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Big news in the world of kind of digital advertising, Google partially loses US advertising tech anti trust case. So a federal judge found Google guilty of illegally monopolizing online advertising technology markets for advertising exchanges and tools used by websites, websites to sell ad space. To figure out what all that means, We've got some smart people who do this. We have people Bloomberg Intelligence that just look at litigation and what it means for certain companies because that can
move stocks in a big, big way. We've got a couple of voices. You're the one, you know, Jennifer Ree, a Bloomberg Intelligence senior litigation analys Talk to her for a long time. She helps us out on a lot of these big cases. Now we've got another voice as well on Bloomberg Intelligence, Justin Turci, Bloomberg Intelligence Antitrust, Litigation and policychanneles. He's down there in d C. Right now, Jen, talk to us about Google here. What's the what did the court find here?
Yeah, you know, this is a really complicated case, honestly, Paul.
Google has these products which you refer to.
It's called the ad tech stack, and it's not something you know, normal consumers know about, but it's a series of software from start to finish whereby publishers and advertisers can come together to sell and buy space on the Internet. Right And it's important because it's moving very quickly and lining up the ads properly, you know, with the consumers that should see those ads. Google actually has, through a series of acquisitions and some of its own products, control
over that entire stack. It has competitors for certain pieces, but it's one of the only ones that has.
All the pieces.
And so the allegation here was that Google was manipulating its control over some very desirable pieces of the stack to force publisher and advertisers to use all of its products, taking fees all along the way, and basically naming its
price because it had these must have products. So what this judge found was that for some of those products, one on the publisher side, the publisher ad server, and then the ad exchange that sits right in the middle and does the auction between the advertiser and the publisher. That Google was monopolizing both of those products and also
illegally tying them together. Meaning hey, publishers and advertisers, if you want to use our ad exchange where we have these really desirable advertisers, you have to use our publisher ad server and therefore we keep our ninety percent or so market share.
All right, justin let's bring you in here to just get your take on the context of Google, because this isn't the first time that there's been an ANATRUS case against Google. What did you make of this decision?
Yeah? Absolutely, And I think Jen really hit the nail on the head here. You know, this is obviously compounding the search ruling that came out last year, and we're heading too a remedy's phase on that case this coming Monday. But to Jen's point, really this aspect of the ruling focusing on the publisher adserver in that exchange that Jen said sits in the middle. That is the crux of the case here. The government is going to likely ask now for divestitures of that publisher adserver and the ad
exchange in the middle. But I really do question whether or not the quarters in a position to order that. I think a lot of testimony at the trial which I attended, really points to the fact the publishers feel reliant on the ad server because the ad exchange in the middle then gives them the real time advertising they want from Google Ads. So if you sip that court in the middle, perhaps you get a remedy that's desirable without actually forcing a divestiture either of those properties.
Justin I just I wonder like at the trial, who do they get to get up on the standard say, I don't like Google? Doesn't everybody kind of Is anybody really complaining about Google and its advertising service?
Yeah, you know, Paul, I think really who's complaining is the publishers who are selling that space on their websites through the publisher ad server, right. I think their complaint is largely they don't really have a lot of control over the kind of ads end up on their website. They don't have control over the pricing involved with all of that. They don't really like the fees that are involved in If they want to use a different add ex change in the middle, perhaps and find a lower rate.
You know that they're paying to get those ads for furnish to their website. Don't want to collect a higher fee. They're not able to do that if they're really relying upon the prices of the policies that Google is using to display those ads on their properties.
What did Google say in response, Well, you know, Google would say, look, we have loads of competitors for these products.
You know, they sort of pick apart the policies that.
The Department of Justice pointed to, saying that you're forcing these companies to use your products, saying no, no, no no, based on these policies, they're not forced.
They have options. They can go to our competitors.
And by the way, there's this doctrine an antitrust and it's called a refusal to deal, and essentially it's a big defense that's used by a lot of these companies. Essentially, what the refusal to deal doctrine says is that any company has the right to deal with who they want to and they don't necessarily have to do business with
their competitors. So, in other words, a competitor ad exchange doing working with Google's publisher ad server, and that can often work but in certain cases, the conduct of the company goes beyond just sort of what's covered by a refusal to deal, and it becomes an unreasonable restraint of trade.
And that's where you sort of get past that.
So what Google tried to say is, well, this isn't unlawful under the intetist laws because we don't have to do business with our competitors.
Folks.
Here at Bloomberg, we have complete transparency amongst all employees. We know where everybody is all the time. It's called the outfunction. It's the calendar I look for justin like, where is this guy? And he's based in New York, but he's down in d C. And I go look at his calendar, which is the outfunction, and he's It's something called the FIC versus Meta trial, another technology company. Why are you down in DC for this trial? What is this trial?
Oh?
You know, this is a topic of the week. I feel like Paul, right, So the f suing Meta right now is seeking a divestiture of Instagram. And what's that huge for the as the acro actual acquisitions of those companies that are arguing with anti competitive but as we all know, they've on these properties now for well over a decade, and I have to say, seeing Zuckerberg on this stand in the last few days at sestimony has
been really, really strong. He did a great job sending off a lot of the criticisms coming from the suc whose case. I think we both saw Jenna and I was already not necessarily the strongest. There's a lot of holes there. I don't think they really defined the marketplace the right way in terms of positioning Meta as a monopolist. So there's a lot going on. It's big tech on trial. I think everywhere you look these days, that's right.
And now it's not just Jen, We've got a bigger team of litigation analysts. Jen, as you sit back here in your experience, are these tech companies I've risk? Do you think from the courts?
Absolutely? Look, you know you're at risk?
He There are liability decisions now, two of them against Google, right, and in both cases the Department of Justice is going to ask a judge to force it to sell assets. As long as that's out there, those companies are at risk. Now, would I bet that that's what can happen? No, I don't think that. In the Search case, which has a remedy hearing starting Monday, Google will be forced to sell Chrome.
And I don't actually believe in this ad tech case that they'll be forced to sell off the publisher, ad.
Server or the ad exchange.
But they're at risk of course, because you have no idea what a judge is going to do. I should say that the remedy hearings will take place, decision will be made, and at that point Google will appeal.
All right, Jen Fantastic, I tell you, folks, Bloomberg Intelligence, it's not just stocks bonds. We've got litigation antitrust research at bi go. This stuff moves stocks. If you're a technology investor, you have to have an opinion on what the antitrust risk is for some of these big tech names, whether it's Amazon, Meta, Google, And we've got experience anti trust attorneys writing this research for our Bloomberg customers on b I go. It is awesome, some stuff justin terracy. Jenniferree.
They are Bloomberg anti trust analyts for Bloomberg Intelligence. We got them and we had them in studio today giving us some opinions on Google and METI can't get it anywhere else.
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Well, the stock story of the day to the downside is United Healthcare. This stock is down twenty two percent. That's the most in twenty five years after they cut their forecast, and you know it's their first earnings missing over a decade, so really shocking the investors in that stock, as well as the insurance space overall. So let's get some clear analysis on this. Glenn Losaf joins us Bloomberg Intelligence senior equity analysts covering these insurance companies. Glenn talk
to us about United Healthcare. What happened today?
High So United reported one Q results which were largely expected to be in line by the consensus inputting us, and the company basically cut guidance by twelve percent.
I believe.
Initial guidance was also the sort of seem conservative relative to their long term target, and now the new updated adjusted guidance is showing a decline of about five percent year over year. The main reason for it is the company highlighted that Medicare members are seeking twice as much here as they did the same period last year, which obviously drives costs and so on so forth.
Yeah, they said at least. John Tozy of Bloomberg News his reporting says that the company said it was blindsided by rising medical costs. Is that surprising that a medical and sure would be blindsided by these costs? Isn't this the business that they're in.
Well, it's not surprising.
It happens from time to time, but the impact, based on the guidance cut is more than anyone could have expected, including them.
Insurers usually look.
At the trends of previous years to sort of forecast what the medical costs would be in the upcoming year. And obviously, if it happens that all of a sudden, you know, I need more care this year versus last year, you know, people getting older, maybe some people deforted, maybe some people changed plans.
You know, medical costs, care demand goes.
Up, and with that, costs go up and impacting health insurers like United. So it's it's surprising, but it happens, maybe not to the degree that we're seeing.
The time around.
What drives rising medical costs for somebody like United I mean they're the eight hundred pound gorilla in this whole industry. What's happening, Well, it's basically it's pretty easy.
You know, more people are seeking more care, that's what's driving the costs. People getting sicker, you know, with age, are people differing care from last year to this year for example, That increases costs on the sort of the other side of the care demand. You know, more people are getting prescription drugs for example, more people are interested in preventive care versus reactive care sort of, you know, just going more often for chapobs, stuff like that drives.
The costs.
But it is surprising that sort of this significant jump relative to expects.
Where does United Health go from here? I mean just on a stock level, I mean, falling in its biggest drop since nineteen ninety nine. Does that move look overdone to you?
We're basically we're not supposed to sort of comment down price targets, as you will know, but basically the stock is down about twenty two percent as of right now. If we take a look at the guidance cut, which was three dollars and fifty cents from the previous guidance and apply sort of historical multiple over the last five years. The downside should be about, you know, maybe sixty percent of what it is right now, about eighty dollars or so.
So based on that, it's probably an overreaction just because things like this don't usually happen to someone like United, as you mentioned, the eight hundred pounds debilla in the space and probably the most solid people in the business.
But it is what it is.
A market sort of quotes Sis on view on where the step should should trade.
I'm're going at the ANR function for you United Healthcare twenty seven buy ratings on the street, one hold rating, one sell. No ratings changes today given this move in the stock. Great job, guys. Glenlosa, senior equerianos for Bloomberg Intelligence, joining us here.
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All right, this morning, President Trump posted on True Social that quote, How's termination cannot come quickly enough? End quote. However, yesterday at the Economic Club of Chicago, Federal chair FED Reserve Chairman j Pale stressed the importance of the fed's independence and it's quote broad support across both political parties are So we'll get a little sense here from FED Chairman shape Pal. Let's take a listen to his comments.
Our independence as a matter of law, Congress has in our statute we're not removable except for cause we serve very long terms, seemingly endless terms. So it's we're protecting protected in the law. So you know, Congress could change that law, but there's I don't think there's any danger of that. FED independence has pretty broad support across both political parties.
All right.
That was Beedchairman Jpale speaking at the Economic Club of Chicago yesterday. Our own Michael McKee was there giving us some live reporting there. But certainly President Trump's tweet this morning got some attention from a lot of folks that look at the FED and look at the treasure market, look at interest rates in the US economy. Irid Jersey joints as chief US interest rate Strategists for Bloomberg Intelligence. I raight, I'm sure you've been talking to a lot
of your institutional uster clients this morning. What did they make of the President's comments there on social media?
Yeah, I mean a lot of people are just you know, I think that there's a scapegoating going on, right, Like President Trump might say that, oh, I want to get rid of J. Powell because I want to cut interest rates. But I think there's also an acknowledgment that in doing so creates certain risks to the economy. And I think from the administration standpoint, having a scapegoat on the economic
outcomes is convenient. Right, So if the economy does fall into recession later this year, they can say, well, look, you know Powell was They can point to this tweet and say, well, the President said that he was going to be too late, and in fact he was right. And then if the economy chugs along, you can take credit saying that all of the fiscal policies that you're
doing is supporting the economy. So I think that there's there's a political convenience here potentially that that JA Powell remaining in office can support the administration in some some way in public opinion.
So ara does Trump actually have the ability to remove Powell from his seat as the chairman of the Federal Reserve. And well, I'm not how much longer is Powell there.
I'm not a constitutional lawyer, so J. Powell probably knows better because he is an attorney. But there are some I would suggest that folks maybe go look at some of Elliott Stein's work here at Bloomberg Intelligence, because he's been following this very closely as to the different court decisions that will lead to independent chairs and directors of independent agencies, whether or not the president can can actually fire them, and what cause means, like how is caused
to fined? That's something that's the Supreme Court is probably is going to be taking up and depending on how that goes will depend on whether or not the President Trump does. Now, let me say, from an economist standpoint, and you know I'm an economist by training, not an attorney. There's a vast literature on why central bank independence tends to have better inflation outcomes. Doesn't necessarily a better growth outcomes,
but has better inflation outcomes. So the idea that you are going to take away the FEDS independence and have an executive branch. The executive branch ultimately run monetary policy probably means that you're going to have monetary policy that's easier than it should be at certain times, and that means that overall you could wind up having inflation and prices running a little bit hotter than it would if you had an independent central bank. Now does that mean
that you get the nineteen seventy style inflation. Probably not. But at the same time, you can have inflation running a three and a half percent or four percent instead of a two And I think that's that's kind of a choice that both the courts, the American people, and the administration are ultimately going to have to make, even if even if Chair Powell can be removed by for.
Cause, I got about thirty seconds left, the ECB cut rates against today. If I'm President Trump, I'm saying, where's my fedsherman? Why is he not cutting rates?
Is that valid?
Well, a little bit and a little bit not.
I mean, I think J. Powell laid it out yesterday. And look, the FED has two mandates. The ECB has won. The ECB's job is to make sure that you have stable prices, and if prices are falling, and if there's other problems and growth is slipping, you cut interest rates. And if you look at the US economy right now. We still have one hundred and fifty thousand jobs per month, we still have rising wages. Retail sales weren't great, but they were fine, and so it's not obvious that the
United States is slipping into a recession imminently. And I think that's the reason why the Fed is sitting on its hands, because it also doesn't know what inflation is going to do because of tariffs and inflation expectations have been rising. If you just look at the University of Michigan Sentiment survey, it shows, hey, maybe inflation expectations are way too high. So if you're the Fed, you have to balance those two mandates.
A Eric, thanks so much for joining us. Appreciate it. Sorry about your aston Villa team not making it. Our Jersey chief US Interest Rates Strategies Bloomberg Intelligencies there in Princeton, New Jersey.
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We had some movement from the European Central Bank this morning cutting rates again. I think the market's even discounting another rate cut in June. Hugh Worthington joins us Bloomberg Intelligence European rates strategist here what you learn from the European Central Bank this morning in their actions?
Yeah, so we had on the face of it, they came out with their statements just what about an hour or so ago saying that they'd actually removed the idea that after the today's rate cut, the rates were still restrictive, which is initially seen by some as being a little bit on the hawksh side, But actually the actual press statement and then the press conference itself very much focused on this whole idea of the huge amount of uncertainty that he's facing in particularly in the face of Trump tarifs.
And you've got to remember, you know, the Eurozone runs about about a two hundred billion euro trade surplus with America, and the focus was of, you know, very much on
those They just have no idea what's going on. They didn't didn't feel they'd have a strong idea what was going on anymore by by the June meeting, and as a result, as you say, now we've actually got a selves to the point where, yeah, another cut is which would be I think the sort of the seventh or eighth on the trot now would be be ninety percent
priced in June, so which which seems pretty reagonal. As a result, we had a situation where yields were sort of edging up on the day, and now you've got the two year yield in Germany down five point seven basis points in the day, it's one point seven percent, So you know that's a pretty dubbish outcome in the end.
Yeah, I wanted to ask a little bit more just about the reaction in the markets. I mean, US yields are a little bit higher. I don't know if you're seeing any contagion of this ECB move into the US or this looks like a piece of news that's just contained inside the EU.
I think it's the rate. Outlook in the EU VERSUS America is enormously different. America obviously faces something possibly of a self inflicted short term inflation shock, but in Europe I think the outlook is very different. Indeed, if anything, you know we're actually looking at so inflation for last month came out around two point two percent is very close to their target of two percent. But if anything, you know, things like energy prices where they where they struck.
Expectations of forecasts for inflation later in the year are now much much lower than we're both in terms of oil and in terms of things like gas prices, and if anything, the ECB is probably facing more deflation concerned and undershooting their inflation targets later in the year rather than you know, the what looks like possibly a very different situation in America. So we're looking at very very different markets, you know, currently and very different rate outlooks as a result.
Red headline just crossing the Bloomberg terminal right now. Philadelphia FED names Chicago FEDS Anna Paulson as president, So a new president of the Philadelphia Fed will have some more reporting on that in just a moment, Hugh, how concerned are the folks in Europe about this tariff policy coming out of the US. The person on the street and you're sitting in the pub tonight.
Sitting in the pub tonight, maybe the sort of people that I go to the pub with there is there's a lot of concern, But generally on you know, in London, I would say people are probably looking at the moment the headlines today more about that they think that a trade deal with the UK is possibly two or three weeks away. I think a trade deal with Europe though, is going to be you know, a lot more difficult, because, as I say, the trade with the UK is more
or less in balance. But the problem you've got is in Europe is you know, they really run a two hundred billion euro trade surplus with America. One hundred billion of that is in Germany alone, So you know, they is I think people are much more concerned probably in Europe as to as to you know, and the capriciousness of Donald Trump with those sorts of numbers that you look about look around, as to how easy it would
be probably to find a deal. And they definitely feel like that at the ECBLL as I say they are. They've made very clear at the meeting today that you know, come the next early June meeting, they don't feel like they're going to be in any way better in the way, any way, shape or form ast to exactly where they where tarifs are going to be and what's going to hit them.
So what would get in the way of that final cut in June.
I don't think a great deal perfectly, honest. I mean, I can't see. You know, a few weeks ago, everybody was focused on where do you think the neutral rate is going to be in Europe? And they were saying, oh, some would be one point seventy five and two point two five percent, And then the tone today's meeting was just one of complete uncertainty. You are at sort of tear up the idea of where neutral rates could possibly be.
People are adjusting their rate expectations down. I think you're probably looking at you know, as I say, at the moment, the market pricing a rate of around one point seventy five percent by year end, but they're also pricing aban a seventy five percent chances that could be coming down to one point five percent, And I think that that seems you know, certainly, you know almost well, it's our expectation, and I think that's where we are going to end
up with with with rates, where with rates markets going to be pricing, you know, by come that June meeting out of thought.
A couple of weeks ago, we're talking about Germany and some other European countries reinflating their economies with fiscal stimulus, you know, infrastructure defense, is that still a story that you talk to clients about, Oh.
Yeah, one hundred percent. You know that there is a lot of fiscal splods are going to be coming, particularly in Germany, but it's going to take an awfully long time to put that together. That's not going to be a story really friendly for this year, probably not even next year. You know, it's going to be something which
is going to take years and years and years. Now now that may well be something that means that the outlook for for for rates could be a little bit more volatile, but really it's going to be sort of in years two to three onwards rather than than the very short term. In the very short term, the impact is going to be there's very little growth around in Europe.
The Bundesbank currently expects growth in Germany to be a out zero point two percent in twenty twenty five, and that's actually was from from one percent just a few months ago. So I think the very short term, yes, there is going to be fiscal spending and infrastructure spending, but it's going to take probably this is going to be like a nine ten year project and it's going to take a long time for it to come through.
It's not going to be coming through in the first couple in the next couple of years, that much, all.
Right, Hugh, thanks so much for joining us. Always appreciate getting a few months of your time. Hugh Worthington, Bloomberg Intelligence, European Rates Strategist.
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