This is Bloomberg Law with June Brusso from Bloomberg Radio.
The Department of Justice, joined by eight states, filed a civil antitrust lawsuit in the United States District Court for the Eastern District of Virginia against Google.
The Justice Department suit, accusing Google of monopolizing the digital advertising market, is scheduled to go to trial before a jury in September, but Google is trying to avoid trying the case to a jury with a novel move cutting the government to check the search Giant wants a judge, not a jury, to decide the case, and argues the government has no right to a jury trial without a claim for money damages. Joining me is anti trust law
expert Harry First, a professor at NYU Law School. Harry, has this been done before, paying damages before a trial or a finding of liability?
Not to my knowledge, it's a you know, you might say a clever move, or you might say it's a silly move, or you might say, when it's Google, who cares how many millions of dollars you may pay unnecessarily? So I've never seen this before. Liligans don't usually pay out money in advance of a trial an indvansive even losing, So you've got to have a lot of money to do that.
The Google argument is that without a monetary damage's claim, the government has no right to a jury trial. Is that true?
Well, Google's argument is, let's see, should we call it silly, ridiculous or desperate? I don't know. So if you are not asking for money, go back to day one. You file a complaint and all you're asking for is an injunction. That is what's called a suit in equity and is just handled by a judge. That's the way cases have
been handled since common law period. If, on the other hand, you go into court and you ask for money damages, that has to be before a judge with under the Seventh Amendment, if it's for more than twenty dollars, I think, with a jury. So that's the distinction. Now what Google's trying to say is, oh, guess what. Now there's no damages, so you don't get the jury trial. So presumably the Justice Department will say to this check thank you, but no thank you. You know, we want to prove our
damages and we'll prove them anyway. So it is still a suit for damages, and you can't get out of it by sort of pre paying the damages and now saying, guess what, it's not for damages. The suit was always for damaging.
The size of the payment hasn't been disclosed, but Google said that after months of discovery, the Justice Department could only point to estimated damages of less than a million. Since the law allows the court to issue treble damages. The speculation is that Google's check is for about three million, which is a drop in the bucket to Google.
Well, yeah, I mean originally they claimed at least one hundred million, and what they're going to be able to prove up a trial, it seems to me, is still a question for trial. So I don't know what their expert reports show or whether they have some additional evidence. So I don't know what the amount is, and I think, frankly, it doesn't really matter. The legal point is the case was filed for damages, it is still the case for damages, and paying them off doesn't and the case and doesn't
change the nature of the case. So I don't see this as the gambit that's going to work. Their claim is not mooved no matter what how much the checks for and you're right, from anyone's point of view, whether it's five million, ten million, one hundred million dollars, this is not very much to Google. And that's really, frankly not the point. So I think, you know, more significant are the other arguments that Google tries to make, which is that this shouldn't be a tried by a jury.
And that's a more straightforward argument. It's not yes, it's a jury trial, but no, it's not a jury trial, because I mean, it would sort of be like saying, well, you asked for an injunction, so yeah, it's fine, We're fine with an injunction. So now it's not a case for anything, So that I don't think that's going to work.
Google said that the government has said the case is highly technical and outside the everyday knowledge of most prospective jurors. Google said it's aware of no case in American history where a civil suit brought by the United States pressing only antitrust claims was tried to a jury.
You know, it's likely that that's correct simply because the Justice Department has almost never filed suit for damages and so it's not a major claim. What would be an interesting claim is if nobody had ever filed for a jury trial, including private party, and that actually is not true.
And in fact, this claim was made in the nineteen eighties in litigation involving the sale of Japanese televisions in the United States at allegedly predatory prices, and the defendant, Japanese television manufacturers, made a strong effort to say there is no right to a jury trial here because it's too complex. The courts never quite got to that holding for other reasons. They focused on other issues. But we've seen the claim before and courts are not all that
well disposed to it. In private cases, there are lots of complicated cases, patent infringement cases. Patents are complicated. A lot of patent infringement cases a large part of it to try to juries, trade secret cases, complex fraud cases. There's a lot of complex cases. To say somehow anti trust is beyond the realm is a little silly, particularly
after Google had a jury trial in the epic case. Now, Google's right to say that this is unusual for the government, but that's a knock on the government, but not on the legal case. And there are reasons for that. But the government clearly has the statutory right to sue for treble damages. Congress gave that to them in nineteen ninety, originally with single damages nineteen fifty five. I mean it's a specific statue. So, as I said, frivolous, bad argument.
Harry, before we go any further, tell us about the government's case against Google here.
Basically, it involves the advertising side of what Google does and the auctions that it runs for those ads that you see popping up every time you move online that seem to say, Hi, Harry, this is for you. You know, starts advertising display advertising, and they run auctions. I forget the number every second, but it's a huge volume of
advertising auctions. And they run the platform, and they provide the tools for both the advertisers and the publishers of these ads to figure out how much space there is where these ads could go, what to charge, how to aunction them off, so that each side feels they're getting the best deal, and you know, they sort of run the show. And they also have the search engine that
generates you know, a lot of the information. So they are all over what people call the ad tech space, and the Justice Department wants to separate out some of these functions so that different platforms might arise that could compete against Google without you know, having the same search engine, having sort of the same tools that seem to favor Google, and placement on Google websites rather than through being so forth. So that's the real thumbnail sketch. But you know everything
you read. The first thing you know that people say is well, this is a complicated market to understand. But you know, again, this is what good trial lawyers do. They break down complexity so that the people who have to decide the case. In this case, the jury can follow it through and that's going to be their challenge.
You mentioned the Fortnite maker Epic Games case that was one of the worst legal losses for Google. So Google's been burned by a jury. Is that why it may be looking for a judge to decide this case, although I would think that it would be harder to try a case before an experienced trial judge than before a jury. And also a jury can't order the breakup of a company, right.
Well, that part of the remedy is going to be decided by the judge and not by the jury. The jury will assess damages, but the sort of equitable part of it. What the ongoing relief will be will be decided in some sort of separate post trial hearing where the government presents few and evidence on what it wants to cure the problem going forward. But damages are compensation for harm in the past, so that will be decided
by a jury. And you know, your question now has moved from are they making a frivolous legal argument to are they making a smart tactical argument. And you know, I'm not sure the answer to that. Why do they prefer judge bring them to a jury. And the only answer I can come up with is just what you said. They don't want to present themselves to a jury. They did that an epic which they wanted to avoid desperately and were unable to. And in less than four hours
the jury said, we know who you are. You are a monopolist. You know, cut the fancy junk, you're a monopolis and you've excluded competitors. They didn't have much trouble with this. Now you could say, well, one strategy is you make this soak complicated the jury to just throw up their hands and say we can't figure this. On the other hand, a jury trials incentive to both parties
to present an understandable case. And you know, the government chose this, and they actually chose a difficult path because they have the burden of proof and they have to make this understandable to the jury. And it's not going to be easy. I don't think it's complicated industry, But you know, if they do it well, the jury will understand it. And maybe that's exactly what Google's afraid of. The jury will see. They're on both sides of these transactions.
Even Microsoft, the second largest company in the United States by market cap but valued over what now, three trillion or two trillion, I lose a trillion here or there, even they are having trouble in this space. And you know, I think jurors will get it, and I think Google's afraid that jurors will get it. And obviously they're not so much afraid of the money part here, since they said, hey, here,
take our money please. They're worried that the jury is going to find against them that they've monopolized this market and then strong relief is going to follow.
But if a jury would get it, wouldn't a judge get it as well? And you know, get it faster and with more background information.
I do wonder about that. Judge Brinkhama is a really good district court judge. She's moved this case along pretty quickly. She doesn't seem disposed to, you know, to Google's efforts to get out of her court to do various things. She hasn't dismissed the complaint, So I wonder why they think they'd have a better chance with her when it
comes to tactics. These are judgment called. You know, those lawyers may know things about their case, may feel that she could understand better why they're on both sides of the transaction, how these marketplaces work. I don't know. That's a decision they have made, though they don't want twelve people judging their behavior.
Some of the plaintiff states that had joined the Justice Department suit said the court to deny Google's motion for some rejudgment allow the case to procedure trial.
Quote.
Google argues that it lacks monopoly power along every dimension except the one that matters most under the law, whether it has the power to control price or output, and it does. Which side do you think has the easier case here? Because you know, it sounds like Google will have a hard time defending well.
As I said, you know, just as in the epic litigation with Fortnite. Yeah, don't look over here that we have a monopoly, look over there, that we compete for lots of other advertising and so forth. And a lot of this does turn on some sort of technical concepts about how we define markets and what the market share is.
And the state's position, which I assume will come out in litigation as well, is that we can figure out whether someone is a monopoly, not just buy or even exclusively by defining a market and seeing whether they have most of it. We look and see whether they can do what monopolists do. You know, does it walk like a duck and talk like a duck. It is a duck. So monopolist control price, they raise it, and they restrict output.
And that's what you know, they want to show in their case that they control the output of advertising and these advertising services, and that leads to higher prices. And that's sort of what's behind the damages claim, which is why the government shouldn't abandon it so quickly, because they want to show harm that prices have gone up, and
you know, there's a direct way of doing it. They bring in a buyer and says, heck, you know, if things were right, I would add to pay less for my ads, and I don't really have a choice but to go through Google, and you know they sack their tolls and if I've got use their platform. So you know, I think they're still going to want to present that that evidence, assuming that they can muster it from their own buyers, which is the federal government.
Maybe Google will have a change of heart if Judge Meta, the DC trial judge who's still weighing allegations that Google unlawfully stifled competition for web search, comes out with a ruling against Google.
You mean, dropping another shoe might not miss their feet. Yeah, you are right, there's one way or the other. They're in the fire. And the question is, you know, I don't want to pursue the metaphor, but you're right. It's a great point. As this is going along before trial, Judge Meta comes down with the decision, which I think you will that just at least to some degree, they
have monopoly and they've engaged in monopolizing conduct, any competitive conduct. Yeah, that may make them say, well, yes, we didn't do so well necessarily before judge. But you know, in some way least they get a cleaner opinion to appeal from as a judgester right, an opinion, so it's going to look different.
I hadn't thought about that. That's a good point, Harry. Of course, of course you make a good point, Harry, and that's why I so enjoy having you on the show. Thanks so much. That's Professor Harry First of NYU Law School.
Conservatives have targeted the Consumer Financial Protection Bureau since its creation in two thousand and eight, part of the attack on the so called administrative state, but a Supreme Court decision last week upholding the bureau's funding system has vaporized the legal threat to the CFPB, Senator Elizabeth Warren's brainchild.
The CFPB is here to stay. And this is really important because you know, it's all about a level playing field. The CFPB is out there fighting every time somebody gets cheated by a bank, every time somebody gets tricked by a mortgage company.
Seven to two vote, which divided the justices along unusual lines, was a rare victory for regulation at the Court, which has been slowly chipping away at the power of administrative agencies. The question is whether this ruling is a sign that a majority of the Justice says will reject challenges to agencies in three key decisions yet to be decided this term. Joining me is Andrew Kim, a partner in the Appellate
and Supreme Court litigation practice at Goodwin Proctor. The case divided the Court along unusual lines in the concurrence and also with Justice Clarence Thomas writing the majority opinion and his fellow i'll say ultra conservatives Samuel Alito and Neil Gorsich dissenting.
I think if this opinion shows anything, the majority opinion shows anything, it's something that we've known all along, which is Justice Thomas marches to the beat of his own drum. And I think most individuals who are watching this decision were expecting some alignment amongst the conservatives on this issue. But I think Justice Kavanaugh, for example, Justice Barrett, you
saw that in the concurrence that they joined. I think those two justices and Justice Thomas as well, might have had serious concerns about the more sweeping implications of what it means to defund the entire agency on this novel constitutional theory. And I think Justice Thomas staked out his position in a way that was faithful to what he believed in with respect to the text of the Constitution
and the history and tradition of that provision. Obviously, there is a divide now, and it'd be interesting to see how this plays out. How do you apply a history and tradition going forward, especially with Justice's Kavanaugh and Barrett joining Justice Kagan's concurrence, and can you look to a continuing tradition. I think that will be an interesting question
going forward. But for at least this case, Justice Thomas stuck to his principles and came out in a way that surprised a lot of people, I think, but I think is also a faitful to his vision of what it means to interpret constitutional provisions with respect to the structure of government and how the government is still to
function going forward. And obviously there is a divide between him and Justice's Alito and Gorsag and we'll see going forward whether that division plays a role in future cases, in future structural constitutional challenges that have separations power implications. But if anything, at the end of the day, Justice Thomas sticks to his guns and he decided, and I don't mean to quote Fank Sinatra, but he did it his way, and I think this should surprise in some ways, should surprise nobody.
You mentioned Justice Elena Kagan's concurrence, which was joined by liberal Justice Sonya Sotomayor and conservatives Brett Kavanaugh and Amy Coney Barrett. She wrote to emphasize the importance of continuing tradition in interpreting the Constitution's meaning. Quote the founding error practice that Theourt relates became the nineteenth century practice, which became the twentieth century practice, which became today's. If you read between the lines, what do you see in her concurrence?
My sense from Justice Kaigan's concurrence is that the Court bipartisan, for lack of a better way of putting it, although there are no parties in the Court, but a combination of liberal and conservative justices are signaling that they don't want novel constitutional arguments that would upturn our system of government, turn over the table, so to speak, and those won't be welcome under this approach to or at least their
approach to history and tradition. I think it is a bit of a warning that the Court is not going to entertain every novel argument drawn under the Constitution to try to curb the administrative state, and that there are certain things that are essential to the function of government, like how agencies are funded. So long as there is a long standing tradition of it, the court is going to be very hesitant to overturn that going forward.
And explain the novel argument suggested here.
Yeah, before this particular case, I think the notion that the Appropriation's clause had much teeth to it in terms of being a check on executive power. I think Appropriation's clause generally had only been litigated only a handful of times. I think opm versus Richmond comes to mind. It's not a constitutional provision that one would think serves as affirmative check on the executive branch in the way that other
constitutional provisions might be. Or for example, a recent issue of litigation has been over the take care clause and making sure that the president has the ability to oversee executive officers, especially those who are heads of agencies. The Appropriation's clause is one of those constitutional provisions that rarely gets litigated, and all it serves by its text is it gives power to the Congress the power of the person to speak to ensure that appropriations are made by
law and says no money shall be drawn otherwise. It's not a provision that one would think serves as an essential you know, often litigated check on the federal government. But the proponents of this litigation, the Community Financial Services Association of America, they try to turn it into that, they try to weaponize a little used constitutional provision, little use at least in terms of active litigation constitutional litigation.
Then they try to turn it into something that could uproot an entire federal agency, citing the admittedly novel although has the majority found grounded, but novel approach to funding a federal agency that we see with the CFPB. So that's what I meant by novel constitution oral argument. You know, we don't see a lot of appropriation's clause litigation, and
it is certainly a creative argument. There have been other similar arguments that raised against other federal agencies, but at the end of the day, it is rare to see an argument like this one drawn up in the grand scheme of things when you're talking about separation of power.
Coming up next on the Bloomberg Law Show, I'll continue this discussion with Andrew Kim, and we'll talk about what this decision means for the CFPB as it tries to enforce new regulations. I'm June Grosse. When you're listening to Bloomberg, I've been talking to Andrew Kim, a partner at Goodwin Proctor, about the Supreme Court's decision upholding the CFPB's funding system.
You know, I've done many segments on the Roberts Court chipping away at the power of the so called administrative state, and this term there are still other cases out there where agency powers are on the chopping block. Shall we say? There are cases involving the Security Exchange Commission, the National Marine Fishery Service, the Environmental Protection Agency, and one of those,
the Chevron doctrine is on the chopping block. Can you look at this case and say, well, there'll be a similar result in the other cases and the agencies will be in the winning column. Or is it too soon or are the cases too different?
I think you might see some flavor of this in the Jarcacy case, for example, which involves you know, the Seventh Amendments and the non delegation doctrine and the use of aljs because there are still separation of powers concerns raised. And that's what I meant when I said, you know, for example, the ALJA issue, the administrative law judge issue. In jocacy, that's more the kind of structural constitutional challenge
that you see. You don't see something like that, you know, the CFPV case where you're trying to challenge the very existence of the agency. I think you may see these principles come into play in jocracy, for example, which is the case concerning the SEC. I will say that jocacy is a little different in that it's not the SEC isn't fighting for its existence in that case, whereas the stakes were much higher for the CFPV here, and I
suspect that had something to do. If you see in Justice Cakes's concurrence, I think that's had something to do with the outcome here on cases like relentless or lowber Ride,
depending on which one you want to call it. On the Chevon doctor and Chevron defference, I suspect that'll have this case far less of an impact because they're The question is you know, at the end of the day, who is responsible for interpreting statutes and should the agencies that are responsible for the enforcement of the statutes get
deference in how they interpret them. I mean, there are separation of powers considerations there with respect to the judiciary, but it's not the sort of thing that's going to cause an existential crisis for a particular agency. And again that that is more a question of statutory interpretation and judicially created doctrines giving deference to the executive branch and their application of admittedly specialist statutes. So I think you're
going to see less to draw there. Give. This goes back to your earlier question about the significance of Justice Kaigan's concurrence. You know, to the extent that a case involves a constitutional challenge to essential functioning of what an agency does, that applies across the board to all federal agencies. I think you will see the kind of caution that at least the four justices and really five, because I think some would argue that Justice Jackson I would argue
that Justice Jackson signed on with her concurrence. I think you are going to see the more that's at stake for a federal agency and federal agencies across the board.
Chevron notwithstanding, I think that is the one issue that really is a question of should the judiciary be affording difference to the executive But other than that, if it's the question of an agency's existence or federal agencies and how they operate across the board, I think the Court will exercise the kind of caution that you saw in the CFPB case.
The CFPB has been threatened since its origin. Does this end the threat to the CFPB once and for all.
I'm going to give an absolute statement, which is rare for me. I think the answer is yes. I think this is probably the last major constitutional challenge to the existence of the bureau. That's not to say others won't bring challenges against the CFPB with respect to what the agency is doing, and they may say that. Challengers may say what the agency is doing is unconstitutional, but those are questions about how the agency conducts itself. I think
this will be the last constitutional challenge. I may be wrong. I think there are those who will try to defeat the agency, you know, using every effort that they have. But I think this is the major, last major constitutional challenge against the agency's existence. Now it's a question of how the agency comports itself as a federal agency as a regulator.
What's been happening with the enforcement actions of the CFBB while this case has been pending before the Supreme Court.
They've wasted no time. I mean, the day after the court's decision, you saw a flurry of activity. In fact, Director Chopra had issued a statement saying that they were firing on all cylinders. And on the day after, you know, the one day after the court decisions, the CFCB had issued a number of supplemental notice is filed in court
saying we'd like to unfreeze these cases. The CFPB took steps to try and unfreeze the two rules that had been blocked through preliminary injunctions or state through preliminary injunctions challenges to the Small Business Data Rule and also the credit card fee rule. And the CFP brought an enforcement action literally the next day. And we've seen behind the scenes that it seems like the CFPB has been gearing up on the private side as well, you know, reinitiating investigations,
reinitiating discussions on the enforcement side. I think they were all holding their breath over there at the CSPV waiting to see how the Supreme court would come out and they've finally been able to let that breath go and they're finally breathing out, exhaling, and in that exhale, you're seeing a lot of a flurry of enforcement activity.
Did the CFPB itself put enforcement activity on hold during this period or was it that the people that they were targeting put cases on hold.
Both those who were the targets of enforcement actions by the Bureau did ask the courts ruling on their cases to stay the lawsuits, to temporarily stop them while the Supreme courts deciding the CSPB case. But we saw this
is something rare. When Director Chopar issued his remarks on the day of the Supreme Court decision, you saw something rare and that when he went and did I think a press call afterwards, he confirmed that the Bureau had at least frozen or slow rolled enforcement actions that had not yet come to fruition, meaning that companies that were either being investigated or being subject to pre lawsuit enforcement activity by the Bureau that had been slow rolled or
that had been frozen while the Bureau was waiting for this decision. So it was a mix of both. It was those both challenging the Bureau had asked to put rules that the Bureau had enacted on hold. Those being investigated or subject to enforcement actions by the Bureau had asked courts to put those cases on hold, and the Bureau itself decided to slow roll things on its end.
That's not to say the Bureau was doing nothing, and it continued with its investigations and with some of its enforcement activity, but it wasn't going at full strength as it is you know, clearly doing now in the wake of the Supreme Court's decision.
So the case over the cap on credit card late fees, which is the case that seems to be getting the most attention, do you think that's an uphill battle for the CFPB. I noticed that that case and the case over the small business lending demographic data collection filed in Texas. I don't think it's any you know, surprise or coincidence that it's filed in Texas.
I'm not going to opine on the specific merits of either of those cases, but I will say I think that's the CFPB's next biggest challenge in terms of this is the type of thing that we're going to see going forward with respect to the CSTB challenge just to how it engages in rule making, whether it's engages in
sound decision making at least in promulgating rules. That is the kind of thing that you typically see in the agents federal agencies that litigate often in court because of trying to defend their actions, and I think this will be a challenge for the CFPB On both cases. I don't think either will be an easy case for the CFPB. I think there are serious merits that the reviewing courts will need to address. I'm not going to opine on the specific arguments because I don't think it's my place
to do so. But I think this is very much a type of activity that we'll be seeing affirmative litigation brought against the CFPB that we'll see going forward. Rather than these attempts to broadly strike down the agency and its existence, it's more going to be these affirmative lawsuits are going to be a check on what the bureau is doing and how it is carrying out its activities as an agency.
Let me ask you a broad question. The Fifth Circuit, the case that we're talking about on the CFPB was from the Fifth Circuit. It the sec case is from the Fifth Circuit, and the Fifth Circuit has an inordinate amount of cases before the Supreme Court this term. Do you think that the Supreme Court is sort of slapping down the Fifth Circuit when it's come out with some pretty novel and on the edge legal theories.
I think you're putting it very generously. My suspicion is I don't think that the CFPB decisions is to be construed as an admonition of the Fifth Circuit per se. I would be really interested to see what happens in the Jarcracy case, because I will say the appropriation's clause argument had been kicking around for the better part of a decade. I would say it wasn't entirely new. There was some basis for it. It is very novel in the sense that you're using this, as I said earlier,
little youth constitutional provision. But I put it like this, it wasn't a departure from established case law because there wasn't much established case law at least as to the meaning of what the appropriation clause is and how to apply it. And that's why you know, the justices in this case had really had to rely and lead in on history and tradition and really the mere text of the recent clause. I would be interested to see what happens in jercracy because I think for the Court and
the Myth of Perstone case as well. I think that those cases from the Fifth Circuit, I won't say that they mark an extreme departure from case law, but they give rise to some serious questions about the issues presented in those cases, especially with respect to in jocracy. For example, the SEC case, you have very interesting questions about the Seventh Amendment and the fact that the Court, the Fifth Circuit in that case took the effort to say you not only lose on one of these grounds, but you
lose on all three of these grounds. SEC. If there is a case where there might be some reading between the lines admonitions of the Fifth Circuit, I think it might be from jercacy. Maybe less so in the Myth of Perstone case.
We'll find out by the end of June. So much, Andrew. That's Andrew Kim, a partner at Goodwin Proctor. And that's it for this edition of the Bloomberg Law Podcast. Remember you can always get the latest legal news by subscribing and listening to the show on Apple Podcasts, Spotify and at bloomberg dot com, slash podcast, slash Law. I'm June Grosso and this is Bloomberg