Welcome to Votes and Verdicts, the podcast of the litigation and policy team at Bloomberg Intelligence. I'm justin terracy in this week for Elliott Stein, who's taking some very well deserved time off. But don't worry, We've got a great episode for you today. I'll be joined by my colleague Jennifer Ree. We'll talk all things the summer season of Antitrust.
Holy Frome joins us for an update on the ever changing landscape of tariffs this week, and Matt Shettenhelm also tunes in about FCC regulation on broadcasting and what's changing there. But first, before we jump into today's episode, a quick word about Bloomberg Intelligence. We're the investment research platform on the Bloomberg terminal with five hundred analysts and strategy is working across the globe and focus 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. So leading off this week, I thought we'd start with antitrust. I might be a little bit biased since it's my own coverage area, but there definitely has been quite a bit going on, I'd say, as us of late out of the Department of Justice
and starting things off, I think we'll turn to generate. So, Jen, there's been a lot of controversy in the news the last few weeks over a settlement that the Department of Justice entered with Hewlett Packard over its acquisition of Juniper Networks. This was entered on the eve of trial from what I understand, So you give us a bit of a sense of what's going on with that one over.
There, Yeah, sure, thanks, justin you know, really definitely, we're seeing some things happening in the antitrust world that are troubling from an enforcement perspective, and you know, you put your finger on it. The first one is this deal. So just as a little bit of background on this deal, it was fourteen billion dollars signed back in January of
twenty twenty four. So what happened with it, as happens with many deals, is the Department of Justice investigated and then sued to block the deal about a year later, that was in January of this year, and the concern in the DOJ had was that the combination was going to harm what they called enterprise customers for w land solutions.
So what that is is really just basically wireless networks for really huge entities like a big business, a hospital, or a university, you know, much like we all have Wi Fi at home. This is just a larger network for these really large spread out entities. And they're basically three main competitors that provide this product Hulot, Packard, Juniper, and then Cisco. Cisco's actually the biggie in the market. And the products you look, Packard and Juniper had that
overlap that compete were called Aruba and missed. So trial was supposed to start in early July of this year. But on June twenty seventh, this this settlement that you referenced was announced, and what it included, right, is a divestiture. Oftentimes, as you know, merger settlements include selling off some small piece of the business to eliminate the overlap. That's really
what it's supposed to be. But in this case, the divestiture was a small part of Hewlett Packard's networking business and also a limited bit of license to some technology that comes from Juniper. Now here's the rub. The allegation, as I mentioned, was that it's large enterprise consumers that would be harmed. But the divestiture was not a product sold to large enterprise consumers. It was for very small businesses.
Interesting, interesting and a lot of products most people have probably never heard of either, but really interesting.
That wrinkle there, Yeah, the business to business products, it's a whole world and we're not always familiar with those. But really, at the end of the day, it doesn't resolve the overlap that caused concerns. You still have this problematic competitive overlap between MYST and Aruba. So now here's the thing that after this very odd settlement that surprised most of us, I mean I was getting ready to go to travel to this trial to listen, in all
of a sudden we see news reports. So it's news reports. I can't confirm this, but what these reports have said is that Hewlett Packard hired these lobbyists very close to the president, and that these settlements were pushed on the DOJ anti trust staff very much against their will. So what you have then is a decision that's not based on anti trust expertise, but based on influence and sort of the transactional nature of this administration. And that's not the way it's supposed to be right.
Hearing a lot about things like that, as I've laid out of DC for sure, right right.
And so we know that Gail Slater, who is the Assistant Attorney General in charge of anti trust at the DJ, that would be the leading person for decision maker for anti trust at the DJ, pushback, but she was overruled by those senior to her, including Pambondi, who are not anti trust experts. And then two of her deputies, who also apparently objected to the settlement, were fired. And what was report is that HPE had hired non the antitrust
but very politically connected lawyers to negotiate the settlement. These are people who are close to Trump or have worked for them in the past. And the Wall Street Journal even just reported, by the way that one of these politically connected lawyers appeared to take it on as a personal challenge to get this settlement done after the anti trust enforcers questioned his role in the process.
Oh boy.
Yeah. So this is a real divergence from how things have been done in the M and A anti trust world essentially since the Nixon administration, and it's not good news for enforcement, our consumers.
Yeah, Yeah, that sounds like a pretty complicated situation there. You know, hard to read the tea leaves too, obviously when we're talking about news reports, and not necessarily a confirmation about how things have necessarily rolled out by the actual folks at the DOJ either. But I guess you know, is there any recourse for this? I mean, the deals closed, what happens now?
Well, so what happens now is that it has to go through what's called a Tunny Act procedure. That's a little bit of a safeguard for this kind of political influence, but really, honestly, it's very limited. And what that means is that the settlement isn't final until a judge has reviewed it and signed off. And this happens, by the way, for all Department of Justice anti trust settlements and not
for the FTC. And the reason, by the way, it was because it was passed during the Nixon administration and after allegations that ITT, a company that had been sued under anti trust by the anti trust enforcers at that time, basically got their case dropped by paying a lot of money to the nineteen seventy two Republican National Convention and then Congress, which actually got things done in a bipartisan manner.
BacT passed the Tunny Act, and that says that judges are supposed to ask whether a DOJ anti trust settlement is in the public interest. But I said it's limited right. The judges are supposed to give deference to the DOJ's expertise and can't really unwinded merger. The judge can approve, reject, or require modifications to the settlement. The courts can solicit public comments, they can hold hearings, they can require the
DOJ to respond to criticisms. But I would say in ninety nine percent of the cases the judge just sign off. It's kind of pro forma. And in a very very few rare circumstances, settlements have been sent back to the
DOJ to supplement them or to revise them. But the thing is justin it's a little bit backwards because if the judge doesn't like the settlement and the companies in the DJ can't agree to a new one, there's not that much that can be done because then the companies, because the companies, as soon as they settle with the DOJ are allowed to close and integrate. So if these companies, HPNG know, we are already closed, they're already integrating before
the tiny A procedure's done. So if you end up with a scenario where there's no settlement because the judge is sent it back but they can't agree to a new one, and now all you have is litigation. Now the case has to be tried, it's extremely highly unlikely that any judge is going to unwind a finished deal. So it's not really it's very messy, right, So that's
what we're where we are now in this case. We're we're going to wait and a lot of people are pushing this judge to really give this a solid review under the tiny Act.
Got it, got it? So you know, you know, we were saying too just with what's happening at DOJ, you know a lot of what we're we're depending on our news reports right about how things are actually rolling out, right, And we've seen a few companies under a scrutiny by antitrust enforcers these days, right, whether it be from the previous administration or companies you know that were looked at under the Biden DJ that maybe we're continuing an investigation
into today, right, You know, but you know, actions to kind of you know, sport those investigations or cases, you know, whether it be hiring lobbyists, making payments to Trump causes. You know, dropping DEI programs has been a big one too, you know, investment development in the US. All these different ways it seems like to create favor with the administration.
I mean, what do you think, Jen, do you think the new approach really is just to transact with the president rather to you know, mount an actual a trust defense or to actually explain, you know, your business practices to the authorities. What do you think about all that?
Well, you know, we have this Hewlett Packard example, but I think based on news reports that a pattern actually really is emerging because you know, another sort of oddity that happened in the M and A world, The DOJ had sued in January twenty twenty five to block a deal between American Express Global Business Travel and Carson Wagon lit Travel. Right, right, that case, very recently and without
any explanation, was dropped. Now there was no settlement here, it was just dropped so doesn't go through a tiny AC procedure. And then it was reported that AMX GBT, the Global Business Travel had hired a guy called Brian Ballard, a longtime Trump becker who had raised fifty million in
his twenty twenty four election. So we see that, and then I read, which is no surprise to me, that antitrust lawyers are basically advising clients now that maybe an M and A or maybe facing monopolization charges to find lawyers or obvious that are close to Trump. So we are moving toward this sort of position of defending deals as an influence maneuver and as a transactional thing, rather than and resolving the antitrust problems and getting real deal resolutions.
God, what definitely a headache, I would say, And you know, I mean, I don't know if that makes the whole situation easier to comprehend what's going to happen for a client, or make some more difficult. I mean, it's really hard to say. But you know, I guess, you know, trying to apply this to what we could what else we could be seeing, you know, for the second half of the year.
What other deals are.
Pending right now at DOJ R FTC that still need clearance?
You know, there are quite a few. Because all of a sudden, we had a little bit of as pause in the market with deal making, but now things are kind of flowing, and we do have some pretty big pending deals. Google's trying to buy Whiz Charters trying to buy cocks. You have Baker Hughes buying a company called Chart Industries, and of course probably everyone's right about Dixon Footlocker.
Those are products we all understand, and you know, justin and you know this because you're covering some of these cases. They are also a whole bunch of pending monopolization suits. Absolutely, yeah, Google, Meta, Amazon, Apple,
Live Nation. I mean, if they're a big, huge platform, they've probably been sou so you know, and I read read that recently Live Nation put a Trump loyalist on its board, and also that Apple has announced just the other day a major investment in US manufacturing one hundred billion.
So I think we're beginning to see all sorts of movements sort of in this influence peddling area, and we'll have to see what happens because we know before the election that some of the CEOs of these big tech companies like Mark Zuckerberg, we're donating money to Republican causes. We're there with Trump at the inauguration, and it hasn't really seemed to help them yet. But maybe the tide is turning now justin sure.
Sure, I mean it's you know, some days it seems that way, Jen, in another days it doesn't, right, And I think maybe we can touch upon this a little bit later with Holly. But you know, even think about companies like Nvidia, right, and you know, there were news reports last year of that that investigations had started at
DOJ related to anti trust issues, you know. And then you know, just two weeks ago, we have President Trump saying, you know, quite quite frankly, at at at an event that you know, we considered breaking up the company and opted against it once he you know, found out how difficult that would be to do. Then yesterday we see tariffs of maybe one hundred percent on chips that are imported into the United States. Right, So that it seems
like things are making some movements in one direction. Then you know, a week goes by and perhaps things move backward to another.
But I think you're right.
I think we're definitely seeing this interplay between folks in the White House that that certainly seems to be a growing trend. There's there's no doubt about that, right.
Right exactly, and it's it's it's going to be interesting to see the next three and a half years here. But you know, I have been saying for quite a long time about the Google Search case that if a remedy comes down, which we expect any day, which is that Google has to sell Chrome, I don't think that's what's going to be in the remedy, but let's just say it is. There is a chance, about a forty percent chance I think that that could be in the remedy.
And then Google appeals that the Trump administration then settles the case with Google for something less, and we'll we'll have to see because that would be sort of history replaying itself, because that's kind of what happened with the Microsoft situation. But I could talk about this all day.
Let's move on.
Let's move on to some of the anti trust topics. Sticking with antitrust, let's move on topics you're covering and it so that you don't have to talk to yourself and ask yourself questions. I'll take over here, perfume many.
I appreciate that any help I can get as well as much appreciated Jed.
So, justin let's move on to other anti trust matters that you're covering, since we've kind of split stuff up here, since there's so much going on in PBMs, that's a really big area that's been a focus all over the place. These are pharmacy benefit managers, and you've been covering the litigation been ongoing against these middlemen in the pharmaceutical area. So we have a case at the FTC that's in what's called a Part three which is litigation but different
than in the federal courts. Why don't you explain all that to us?
Yeah, definitely, J. And So this one really started bubbling up last fall. I think it's probably the last real significant Part three enforcement action outside of a merger context that we have kind of as a hangover, if you will, from the con FTC right before the Trump administration in January.
But what the case is is really built upon these reports and investigations that were conducted at the FTC, and it basically alleges that these middlemen, these drug middlemen, if you will, the pharmacy benefit managers that sit between the pharmaceutical companies, the insurance companies and consumers, really what they have done is in order to place a particular drug on a formula ay at an insurance company. It's alleged that they demand these high rebates from the drug manufacturers
in order to do so. The alligation is that they might pocket those rebates not pass them onto consumers, and as a result, the list prices for drugs that are paid by folks who are uninsured are perhaps underinsured, are astronomically high, way higher than they need to be. That is the chief allegation of the case is that drug prices are driven up by the practices of these PBMs
who sit in the middle of the chain. So what happened though, the case was brought, as you said, internally as a part three preceding case at the internal Tribunal over at the FTC and not in a federal court. And right now, you know, it seems like all roads eventually lead to a federal court on this one, and
there are a few reasons why. But you know, Jen, I know we've talked about this before, but it seems like every last kind of constitutional issue or you know, new way of thinking I would say about the FTC's scope of power and how broad it should be really seems to be triggered by this litigation. And right now the reason why I'm this up today is that there's been a motion to lift a stay of the case.
Chair Ferguson at the FTC and Commissioner Mater had proved, you know, Chair Ferguson had been recused from the case. We now have Commissioner Major in at the FTC. There are two FTC commissioners who are now available to participate in the litigation. There were none before. That's why this day was issued. So the reason for issuing that sday is now gone. I think for that reason, the state
probably becomes lifted. But the PBMs have indicated they're going to file a motion to dismiss very shortly at the FTC in this tribunal, and I think the effect of that is to push the case up to Chair Ferguson and up to Commissioner Mater. It frankly give them some kind of an opportunity to say whether bringing this case in a part three was really the way to proceed in the first place. I think we're going to have to see that some decision making made around that concept.
Does it get refiled in federal court maybe, does it have different claims than those assert it. Maybe it does to Both Chair Ferguson and Commissioner Mater have been somewhat critical of this expansive view of Section five of the FTC Act, which is the actual way the claims are structured. Here there could be some changes made to how they're actually pursuing this from an anti trust perspective.
Okay, so remains to be seen then, whether this continues on as a Part three, whether it gets moved to Federal Quarter, whether it continues at all.
Right, yeah, I think that's right, you know. But even if it continues as a Part three. You know, there are our broader problems, I would say, with the litigation outside of the claims itself, and those really lie in the area of some Supreme Court precedent that's been handed down the last couple of years. In the first case, there is the Darquesy decision from last year that took issue with the litigation of private rights right in an
actual internal preceding itself. And that's a pretty complicated concept, I'd say. But the argument basically is, look, there are too many big things, big ticket items being litigated as part of this case for it to be litigated at the agency belong in a federal court. That's the really basic way to kind of paint the picture around that. And the other issue is this whole discussion we've seen about whether or not the president can remove FTC commissioners
and thereby the judges that sit under them. Is there if the removal is not allowed, can this court then be hearing Is it constitutional for this internal court to be hearing the case? Those are some really big questions.
They're currently on appeal to the Eighth Circuit in this case, and we'll probably have a hearing on that this fall, and that could also be determinative of whether or not the litigation can continue as a Part three even if the commissioners do you want it to continue it that way?
So what about some of the other cases I know that you were following, starting kind of late in the Biden administration when we still had Lena Khan as the chair of the FTC. I know that they brought some unusual, somewhat novel cases against Pepsiico and also Deer I know as John Deere, but I think they go by Deer in company they do. Yeah, those Part threees are what's going on? With those cases.
Yeah, So interestingly enough, neither of those were brought as a Part three But you know, we've already kind of seen these these developments and changes the cases, frankly along with the changes in ideology that we have running the Commission. Right, So the PEPSI case, Commissioners Ferguson and Holyoak were really critical of that litigation when it was filed. The case has been since dismissed. The FTC which volunteerily withdrew that matter.
They're not pursuing it anymore. It was a Robinson Patment Act case, right, which we could see it's complicated statute for sure, but we could see more attempts to bring a case under that law in the future. And the deer case that's continuing on as part of a multi district litigation and federal court in Illinois so alive and well,
probably see a settlement there later on. But you know, to your point, we haven't seen a new Part three action from an enforcement perspective outside of mergers with this new commission, and I think there really is there are a lot of valid questions to be asked as to whether the current makeup of the Commission is really interested in you using that tool for an enforcement matter outside of merger clearance.
Well, you know, justin I know, you and I could sit around and talk for like the next two hours just about anti rust matter and everything that's happening in the antrust world because it's so interesting to us. But maybe it's time to move on to some other legal subjects and policy subjects.
Our listeners might appreciate that.
I might appreciate that, and our colleagues that are waiting patiently might also. So I'm going to turn the moderator roll back to you and you can move on to some of the other subjects.
Sounds great, thanks, Jen. So let's bring in Holly from now to talk a little bit about tariffs this week. Holly, I feel like we could have a weekly podcast just about tariffs and everything that you're covering week to week. It seems to be the perennial topic. Although something perennial is the word if it's every week there's something new that's happening. But uh yeah, let me start just asking you.
You know, so you've been following a bunch of lawsuits right recently that challenge the reciprocal tariffs and fentanyl tariffs. Can you just give us a quick update about what the STAF is on that litigation?
Thanks, Justin.
I think you could safely say that it's the daily changes on tariffs. So what's happening now in the courts are there are various appeals making their way around the appellate court. So the most advanced case is the one before the Federal Circuit, and that's the Appellate court for the International Trade Court. And as some of you may know,
that court found reciprocal and pentanal trafficking tariffs unlawful. It found the reciprocal tariffs the president posed were unbounded and so it said that the statute doesn't allow them, but if it did, the statute would be an unconstitutional delegation of Congress's power. And with regard to fentanyl teriffs, it found those terriffs weren't sufficiently related to the emergency. The presidents cited the fentanyl emergency as the basis for them.
So the Federal Circuit heard oral argument on the appeal of that ruling on July thirty first, and based on that hearing, we think they may agree the tariffs are unlawful. We think their opinion could come in late August. And there are also appeals before other circuits. So there's an appeal of a Washington District court's ruling finding tariffs unlawful
that appeals before the Washington d c. Circuit. So the district court found tariffs unlawful on different grounds than the International Trade Court and basically said the statute the President used, which is the International Emergency Economic Powers Act or AIPA, it doesn't allow tariffs at all, and so struck the tariffs on those grounds. So a hearing on that appeal
is set to be heard September thirtieth. And then the third appeal is before the Ninth Circuit, and that arises from a California federal court's ruling that it doesn't have jurisdiction to hear challenges to the tariffs, only the International
Trade Court does. So we expect that this Supreme Court will ultimately have to decide this case, and we'll render an opinion relatively quickly, possibly as early as four Q. And what we said is that the Supreme Court may find reciprocal terrorists lawful, but may say that the fentanyl tariffs are lawful.
Okay, got it? And holiday President Trump was in the news this week because he's pledged to impose tariffs of up to two hundred and fifty percent on pharmaceuticals.
What is that?
What would that would that also fail if the reciprocal tariffs are deemed unlawful? Is there a tie in there between the two?
Well, not necessarily, because the statute the president would you would likely use to impose the terriffs on pharmaceuticals is
section two thirty two of the Trade Expansion Act. And what that section allows is if the President's Commerce Department finds imports threatened to impair national security, the president can quote adjust imports, and the statute also mentioned in the headline duties, so that language is arguably a lot clearer than the language and the emergency Statute, which merely says the President can regulate imports but never mentions the word tariffs.
And so courts have held that section two thirty two allows president to impose tariffs, and that section has been used by multiple presidents to do so, whereas President Trump is the first president to use the emergency statue to imposed tarffs. So even if reciprocal tariffs are deemed unlawful, it doesn't mean that the section two thirty two terraffs will be deemed unlawful.
Okay, got it, Thanks, Holly. Really appreciate the updates on tariffs, and I'm sure we'll be talking about them again next week. That seems to be the name of the game right now, but right now turning over last, but it's certainly not leads to Matt shutting Helm down in DC. So, Matt, I know you've been tracking developments at the Federal Communications Commission related to broadcasting, including some significant deregulatory moves down there.
You've had some action there this week related to national TV ownership cabs and could you tell us a.
Bit about that.
Yeah, thanks, justin. Yeah, a lot of client interest around the potential for deregulation for the broadcast TV industry, which has for decades been subject to these FCC rules that all of their competitors that you know, over the Internet, all these new ways we get video, they don't face these sorts of limits, and yet broadcasters are still stuck with these these these limits on how many stations they can own and how big they can get that that date back from from a different time, and there's a
considered push from this administration to ease those rules. We saw the first steps towards that goal this week when comments were filed. When the FCC asked, how should we ease the national ownership cap. The national ownership cap is this thirty nine percent limit on how many households TV broadcasters can reach. We're talking about companies like Nextstar, Sinclair, Tegna, Disney Fox, companies that own your local broadcast TV stations,
and how many stations they can own. As I said, right now, it's thirty nine percent of the US subject to a limit. The FCC asked for comments on how and whether it should ease that limit or remove it entirely, and we saw this week the every interested party filing their opening comment about what the FCC should do, And as I went through those, I'm not really surprised by anything that I saw there. The broadcast broadcasters pushed strongly
for elimination of the national ownership cap. People the interests on the other side of the negotiating table, the cable groups that have to negotiate with the broadcasters, they say, no, we need to keep this rule in place. It still serves an important value. Public interest groups that like to protect localism also defended the rule. All of that was expected, and so I wasn't really surprised by anything we saw there.
The one thing I wanted to footnote and keep an eye on was the opposition from Newsmax and its potential ties to President Trump. And so the one thing I'd be a little bit cautious of from the broadcasters perspective is if President Trump suddenly jumps in the middle of this in a way that we don't expect and and so right now, I don't think that's going to happen.
But when you see Newsmax pushing hard against the deregulation, it does make you, you know, want to keep an eye on whether President Trump might get involved here.
Interesting it sounds like Newsmax might have the Trump card, so to speak, at us, at least.
You want to be watchful of that possibility the day.
Yeah, and I personally can't believe we haven't made that pun on this podcast before now, either, But there you go.
I'm glad you brought us there. Yeah.
Yeah, So, Matt, what happens next with all of this?
Yeah? So, so I don't think the FCC is going to take real long. Sometimes these FCC rulemakings can can drag out for months or years. Formally, we have reply comments due in a couple of weeks. August twenty second is the final deadline for filing. Typically the FCC will keep the docket open after that and take meetings with interested parties. But I think the FCC is, you know,
not going to sit around real long on this. So I think action in the fourth quarter is a real possibility when the FCC will adopt a final order easing or eliminating this national ownership cap. October twenty eighth meeting looks like a real possibility to me. So after that, what we're inevitably going to have a court fight about whether the FCC can do it or not, or only Congress can can remove this national ownership cap. I think
the FCC can win that fight. I'd give the FCC a slight edge in that court case, but it's a tough issue. It might depend on what court ends up hearing this, what three judge panel ends up hearing it. So a lot of moving pieces to come, but I don't think we'll be waiting long. I think the FCC will move on this by the end of the year.
Got it, Got it all right?
Thanks? So much.
Matt really appreciate that update. So thanks to all my colleagues for joining me today. Really appreciate that. And thanks most especially to you the listener for tuning in I'm justin trecy and for Elliott Segin this weekend. This with votes and verdicts.