Tariff Suits, Tech Antitrust and Tax Bill

currencies and commodities. This podcast series examines the intersection of business policy and law, and today's our weekly check in on the litigation and policy catalysts that we're watching and that we think will impact companies across a number of different sectors. My name is Elliot Stein. I'm an analyst with the Bloomberg Intelligence covering litigation in the financial sector, and I'll be your host for today, April twenty fifth,

twenty twenty five. And since things move very quickly these days, especially when it comes to policies, we're recording this at ten thirty am Eastern Time. Delighted today to be joined by a handful of my colleagues on the Litigation and Policy team. We have Nathan Dian and DC, we have justin THEREESI and Holly from here in New York, and we have Tamlin Basin out in London. You can find all of our research on the Bloomberg terminal at BI go and more specifically on our dashboard BI Laws Go.

All right, So I think, Holly, why don't we start with you. You've been covering the growing number of lawsuits that have been challenging President Trump's tariffs. There's several lawsuits going on, and I think this week may have been sort of the first time we have sort of a preliminary ruling. Do you want to give us an update on the k and where they are and how you see them playing out?

on China. The next lawsuit challenged the reciprocal tariffs for the Universal Tariff and then the other lawsuits and two of them were filed by one of them was filed by a group of states, and then the other one was filed by the state of California challenge to all tariffs. And so they're all, you know, they make very similar arguments, and if you want to get into them, I can.

this is not one of them. And so they say this was a statute that was meant to deal with emergencies and like imposed trade embargos and things like that. It was not meant to impose like Adflorm's duties, and you can you we know that because it doesn't mention the word teriffs, and so that's one of the arguments. The second argument is that on one lawsuit, a challenging reciprol cold tariff says that the statute requires a national

emergency that poses an unusual and extraordinary threat. And that's a quote from the statute, an unusual and extraordinary threat, and this is not the trade deficit that was cited as a basis for the reciprocal teriff. Is not an unusual and extraordinary threat. It's been in existence for fifty years. So this statute was definitely not meant to address an emergency like that. Or this is not an emergency, so it was not meant to address this situation like that.

Then the lawsuit challenging the tariffs on China say, they don't contest, they don't claim that the illicit drugs and unlawful migration that's the basis for that, that that emergency is not an emergency, but they that the teriffs are not necessary to address that emergency. And then finally, all of the lawsuits argue that if AYIPA authorizes the terroriffs, then Congress unconstitutionally delegated.

declarations of emergency. And the law doesn't constitutionally delegate power because it provides called an intelligible principle to the president. And in the one case in which two Supreme Court justices indicated they want to revisit the so called non delegation doctrine because this is a doctrine that hasn't been you has been looked at for like I think over

seventy years or something like that. And in the one case in which two justices said they may want to revisit the doctrine and redefine it, they had a carve out for situations where the President and Congress's powers overlapped in areas wherehere they typically overlap, like and they explicitly mentioned foreign affairs, and I think this is something like that tariff powers, something like that. So I don't think they're going to want to revisit that doctrine in a

case like this. So I said, these are going to be up the law is going to be upheld. And with regard to the recent rulings in the International Trade Court, what happened there was the challengers came in, they filed and what's called a TIRO temporary restraining order. They asked the court and in a preliminary injunction they asked the

court to stay the terrorists right away immediately. So the court then, within a quick turn and I think was like a couple of days, said that they're not going to grant a tierro the terrifts are still in place because they did not find that the challengers showed that

they had an immediate immediate irreparable harm. So so ther the TIRO last for fourteen days, and they said that they did not show that they would be immediately harmed in that fourteen day period because they none of them claim that they even pay the terroriffs or were about to pay the terriffs. And so that's an interesting issue that's come up, is that, you know, do any of these challengers have standing to sue the government over these terraffs?

preliminary injunction motions to be filed. And there's you know, the court the cases that have not been filed in the US International Trade Court, the government is moving to transfer them there, so before there's a preliminary injunction motion or hearing, we'll have to see if it's transferred to the U S I C.

every week since there's so many cases. All right, thanks, Ally, let's move on to Justin and all things anti trust, lots lots of So Justin's been in DC for the last two weeks basically following the FTC versus Meta trial, but also in the same courthouse as our other anti trust analyst, Jenry, who can't make it today because he's still in the courthouse for the Google Search Remedies case.

So Justin maybe update us on both those cases. And then there's also the Google ad Tech ruling that came out, I don't know, in the last couple of weeks, right right, yeah, tell us everything.

and the government there is seeking a divestiture of those assets. So, you know, I think we've always had this view that with regards to that case, the FDC had some problems with the way that it brought it. It's been a long time since those acquisitions were closed. You know, there are issues with the relevant product market, and there are issues I think with the pro competitive justifications or the things that really happened with those acquisitions since they took

place two weeks in a trial. It's certainly my view that the that Meta certainly keeps its edge here and the reason being that CEO Mark Zuckerberg in the first week of trial did a great job in my view in terms of explaining why Meta's actions with regard to Instagram and WhatsApp, since they those acquisitions took place, you know why they were actually good for those platforms. You know, the improvements they made to Instagram, things like direct messaging,

things like real things like threads. All of those things were added to the platform after the acquisition. So there are those pro competitive things that happened to the platform since metatook control. In terms of the actual product market and the way the FTC defined it, they really chose to bring that case about friends and family sharing they call a personal social networking services market. The issue is, since you know, since these acquisitions took place, you know,

well over a decade ago, things have changed. The use case for a lot of these things aren't what they used to be. Folks hop onto Instagram now and they spend a lot more time, in terms of Meta testimony anyway, looking at unconnected content like videos for folks they don't know from creators they might not know in real life, versus actually connecting with friends and family. So if that

core use change. If that core use has changed with those products, then the market definition offered by the FDC for those products really has taken kind of a backseat to the realities of today. So in many ways, where this case might have been successful a decade ago, the realities of the marketplace have maybe tripped away at the FTC's ability to bring it now.

can think of right now between friends and family. We can join on four month after the after the call, not a problem. But you know, there's a lot more communication happening that way now, and all of these apps. There's kind of these share screens now too, where you can take you know, a particular piece of content from something like Reddit, from something like from something like this coord and you can hit a link to share it for through I Message or through Whatsappened, through all these

other means. So like that's sharing in many ways as Meta has replaced a lot of the actual posting that would happen ten plus years ago. So the market is changing. That's been their testimony so far.

it's unlikely that's going to happen. That seems more like an opening solvo and similar to a negotiation in terms of scaling back with the court's actually going to be

likely to do here in terms of a remedy. So we think what's more likely is that sharing some user data information, that kind of information that's allowed Google's algorithms to develop and become as strong as they have with nascent search engines or search engines that haven't really developed the same degree, that's really what we're likely to see here, and there are there has been a lot of testament this week about ways to anonymize that data so that

privacy concerns was sharing it aren't an issue if the court ultimately decides to go that way. And I think in a lot of ways too, these exclusivity agreements, So with companies like Apple, where Google Search is a default search behind things like Safari or Siri, you know, Apple gets paid twenty billion dollars a year from Google for that to be the default kind of search mechanism behind

its platforms. So big issue for Apple if those agreements are taken away, and those agreements were found in being anti competitive, right, so there's a high possibility of thereose payments up question mark, Does Apple stop using Google Search behind Siri or Safari if they don't receive those payments,

that's a big question too. If Google Search has really developed that strong better search might in some ways it might still be into Apple's benefit to use Google Search behind those platforms, even if it's not being compensated for doing so. But we think those agreements are an issue, and you know, also likely we see some sharing of user data just so that you know, other search engines can develop their algorithms in a way that they could actually compete.

placing their ads. Google ties those products together in such a way that if you want real time ad demand, the court said, you have to use Google's ad server to get there, and that tie in many ways. That's the problem the court had. The court, as we expected, didn't think that the actual buy side where people look to place advertising, had a monopoly there. We didn't think the court would find an issue there. It seems to be a very competitive market as opposed to the other side.

we're not thinking it. Divestiture is likely there. And the reason why it's a Google's adser for they operate in things other than the digital app that the display advertising that was an issue in this case. There's a whole bunch of other ads that they transact in for video ads and app ads that were not part of this litigation. So to force the sale the entire thing seems a

little bit unlikely. We think snipping that tie I mentioned between the two products is more likely to be a remedy in this case.

dive on that, we certainly can. But you know, what we're gonna see next week is the start of the markups. And so, as you remember, the House and the Senate passed the same resolution, and in these resolutions, it went to each one of the committees and said, go forth in either identify areas that you're going to cut or identify areas that you're going to increase the deficit aka bring more benefits in this case, you know, and so forth.

with all the taxes. And so when you think about like increasing self deduction or changing the corporate tax, or President Trump coming out in support of the millionaire's tax just this morning, or going from the thirty nine point six percent tax rate to the forty percent tax rate. You know, this is where the House in Ways and Means Committee is going to play. Now, the interesting thing here is that just for next week, just note that the only committee that we think the Judiciary Armed Services

Committee there meeting the Armed Services one. If you have, you know, exposure to the defense contractor space, that's the one to pay attention to because they're one of the few committees that was told to increase the budget. Republicans are seeking about one hundred and fifty billion dollars in additional funding for border security and the defense. So again, if you have the defense contractors in your portfolio, you

want to pay attention to that. But the House Ways and Means Committee is the most big one to talk about, and that is most likely going to take place in mid March. The Republicans wont all this done by Memorial Day. I don't think they're going to be able to do it for a couple role of reasons. One, it's much more difficult to actually come up with the specifics than it is to have the resolution itself. It's very easy to agree on a top line number, and that's what

they agreed on. But when the Republicans agreed in the House to cut one point five trillion dollars, and the Senate Republicans agreed to cut as a floor four billion with a B. There's a substantial difference in how they're actually going to approach this. So they have the overline numbers agreed, but how much they're going to cut or are they going to increase the deficit, that's a little bit more difficult. So Speaker Johnson wants all this wrapped

up by Memorial Day. I don't think they're going.

the Republicans actually come up with a deal. And for what it's worth, our base case scenario that we're working off at the moment is that because the Senate instructions only have four billion as a floor, it's much easier easier to tell your constituents today you're not going to cut for something like Medicare sorry, Medicaid snap benefits, the Inflectional Reduction Act. It's much easier to say we're not going to cut that, and then they say, you know,

we're going to increase the deficit. So I think more likely than not a deal is done, the deficit most likely will increase. And for what it's worth, the Committee for Financial Responsible Budgets said that if you take the Senate plan as is, you're looking at a five point three billion dollar deficit increase, not taking into account economic growth or any other type of indirect benefits from that. So again interesting there. The other thing, just really.

governor race for Arizona. And so I do think that while the deficit hawks are going to complain about it, and I think certainly Representative Massi from Kentucky is not going to support that, I do think the rest of them will get in line because at the end of the day, they need to get a deal done, and if they get a deal done now before September thirtieth, they can always come back next year and try it again.

But I would also just say that, you know, we're working off of a permanent extension of these trump are attacks cuts. Nothing says that you have to do it permanent. You could always just come back and say we're only going to do it for three to four years, get us through the rest of the President Trump's administration, and the price tag of that lower substantially. It makes it

much easier to pass. So a lot of things can happen here, and I certainly think that, you know, but we ultimately do think a deal is going to get done because as if not, then the individual tax rates go up in the end of the year. And President Trump has already said he does not want a return of President George HW. Bushes read my lips, no new taxes.

go somewhere between twenty five to thirty thousand. But again we'll see.

million euros. What was that about? I know is related to the Digital Markets Act, but maybe just tell us a little.

nearly all of them were American technology firms. Once you were identified as a gatekeeper, there was this sort of laundry list of dues and don't that the identified firms had to comply with. If they didn't comply, then the European Commission would have sort of direct enforcement power. Just weeks after the DMA took effect, we did see them launch these probes that we're going to talk about into Apple and Meta, as well as some probes into Google.

So what happened was on Wednesday, the fine against Apple was five hundred million euros. Against Meta it was two hundred million euros. Now, these are really minuscule numbers compared to what the European Commission could have fined. They could have find each firm up to ten percent of their total revenue from the previous years. The final was actually zero global revenue. So we're talking tens of billions of

dollars in potential fines. The fines. Doing the math, it was it was zero point one four percent of Apple's revenue from twenty twenty four and zero point one three percent for Metas. So this is smaller even than what the percentage we are seeing under GDPR General Data Protection Regulation, where you're only allowed to go up to four percent of a firm's revenue. If you would have used that same scale here, we would have seen fins of about doubleness.

So I think this really does kind of suggest that the European Commission has sort of pivoted away from sort of these potentially eye popping fines. However, that doesn't mean the tech firms are off the hook, and the reason is because there is a behavioral component to these actions.

So specifically, if you look at Apple, the focus of the probe was on this sort of app store policies that have sort of caught regulatory i are both here in Europe as well as in the US, And specifically is how on these restrictions that Apple places on app developers, these sort of anti steering measures, And one of this is is Apple is trying to control all communication between the developers and end users within the app, meaning that that developers can't sort of direct users away from the

app store to sort of potentially lower priced subscriptions on where Apple maybe doesn't get sort of it's take rate. What the Commission said here is is that you know, Apple has obviously made some measures to open that up. They said, you haven't gone far enough. You really have to open the system up. Apple's going to have sixty days to make those changes. For Meta, it's sort of much less of an immediate change that's going to be required.

That's because the finding against Meta was on it's called the consent or pay model. So essentially what the European Commission has said, and this also sort of goes back to GDPR, which was you were not allowed to condition use of your app on a user's willingness to allow their personal data to be used in order to serve advertise advertisements. So Meta tried to comply with that by saying, Okay, you can either consent to letting us use your data,

or you can pay a monthly subscription fee. Now, the EU Commission has said that that's not necessarily a fair you're sort of coercing users into allowing us them to use your data. So here the Commission said that that wasn't compliant with the DMA. However, Meta in November twenty twenty four change its policy again and now it says it's offering users a choice to use that for free, and there's going to be ads that use less personalized data.

The Commission is still trying to determine whether that complies with the DMA. However, what it does tell us is that there's no immediate change to Meta now. Now, Apple and Meta are pretty certain to appeal here. However, I think this is still going to have to make the changes. And again there's that six day day window. The reason for that is they'd essentially have to almost meet the tro standards that we talked about earlier in order to

get a reprieve on those on making those changes. I think that's a bit unlikely here, And I think what we're definitely seeing is did the Commission and probably significantly into response to sort of President Trump's rhetoric against sort

of the fines of American tech firms. I think the Commission made a very conscious decision to not go really hard on the fines and maybe to lean a little bit on the behavioral remedy, and they're hoping that that's not going to further exacerbate tensions, but also continuing to sort of try to demand and nudge technology firms into complying with these new roles. I think that's what we're seeing here.

We just got the finalization in two of these. The Google one we had the preliminary findings just a few weeks ago. I think it's going to be another few months until that's wrapped up. So one is on the play Store. The other one, which is potentially more risky for Google, it's on sort of self preferencing of its own verticals and search results, so think of sort of Google flights for sort of Expedia or Kayak, and the way that it's ranking its verticals and those search results.

The commissions take so far has been that that's abusing its market position to preserve its status in those search rankings. So again we should get that in a few months. And the other Apple one is on sort of this app store destructure where it's proposed to charge sort of fifty cents per downlae for apps orre to download apps, any apps on app Store, And this is sort of in response to a lot of pressure they've been getting over that thirty or fifteen percent take right on apps.

at your convenience with any questions. As a reminder, you can find all of our research on the Bloomberg terminal at big or on our litigation and policy dashboard at BI laws Go, and we encourage you to listen to other episodes of Votes and Verdicts on whatever platform you'd like to get your favorite podcasts. Thank you again for listening, and have.