Hello, and welcome to the Votes and Verdicts podcast, hosted by the Litigation and Policy team here at Bloomberg Intelligence, the investment research platform of Bloomberg LP. Bloomberg Intelligence has five hundred analysts and strategists working across the globe and focused on all major markets. Our coverage includes over two thousand equities and credits and have outlooks on more than
ninety industries, one hundred market industries, currencies and commodities. This podcast series examines the intersection of business policy and law. I'm Nathan Dean, an analysts with Bloomberg Intelligence covering policy, and I'll be the host of today's episode, which we are recording on April tenth, twenty twenty five. So today we're going to start with two court cases slash hearings that we're covering, and then we'll end up with an update on what we've seen in the congressional based as
we can buy. Now, if you're listening to us, you know that President Donald Trump has temporarily dodged tariffs for He's put it at ten percent for most countries, but obviously he's hit China with harder with one hundred and
twenty five percent. While we're not going to talk about tariffs in today's episode, if you do have a Bloomberg terminal, we continue to suggest that you type BI tariff or BI tariffs go into your turminal to get all the updates of what our analysts are thinking in terms of tariffs and the upcoming earning seasons and how it will all play out. So with that, let's turn back to the courts, and I'm going to bring in Jennifer Ree,
our senior anti trust analyst. Jen when we were talking about what to talk about on this call, you said in our ib chat, I can preview the upcoming hearing on remedies in the DOJ versus Google search matter. So let's go with that question first. Can you preview the upcoming hearing on remedies and the DOJ Google search matter and explain what the case is for those of us, including me, that don't know what it's about.
Yes, sure, Nathan, and right, good to not talk about tariffs or think about tariffs for a few minutes. Right, So Google is about to go back into court against the Department of Justice. That's on April twenty one, for about three weeks. So just as the background What this is is the second phase of a matter that was actually tried back in the end of twenty twenty three, and this was the Department of Justice and a group of states challenging Google for illegal alleged illegal monopoly maintenance
of its search engine and search text advertising. That closing arguments for that were in May, and then there was a decision last August against the DOJ again holding that it illegally maintained its monopolies for search and search text advertising. All that is are those are the ads that come up when you actually do a search on Google, and there's some that are text and some that are images. These are the ones that are text, and it kind
of goes hand in hand with search. If you have most of the searches, you're going to be selling most of the search text advertising. So how did Google do this? Mostly what the judge said was that Google's payment to third parties for default positions for Google Search at most search access points blocked out its competitors. So what they mean is that Google was paying about twenty billion a year to Apple so that Google Search was set is
the default behind Safari. If you open up Safari, you do a search you're actually using Google search engine and also Android device phone device makers, so they want to license Android, they want to make an Android mobile phone. Well, Google would say, but you got to put Google Search front and center, and you can't install any of our search engine competitors, like being our duc dot Go. So by doing this, the court said, Google kind of tied
up the vast majority of search access points. Really, all you're left with is Microsoft, because Google's not going to get an agreement with Microsoft to put it behind you know, Internet Explore. I guess now it's called Edge because Microsoft's going to put being there. So now what's happening is the next hearing is to say, all right, you're guilty. What are we going to do about it? What's the remedy?
And the Department of Justice has really asked for all lot a long list of sort of drastic and complex remedies. I think they're very much swinging for the fences. These remedies sound scary. I don't believe they expect to get quite a few of them, particularly the most drastic. But look, when it's a negotiation, you've got to put everything out there to be happy with the middle ground. Right, So first I think the most obvious one is they're saying, hey,
no more payments for this default position. You've got to open up this market to some of your competitors. And that means you also can't make payments or other inducements to pro hit it anybody from pre installing as a default one of your competitors. And so this would be no payments to Apple, no payments to Mozilla for Firefox, to telecoms, to Android makers.
Et cetera.
And they also can't use their ownership of Android to also push for sort of other Google products or the bundling of its other products. They also have to give prior notice to the DJ. This is what the DJ is asking for. This hasn't been decided yet for investments or partnerships with IT and any search competitors or company that controls a search access point for a generative AI product. Now, it doesn't mean that Google won't be able to make
these investments. It just means they're going to have to go to the DJ first and pretty much give it the right to approve or disapprove or maybe place conditions on the investment. Now, the big one divest Chrome. DJ says this is necessary to break up this monopoly and to really open up the marketplace and possibly down the road Android if Google abuses its ownership of and Android in ways that you know, counter the injunction. Now, the
other options are some data sharing with qualified competitors. This includes things like search indexes, add data, some user side data so long as user privacy is protected, choice screens, which has been used in Europe on existing in New Android to Bose devices and in Google Chrome. And then last I think, also allowing publishers or content content creators to easily opt out from having their content used for search index or to train an AI model. So this
is what they're asking for. I don't think they're going to get most of that, Nathan, but that's what the hearing is going to be about. It'll be both sides presenting evidence as to why these are the necessary remedies in Google providing evidence and testimony as to why they don't make sense and they could have bad, unintended consequences for consumers. I think the most likely remedy will be the first one, just saying hey, no more payments for default.
I think maybe choice screens could be implemented something like that, and maybe some data sharing. I'm not so sure about that one. I was to say, I primarily think it'll be limited because this judge is adhering to Microsoft, which sets a precedent forum. It's in hit that circuit, and the Microsoft court really counseled against to have caution with these kinds of remedies.
So, just to make sure I got it right, you said this was going to be three weeks.
Three weeks but nonconsecutive, So it'll start April twenty one, but it won't wrap up until May, and then closing arguments will be later on May thirtieth.
So how do you advise a Bloomberg client or is anybody listening right now if they wanted to try follow this?
What are you know?
Is there like a rhythm to this? How are you covering this?
Like?
How would you advise them that they monitor this?
Well?
I think it's really important not to be reactionary because the news will be, you know, play by play each day saying something happened great, that something happened bad, and then the judge will issue is decision, and I think the market will react. What everybody should think about is the fact that once that decision is issued, no matter what it is, Google will appeal both liability and the remedy decision, and probably the remedy will be stayed depending
the appeal. Meaning there's not really going to be an impact for another year or two and people need to keep that in mind. And our appellate courts tend to be conservative. So if this judge does do something drastic, I think Google has a shot at getting it pulled back.
Well that's good insight and good to note.
Okay, so let's let's turn it over to Justin Treesy, our other anti trust analyst. We have a mad A trial coming up. What's at stake? What are you looking for in the Meida world?
Yeah? Yes, so I think as far as anti trust trials go, Nathan, this one here has got every bit of drama and intrigue I think you could want. Right, So, what the government here, the FTC is looking for is a divestiture of Instagram and WhatsApp two properties of metas like closed a long time ago. Right, Whatsappen was closed back in twenty fourteen, Instagram back in twenty twelve. So really long standing operations here that are now under the
meta umbrella. Zuckerberg is coming to testify this trial of things precede as planned the trials before. Judge James Bosburgh's been in the news like crazy lately with regard to a lot of things coming out from the administration. So all those facets make for a really interesting case. But at the end of the day here, like I said, these deals closed a long time ago, over over a decade.
At this point, state claims against Meta around these anti trust issues were already dismissed and what the FDC is because they were brought too late. But that same requirement doesn't apply to the federal government when it's bringing these
kinds of cases. So what's that issue here is that, you know, really what the govern is saying is that these purchases made by Meta were done really for anti competitive reasons and claus it's anti competitive harm to the marketplace and to consumers, basically alleging that the reason behind these purchases was to really nip competition in the bud before I had a chance to grow and flourish to
compete against Meta directly. But you know, I think we can expect to this trial here, Meta is going to really offer all these pro competitive business justifications for why these acquisitions were good for the marketplace and the FDC from an anti trust law perspective, we really think that the claim, the way it's bringing the case about what the relevant product market is, it's really discounting a lot of realities in the marketplace and how it operates today,
and that if that market can't be sustained at trial, it's pretty much game over for the FTC. So all of that's coming to kind of coming together and as toue here for the trial beginning next week, and I'll say, ultimately from our perspective right now, we really give Meta the edge. There's this sixty percent chance we think at this point anyway that it is victoria us and all
the claims in defending all the claims against it. But again, you know, it's trial and anything can really roll out one way or the other, and you just don't know sometimes until things get underway.
So two questions for you. One is WhatsApp still thing.
Yeah, that's a good question, you know. And what's really interesting here, right is that you know, Meta paid or Facebook at the time, paid nineteen billion dollars to close that deal to acquire WhatsApp back in twenty fourteen.
And only one billion.
Dollars to purchase Instagram, So, you know, really interesting from that financial perspective, the way the deal's kind.
Of rolled out back then.
You know.
But I think one other thing, you know, I haven't mentioned too is, you know, there's all this talk now too about Zuckerberg meeting with President Trump and maybe, you know, trying to support the trial from even taking place and make some kind of a settlement with the government. I think that's still unlikely, but when we're seeing things like that in the headlines, obviously, that raises the chances of some kind of a deal more than where it was even you know, a month ago.
I would say, you know, and I almost said that, I said that in jest, but that was actually a really great answer to a question that was said in jest by My other question is is that you said sixty percent chance. Can you just give us one or two things that could potentially happen next week or during this trial that would immediately flip you into the forty percent category. If there's something like is there like a code word the judge would say, or anything that would make you go, ohh.
I got to change this back to my note.
Yeah, you know, so that's a really great question, and I would say, you know, really what's on the line here with what I said about the FTC and whether it defied the product marketed issue here the right way? You know, I think that that's really going to be
part and parcel to how the case rolls out. And last week, you know, I attended a technology tutorial that that Meta present different Judge Boseberg, who during that tutorial set he's never used any of these social media products ever before, and aside from his his kids actually showing him posts that they had made using Facebook or Instagram over the years, he has no relationship with these technological tools at all. So that's going to be interesting to see.
But during this tutorial that they that they held last Friday in DC, you know, Metta really did a great job. I think it's showing these similarities between things like feeds when you open an app on even YouTube or TikTok for example, which the FTC left out of this product market as competitors that are operating in this personal social media network services space. So that being the case, that's
what I'm watching for. If it seems like Meta is really convincing the court that the property is like that that the FTC left out of the product market actually are competing with those that are in the product market for Facebook. That's really going to push things even further into Meta's favor. I think at the trial itself.
That sounds good.
Okay, So let's say goodbye to our New York based friends and let's move to one of our Washingtonian based analysts, Matt Schattenhelm. Matt, you were watching Congress this week, you were watching the Senate Commerce Committee. We saw action on two Trump nominees, one for the National Telecommunications and Information Administration that you may have to explain to our listeners what the NTIA actually does, and there for the Federal
Communications Commission. So can you walk us through what happened and what does that mean for the TMT cover companies.
That you're covering. Yeah, thanks Nathan.
Yeah, So to development Wednesday of April ninth on Trump nominees that are important in the TMT space. So, yeah, nt i A is the federal agency, a small federal agency that's responsible for managing the federal government spectrum. But it's also particularly important because it's managing a broadband funding program A forty two billion dollar broadband funding program that the that that started under the Biden administration but never
got around actually passing out the money. And the Trump nominee who was before the Senate Commerce Committee, aar L Roth, has been appointed to lead that agency and one of the big projects on her plate is finishing the distribution of the forty two billion dollars in funding. And there's been a big push from Republicans to revamp how the Biden administration structured that program, and instead of prioritizing fiber projects, there's been a push to make it more technology neutral.
And what that would mean as a practical matter is that a much larger percentage of that forty two billion dollars could go to satellite companies like Elon, Musk, Starlink, and so it would be a likely and negative for fiber based companies like cable operators who would be going after that money. So Ariel Roth, the nominee, has championed that cause of being technologically neutral as opposed to simply
prioritizing fiber. She got a vote from the Senate Commerce Committee on Wednesday that cleared her from that important first step, and so now she awaits a final vote on the Senate floor. As soon as that happens, she can move ahead with this important work on the broadband funding project. So and the other one that also in the same hearing the Senate Commerce Committee took up was the FCC
nominee from President Trump, Olivia Trustee. Right now, the FCC is divided two to two, two Republicans to two Democrats, and she would break that tie and make it three to two for Republicans. And why that's really important is because none of the controversial stuff can get through until the Republicans have a majority. And high on the list
of potential importance controversial things is broad broadcast deregulation. Uh TV broadcasters have been subject to strict ownership limits for decades that other competing companies in the video space internet streamers don't face, and broadcasters have said, look, this is crazy that we're still subject to these limits.
UH you should ease them.
And I think Brendan Kahr at the FCC is going to be on board with that, and we're going to see some pretty significant rule makings from the FCC to ease those rules. Olivia trust is likely going to be a vote in support of those rulemakings.
She had.
She had a question yes at the hearing that that touched on that and she and she seemed generally supportive of a deregulatory approach. So the hearing before the committee on Wednesday went well for her. Uh, some pushback from from Democrats on some issues, but not real strong. So she shouldn't have a lot of trouble getting through.
And like then Ariel Roth.
She'll get a vote from the full Senate and she should be on board at the FCC in the second quarter of the year.
No, that sounds good.
And you know, I was watching a couple of hearing myself this week. You know, we had obviously the US Trade Representative Jamison Greer testifying to Senate Finance in the House fin Ways and Means Committee, but it was on tariffs, and obviously lots of things happening on tariffs.
I'll just leave it that.
But just today we saw Senate in the Senate Banking Committee Michelle Bowman, who is President Trump's nominee to be the next FED Vice Chair for supervision. She testified with along with four other individuals. She actually only got a couple of questions, nothing really groundbreaking or that would dramatically
change her outlooks. So I anticipate she'll get confirmed in the next couple of weeks, and I think the Senate's going to be spending a lot of time to try and get a lot more of these regulatory leaders into office over the next few weeks once they come back from their Easter recess.
On April twenty eighth, Son, thank you very much for your piece. Really appreciate it.
And I'm going to end here by talking a little bit about what we just saw this morning, again recording this on April tent in terms of the House adoption of the Senate Budget resolution plan to extend the Trump era tax cuts. So the situation is this is that here we are April tenth. Now the House and the Senate have both passed the Senate Resolution for extending the Trump era tax cuts to in order to extend these tax cuts, this was originally from twenty seventeen, which used reconciliation.
That's time to do that.
You're looking around four to four and after trillion dollars, you know, the Senate resolution calls for an additional one point five trillion dollars in terms of additional tax cuts. So four point three to four point five current status status quo extensions one point five and additional tax cuts.
But then under the.
Idea of reconciliation, these tech cuts, these tax extensions have to be offset. Now, if you are on the Senate Republican side, you know they're adopting this new procedural process, if you will, we're rather than trying to offset it and pass it in terms of trying to find like for like moneies, they're essentially saying that the current policy is the current policy, and therefore the cost of it is essentially zero. So you go from four point three
to four point five trillion dollars to zero. Now, the House wasn't exactly on board with this idea because in terms of the cost estimates for both of these plans, the House originally wanted to cut two trillion dollars worth of things, so think of things like Medicaid that benefits the Inflation Reduction Act, and the Senate plan had four billion with a B as a floor for cuts, meaning
they would cut at least four billion, but mostly higher. Now, this was somewhat challenging for a lot of the House Republicans to come on board with. They weren't too thrilled about this. We saw President Trump on April ninth, way in, we saw Speaker John sin s way in just this morning on April tenth. But the House ultimately did adopt
the vote. The budget had one Republican voting against it, and it was two hundred and sixteen to two hundred and fourteen due to the fact that there were two Democratic lawmakers who have passed over the last couple of months.
And they have open seats. So where are we going right now? Well, this is not a bill, This is not legislation.
This doesn't have any specific language in this, but this does allow the momentum to keep going, and this does allow for both parties to negotiate on the specifics. Now, if you ask me, and because you're listening to this episode, you are asking me, you know, what do I think is going to happen? I think Congress and by means the Republicans, are going to pass this resolution sometime between
June and September. In that the Trump era tax cuts will be extended, and in that I think there will be one point five trillion dollars worth of tax cuts. Think of things like no taxes on tips, no taxes on over time. Maybe additional changes we'll see as the
committees come up with their work. But I also think that there's going to be minimal changes to the current programs that are outlined earlier, like Medicaid, which is very important for the healthcare companies that benefits, very important for Walmart and Kroger and Albertson's, and the Inflation Reduction Act very important for those solar companies. I just don't think that there is much going to be much in the way of changes Medicaid. We saw Senator Josh Holly come
out and say, don't touch this that benefits. We saw House ad Committee Chairman Glenn Thompson come out and say very few changes here, and then for the IRA. Just this morning, for Republicans including Senator Tom Tillis of North Carolina, sent the letter saying don't touch the Inflation Reduction Act. Where I'm going with this and where I'm going on this eight minute ramble is that I do think that there's a big chance you're going to see a deficit
inducing bill at the end of this year. Because even though the House Republicans there's about thirty of them, are not comfortable with increasing the deficit. I do believe President Trump's message of economic growth plus money coming in from tariffs, plus you just better do this, because I'm going to say you better do this is going to eventually convince them to get past the line. So I originally thought
September October would be the timeframe of this. But the last thing to keep in mind is that embedded in this is five billion dollars to increase the debt ceiling, and if you believe Treasury, the X date for that debt ceiling is most likely going to be in July and August, so this would have to wrap up before that. So Congress is now out until.
The April twenty eighth.
They'll come back and then you'll start to see the specifics of exactly how they're going to do this. But again, there's really nothing here saying you have to do something except for the debt ceiling and then the increase at the end of this year. So I know that was a lot, but with that, I'm just going to say thank you very much for listening. Let's end it there.
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