Arm, Bayer, Google, Kroger, Novo, TikTok

This podcast series examines the intersection of business policy and law, and today we'll be looking at the litigation and policy catalysts that we're watching in December twenty twenty four and that we think will impact companies across a number of different sectors. My name is Elliot Stein. I'm a senior litigation analyst covering litigation in the financials sector, and I'll be your host for today, December two, twenty twenty four.

If you have any questions about any of the matters that we'll be discussing on today's episode, please don't hesitate to reach out to us at your convenience with questions. So we'll be discussing a handful of sectors today. First, Matt Chuttenhelm, who covers TMT policy and litigation, will discuss in anticipated court ruling in TikTok's fight against the US government's sale or band law targeting the platform. After that, we'll discuss a trial that starts December sixteenth in arms

case against Qualcomm over chip licenseing. After that, Holly from who covers consumer and industrials litigation and policy, will discuss a key appeals court argument also on December sixteenth, in a two point four billion dollar case by Canadian Pacific

bondholders over redemption rights. Holly will also talk about a verdict that she expects in a seven hundred and fifty million dollar PCB contamination trial against Bayern Monsanto, and Holly will also walk us through some of her research on the legality and process for some of Trump's threatened tariffs.

After that, we'll talk anti trust and we'll bring in Jen Ree to tell us about a verdict that she expects in the FTC's challenge to the Kroger Albertson's deal and sticking with anti trust, Justin Teresi, we'll discuss what he expects in the DOJ's case against Google over the company's two hundred billion dollar ad tech Steck. We'll then move to healthcare and Dwayne Wright, who covers health care

policy out of Washington, DC for US. We'll update us on President Biden's plan to cover anti obesity drugs under Medicare and Medicaid, and then we'll move on to financials and bring in Nathan Dean, our financials policy analyst also in Washington, to talk about deregulation in the financial sector and why crypto is poised to do well with Trump's victory.

And then I'll wrap up with previews of a few things that I'm watching for in December, including in anticipated ruling in a coin base lawsuit seeking to force the SEC to engage in crypto rulemaking. I'll also talk about Turkish bank Hawkbanks petition for further review of a ruling denying it's immunity defense in a US criminal sanctions case. And I'll also briefly talk about a ruling in a lawsuit by banks that are challenging in Illinois state law

that would ban interchange fees on taxes and tips. As always, all of our research is available on the Bloomberg terminal at bi go. And with all that out of the way. Let's get started with the content. Matt Shettanhelm, Let's bring you in. Let's talk a little TikTok. The US government past the law that would force TikTok to be banned in the US unless its owner Bitte Dan sells it. There was a key hearing in September. It sounds like

you expect a decision by December sixth. Why don't you come in tell us more about the case, about the timing, and then if you could also talk about the ARM versus Qualcom case, which I know you're not covering. Our colleague Tamlin Basin is covering. He couldn't make today's call, but he did relay the relevant information to you. So why don't you come in and tell us about both these cases?

it's possible. Two of those three judges at the Court were nominated by Republicans, one was appointed by Trump, so we can't rule out the possibility that their views have eased a little bit and they might want to create a path for Trump to block it. It's probably not likely that he would go back to Congress and have Congress perverse itself with a new law. But if TikTok wins this case, suddenly Trump has a much more significant

say in the matter. But if TikTok loses, has really felt like it was most likely coming out of that hearing, it's going to be panic time. I think for the company, its next move will be running to the US Supreme Court and pleeing for a stay of that January nineteenth date, so the court, the Supreme Court could take up the full case. I think that would have a chance, but I'd view TikTok TikTok as as the underdog in that matter. So definitely something to watch in the immediate days ahead.

Turning to Tamlin Basin's research on ARM Qualcom. So yeah, A trial is set to start in December December sixteenth in Delaware Federal Court in a trademark infringement and breach of contract dispute between ARM and arm's largest client, Qualcom. Now, the trademark claims are really just window dressing the relate to whether Qualcomm is allowed to continue using ARMS marks, But this is fundamentally a contract dispute that has its roots in Qualcomm's decision to acquire Nuvia for one point

four billion dollars in early twenty twenty one. Nuvia at the time also had a life since with ARM that Nuvia was using to try to design chips for use in servers and PCs. And just for background, Qualcom has primarily made chips for smartphones and so the Nuvia acquisition broadened its addressable market. ARM wasn't happy with Qualcomm's apposite

acquisition and responded by terminating Nuvia's license. So the legal dispute is really over whether the termination of that Nuvia license blocked Qualcom from continuing to develop the technology it acquired. Qualcom has maintained that its own license with ARM allowed it to continue that work, and ARM, of course views it it differently. We do think there's a strong likelihood that this case settles, likely before or during trial. As I said, it's set to start in December mid December,

December sixteenth. This is fairly high stakes litigation for both parties. But again, Qualcom is arm's largest single customer, accounting for about ten percent of total sales last year. ARM is seeking a new license agreement that pays a higher rate than the new VA agreement, and Qualcom is looking to expand outside of the handset market, and it's going to be in both parties interest to put this behind them

as soon as possible. And so Tamlin's conclusion is that it's unlikely ever to get to a verdict in this case.

legality and the expected processes for Trump's threatened tariffs. Why don't you come in and sort of walk us through all these things?

been sort of a roller coaster so far. Verdicts to date by plaintiffs suing over Sky Valley total one point five billion dollars, but a one hundred and eighty five million dollar verdict was reversed by an intermediate appellate court on grounds that could affect all of the verdicts. But in October, Washington State's highest court agreed to review that ruling,

so we await the decision there. On that trial underway, we expect a verdict in December, and plaintiffs have asked for seven hundred and fifty million dollars, but we can't predict the amount it will be. We think the jury will find for plainniffs. In litigation by holders of Canadian Pacific bonds, a hearing before the Second Circuit Us Court

of Appeals is scheduled for December sixteenth. The bondholders sued Canadian Pacific, claiming they had a right to redeem two point four billion dollars worth of bonds at one hundred and one percent face value after the company failed to get a decision that was effective approving its merger with Kansas City Southern Railway by March twenty fifth by the relevant agency. They claimed the indenture agreement pursue into which the bonds were issued required a decision before that date.

The approval from the relevant agency was rendered March twenty fifth, but wasn't effective until April fourteenth. The lower court found Canadian Pacific found four Canadian Pacific based on the language of the agreement, and we think that ruling stands on appeal, we may get some insight as to the panel's inclination.

On December sixteenth, the day of the hearing. Turning to terras, president elect Donald Trump pledged on the campaign trail terrorists is sixty percent on goods from China and up to twenty percent on goods from everywhere else. Recently, Trump said he would impose additional twenty five percent tariffs on goods from Canada and Mexico until the border crisis and Phentanmenal crisis is resolved, and ten percent on goods from China.

We don't know if that ten percent is in addition to the sixty percent he mentioned on the campaign trail, but whatever the case may be, we think it's highly likely terras will be imposed, and we think in general, the president has power to impose them. There are a number of laws on the books that give the president power to impose terrorists, to protect national security, the US dollar, and to address countries that are not abiding by trade agreements.

We think Trump may have justification under one of the current laws on the books, but if he does it that way through a proclamation or after agency investigations, depending on which statute he uses, will likely be challenged in court. Based on prior cases in which Trump's first term terrorists were challenged, they could those those terriffs could be stayed or even tempor early struck. By the way, all the cases we located in which terrorifts were struck were reversed

on appeal. But in any event, that's there's a potential for delay of the tariffs.

So I went back and I looked at the average timing for decisions on Federal Trade Commission comparable at least Federal Trade Commission court efforts to win a preliminary block and a proposed merger. I went back to the start of twenty eighteen and I saw that the average days from the start of trial was fifty five. And at this point we're ninety eight days from the start of

trial for Kroger, which was August twenty sixth. It had finished up on September thirteenth, then the closing arguments were held September seventeenth. So I definitely think it'll come out, but at this point I'm not really sure what's taking so long. I don't think that this delay means anything

in terms of the verdict. At the end of the trial, we thought the FDC was more likely to win the preliminary block than not and continue to think that, and the main reason is that their case showed undue concentration. The evidence really showed undue concentration in various regional grocery store markets in a very straightforward way and was really,

I think supported by most of the evidence presented. That the companies had offered a remedy, which included a divestiture of just under six hundred stores and other ancillary facilities to a company called CNS Wholesale. Now, I should point out that when companies offer a remedy for a deal, it's essentially conceding that the deal has anti trust problems, because if you don't have problems, you don't need a remedy. The remedy is intended to fix whatever the issues are.

And I think the companies were depending on being able to convince the judge and trial that the remedy they were proposing was sufficient to fix these problems and she should allow the deal to close.

the merger. So it means the buyer has to be shown to have experience, skill, and incentive to be able to buy these assets and jump into the market and compete pretty viably and quickly in a short period of time. And in this case, I think the CNS witnesses weren't that convincing with respect to whether CNS could do this

or even had the incentive to do it. The primary experience of the company is in wholesaling, and there was also a suggestion that it was more likely to use the stores they were buying from Kroger and Albertson's to bolster their wholesale business. In other words, they buy the stores, then sell them to other grocery store retailers change for

a contract to beat the wholesaler. So I should just say if the judge rules for the FTC, it means the deal is blocked pending an internal hearing at the FTC to determine whether the deal violates the intertrust laws or not. I really doubt the companies will stick with the deal if that comes to pass, because that could take another eight to twelve months, and this deal has already been pending since October of twenty twenty two, so a loss in court would likely lead to an abandonment

of the deal. And if that happens, Kuroker is going to owe Albertson. Albertson's a six hundred million dollar breakup fee that's in their purchase agreement. Now really quickly, Elliott. There are also decisions pending from two state courts, Colorado and Washington. Those state attorneys general decided to go it alone rather than join the FTC suit. Kind of unusual, pretty unprecedented, but they did that in state court under

state laws. And I think these decisions will come out after the federal judge's decision, but the Washington judge recently scheduled to issue a ruling on December tenth, so there's some chance it come out before the federal courts. But I should say both of these judges express hesitation about issuing a nationwide injunction on the basis of state laws, So I suspect if either won rules against the companies,

it would be for a state wide injunction only. And the FTC decision we expect any day now will be the this positive one that's either going to make or break the deal. So with that, waiting for this deal, Elliott, as I wrote today is like waiting for GOODO.

US Department of Justice. So what's going on here, Well, that's complicated, but in a nutshell, the DOJ is alleging that Google has a controlling market share in all three parts of the ad tech market for display ads, and that Google acted anti competitively with respect to that dominance. So in the ad tech stack, this includes the cell side, which is website publishers, the buy side those wanting to advertise, and the ad exchange, which serves in the middle to

link the two sides. Now, what are display ads, Well, those are essentially those little rectangular or square advertisements that you see when you visit a website through a standard computer. Really important here, Mobile ads in app ads and connected TV ads are not a part of the DOJ's alleged

relevant markets in this case. But based on Trialt testimony and comments the court, we think it's extremely unlikely that the DOJ is going to get everything that's after in this case, especially as it relates to the buyside or the advertiser side, because on the last day of trial, Judge Brigham has said that that itself was a very competitive market.

That said, we really don't think a court ordered divestiture was supported by the evidence at trial, with the testimony of publishers and competing publisher ad servers really suggesting to us that behavioral remedies like simply cutting product ties or restricting policies could in many ways solve the issues that

are in hand in the case. We also think Google's council did a really good job here of establishing the pro competitive benefits of allowing some formulation of a unified solution under one roof to continue, like security, web page latency, and billing issues, to at least support the continued availability of a kind of one stop shop if customers truly

want that option. Either way, we're almost certain that we're almost certain that the out final outcome in this case it's not going to be decided now, but rather ru in the future by either the Fourth Circuit Court of Appeals or possibly even the US Supreme Court that aside, it's also too soon to tell whether a new DOJ under the incoming Trump administration would be open to some kind of a settlement during that appeals process, should liability

in fact be found. Judge Brinkham must state it her hope to have an opinion issued prior to the close of the year, and judging by the truly extraordinary speed with which he has moved the litigation along here, we think it's really likely we're going to see a ruling in this case this month. If Judge Brinkhama does find against Google, will then move into a phase of the case that we centered around what the appropriate remedy should be to address to address any antitrust violations that are found.

And if that's not confusing enough, Eliot, No matter what happens here, a second government enforcement suit on substantially the same issues is being led by Texas Attorney General Ken Paxton, and depending on what we see coming out of the Virginia case, as a result, that separate case is slated for its own trial this coming year in March. So with that, I'll turn it back to you.

couple of things. Some caveats to this one. When the Biden administration released their proposal, the agency is not projecting a lot of utilization and expect very few seniors would continue using the drugs after two months. Mirrors a Congressional Budget Office cost estimate that came out a couple of months ago that showed while there would be some initial uptake, we could see interest flag over time as seniors get

tired of using the drugs. And then the other piece is that some aglue tide, which is the main ingredient for wakeo vi and ozempic, is expected to see deep cuts as part of the IRA negotiation program. These drugs or this drug is already discounted by about sixty percent off of the this price, so even with more volume, we could see drastically lower prices. And that's all assuming, of course, that the Trump administration continues to move forward

with the negotiation program. But it's also worth flagging that the Trump administration would have to finalize this provision as part of the managed Care rule. Now working in its favors the fact that Republicans and Democrats support the proposal, so the Trump administration we have to approve this proposal as part of a final rule. Working in its favor

is the fact that Republicans and Democrats support it. As I mentioned earlier, CBO scored a similar proposal at about thirty five billion dollars over ten years, and it seems like the type of policy that would fit into the tax extension package that the Republicans are going to push in twenty twenty five. One way to think about it, thirty five billion compared to three to four trillion, it's not much of a heavy lift. The other piece is

kind of the internal administration dynamics. HHS nominee RFD Junior opposes weight loss drugs and is more focused on preventing chronic diseases. Doctor Oz the likely CMS administrators ports expanding access. I never thought I'd say those two things, but that is where we are with the nominations. Central to an ultimate decision by the administration will be balancing the cost

with the expansion supported by Republicans and Democrats. Now the rule is expected by April or final rule is expected by April, and it could open up access to these drugs as early as twenty twenty six, but more likely twenty twenty seven, given new formulary demands and also midikaid requirements, which by rule they're supposed to cover any changes made at the federal level within sixty days, which is a

fairly quick turnaround for states given state budgeting process. Now, finally there's litigation and whether, in a post Chevron world, skirting the statute for obesity is permissible. It's worth noting the current administration provides access to people who are obese but not overweight, since overweight is not a disease. Whether or not that is a distinction a court would look

at remains to be seen. But overall, there's a lot to unpack here, with several months of conversation about whether this is the right way to go or if even the Trump administration will move forward. So we'll have more to say over the coming months. And with that I'll turn it back to you.

right now by the Bidenerra regulators. You have the Bosle three end game, which was an increase of you know, saying about nine percent in terms of capital requirements for the g SIVs like the Bank Americas, the JP Morgan's, and the Goldman Sachs of the world. That's been indefinitely delayed. I think, you know, there's still this question out there of whether or not they'll finalize the Basle three endgame.

I think there's a lot of questions coming from New York and from Europe and saying, look, the Europeans have already implemented this they call Basil four. The Americans need to implement something as well. We're taking the different take.

We're just saying that the Trump era regulators, when they come in and this is at the Office of the Contour or the Currency and the FDIC, will hit pause on this and then do more of a capitalistic review over twenty twenty five in trying to determine whether they actually want to move forward with Basle three or not.

Just reminder, over at the Federal Reserve, vice Chairman Michael Barr, the Vice Chairman of Supervision and Regulation, and then Chairman Jerome Paul remained at the Fed until twenty twenty six or until their terms are debt. So you're gonna have a little bit of bienarior regulators and a little bit of Trump air regulators, which for the most part in

banking means that you have regulatory status quo. Should also stayed on the regional bank side, for P and C, Truist and US Bank and Capital One, we think this regional bank long term debt proposal that was out there that would require these regional banks to issue around seventy two billion in long term debt. This is not t lack debt, but just long term debt. We also think

that's going to be indefinitely delayed. So the idea here with bank for deregulation is, yes, there's a lot of sentiment out there, but because the FED, as they're individuals in place until twenty twenty six, and the OCC and the FDIC flip quicker, you essentially have regulatory status quote for a year, because the OCC and the FDIC cannot pursue a deregulation initiative unless the FED goes along with it. There could be other things they work on, SLR reform,

you know, supplementally, leverage ration and so forth. But what we're trying to say here to our clients is is just remember deregulation from the banks can be seen as a positive thing, but it's going to take years, if not even longer. I mean you're looking at probably twenty twenty seven and twenty twenty eight before some of the

efforts of this deregulation actually hits the bottom line. On the On the asset manager side, well, Blackrock, the biggest asset manager that we cover publicly is up only three point ninety six percent. So the sentiment here isn't as great as it was during the banks. But also because there wasn't a lot of policy risk for asset managers at the get go, the bidinary regulators really weren't looking all that much. Yes, they said that they were looking

at private credit. Yes they said they were looking at hedge funds and private equity firms in terms of systemically risky, but we think that work is now going to be paused. Certainly questions about private credit could be asked, but I don't see any material policy risk for the asset management industry within the next two years. You could get the rumbling of something, but I just don't even know what that is. That's how back to the beginning of the

drawing board they are with the asset managers. Now looking at the exchanges, CMME Group is up five point seven six percent. Remember they're a derivative exchange. Intercontinental Exchange ICE, which is both derivatives, and the New York Stock Exchange is only up two point one percent. But again, the exchanges are facing regulatory status quo. There hasn't been a lot out there in terms of policies for the exchanges minus some of the equit market structure proposals out there

that the SEC has finalized. And then Elliott has talked about in many instances the court cases that are subsequently following that. So again, the exchanges really have a policy status quo here. But Elliott, to your point about crypto, and this is why we saved crypto for last. If you look at coinbase, they're up sixty six point nine to eight percent since the election. And if anybody's been following bitcoin, you know that bitcoin is now flirting with

one hundred thousand dollars. Now why is this the case. Well, President Trump has said that he wants to make the United States the crypto capital of the world. Now we do not mean we do not believe this means to be the wild wild West, that there are not going to be any rules or regulations or anything like that. We think this is going to happen in two ways.

One is you're going to get an SEC chairman next year that is going to be amicable, if not pro crypto, and will embark on a rulemaking and trying to determine a little bit more about what the SEC's role is

in terms of looking at cryptocurrencies. We also anticipate Congress is going to jump back into this crypto debate, and we are giving a seventy percent chance of a bill passing next year that would develop the sec having authority over cryptocurrencies that are securities, and then the Commodity Futures Training Commission would be given spot authority over those that are deemed commodities. And just remember that Bitcoin right now is a commodity and ethereum most likely is a commodity

as well. Now, what does this mean for somebody like coinbase, Well, it means that they're going to have to pony up tens and millions of dollars in new registration costs, governance costs, and so forth like that. But I think Coinbase will probably be okay with that. It gives them the ability to move forward without having this regulatory enforcement action hanging, these potential for enforcement actions hanging over their heads, and

gives the industry clarity on how to move forward. Now, anytime you see a regulation like this thrust on in industry that doesn't usually have regulation, it also impacts the best place. It also helps the bigger players, the publicly traded ones, the folks like Coinbase, because they have the technology spend, they have the legal spend, they have the compliance spend. And who do they gobble up market share from?

Most likely the mom and pops, the folks that are creating firms in their garages right now and don't have the hundreds of thousands of dollars to have meetings with the ICC or the CFTC and and so forth. So there's a lot of reason why the cryptocurrency industry should be, you know, feeling good about a Trump administration. But again, what we tell our clients is is just it's not

going to be the wild wild West. There are going to be rules and regulations, and if Congress passes that bill in twenty twenty five, will then be up to the SEC and the CFTC to implement those regulations in twenty twenty six and twenty twenty seven. So with that, Elliot, I'm gonna pass it.

in that case in December. That's going to be sort of more a Trump administration effort, probably to unwind or narrow that enforcement action, similar to what you were talking about, Nathan. But the case that I'm watching for a possible rule and in December is an affirmative action from Coinbase against the SEC, asking the SEC to engage in crypto rule making.

The SEC refused that request. Coinbase then sued, arguing that the SEC's refusal was arbitrary and capricious and an abuse of discretion, and that the SEC is exceeding its authority by refusing to engage in rule making while pushing an

aggressive enforcement agenda. The parties were in court on September twenty seventh in the Third Circuit Court of Appeals for argument on this issue, and after listening to that argument, we think Coinbase is poised to get a partial win, sending the case back to the SEC for the agency to explain in more detail why crypto rule making is unnecessary. We give it about a seventy percent likelihood of that outcome.

We're only at thirty percent, however, for Coinbase to get a court ruling that compels the SEC to do more and engage in crypto rulemaking, there's no deadline for a decision. I do think it could come in December, and of course, you know, like Nathan talked about, and as I mentioned, once the Trump administration comes in in January, we do expect more crypto friendly policies, which can include rule making

like the type Coinbase seeks. And we do think that new SEC leadership will narrow or drop or settle on favorable terms for Coinbase the enforcement action against the company. All right, moving on to the second case I'm watching. This involves Turkish bank Hawkbank, which was indicted by the Justice Department in twenty nineteen for violating sanctions on Iran. The bank tried to argue it is immune from charges under sovereign immunity because the Turkish government is the majority

owner of the bank. That immunity defense is been rejected by the courts so far, most recently by a panel of a federal appeals court in October. Hawk Bank is trying to get further review of that decision. They're asking for a bank review, which would mean the full appeals court, and we think we'll find out this month if that petition for review is successful or not. We don't think

it'll succeed, but we'll see. And bigger picture, we think Hawk Bank is likely to wind up settling this case at some point down the road for one billion to

two billion dollars. And then, finally, the third case I'm watching this month for decision is won by bank trade groups challenging in Illinois law that would ban interchange fees on taps I'm sorry, on tips and taxes at stake for the industry or compliance costs that could range from the hundreds of millions of dollars to more than a billion dollars by some estimates, and penalties could also run into the tens of millions of dollars or maybe even more.

There was a hearing on October thirtieth on the bank's motion for a preliminary injunction to put the law on hold. We think the judge at that hearing was inclined to agree with the Bank's arguments that the Illinois law is preempted by federal law because the Illinois state law would interfere significantly with the bank's federally granted powers to collect fees,

process transactions, and process data. We think the judge, you know, we're expecting a decision on this preliminary injunction motion by year end. No guarantee, but we think it could come this month, and we give the banks a seventy percent chance of winning, either at this early stage or later in the case. So those are the three things I'm watching. With that, we will wrap up this episode of Votes

and Verdicts. As always, thank you for listening, and as a reminder, you can find all of our research on the Bloomberg terminal at big and we do encourage you to reach out to us with any question that you may have, and we also encourage you to listen to other episodes of Votes and Verdicts on whatever platform you like to get your favorite podcasts. Thank you for listening and have a great day.