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Big news in a text bak Big news for Google and Apple on others. The US government proposal to break up Google did not get the support of the courts. Here, let's talk to an expert on this stuff. Jennifer Reed joins US here Senior Litigation. Now she covers all the antitrust stuff for Bloomberg Intelligence.
It looks like this. Well, first of all, Jen, what did the court's rule?
You know, really, the court aligned much more so with what Google proposed than what the Department of Justice proposed. No divestiture of Chrome or contingent divesture of Android because that was in there. Some data sharing, no exclusive agreements, some search syndication meaning search engine can basically provide results that just come straight from Google. Right, They're mimicking Google.
The surprising thing though, here, and what was great for Apple, is that the judge said Google can could continue to pay for search default positions.
That's with Apple.
With Mozilla, it pays some OEMs to pre install Google Search on the Android phones that they group that they manufacture, and that I think was a really big surprise.
How is this remedy consistent with the original ruling, with the original finding of the court.
You know, I actually have a.
Really big problem with aligning those two things because I don't think that it is. In terms of no chrome divestiture. I think it's very consistent. And Paul, you know, I've been on this show before and I've been saying for two years that there would not be a chrome divestiture ordered here. But where it's inconsistent is with this default position. Because having a monopoly is not illegal, but it's the conduct that maintains the monopoly that's exclusionary that is illegal.
And what the judge found in that liability decision that the conduct that was illegal were the default agreements. Right, This was exclusionary. This kept other search engines from being able to grow and scale and get better. He's allowing those default positions to stay in place. Now it's a shorter term. It's only for one year. Theoretically, in one year or one year after that, other search engines that
have improved can compete for that contract. But it's still odd to me that what is found to be legal is allowed to continue.
Well, the stock market likes it.
This is a company, it's got two point eight trillion dollars in market capital, it's up nine percent today. You just don't see that very often here. So what does this mean for just Silicon Valley in general? Can I sit back if I'm a CEO in Silicon Valiant saying, Hm, the courts are maybe a little bit more aligned with our industry how we think about the world than maybe the government.
I would say that the way Silicon Valley can think about it is that this judge was cautious. And this judge did talk about needing to apply caution when you're dealing with tech markets and Silicon Valley companies because judges don't understand it want to impact the route, the innovation and the natural course of the industry, right, they don't want to distort that. And so it does suggest that it's more likely a judge is going to be cautious
in future remedies for other cases. But what I think everybody has to keep in mind, because I've seen people talking about the fact that there's read through for some of these other monopolization cases. I don't really think that there is, because the facts are entirely different case by case, the markets are entirely different, and what made a divestitor remedy inappropriate here doesn't necessarily exist as a fact pattern.
Let's say an FTCV Meta or usdojb Apple or the other DOJ case against Google in the ad tech space. Those are different cases with different facts, and I don't think that there's necessarily a read through that companies are safe from divestiture orders because of this one.
Do we think that AI, the quickness and how it's developing played any kind of role in the judge's decision here?
Oh?
Absolutely. The judge even observed that in the liability hearing, which was now a year and a half or so ago, that AI barely came up at all other than by Google, it barely came up. But in the remedies hearing it was all about AI, and the witnesses were all AI, and he says it just shows in a year a year and a half how much things have changed, and the fact that you now have real competition to general search other than other general search engines, and I think that impacted him a lot.
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So in Bloomberg News, Scarlett, I think if you get a b a green Bee nextra story, that means it's like an exclusive or breaking news.
Yeah, great, a scoop.
Okay, so that's a good thing, right that.
It's a very good thing, you know, Yeah, reporter, you know who gets a lot of those green Bee things.
He's walking to the Sucio Stuve.
Mark Germy and it's usually about like textuff Apple particular stuff.
And he's got another one today. I don't know.
Apple's lead artificial intelligence researcher for robotics has departed the company to join the meta platforms. I feel like I've read this kind of piece from Mark almost on a weekly basis.
Over you mean Apple losing on AI.
Yeah, I mean people kind of walking out the door.
At some point, it's got to be a problem even for the apples of the word.
Mark Irmont juines is he's a managing editor for Global Consumer Technology Bloomberg News. He's usually out there in LA. But something's going on there because Mark Herman's here in New York. Who was the other dude we had on the entertainment Dude Shaw he was. He's in New York. So I don't know what's going on out there in LA. Maybe they're cleaning offices or something.
No, we both have both have colleagues here, are all right?
All right? Mark talked to us about Apple.
Is it a problem that they're losing some of their AI folks, the robotics folks, that kind of thing.
You don't typically see that too often.
It's only a problem if it impacts the consumer. And right now, Apple's AI efforts are impacting the consumer because Apple Intelligence and Siri lag very much in comparison to competing products on other platforms. Now, this can all be turned around, right You've got the ability for Apple to do partnerships. I predict there'll be some sort of big
AI partnership for Apple. I've reported that they're in talks with Google and an AI partnership I've reported they've been in talks with Anthropic and Open Ai on potential AI partnerships. They get one of those done, it's a different ballgame. They buy a company I reported first reported over the summer that they've talked to Mistral reported that they talk to Perplexity. I don't expect either of those deals to get done, but that certainly shows you where.
Their head's at.
Okay, if this all gets turned around with a major new version of Siri next year, if they get the Apple Intelligence pipeline heading in the right direction, if they buy and hire the right LLLM people, they could be in pretty good shape. Don't forget. Apple has the best ECO system, they have the best hardware, and they're able to deploy new features and operating system upgrades faster than
any other company. And so at the end of the day, this is still their game to lose because there are so many levers they can pull, especially with their cash balance, to turn this thing around.
So why haven't they done any of those things so far? Why are they waiting? What's the hold up?
Well, you know Apple, Unfortunately for them, they're very tied to a couple cycles, right. They have their spring cycle, and then they have their fall cycle. The fall cycle has been set for some time. There's really no changing that. That's locked and loaded. You'll see the introduction of those products and those software features next Tuesday at the iPhone
seventeen launch event. The spring is really the next opportunity for there to be major new features, right, that's when they're going to roll out pretty big update to iOS twenty six called iOS twenty six point four. At that time, I expect them to release an overhauled version of Siri that are going to fix a lot of these issues. That's a lot total now though it is a long time. Yeah, it is a long time. And the truth of the matter is is that the AI space runs far more
quickly than even the mobile space. You saw a lot of innovation in the smartphone space in the last two decades. AI is moving ten times as fast as.
That, and they're aware of that. They're smart people. I guess they've made the decision that they're comfortable with their timing. Did they run the risk of making a fun fundamental error in their judgment of that timing.
I don't think they're comfortable with the timing. I think that the timing was actually even further out. I wasn't expecting a major new version of SERI with incredible enhancements for consumers, probably not until the end of twenty six or sometime even at the tail end of twenty twenty seven. So this is going to be happening at least six
to twelve months sooner than Apple had originally planned. They are probably one or two years away if they did nothing of starting to bleed share to competing smartphones with major AI features right now. Let to tell you the truth. We talk about AI all day every day. It's very important to the market. It's very important for the current technology age. Nobody's buying phones because of AI or not because of AI, but we are moving towards that, and
that is going to happen. It's one or two years away, and so if they're not in good shape by then, they're going to start being impacted not only in terms of what we talk about, not only on Wall Street in the stock market, but in actual purchasing decisions by consumers, because right now, consumers only care about a few things when they buy new phones. They want to fix their broken screen, they want a better.
Camera, and they don't want to pay too much for it either. That's the other thing. I mean, we'll incorporating all these AI g wiz factors bring up the price to fifteen hundred dollars for your standard phone. That's something that consumers may not stand for.
Well, to your point, it's a very good point. You may see AI cost drivers increase because in many cases it requires, especially on Apple's side, improve chips, more processing power, improve battery life, improve cameras to take advantage of these things. So you may see the core technologies in these devices actually go up in price in order to enable these next set of AI features. Because unlike Google and Open AI, Apple's less reliant on the cloud. It's really a hybrid model.
So to your point that the core hard is very important here too.
The Google legal announcement here the ruling obviously very positive for Google, but also positive for Apple to stocks up.
Yeah, it's a big deal for Apple, and some people have said this is a bigger deal for Apple than Google. Is complete nonsense. To be honest with you, Google had hundreds of billions of dollars at stake here.
They could have lost.
Their ability to strike search agreements at all, default search agreements. They're basically giving up some data and pretty much nothing else. So massive win for Google, big win for Apple, gigantic win for the technology industry.
Because you ask you that, yeah, you have precedent.
Here is set now, so you know, Meta is probably in better shape than they would have been otherwise. You know, Apple has this DOJ trial too. You know that we've Google just had its moment. Apple's going to have its moment in a couple of years, and this sets a lot of the precedent for that. So at this point it's anyone's guess, but I would assume that Apple's going to get off scott free.
Also, I mean so, I mean again in Silicon Valley, I got to think that this feels like a little bit of a little bit of a reset on the regulatory front, which was front and center.
A little bit of a reset.
You know, the European Union is still you know, going fast and furious. But if you're a technology consumer, this is amazing news. If you work at a technology company, if you invest in a technology company, if you're into technology, this is great news. These companies are going to be able to innovate at the pace that they want to and you know, move fast. And break things.
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Macy's on earnings, the department store chain lifted its outlook, but did take care to point out that the consumer is still feeling pretty cautious. So for more, let's bring in Emily Cohne. Emily is Bloomberg's consumer team leader, also a Big Red alum, graduated from Cornell University and was an editor at the Cornell Deli Sun to discuss Macy's latest results. So it sounds like a good news bad news kind of story, but investors are taking the good news.
Here, Thanks Carlett. Yeah, maybe I would say cautiously optimistic.
That's a favorite term of ou CEOs.
I think this falls in.
Line with what we've heard from other retailers. Shoppers are still shopping. Tony Spring told us on a caller earlier this morning. He used the word surgical, So they're being precise about what they're spending on being choosy. They called out home furnishings and apparel as strong sellers, also citing high demand for fine watches, jewelry, mattresses, so they are shopping. I think the main question I have is how long will this last?
How promotional are some of these retailers. How promotions do they have to be? Because I know that goes right to the margin.
Yeah, I mean, that's an interesting segue into Dollar Tree. I think Dollar Tree raised prices so far this year to offset the cost of tariffs, and shoppers felt that and that doesn't have that has a limit. There's only so far you can raise prices, and I think that is starting to eat away at their bottom line. They can't really raise prices that much anymore. I think these
retailers are in a difficult spot. They want to keep let prices low because of how the consumer is feeling, but also their costs are up on account of tariffs.
I would imagine Dollar Tree has a lot less cushion, as you say, to raise prices, given who they're targeting, and given how they're seeing a lot of higher end consumers trade down to Dollar Tree than a Macy's. Macy's did say explicitly that price increases are on the way, didn't.
They Yes, they said that they've already started and that they're coming. But their sales are strong, and I think you know they're in the midst of a turnaround. There were signs that Tony Springs strategy is taking hold.
Comp sales rose more at.
His reimagined stores than they did overall. So I think that that's a good reason behind the stock jump this morning.
What is a what's different about a quote unquote reimagine?
Good question?
I think that is a really good question. I think these are the stores where they believe that they can have the greatest edge. So they're they're doing a lot to reinvigorate sales. They're redesigning the stores, they're rethinking their assortment, and these are the stores that they say we should really watch. This is the future of Macy's.
And Tony spring is also Cornell guy.
Oh there you go, not big red gathering here.
I didn't even know that.
Let's put this into context. What we heard from Macy's, what we heard from Dollar Train, of course Dollar General earlier in the month, or was it this month or last last? In any case, what are we hearing from retailers overall, because investors are punishing some and rewarding others. Even though the message, I would say is fairly consistent that consumers are spending, they're just being really, really weary and careful. I think you nailed it.
I think retailers continue to point to strong sales momentum. People are shopping even in the face of tariffs and threats of inflation. I think the question I have is knowing that retailers stock up months ahead of time, They had their inventory that they sold through now months ago,
perhaps even before tariffs. I don't think we've really seen the full paths through of the costs of tariffs yet, and I think we'll continue to see that in the coming months, and especially during the all important holiday shopping season.
Let's go there.
What's Is there a consensus building to how the holiday season may shape up?
It's still early. I think the outlook isn't great so far. Although Tony Spring did say that the back to school shopping season was he used the word good, and he said that back to school is generally a good bell weather for the holiday shopping season, So there was a slight note of optimism there, But not totally bullish.
Emi you cover the consumer team or the team leader for this group, which company is most interesting is most exciting right now? Like who is leading the way in terms of being innovative and coming up with novel solutions to the persistent challenges that this industry faces.
Yeah, for sure.
I mean I think that discount retailers are really the ones to watch right now. So I'm really interested in TJ Max, Marshals. These are the companies that people really look to for deals. They have an interesting buying model where they're buying like the extra inventory that other retailers didn't sell, so they're a little bit isolated from the tariffs, and they also are benefiting from the fact that a lot of retailers bought a lot of stuff ahead of tariffs.
I'm also really interested in the dollar stores. Dollar stores, you know, have a huge footprint there in these rural parts of the country that traditionally the big retailers don't reach. That has given them a big advantage. Now Amazon and Walmart are coming for those dollars from e commerce in a really big way. So I'm really interested in how these value retailers do.
Any of those companies have a large online presence.
While they are doing things like partnering with Uber Eats and delivery delivery services like that. But I think the main draw is like, if you're living in a rural part of the country, like the place that you go to buy a gallon of milk at the end of the day is your Dollar General, Like that's the store that you have. But increasingly Walmart and Amazon are looking to these rural areas as their last frontier.
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Dollar Tree profit outlook disappoints investors. Here let's go to Jen Bartash's Bloomberg Intelligence senior al. She covers a lot of the retail names for Bloomberg Intelligence. Jen, what did you learn from Dollar Tree?
Yeah, it's an interesting It's an interesting takeaway from Dollar Tree because a lot of what they talked about was bringing in hire income households. That's an echoing of what we've heard from a couple of the retailers, most notably Walmart. But at the same time, they're staying super conservative and so, you know, although they had a much stronger than expected quarter, I think there's a lot of anticipation that the second half of the year might be a lot harder for them.
Right The outlook for this quarter on its own kind of underwhelmed investor, and a lot of that, the company says is tied to terror related costs.
Exactly Scarlett and what they're talking about, and this is something that we're seeing across the retail sector broadly, is that the costs of tariffs have started to come in, but they really haven't fully hit yet. A lot of retailers are selling through inventory they bought when tariffs were at a different rate were not there, and as they're replenishing that inventory, it's becoming more expensive. It's getting harder to mitigate those costs, and they're starting to see some
targeted price increases being passed through to consumers. We think that's only going to accelerate as we get into the second half of the year.
So have you is there any consensus building at jenas to how much retailers are going to pass through terror related cost increases to consumers are kind of a rule of thumb being created.
You know, I think for the most part, we're looking at, you know, between eighty and ninety percent can be mitigated by retailers at this point in time. Now, that does change whenever the tariff landscape changes. So when tariffs for China are you know, or for India, we're at ten percent, that was easy to forecast. When they jump to fifty percent,
that gets a lot harder. And we still don't have a final number for China, and so there's still some uncertainty out there, but there's there's pretty good confidence that between negotiating with suppliers, diversifying sources and things like that, that they can mitigate a large portion of the cost. But it's just a question of how long they consistain that mitigation before inevitably they start having to pass a little bit of price through.
And a lot of that is kind of unanswerable right now until they go through the whole process. Jen remind us of where Dollar Tree is at with the divestitu or the shedding of the family dollar chain that did not work out as planned, is that completely off its books?
Now it is.
They completed the transaction on July fifth, so it's completely off the books. It gives them a lot of liberty to really focus on the business and really drive growth and what's always been the bigger part of their business. And there's a lot of opportunity out there. You know, they talk about gaining share and there there have been some retailers that have gone under in the last you know, year and a half that that makes it a great opportunity for them, as a more focused organization to take
advantage of that. And that would be Party City to a lesser extent, Joan Fabrics. You know, these these create present opportunities for Dollar Tree to really execute on their strategy and hopefully continue driving some top line growth.
So what's the what's kind of the expectation here for for just kind of the holiday season broadly defined?
Jen, Yeah, for for the holidays, I think, you know, the retailers all say that they're pretty well prepared. You know, consumers I think will be ready to spend, but they'll be selective. We're we're expecting that once inventory is sold out, there won't be a lot of reordering. So this is a holiday season where if there's something special if you want to get you might want to get it because once it's gone, it might not get replenished or replenished
quickly or at the same price. So sorry you seeking that sort of behavior.
So the takeaway for this holiday season is you see it, you snap it up because it may not come back. Will it ever come back? I mean, you have the removal of the Deminimus exemption, So consumers are losing a lot of their DTC access that they once counted on, and these retailers need to think very carefully about how they're going to restock and rebuild their inventory. That's that's again I hate to use the word sobering again, but it's a whole new mindset for consumers.
It is. It's a new mindset for retailers as well, where we've already seen them kind of scale back on some of their ordering. They had a lot of orders that were canceled waiting on tariffs. Now they've kind of put some through. But what we're hearing is that they're very closely managing their inventory. And so you know, if a hot new toy sells out, you know, like early November, you know they may or may not be getting more in It's gonna be an interesting holiday season this year, for sure.
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