This is Bloomberg Law with June Grasso from Bloomberg Radio. The Sound of Large Madness a big business for the National College Athletic Association, bringing nearly a billion dollars in revenue last year, but zero to the players. The Supreme Court has agreed to consider the latest effort to have the n C double As amateurism rules declared a violation of the antitrust laws, something that could up end the
multibillion dollar business model for college sports. Joining me is Audrey Anderson, who had the higher education practice at bass Barian Sims so Aurey. The Justices will review the Ninth Circuit decision that allowed student athletes to be compensated as long as it was tied to education. What's the n
C double as argument for overturning that decision? The argument is that when you're looking at a rule that promote amateurism, the court should give the m C double A some leeway because without those rules, the products that the n C double A is putting forward college athletics won't exist. So an antitrust law, there is a doctrine that says if you have a joint venture, which is what college athletics is, all the colleges come together to put forward
this product of college athletics. Because you have a joint venture, the participants in that joint venture are allowed some leeway to put together rules or agreements that allow the joint venture to exist, and the courts are supposed to give those participants some leeway. So the n C double as argument is, Hey, the Ninth Circuit was much too strict in the way it reviewed our amateurism rule in this case. Why are both sides saying there please? The court took
this case at the trial court level. The Ninth Circuit neither side got everything it wanted, So both sides there pleased because the plaintiffs, the student athletes, wanted much more. They wanted full out what we call pay for play. All they got was that they could be given benefits tied to education, and even those benefits that were tied to education, if they were cash or cash like, they're
limited an amount. So it's conceivable that the Supreme Court would say that the Ninth Circuit was not strict enough in the way it looked at the MP double A rules, and you can still have a collegiate market with even fewer limits on the benefits the college athletes are able to obtain. Does the courts decision in an n C double A case tell us anything about how it might decide the current case. Well, I think the two sides
have very different views. I mean answer to that question June, that four case gives us very limited information and how the Court will approach this case. Because when the Court was talking about the rules around amateurism in the nineteen eighty four case, they were looking at rules about television contracts. So they were only talking about the rules about amateurism to distinguish them from rules about TV contracts. A lot of people called that language in the nineteen eight four
case dicta not binding legal les. In addition to that, the facts of college athletics have changed really dramatically in the last thirty six years, and that's important when you're doing an antitrust analysis. Could a decision by the Supreme Court change the structure of college sports and the relationship between college athletes and their schools. It definitely could. If the Supreme Court held that the courts have free reign
to be very intrusive in reviewing the rules. The m double A tries to put forward about what an amateur is or what kind of commercial relationships a student athlete can have with its college and still participate in college athletics. That could really change things. If the point if one full out, that is, student athletes can be paid for their participation in college athletics, and the n C Double
A can't stop that, that would upend everything. I'd be really surprised if the Supreme Court went that far, But in any event, this could really change up what happens in college athletics. So minor Supreme Court decision put an end to this controversy over amateurism. Whatever happens in this case, it's only one battle front for the m C Double A. Even if they were to win this case and the Court were to say yes as an antitrust matter, the m C Double A gets to define what amateurism means.
The state legislatures are making laws saying that college athletes can get unlimited amounts of money from third parties for selling their name, image, and likeness, and that changes the way that college sports looks quite a bit, and the Supreme Court's decision isn't going to do anything to change those efforts. Is already in the process of changing its rules to allow athletes to be compensated for the use
of their names, images, and likenesses. Yes, they have proposed some changed rules to allow student athletes to get some limited compensation for name, image and likeness rights. But I don't think that the rule changes will satisfy the state legislatures who have already passed laws. They're just not enough.
As long as there's so much money in college athletics that's going to the coaches and the universities and not to the student athletes, the n C double A is gonna have to withstand the pressure and of courts and from the state legislatures to do something more to allow college athletes to more directly benefit. That's Audrey Anderson of
Bassbarian SIMS. If there were any lingering doubts about the government's inclination to go after the tech giants, that's been resoundingly settled, with antitrust actions escalating the final weeks of the year. Google is facing three antitrust lawsuits and Facebook to lawsuits. And the lawsuits against Facebook by the Federal Trade Commission and a group of forty six states seek to break up the social media giant, alleging that Facebook
thwarted competition to protect its monopoly. Here's New York Attorney General Leticia James. No company should have this much unchecked power over our personal information and our social interactions. Joining me is antitrust expert Harry First, a professor at n y U Law School. Harry tell us the basics of
the government suits. There are two cases files, and their pretty much the same, although not completely the same, one by the Federal Trade Commission and the other by a group of states, And the basics are of two parts.
It looks at al Facebook has maintained its monopoly position in the personal social network market by first of all, acquiring aggressive startup competitors that might challenge it in one way or another, and second by conduct which says will allow you developers to work with us on our platform and interoperate with us, as long as you don't challenge our what they call core functionality. You know, get too close to being a real competitor rather than an addition
to what we offer. So those are the two basic aspects on the first. With regard to acquisitions, as I think is well known, the focus has been on two major acquisitions for which face Book paid a lot of money Instagram and what's that The state complaints adds a bunch of other acquisitions to the list. Facebook has acquired a lot of companies over time, I guess, but the basic focus has been on those two, and for somewhat
different reasons. Zookerberg particularly, but others of Facebook were concerned that they posed a direct competitive challenge to the dominance that Facebook had already achieved, and it was easier to buy them than compete with them. Those are the basic aspects of both complaints. Does the government have to prove that Facebook bought the companies bought What's Happen Instagram to
kill competition? That is their theory. Yes, so the theory realize a lot on internal documents at this point, at least the complaints that presented um a lot of emails, presumably will also be uh interviews, depositions, and at some point perhaps at the trial um as to what the purpose was of these acquisitions. And also presumably they'll have
some outside experts which verifies that this wasn't paranoia. By the legitimate concern that these upstarts might challenge what they're doing, they are making out a case that these weren't just um sort of neutral acquisitions to advance their business, but we're really done to suppress a competitor that could be PETI. The state's complaint also quotes from former Instagram CEO Kevin Sistram asking an Instagram investor if Zuckerberg was likely to
go into destroy mode if he was turned down. Sistrom said, quote bottom line, I don't think we'll ever escape the wrath of Mark in the government trying to paint a picture of Zuckerberg here and why. I think there's a degree of personalization, you know, Zuckerberg's personality as as there was in the Microsoft litigation in the ninety nineties when it was Bill Gates who was in control and you know,
and what he was trying to do. So this idea that Zuckerberg had developed a reputation, as you know, the estate's complaints says buy or bury strategy. Either you know, you sell out to us, or we're going to make your competitive life miserable. And yet there's some there's some focus on him, which is legitimate since is the head
of the company. There are other emails from other people, of course, and um presumably there will be others, but yeah, it's to try to show, you know, this wasn't done to advance competition, but to suppress it correctly if I'm wrong. But there were also emails of Bill Gates in the Microsoft trial, weren't there? Don't they learn that they can't put anything in emails? You know, the most wonderful thing
about anti trust litigation is how familiar it is. Writing things that damage your case preceded the development of email. And you know it used to be just harder to find these documents because you had to physically search through files. But I mean it's seriously, literally, from the beginning of the anti trust laws, statements that business executives have made in one way or another have been used to hang them and to show intent. And so the courts often
say that intent isn't relevant. We look at objective facts. But intent does help you understand what the facts mean and has always played a role. And John D. Rockefeller and putting together Standard Oil used the same sort of fact that he would say, Look, if you don't sell out to me, I'm just going to cut prices on you completely and push you out of business. So you
really don't have a choice, and Zuckerberg didn't. Basically the same thing, and of reviss easy you sell us to us, or We're just going to copy all your features and you won't be able to survive. So yeah, they keep writing these things, thank god, and anti trustfers keep finding them. Facebook says one of the arguments is that these apps needed Facebook's investment to reach their current levels of success. Is that a good argument for Facebook? I mean it
is an argument they will make. They haven't the opportunity. I mean, obviously the one sided document, we're reading these two complaints and so um they have a response, which is, you know, after we acquired them, we've invested a lot of money in making them better, money that these companies might not have been able to get, and a degree of interoperabilities these companies couldn't have achieved on their own. So the bottom line for consumers is that consumers are
better off, not worth off. Um, and these companies have been developed in in ways that are quite helpful. Now, whether that's true or not, it will be tested in court as well. You know, then they can they make that argument. I do, they can make an argument that they've invested in these companies. Um. The Instagram case may be easier to make than what'sapp UM. I think there was a lot of UM disagreement with the old UM management of what's up to what that application should be UM.
But this is fodder for the trial and it is a plausible legal argument. Like the Google case, consumers don't pay anything to use Facebook. What kind of challenge does that pose to the government in proving its case right, Well, two answers. One answer is that the government complaints make an effort to show what the consumer harm was. I mean, obviously they cannot say the consumers are paying more than
they should. Although there's there's a staphisticate an argument that Facebook should pay consumers because you know that you sometimes companies actually by customers because they make money that way by having more of them, and so that would not you know, the price of zero maybe more than than it should be, if you understand what I'm saying, UM.
But that is not the argument the government's banking and wisely so, what the government is trying to do is to say something that many people have said, and that UM, you know, value to consumers is not just the price, but quality and innovations, which is sort of similar, but they're non price qualities that that are important. You know, there was the famous Hershey bar example where Hershey didn't change the price of the Hershey bar, they just cut down the size of the bar. Uh. So Um, that's
basically arguments are making. The price is zero, but the product keeps being degraded and you get, um, consumers get less value for it, so um, you don't get as many choices your your choices on privacy have been changed over time to be less favorable to consumers. The States argue, interestingly, I think that the ad load has changed so that you get more ads now, um than you used to. And they have apparently an email saying that this is
a tax on consumers who wants more ads. But um, apparently they have data that show that the amounts of ads that you have to scroll through has increased. And that's another way of saying the prices increased. Um. And you know, so I think a judge is gonna have to be convinced that not to look just as price, but other aspects non price, all the aspects of the product.
So that's that's one answer. The second answer is the idea that you have to prove an effect on price is actually not legally required, and um, the last major case like this, which is Microsoft UM. There was never any proof of effect on price. Never. It was all about UM squashing a nascent competitor, you know, helping to push them out of business through various UM tactics that Microsoft pursued and UM in some ways very similar to what the government's arguing here, but never an argument that
price was suspective. We look back now, we say the government actually approved both the acquisition of Instagram in and What'sapp in twenty fourteen. And Facebook is using that as a response to the government saying, yes, this is what they call an inconvenient Well I call it an inconvenient half true. So legally that's actually untrue. The government did not approve these acquisitions. What the government does when it reviews acquisitions, what the US government does others are difference.
Actually the US government does is it decides whether to sue or not. It doesn't approve a merger. It's very clear that it doesn't. And the government, as Godlines says that all they do is they decide whether it is to so they decided not to sue. They didn't approve
the mergers. And there have been cases whereas the government goes back after the mergers completed and bring suit because the problem with a merger is that you're trying to predict what competition is going to look like in the future, or, as one recent judge says, you know, I've got to have a crystal ball, and that's tough. You know, it's
hard to predict the future. So that's sometimes a high burden. Now, there are cases where the government is allowed to do legally to do afterwards and say, you know what, look at what's happened. We don't have to guess at what the effect was on competition. Now we know, oh my god, we better we can do something about it. So the government is legally allowed to do that. So that's why
I say it's an inconvenient half truth. The government did, they have to see itself, did review both of these mergers, decide not to challenge them, as the Europeans did as well, except the Europeans actually approved under European competition. So as a tactical matter of course, Facebook is going to say, and as summary of plausibility looks, um, we make a lot of actisy, You're going to go back and just examine a few of them to say ah, we're gonna
start to overturn this, overturn that. That's not the way the law is supposed to work. It's a problem with the narrative. But there are responses to that that the government plants are going to have. In particular, you know all those emails, they didn't have them, and they made the decisions on Instagram and on What's App. Facebook made some promises about what it wouldn't do and then proceeded to break the promises. So I'm not so fast. Facebook.
You weren't straight with us when we reviewed the mergers and now we know their effects. This is always the headline. The government is asking for a breakup of Facebook by spinning off Instagram and What's App. How big a hurdle is that for the government reorganizing or breaking them up? It depends on whether you like the polite or their
colloquial is always are hurdle for the government. Now past history in monopoly cases, which is what this position does, mostly is that when there are break up, if you can break up accompanied by the divisions that it has acquired, so that in effect you're just sort of unbreaking them but not completely reorganizing them. That considered more likely easier to do, sort of thinks of the lego set. I can't you know you can take the blocks apart and
you know there were blocks together. That's more plausible. Now Facebook has made efforts of the recent path, maybe the last year or so, to integrate both companies more fully. Whatever exactly that means. I'm not sure into Facebook as
a unitary company. I think anticipating laws and so they're going to say that technically you can say, we can invest these companies, but this is tremendously disruptive and costly and will end up harming consumers by giving us, you know, a less valuable Facebook or less valuable Instagram analyss valuable. What's that? So, judge, even if you find we violated the law, this is not an appropriate remedy. It's a
harmful remedy. And what you should do is just enter in order stopping us from whatever bad conduct you found, and that should cure the problems. So I think that's roughly how the arguments might go. But the government is not committed to reorganizing Facebook this way. They might learn that there's a better way to break Facebook up into smaller companies that should compete with each other. But that's
the future. Yet, as we talked about, the government is also filed an anti trust suit against Google, which case has a better chance in court? Google or Facebook, they both faced similar issues the free goods the consumers side, so that's similar. They are different business practices. I think Google, as we discussed, is sort of more straight forward legally because these were contractual agreements for the Android operating system, and in that sense sort of is even closer to
the Microsoft facts and litigations. Facebook is similar to Microsoft too, because it's also an effort to suppress the nation competitor, but instead of one tactic, you know the question that people raised as well as to post Facebook has decided to acquire the upstart brows or Netscape instead of just trying to push them out of business, then we look just like Facebook. So they both have similarities to the Microsoft case, and each of them are a little different.
So I'm not quite sure how to answer that. I think they're both plausible cases, and we'll just have to see what the strength of the facts are when these cases or if these cases go to trial. Thanks for being on the Bloomberg Laws Show, Harry. That's Professor Harry First of n y U Law School. TikTok is one of the most popular apps in the world, with more
than one hundred million US users. A panel of judges on the DC Court of Appeals has signal skepticism of the Trump administration's continuing efforts to ban new downloads of the Chinese owned video sharing app, making it unlikely that any TikTok ban will go into effect. Joining me is a nat Alambeck, Assistant professor at Case Western Reserve University
School of Law. Any insight into why TikTok has not been able to close a deal with an American buyer, Well, I mean, I'm just speculating, but I would think that these are a few things that are going on. One could be that they're waiting for a different administration. I doubt that, but maybe they're stalling. Another one could be that the deal has to go through and there's a lot that's involved. Is there going to be divestment of the ownership, how is that going to be? How is
um information of investors going to protect it? Who's gonna know what? How do they make sure that, you know, if they stay involved, they don't have access to that information? That the government wants to protect. I'm just assuming that that's why it's taking a lot of time. It needs to be approved. They need to figure all that information out. The deadline set by the Trump administration for requiring byte
Dance to sell TikTok has passed. What does it signal that the government hasn't gone to court to force a divestiture to meet means that the government for now, Again we could be surprised, right, but for now, it means that the government is not pressing on this. But again, like I said, it could mean that there's a deal in the work that we don't know about. It could mean that the governments decided not to continue to take actions on this and they're waiting for the next administration.
It could mean that there's other actions that the government's going to take. For example, I don't know if you saw, but recently the sec as I asked TikTok and other companies to ask for information on how are they protecting the users privacy? What are they doing with information they're aggregating on users. There could be several things, but one thing is clear and that the government you know, has this deadline. They extended the deadline. The deadline has passed,
but they haven't done anything since. Explain why two federal judges, one in Washington, d C. And one in Pennsylvania, blocked the Commerce Department from prohibiting new downloads of TikTok, right, And and that's very good that you said that, because we really need to separate the things. We need to separate. On the one hand, these two orders, right, the one order was to divest and the other order was the band, and that is on on app stores and to allow
new users to download the app. And the issue is really with regards to the second, and that is censorship, right, censorship of speech, censorship of social media applications. And there's a concern here of privacy of national security. Explain for us what the issue was during the oral arguments of the d C circuits. There are a few issues. One of the issues is with regard to UM the I
E e P A band. And then whether there's an exception for information and communication, whether the President has or does not have authority to regulate or prohibit directly or indirectly, any personal communication doesn't involve a transfer of anything of value or any information or information materials, And really they put a lot of focus on this world indirectly, and it's very important because there could be many different kind of bands. And that's why it's interesting to see how
the court's going to interpret this. They're gonna look at tick took messages on the app or on the company and whether there was authority or not to do that. And then also you know, even when the everman talks about national security, then you might ask the question national security from what and from home? And is there a privacy violation? Is this the correct way of addressing that kind of harm and also showing the harm. So there's so many different issues, um that the court is going
to deal with here. One of the judges, Judith Rogers, said, Congress wrote this language, and the government's justification for the band seems to fly in the face of that. What
language is she talking about? That's a great question. So now we're talking about the free speech implications of the sanctions, right, and and the question is whether these sanctions are really what congresss intendant and and and again they're looking at the interpretation of the i e e. P A and whether it gives the presidents broad authority to freeze assets or bar financial transactions or and what the president can do.
And and I would just say that that was changed a few times, and that Congress specifically excluded from the president the powers of the ability to regulate directly or indirectly a range of informational materials, whether they're commercial or not. And the amendment is'sliclbly mentioned materials such as publications, films, photographs.
So there's a lot of discussion on that on whether it was even allowed, because what they wanted to do is to protect free speech, okay, And so the question is whether that's violated here or not based on that interpretation to affect did it seem to you as if the judges were skeptical of the government's conduct. What I think is is really happening here is that the judges know, you know, of of the intentions of and of the laws and the protections of you know, free speech and
free and the First Amendment. And what they're really pushing I think the government to do is to explain what is it that you're doing, what is the harm? Explain it to us what's going on. And I think it's very important in light of everything that's happening. And I think there's no doubt that there is, you know, and you can see what's happening right, There's no doubt that there are issues with TikTok, other countries of band TikTok. There's issues with UM. There may be issues with with
regards to national security. It is just the issue is here, whether that particular action, okay, of of banning the app and the stores after you have so many millions of Americans they are already using it, whether that's the correct measure, and whether the president had authorities to take that measure. I think that's really what's going on here. Under a Biden administration. Do you think that the government will continue to press for a sale of TikTok or bands on TikTok.
That's a great question, because that's a question, and I'm you know, I'm asking myself too, because I think that although you know, for example, so I write about menders and acquisitions and CPIUS that UM the committee that's reviewing UH, you know, deals with foreigners invests in um U S technologies or now emerging technologies, and how the Trump administration is actually gave Cephius more authority to look into those
UM types of transactions. I think the definitely the Biden administration is also going to scrutinize those types of transactions, especially and when it comes to national security. Um. Whether it's going to have the same flare as the Trump administration, I don't know, maybe not, but I think that you know, Look, it's what's happening around the world. Look, it's what happened in the United States. You will see that they're going
to step up investigations on privacy. They're gonna step up I think again, you know, and just thinking investigations on whether investments have to do with national security or do owned before the clear stern field. UM. So I still think it's it's going to be um, you know, in the background, um and especially with what's happening in that you know area, not just here in the US, but
around the world. So I definitely think so how they're going to do that, you know, it's it's up to divide an administration, and I guess time will tell, but it's definitely an issue that's going to continue, UM to be relevant, I think, and I don't know, he might act differently for the people that he's gonna point are
gonna act differently or going to put different emphasis. I don't know, but I will definitely think that there's it's um, there is momentum for for example, maybe for more privacy laws, right uh, for more um protections of consumers. So UM, I think it's still gonna be quite an issue because um, you know, I don't know if you know this if
you read my piece. I just wrote a piece about alternative venture capital and then usun accord investors, and what I found is more and more international players are investing in, you know, in our private firms for different reasons. Sometimes for financial reasons. Sometimes they have strategic reasons, right Um.
They might want to get access to the technology that the companies are working for, or they want to might want to be able to establish you know, some sort of partnerships that collaborations that maybe have a subsidiary in their own countries. So there could be you know, different reasons for why they invest or maybe for fires reasons they want to make more money. But the point is is that we're seeing more and more of these investments.
Those are it's one of the players that you know, uh, definitely investing in our private markets, and they're investing in private markets for several reasons. Also, because those are private firms, there's less scrutiny versus if it was a public firm, right, and those firms are usually you know, could be under the radar. For example, unicorns are well known firm, they have a reputation, but if it's if it's a tech startup, right,
it might be less visible. Um, and definitely doesn't have to disclose information to the public the way a public company would have to. So we're definitely seeing that trend. And we're seeing cps even before the Trump administration, but especially during the Trump administration looking into these deals and and they even blocked several deals. Can you give us
some examples? Can give you, you know, several examples for example, um, you have a grinder and you have patients like me, right, and patients like me, for example, is a healthy startup and if it was forcing into a fire sale? Uh? And uh Grinder was uh you know, a dating app and that also collected personal data on users. And also, um, you know the government tried to stop that. And there's how we monogram and financial and many more examples. And if you look around the world, it's not just here.
For example, with how we the UK recently also said that they're gonna ask um, you know, with regards to how we that um, They're not going to use that in the UK as well. Your final thoughts about this, What I think is really the issue here is privacy. Um. That's why, for example, we're seeing all these antitrust lawsuits, right,
and that's why we're seeing the SBC probing into these companies. Now, maybe we should think about having more privacy protection in the United States, but I think there's true and I'm hoping that the next administryation is maybe going to push for those because I think it's important to protect consumers here. I think we're seeing those initiatives take place around the world, and it's important to do two things. One is, of course to protect consumers, but also to encourage innovation and
entrepreneurship and investments in US companies. Right, So we have to be very delicate when we're balancing all these things. But definitely in terms of privacy. As a consumer myself of technology, I would like to know companies are not using my information, whether there are American companies or other companies are selling my data using AI to agreeate information on me, you know, marketing to me that way using profiles.
So I really think that, um, it would be nice to see if we have more protection of consumer privacy through in the United States. Thanks for being on the show. That's Annett Alan Beck, assistant professor at Case Western Reserve University School of Law. And that's it but the edition of the Bloomberg Lawn Show. Remember you can always get the latest legal news on our Bloomberg Lawn Podcast. You can find them on Apple Podcasts, Spotify, and at www
dot Bloomberg dot com slash podcast Slash Law. I'm June Grosso. Thanks so much for listening, and please tune into The Bloomberg Law Show every week night at ten pm Eastern right here on Bloomberg Radio.