Hello, and welcome to the Votes and Verdicts podcast, hosted by the Litigation and Policy team at Bloomberg Intelligence, the investment research platform of Bloomberg LP on the Bloomberg Terminal. 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 we have outlooks on more than ninety industries and one hundred market industries,
currencies and commodities. This podcast series examines the intersection of business policy and law, and today's our weekly look at the litigation and policy catalysts that we're currently watching and that we think will impact companies across a number of different sectors. My name's Elliott Stein. I'm an analyst with Bloomberg Intelligence covering litigation in the financials sector, and I'm delighted today as always to be joined by several of
my Bloomberg Intelligence colleagues. And as always, you can find all of our research on the Bloomberg terminal at BI go and more specifically on our Litigation and Policy Dashboard, which is available at BI space laws Go. I'm going to time stamp this today is July thirty. First, it's three pm. Things move quickly, especially when we're talking about things like tariffs, so it's important to time stamp this
and to get the conversation going. Let me bring in one of my colleagues, Holly Frome, who covers a lot of different litigation and policy issues in the consumer and industrial sectors, but in particular, she's been covering the lawsuits that have been challenging the Trump administration's tariffs and today, just a few hours ago in the Federal Circuit, there was an important hearing by all of the judges of the Federal Circuit concerning a decision by the Court of
International Trade from late May that struck down President Trump's reciprocal tariffs and also those concerning sentinel trafficking. But I don't want to step on Holly's toes. I'll let her talk about the hearing in these cases more specifically. So Holly, why don't you come in and sort of tell us what your takeaways are from the hearing today?
Thanks Elliot.
So, I think a group of the judges, especially during the first part of the argument, seem to be concerned about the government's argument that the emergency statute allows for teriffs. This statue, you know, one of the judges said that
the statute doesn't mention the word tariffs. Another judge said that, you know, if we assume that the president can impose these tariffs, that would upset the entire you know, statutory regime that imposes tariffs, that allows you know, Congress to import tariffs.
And another thing.
They said, there there are a whole bunch of statutes in the Code, in section nineteen of the Code that allow for tariffs and specifically mentioned either the word tariffs or duties. So this statute doesn't mention that that word
at all. And that's something that the court was focusing on, and I think the government was just trying to say that, you know, the regulated imports language has been construed to allow a bunch of different things, and if you look at regulated imports alongside of you know, the other actions the emergency statue allows the president to take, this is you know, sort of a lesser power than than the
powers he can use under that statute. So I think that's one of the concerns that you know, that that a group of the judges seem to be concerned about.
And when you're talking about the statute in question. This is IEPA, Right, International Economic Emergency Powers Act, that's right. And the language you were talking about it has language saying that president under certain circumstances, right, if there's like, you know, an extraordinary event or an emergency of some sort.
Yeah, the language is like an unusual an emergency that poses an unusual and extraordinary threat to national security or the economy.
He can quote regulate importation.
And that's the language that the government's hanging it's had on. And so you don't think there's a majority of judges at the hearing today that bought that argument from the government.
I think that if they're going to find for the challengers, it's going to be on that argument. In other words, like I don't think that they're comfortable that any of the judges were comfortable saying that the trade deficit is not an emergency, which is something that I was saying, that the trade deficit doesn't appear to be an emergency that meets ayep as you know, requirements. I don't think the judges are going to rest their their hat on that.
I think that if they're going to find for challengers, they're going to find that AEP but doesn't authorize terraffs at all, in which case both reciprocal tariffs and fentanyl trafficking terrorifts are unlawful. When I was counting, I think I counted about six judges who had this problem. And there are I think ten that are I'm sorry, eleven that are on that panel. So that would be a majority.
So you think in some ways they might go, they might go farther than the Court of International Trade and essentially say that APA doesn't allow for terrifts at all. I think so interesting. And so when do you expect a ruin?
I said, in August or early September.
Okay, and inevitably this is destined for the Supreme Court no matter what happens, right, yes, And so how do you see that planet?
I think, you know, nothing's changed my mind about you know, the oral ar even today didn't change my mind about what I think will happen at the Supreme Court. And I think that the Supreme Court will be the only court that finds that the trade deficit is not an emergency. Uh So I think that they'll say that the reciprocal terrorists are unlawful on those grounds. But nobody has challenged, and even today, I think they were talking about other
ways to find pentanal trafficking tariffs unlawful. Besides finding that it's not an emergency. No, nobody has said that the fentanyl crisis is not an emergency. And for that reason, I think that the Supreme Court, you know, is not going to reach that issue. They're just going to decide whether the tariffs deal with the fentinal crisis. And I don't think they're going to want to allow courts to or or they're gonna they're going to either approve or disapprove of that reasoning.
In which the the the.
International Trade Court said that that the tariffs don't deal with them. And I don't think that the Supreme Court is going to want to allow courts to address whether, you know, actions taken in response to emergencies deal with the emergency. So I think they're going to reverse on those grounds and reinstate the fentanyl trafficking terriffs.
Interesting. So, then at the end of the day, whenever this gets us to the Supreme Court, presumably towards the end of this year, you think the Supreme Court will strike down the so called reciprocal tariffs, but allow the President to impose the fentanyl related teriffs, and thinks, so, okay, great, all right, well we shall stay tuned. All right, let's move on from tariffs. We'll stick with DC though. Let's bring in Nathan Dean, who covers a whole slew of
policy issues for US out of Washington. Nathan, you wrote yesterday that the odds of a government shut down dunt dun duh at the end of September have increased to forty percent. That's not an insignificant number. So tell us what you're seeing and why you think that.
Yeah, so, you know, I think you know, the general expectation is when you get to one of these things, you know, when the government runs out of money, which is in this case, the fiscal year ends on September thirtieth, you know, the general thought is you have a continuing resolution. Because look, Congress is nowhere near finalizing its twelve appropriations bills. I was actually just looking at the current status of it. Ten of them have passed, sorry, two of them have
passed the House, obviously on bipartisan lines. The rest haven't even come up for votes yet, and there's still just past the committee level. Which means when Congress comes back from their August recess, they essentially have like three or four weeks to put all of this together to finalize inappropriations bills. So it ain't gonna happen. So I think the solution is what do you get when you have a continuing resolution? Well, you get a kick of the can.
But this situation is a little bit different because the Democrats spent all last week before the House left. The Senate's still here, but the House was is gone. Before they left. The Senate leadership and House leadership over the Democratic Party spent some time talking about what to do in terms of this funding fight, because there are a lot of folks on the progressive side that want to
fight President Trump. And one of the easiest ways you can do that is through the appropriations process, because you know, the Republicans are dictating what the bills look like. They're going to come in. They're going to say here's our appropriations for next year, and you can essentially say to President Trump, no, we're not going to play, We're going
to shut the government down. The challenge is is that politically, every party that has been seen shutting the government down for the last ten years has a political price for it.
Obviously not to the point where people are going to remember this when they get to the November midterms, but you know, when you're talking about momentum and momentum swings, you know it's going to be a very difficult position for the Democrats to be in if the Republicans come to them say here's a continuing resolution that is clean ish, you know, just call it clean clean ish, and it's
gonna be very difficult. Now, the one thing I would throw in here is is that if the omb decides to put additional recissions packages in play, that could fire up the Democrats because if you recall, you know, Congress has passed a nine billion dollar recissions package that takes away funds from USAID rail stations of MPR for example.
Not that big of a deal when you talk about a budget that's in the trillions, But because recissions avoids the filibuster and is a majority vote in the House and majority vote in the Senate, if the Republicans try that again in September, political roadblocks from political rhetoric is going to increase, and we're going to have to take a closer look the last thing I'll say though, is is that you know, just from the investment point of view, you will see a lot of headline risk, and you'll
see headlines in the news that say, like shutdown may spook markets or so forth like that. There is no market impact to government shutdowns. In the thirty days shutdown it occurred under the first Trump administration, the S and P yes declined about three to four percent right after the shutdown, but by the time the shutdown ended, it was up like fifteen percent.
The only thing that we actually something we want to shut down why yeah.
I mean, I'm well, for those of you in New York, you may, but for me wants to take my kids to the zoo, I'm gonna say no shutdown because it means I can't get into the museums. But and I'll say a little bit of the secret sauce here, just you know, every time we get a shutdown, we do get calls from people saying, look, we're trying to figure out what impacts, if any, that were of this shutdown.
And I said, outside of small contractors and people who are furloughed, it's very difficult because even large defense contractors, you know, yes, they have their separate issues with impoundment and you know recisions, but even large defense contractors are usually funded on a two year basis. So if you're thinking of like the Boeans, the Raytheons, the Lockey Martins and so forth, studexos, you know, they're they're usually covered.
And the last thing on a shutdown is that you know, a lot of traders don't get information from the FEDS, like the Commitment of Traders report from the CFTC or the Bureau of Statistics reports and so forth. All that stops, and so you may have to learn how to trade for a couple of days without having that info.
Got it. So you think if there's like more recisions packages, that increases the likelihood of a shutdown, Yeah, But if there isn't, if we don't see those, then maybe it's not. Yeah.
I mean, ultimately, the reason why one shuts the government down is they want to get political gains from it. And when Senator Schumer has this position where you know, let's just continue to let policies play out and then we'll develop a strategy in twenty twenty six, it's going to be a tall task for him to come back and say, right, I think it's going to be politically advantageous to shut the government down right now. It certainly would play up to the base. But what's the endgame strategy.
Let's say you shut the government down and President Trump says, okay, we've got a government shutdown. Eighty five percent of the government is now non essential, deemed non essential. Why do they have to come back? You know, if they're not essential, then why do they have to come back? And the other thing I just point out here is that if there's no endgame strategy here, how do you get out
of it? Because if you're seen folding two three weeks later and you don't get anything in return, that's almost as bad as you know, not doing it anything at all. So I just again, I'm not seeing the road path here for a shutdown, despite the fact that a lot of Democratic congressmen and women have been going on Bloomberg Television saying that they're going to welcome a shutdown.
Alright, it makes for good, good talking points, good politics, as you said, but at the end of the day, risky path to follow. All right, thanks Nathan. All Right, let's turn to anti trust. We have our two anti trust analysts on this episode, we're going to start with Jen ree Jan. Let's talk a couple of different issues. First, the Dick Sporting Goods and its acquisition of foot Locker for two and a half billion dollars back in May. You put out a note last week saying you think
antitrust clearance might come by mid August. Why don't you tell us what you're thinking? Is there?
Sure? We go from government shut down to Dick's spoorting goods.
It's a natural segue, a.
Natural segue, you know. It is a little bit sticking my neck out a little bit saying that I think this probably could get clearance in August. And the reason is because a deal like this would normally take something from the signing in May that you mentioned to a decision would normally take something more like eleven months. Yeah, because you know, everybody knows what these companies do, and you all know superficially that they compete. They both sell
athletic shoes. You know you could go to either one to buy a pair of sneakers and ideal yeah, and
we do, right, And they sell related apparel. And when you have retailers that merge, those reviews can take time and The reason is because it's really like a thousand mini mergers that have to be assessed because people aren't going to drive from California do Illinois to buy the shoes, and what the FTC's looking at our brick and mortar stores not necessarily buying them buying something on the internet.
And so they're just drawing little circles all over the country where these both of these companies have stores and then asking what their market shas are and who else competes and that kind of an assessment. Yeah, it takes a long time. But here's the thing that's happened. These companies did something recently called a poll and refile. Now, what that is is when they decide to merge, they
have to notify that deal to the government. That's what the law says, and once they do, the government has thirty days to make their decision as to whether to just clear the deal or to get into a very long, in depth investigation the thing I'm talking about that can take eleven months, and the companies are not voluntarily allowed to give the FTC more time than those thirty days.
But one way they can give them an extra thirty days is by pulling the notification, canceling it essentially and refiling it because they're restarting that new thirty days now. During the Biden administration, doing that didn't really mean anything, right, It didn't mean much at all other than companies adding thirty days.
And the reason is.
Because it was sort of wrote that the FTC and DJ in that administration was just asking for more time from companies and looking for these notifications and refilings, and it didn't necessarily mean the company could get clearance after that second filing. It didn't necessarily mean they'd get out of that in depth investigation. But I think this FTC now is different. I haven't seen I don't think a
pull and refile yet in this administration. But I think by doing it, the companies probably got signals from the FTC that maybe they just needed about another thirty days to get comfortable with the two companies I know they have said they don't really view themselves as being all that competitive because they have a different demographic that shops
in their stores. One is a mall store always and one is a non mall store always, So they say, if you really dig in FTC, we don't compete as much as you think we do and where we do compete, there are a lot of other competitors regionals, Mom and pops, et cetera. So it may be a very good sign here that they could get cleared after that second thirty
days expires. And the other possibility I'm thinking about is that this FTC has been very vocal about telling companies, if you do have an overlap that could be problematic, come to us early. Just walk right in as soon as you file, show us where that overlap is, offer up your remedy, your divestitures, and maybe we can't just get this done fast. And it's possible that Dix did something like that where they walked in said here are the regions where we overlap, here's where there are to
other competitors, this is what we're willing to divest. Let's just work on that for thirty days and make this all go away. So either way, we're going to hear in mid augustether this deal is cleared or whether an in depth investigation is opened.
Very interesting, and you know what, I never really it never dawned on me that foot Locker is only in malls and Dix is only not in malls. But yeah, It's like one of those revelations like when you first realize, you know, like the FedEx logo has that like a arrow in it.
Exactly, and you know, I started looking into it, and they are actually a lot more small competitors to these companies than you would think. Different regions have different companies, but each region kind of has another sort of equivalent to Dix and other you know, specialty shoe stores that where you go in and you get fitted for the right running shoes or the right basketball shoes. So you know, I think competition maybe wrote more robust in a lot of regions than people think.
All right, good stuff. Let's the other thing I wanted to ask you about, which you've talked about on this podcast before. But now we're like really getting close to sort of the d day that you expect. And this is in the Justice Department's antitrust case against Google oversearch issues, monopolization issues, and you'll expect a remedy pretty much any day at this point.
Yeah, really, I think early August. The judge that August, it could be any time doesn't even have to be August. Judges aren't held to what they.
Say, well did he say which August.
So but I do think it's going to be August. I think it'll be in the first few weeks. And that kind of was confirmed because just the other day there was an order on the docket where the judge asked Google to submit a brief by August first that just explained some differences between some of its proposals in its own remedy proposal, and so that suggests to me he's really working on it hard now and he's kind of on the detail and he's going to get something
out in you know, before middle August. So right, this is about that liability decision against Google that came down last year that it was paying third parties to set Google as the default, essentially was illegal and was pushing out other rival general search engines which weren't able to gain scale because Google had these agreements and sort of
blocked up that position. And the DOJ really asked the judge for a very long list of measures to be imposed on Google, including the big one that we hear about to force Google to sell Chrome. Now that's really the big thing I think people are waiting to hear.
But aside from that, they are actually still also pretty drastic the DJs asked Google to share user click and query data with general search engine rivals, It's search index, it's search text ad data with both rivals and advertisers, to syndicate search results, and to employ choice screens for Google's properties like Android and Chrome, and to be of course prohibited from paying anything of value to these third parties for these default positions or to favor Google Search.
And I think the same would probably extend to AI. Google's AI product, Gemini as well. It cannot pay other companies to set Gemini as the default or to exclude rival AI chatbots. And then they want a technical committee that would oversee this that would mostly be controlled the DOJ.
When you say the DOJ, this is the Trump administration's DOJ, right.
Okay, Yes, Now, the first set of remedies were proposed by the Biden DOJ, and the Trump DOJ did revise those, but only very very slightly. Really, they asked for pretty much the exact same subset of measures. They dropped out what they want. What the Biden administration wanted that DOJ dropped was sort of pre approval for any AI investments that Google makes.
Okay, right, And I mean what just struck me was that, you know, there've been these news reports of a couple senior Justice Department officials and the Anti Trust Division who were sort of forced to leave because I think they want to be more aggressive on the M and A front, right in terms of anti trust enforcement. But here we have like a pretty aggressive, you know, position by the
Justice Department, at least with respect to Google's search. So it does seem to be maybe a little bit of an economy which you've talked about, I think many time times and how it's going to be idiosyncratic, but somewhat of a dichotomy between M and A enforcement and monopolization enforcement, particularly in the tech sector. Yeah.
I mean, I think that the administration probably wants to look somewhat business friendly, and that plays out in the M and A space, But with respect to these big tech platforms, they have not been a friend to most of the GOP that consider them to have censored conservative viewpoints and promoted more liberal viewpoints, and so they have a bone to pick with big tech and big tech platforms, and I think that we're sort of seeing that play out with all of these lawsuits where we have not
yet mostly brought by the Biden administration. But we haven't yet seen any letup or any talks of settlement or going easier on any of these companies yet, got.
It, all right? Good stuff, all right, So, since we're talking tech and anti trust, that's a good segue to Justin and to talk about anti trust and everyone's favorite topic, artificial intelligence. Last week, the Trump administration released its AI Action Plan, and Justin you wrote following that that the Trump AII plan reduces anti trust enforcement risk for companies
like Nvidia and Microsoft. And I know there were, you know, they were among companies previously being investigated for potential anti trust viorations. But maybe maybe you can tell us a little bit more about your thinking and what it was and that AI Action Plan specifically that really reduces risk for these companies.
Yeah, yeah, thanks Elliott. You know, I think I think the introduction to the AI Action Plan that came out last week probably frames the situation here really well. So if everyone remembers drill, baby, drill, we're now moving into build, baby, build when it comes to AI. That's a direct quote from the second paragraph of the introduction to the AI
Action Plan that came out last week. But you know, generally what we're seeing here is this, There is no question that this set of policy directives issued by the White House last week is really concerned with American dominance in AI. It specifically calls that China, I think it's and with foreign entities in general on their growth around
the AI issue. And look that it's light on actual specifics about regulation should be and what programs might look like, but it certainly is giving marching orders to executive agencies to go forward, I think in several different ways. Whether it be with energy infrastructure, whether it be with supply chain management, government contracting, you name it. It's a directive to go forward with the creation of regulation and programs that
are really fostering the growth of AI. And I think the way that that relates to antitrust and what we're seeing there is the following, and that is in the sense that the plan itself says the FTC should review investigations that were started under the Biden administration that could really hamper or burden AI. Right, And that's really broad obviously, right, what does that mean? But I think you know the takeaway from that is that you know, it's not a
free pass for big tech. But when we're talking about AI specifically. There seems to be a concern here that that you know, that anti trust enforcement could really hard, really take an unnecessary swipe at the growth of AI dominance by the US, right, so that that's that's kind of the gist of of the report itself. But you know, I think companies specifically that are effected here though you know, news broke last year that in the in the fall
that the FTC was investigating Microsoft. But you know that that investigation super broad, right, not just AI we're talking about here, and I think specifically that involved Microsoft's investment in open Ai. Also we're looking at, you know, things like cloud computing and software bundling, all that other stuff that that might be a concern of Microsoft. I think
that stuff probably still goes on. Chair Ferguson's comments around those investigations were very strong and supportive back in March. It's really a carve out here, I think in many ways for for AI.
It welf interesting And so what are you sort of looking for next? Because a lot of a lot of these investigations, you know, are not you know, the developments are not publicly disclosed. I mean, I suppose companies could say something about them if it's favorable, But you know, what are you looking for?
Yeah, so, I think it's a lot of the reading of the tea leaves here. I think, you know, the reporting has certainly suggested that there's an uptick and lobbying around these issues here. I think that's not necessarily surprising. I think when I'm talking about looking at reading the tea leaves, the comments last week by the President, right just saying, hey, you know, I thought about breaking up Nvidia, but you know, I opted against it when I realized
it'd be kind of hard, you know. I think things like that obviously set the tone with where we're headed with these reported investigations. You know. But again, the contours of that are really interesting. You know, if we're not talking about something like a breakup, are we still talking about changes to the company's behavior. Are we still concerned with the way they might be bundling some of their products.
I don't know.
I think it's fair to say that that relationship exists. It's a strong relationship in the line of communication between tech companies and the White House seems to be open, But the actual contourst there. It's really a lot of the reading of the tea leaves and you know, as you implied Elliott, these investigations, they are confidential. And the report itself, the AI Action Plan, it was really focused
on things that started to Underbiden. If they're investigations that started under the Trump administration, at our chair ferguson the FTC, it doesn't really encompass those. And we just don't know and want to know if there's new investigations related to tech or AI that could fall into that bucket of things that are excluded.
Got it, Well, we will rely on you to read the tea leaves and tell us what they say.
Yeah, absolutely good stuff.
I think we're gonna leave it there. We will wrap up this episode of Votes and Verdicts. Thank you so much for listening. If you have any questions about any of the matters that we discussed on this episode, please don't hesitate to reach out to us at your convenience with questions. As a reminder, you can find all of our research on the Bloomberg terminal at BI go, or you can go to our litigation and policy dashboard on
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