15- vs. 30-Year Mortgages: Which Is Best for Me?

15-year mortgages and 30-year mortgages appeal to different audiences. One helps you reduce the overall cost of your mortgage in exchange for a higher monthly payment, while the other offers lower monthly payments if you’re willing to pay the lender more over the lifetime of the loan.

The most popular loan term is 30 years, but this isn’t always the best choice. For some people, a 15-year term may be a better fit. Here’s a quick example illustrating the differences in monthly and overall costs between the two loan terms.

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The costs

Let’s assume you’re interested in purchasing a $250,000 home, and you can afford to put 20% down, so you won’t have to pay for private mortgage insurance (PMI). This means you’ll need to borrow $200,000. The average interest rate on a 30-year mortgage today is about 4.7%. This means your monthly payment would be about $1,037, and you’d pay a total of $423,000 over the 30-year loan term, including your down payment and interest.

Fifteen-year mortgages often have a lower interest rate, because the shorter loan term reduces the risk to lenders. This helps to lower the amount that you’ll pay over the life of the loan. However, your monthly costs will be higher, because you’re paying for the home in half the time.

The average 15-year mortgage interest rate today is 4.1%. That amounts to a higher monthly payment of $1,489. However, you’ll only end up paying a total of $318,000 when all is said and done. That’s a difference of $105,000.

How to decide

A 15-year mortgage can be the right decision if you’re looking to minimize the overall cost of your mortgage. However, you have to ensure that you can afford the higher monthly payment. You don’t want to put yourself in a position where you’re struggling to cover your monthly costs. If you found yourself unable to make your payments, you could lose your home.

When you choose a 30-year mortgage, you’re resigning yourself to paying a lot more over the course of the loan. But you have a lower monthly payment, and this can help you in two ways. First, it may allow you to purchase a more expensive home than you would be able to afford if you were using a 15-year mortgage. Second, it frees up your cash so you can put it toward other goals, like building up an emergency fund or saving for retirement. If you invest that money, it’s possible that your investment returns will be greater than the interest rate you’re paying on a 30-year mortgage, especially if your portfolio is stock-heavy.

It isn’t set in stone

You’ll need to decide which loan term you want when you purchase the home, but you’re not locked into this decision forever. If you find that your 15-year mortgage payment is starting to put a strain on your budget, you can always refinance and switch to a 30-year mortgage down the road. Keep in mind, though, that you’ll have to pay closing costs all over again when you do this.

Another option is to go with a 30-year mortgage but make larger monthly payments in order to pay it off ahead of schedule. You could even pay off a 30-year loan in just 15 years if you paid enough every month. This would save you a lot of money over the course of the loan, though it would likely still cost you more than a 15-year mortgage, given that 30-year mortgages tend to have higher interest rates.

Take our previous example. If you were going to pay off the 30-year mortgage with a 4.7% interest rate in 15 years, you would need to pay $1,551 per month. Over the course of those 15 years, you’d only end up spending $329,000. You’d save $94,000 by repaying the loan in half the allotted time — though the 15-year loan with a 4.1% rate would be $11,000 cheaper overall.

The nice part about this approach is that if for some reason you find yourself unable to make the higher monthly payments, you can always fall back on your standard monthly payments without fear of losing your home. However, you need to make sure your mortgage doesn’t have a prepayment penalty. These don’t usually kick in unless you pay off more than 20% of your mortgage balance in a single year, but make sure you look into this before signing on the dotted line, because prepayment penalties can significantly reduce the savings of paying off a mortgage early.

It’s important to think carefully about how much you can afford to pay per month when deciding on your loan term. But you also have to think about the best use for your money. For most people, a 30-year mortgage is the smart approach, because it gives them more money to put toward their other financial goals, and they can still pay the loan off ahead of schedule if they choose.

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Attention, Seniors: Don’t Get Too Comfortable With Your Social Security Raise

There was good news in mid-October on the Social Security front: Beneficiaries are getting a raise next year to the tune of a 2.8% cost-of-living adjustment, or COLA. And that boost is no doubt something millions of seniors will celebrate.

But before we get ahead of ourselves, let’s take a step back and recognize that while the latest COLA is the most generous one in years, it’s hardly a life-changing sum. The average recipient at present collects about $1,400 a month in Social Security, which means that with the COLA, the typical senior is looking at a roughly $40 monthly boost.

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Now, when you’re living on a fixed income, any extra cash you get is a boon. The reality, however, is that your modest raise probably won’t make a huge difference in your day-to-day quality of life.

Furthermore, while this year’s COLA does a reasonable job of keeping pace with inflation, most COLAs do not. Since 2000, in fact, Social Security beneficiaries have lost an estimated 34% of their buying power, or so reports the Senior Citizens League, and it’s due to the fact that COLAs were overwhelmingly stingy during that period. Throw in the fact that Social Security isn’t equipped to sustain retirees by itself in the first place, and it makes the case for a healthy dose of cynicism amid some otherwise encouraging news.

Take control of your finances

While there’s nothing wrong with eagerly anticipating your $40-a-month raise, or however much your boost amounts to, there are certainly better things you can do to improve your financial outlook — especially since 2019 might be the only year in which you receive an increase that substantial for the foreseeable future. For starters, cut back on spending if you’re currently struggling to pay the bills. If you take a closer look at your expenses, you’ll probably find that there are certain costs you can shrink, like the restaurant meals you tend to pay a premium for or the vehicle you own that goes unused most of the time. (Hint: If you rarely drive your car, it’s far cheaper to pay for the occasional taxi.)

Another option? Look into getting a part-job time. You may be shaking your head, thinking that the whole point of retirement is to stop working and start enjoying your free time, but if you’re having trouble keeping up with your expenses, a few hours of paid work each week might do the trick. Besides, you don’t have to resign yourself to some boring old job to boost your income. You can always start your own business or monetize a hobby — in other words, do something that’ll bring you enjoyment on top of that additional cash.

Finally, be savvy when it comes to healthcare, because chances are, it’s one of your biggest expenses (if not the biggest). There are numerous steps you can take to save money on medical care in retirement, from choosing the right Medicare plan to filling prescriptions more strategically (think buying generics and ordering medications in bulk).

A $40 monthly raise in retirement is better than no raise at all. At the same time, don’t get too comfortable with that boost, because for all you know, you won’t see another one like it for several years. Instead, take steps to lower your expenses and stretch your income so that you don’t end up struggling financially if future COLAs wind up falling short.

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Frustrated GM investors ask what more CEO Barra can do

DETROIT (Reuters) – General Motors Co (GM.N) Chief Executive Mary Barra has transformed the No. 1 U.S. automaker in her almost five years in charge, but that is still not enough to satisfy investors.

Ahead of third-quarter results due on Oct. 31, GM shares are trading about 6 percent below the $33 per share price at which they launched in 2010 in a post-bankruptcy initial public offering.

The Detroit carmaker’s stock is down 22 percent since Barra took over in January 2014. After hitting an all-time high of $46.48 on Oct. 24, 2017, the shares have declined 33 percent. In the same period, the Standard Poor’s 500 index .SPX has climbed 7.8 percent.

Several shareholders contacted by Reuters said GM could face a third major action by activist shareholders in less than four years if the share price does not improve.

“I’ve been expecting it,” said John Levin, chairman of Levin Capital Strategies. “It just seems a tempting morsel to somebody.” Levin’s firm owns more than seven million GM shares.

Barra has guided the company through the settlement of a federal criminal probe of a mishandled safety recall, sold off money-losing European operations, and returned $25 billion to shareholders through dividends and stock buybacks from 2012 through 2017.

GM declined to comment for this story, but the company’s executives privately express frustration with the market’s reluctance to see it as anything more than a manufacturer tied mainly to auto market sales cycles.

GM’s profitable North American truck and SUV business and its money-making China operations are valued at just $14 billion, excluding the value of GM’s stake in its $14.6 billion Cruise automated vehicle business and its cash reserves from its $44 billion market capitalization.

The recent slump in the Chinese market, GM’s largest, and plateauing U.S. demand are ratcheting up the pressure.

GM is one of the few global automakers without a founding family or a government to serve as a bulwark against corporate raiders.

In 2015, a group led by investor Harry Wilson pressed GM to launch a $5 billion share buyback, and commit to what is now an $18 billion ceiling on the level of cash the company would hold. In 2017, GM fended off a call by hedge fund manager David Einhorn to split its common stock shares into two classes.

Einhorn, whose firm still owned more than 21 million shares at the end of June, declined to comment about GM’s stock price.

Other investors said there were no clear alternatives to Barra’s approach.

“I’m clearly a frustrated investor,” said Michael Razewski, a partner with Douglas C. Lane Associates, which owned 2.57 million GM shares at the end of September. “GM is a name that I am still particularly bullish about despite years of disappointment.”

Some investors said they would welcome a spinoff or partial float of Cruise, or the creation of a tracking stock, as a way of calling attention to the potential value of GM’s autonomous vehicle technology.

“In the near term, really the only way to drive this stock higher is via Cruise,” Razewski said.Some investors have given up waiting. Barometer Capital Management sold its 420,000 GM shares in the first quarter of 2017.

Barometer portfolio manager Jim Schetakis said GM should exit the money-losing sedan business like rivals Ford Motor Co (F.N) and Fiat Chrysler Automobiles (FCHA.MI) have done and possibly split off its China operations. Barra has had enough time as CEO, he said.

“The board has to walk out to the mound and take the ball away,” he said.

Reporting by Ben Klayman in Detroit

Fed’s Kaplan sees two-three more rate hikes to hit ‘neutral’ level

NEW YORK (Reuters) – Another two to three interest rate increases from the Federal Reserve will likely put U.S. borrowing costs in “neutral” territory where it is neither stimulating nor restricting economic growth, Dallas Federal Reserve President Robert Kaplan said on Friday.

At an event sponsored by the Manhattan Institute, Kaplan said he has not decided yet whether the Fed would need to raise rates above this neutral level.

Against solid economic fundamentals, Kaplan said current Fed policy remains “modestly” accommodative. It may achieve a “neutral” level with two to three quarter-point hikes toward 3 percent by June 2019.

Kaplan’s comments came after the U.S. central bank on Wednesday released minutes on its Sept. 25-26 policy meeting where policy-makers agreed to raise key short-term interest rates for a third time in 2018 as the economy has been expanding at a faster pace due to the tax cuts enacted last December.

“The Fed is basically meeting its dual mandate,” Kaplan said, referring to U.S. unemployment hitting its lowest in almost 49 years in September and inflation near its 2 percent goal.

Kaplan will be a voting member of the Federal Open Market Committee, the central bank’s policy-setting group, in 2020. His view is seen in step with Fed Chairman Jerome Powell’s.

Powell said earlier this month the U.S. economy can expand for “quite some time” and the Fed may raise interest rates past “neutral.”

Kaplan expects economic growth to run about 3 percent in 2018 and the jobless rate, currently at 3.7 percent, to fall further.

While the economy will likely cool from current levels, he said he did not expect a U.S. recession anytime soon due to a strong consumer sector, which accounts for nearly 70 percent of overall economic activity.

Kaplan voiced concerns about challenges the economy faces including an aging workforce, a shrinking pool of skilled labor and geopolitical uncertainties.

(Graphic: U.S. federal funds – tmsnrt.rs/2NQ3q6l)

Reporting by Richard Leong; editing by Diane Craft

With market on edge, investors look to tech trio

SAN FRANCISCO (Reuters) – The pressure is on for Amazon, Alphabet and Microsoft as they prepare to report quarterly results at a time when confidence in those market leaders looks increasingly fragile and in danger of derailing Wall Street’s rally.

After worries about higher interest rates sparked a steep sell-off in early October and again on Thursday, the SP 500 remains down 5 percent from its Sept. 20 record high close, with top-shelf stocks including Amazon.com Inc (AMZN.O), Alphabet Inc (GOOGL.O), Netflix Inc (NFLX.O) and Facebook Inc (FB.O) showing little of their vitality from recent years.

A quarterly report from Microsoft Corp (MSFT.O) on Wednesday after the bell, followed by Alphabet and Amazon late on Thursday, will influence sentiment across Wall Street.

“The equity market is at a critical point here,” said Kurt Brunner, portfolio manager, Swarthmore Group in Philadelphia, Pennsylvania. “In order for it not to get a lot worse, I think you need to see Amazon and Alphabet put up some good numbers.”

With investors worried about increased internet regulation and criticism of Facebook’s handling of user data, the social media company’s stock has slumped 29 percent from its record high on July 25. Alphabet is 15 percent below its July 26 record high close, while Amazon has fallen 12 percent this month.

Microsoft has also stalled after doubling over the past two years.

Still, Netflix and Amazon remain up 81 percent and 51 percent year to date, respectively, underscoring their places among Wall Street’s crème de la crème. The SP 500’s largest component, Apple Inc (AAPL.O) has gained 28 percent in 2018, even after falling 7 percent from its record high on Oct. 3.

A 5 percent surge in Netflix on Wednesday after its upbeat quarterly report allayed fears the video streaming company was losing steam.

But that did little to perk up its fellow stocks in the so-called FANG group that also includes Amazon, Google-parent Alphabet and Facebook. In the past, those stocks have often risen together.

Powerful rallies by Facebook, Amazon, Alphabet, Apple, Microsoft and Netflix in recent years have made them must-own stocks for portfolio managers, making their ownership so widespread that they are at risk of a major sell-off should a majority of investors’ views about them change for the worse.

“So many funds are invested in the same stocks. They got less crowded in the past week, but at this point it’s difficult to say if we are going to shrug everything off and go to new highs a month from now, or if we’re going to test more lows,” warned Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.

The recent slide has left Amazon and Facebook trading at discounted multiples of their expected earnings. Amazon’s forward price-to-earnings ratio last week touched 74, a seven-year low, according to Refinitiv data. Facebook this month traded as little as 18 times expected earnings, the lowest since its 2012 public listing.

ROBUST EARNINGS GROWTH

Helped by a strong economy and deep corporate tax cuts, SP 500 earnings per share are expected to grow 22 percent in the third quarter, according to I/B/E/S data from Refinitiv. But some investors are already eyeing slower growth in 2019, when the corporate tax cut benefits will be a year old and no longer create an extra boost.

Investors are also nervous about potential fallout from U.S. President Donald Trump’s trade conflict with Beijing, and higher interest rates as the strong U.S. economy and low unemployment pressure prices.

Propelled by its cloud computing business, Amazon is expected by analysts to report a September-quarter non-GAAP net profit of $1.54 billion, or $3.12 per share, compared to just $256 million a year ago, according to Refinitiv.

Alphabet’s September-quarter non-GAAP net profit is seen rising 9 percent to $7.36 billion, or $10.43 per share.

Microsoft’s non-GAAP net income is seen rising 13 percent to $7.46 billion, or 96 cents per share.

Facebook reports its quarterly results on Oct. 30, followed on Nov. 1 by Apple.

Amazon and Alphabet are widely considered technology companies. However, within SP Dow Jones Indices’ Global Industry Classification Standard, Amazon falls into the consumer discretionary sector and Alphabet belongs to the recently renamed communication services sector.

Reporting by Noel Randewich; Editing by Richard Chang

UBS warns staff over China travel after banker held in Beijing: source

HONG KONG (Reuters) – Swiss bank UBS Group AG. (UBSG.S) has asked its China wealth management staff to reconsider their travel plans to the country after authorities there asked one of its bankers to delay her departure from Beijing to meet with local officials, a person familiar with the matter said.

The banker, who is based in Singapore and works in the relationship management team in UBS’s wealth management unit, still has her passport, but was asked to remain in China and meet with local authority officials next week, the person said. The identity and position of the banker were not known.

The purpose of the meeting with authorities is not clear, but the bank has asked others in its China wealth management team to review their travel plans carefully.

No other units in the bank, including back office or asset management teams, have been asked to re-consider existing travel plans. A UBS spokeswoman declined to comment

The Swiss bank is the largest wealth manager operating in Asia, with $383 billion of assets under management, according to Asian Private Banker magazine, ahead of Citigroup C. n, Credit Suisse CSG N.S, HSBC (HSBA.L) and Julius Baer Bakers.

The meeting also comes as UBS has been building up its presence in China. Last week it moved a step closer to becoming the first bank to take majority ownership of its China joint venture under new rules designed to open up the sector, when two of its current partners put their stakes up for sale.

Any deal on the stakes will need the approval of Chinese authorities, who are yet to give the green light for the 51 percent shareholding.

Reporting by Jennifer Hughes in HONG KONG and Tony Munroe in BEIJING; Editing by Sam Holmes

Google to charge Android partners up to $40 per device for apps: source

(This Oct. 19 story has been refiled to fix wording in fourth paragraph)

By Foo Yun Chee and Paresh Dave

BRUSSELS/SAN FRANCISCO (Reuters) – Alphabet Inc’s (GOOGL.O) Google will charge hardware firms up to $40 per device to use its apps under a new licensing system to replace one that the European Union this year deemed anti-competitive, a person familiar with the matter said on Friday.

The new fee goes into effect on Oct. 29 for any new smartphone or tablet models launched in the European Economic Area and running Google’s Android operating system, the company announced on Tuesday.

The fee can be as low as $2.50 and rises depending on the country and device size, the person said. It is standard across manufacturers, with the majority likely to pay around $20, the person added.

Companies can offset the charge, which applies to a suite of apps including the Google Play app store, Gmail and Google Maps, by placing Google’s search and Chrome internet browser in a prominent position. Under that arrangement, Google would give the device maker a portion of ad revenue it generates through search and Chrome.

Tech news outlet the Verge reported the pricing earlier on Friday, citing confidential documents.

The European Commission in July found Google abused its market dominance in mobile software to essentially force Android partners to pre-install search and Chrome on their gadgets. It levied a record $5-billion fine, which Google has appealed, and threatened additional penalties unless the company ended its illegal practices.

The new system should give Google’s rivals such as Microsoft Corp (MSFT.O) more room to partner with hardware makers to become the default apps for search and browsing, analysts said.

Qwant, a small French search company that has been critical of Google, said in a statement on Friday that it was “satisfied that the European Commission’s action pushed Google to finally give manufacturers the possibility to offer such choices to consumers.”

Reporting by Foo Yun Chee in Brussels and Paresh Dave in San Francisco