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 is 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 we'll be looking at the litigation and policy catalysts that we're watching this week and that we think will impact companies across a number
of different sectors. My name is Elliot Stein. I'm an analyst with Bloomberg and te Elligence covering litigation in the financials sector, and I'll be your host for today in March twenty seventh, twenty twenty five, and I'm delighted today to be joined by a number of my colleagues on the Litigation and Policy team. And as always, you can find all of our research on the Bloomberg terminal at big and more specifically on our dashboard BI laws go
all right, so let's get started. Nathan Dean, let's bring you in. Nathan Covers a financials policy out of Washington, d C. He's our go to guy in DC. We had confirmation hearings today for Paul Atkins, President Trump's nominee to be SEC chair. I think you watched that whole thing because you were sending me ibs and some messages while it was going on, giving me sort of a running commentary. Any takeaways.
Former Commissioner Paul Adkins is a Doctor Pepper fan because he had a big, gigant taking it. I would have thought it would have been Diekoke, but he had a big Doctor Pepper or right there on the dial as he was testifying. So, but you know former Commissioner Paul Atkins, he is now the head of Potomac Advisors. You know, he's like the godfather when it comes to SEC rules
and rulemakings for the conservative Republican side of Washington. I mean, he he knows the SEC inside and out, and so I don't think he's going to have any issues whatsoever getting confirmed. And today's hearing did really dive all that deep into the weeds. They never do. I mean one of the bigger complaints was that from the democratic side is they had four individuals in this hearing and they only had one hearing. Amongst the four of them.
I mean four point homin news were being asked questions.
Yeah, so they had four nominees and Commissioner Atkins was just one of them. They also had the the next gentleman to be the Comptour of the currency for example. So there was a lot of discussion that could have gone into They didn't have much time. But you know, I say, there were really three key things that he said,
and the first one was regulatory clarity. And this is really good for the cryptocurrency industry specifically like robin Hood and coinbase, because you know, the SEC has over the last few years and their eyes operated is in terms of gotcha violations, lots of enforcement actions. If you've read any Avelliates pieces over the last year, you know the
SEC has been busy. But I will say that you know, the regulatory clarity is something that Commissioner Akins wants to move forward with and that's going to bode well for the crypto industry. With the note that this is only securities related anything else is outside of the SEC's jurisdiction and needs Congress has approval. Second is capital formation. He talked a little bit in terms of private funds. Think of changing things like the accredited investor definition to make
it easier for individuals to investigate in private funds. You know, I think that's going to be a big issue for twenty twenty five. And then the third is market structure. You know, when Commissioner Afkins was around in the early two thousands, you know, he was one of the individuals that voted on rank NMS. This is the regulation that created the equity market structure that we know today, and he had a lot of issues with it. Now, I don't think he's going to jump in here and say, right,
we're going to make these changes right away. But you know, in response to Senator Kim's question about the consolidated audit trail, I think it's certainly something that he's going to be looking at. I would just put those changes potentially in like the latter half of twenty twenty six, maybe even twenty twenty seven. So there's a lot here to talk about. But overall, I think if you're one of the companies
that you're going to be regulated by the SEC. I think you're going to find somebody with the chair who is certainly going to take more into account the company or business views towards regulations than what we've seen over the last four years.
Absolutely, And I mean you mentioned drag an Ms. I'm actually curios. Yeah, I assume he didn't say too much about it. You know, I'm watching a lawsuit by CBOE and NASDAC challenging against the SEC, challenging the rag Ms amendments from late last year that reduced you know, access feed caps and tick sizes, And I thought it was interesting because you know, the SEC is you know, revisiting a lot of the rules that are promulgated on the President Biden, but the rag Ms rule they're still defending
in court. So I'm as you're really curious to see, you know, how that plays out and once he comes in, whether they start revisiting that and taking a different view.
Yeah, you know, regulation, national market system. You know, it's been around for a while, and so that's the one major difference between he saw effect that you see between the Biden and the Trump administrations because you know, generally speaking that what we're seeing coming from the Trump administration at the moment is reversals of things that have been
finalized within the last two to three four years. But the core structure of Reagan MS has been around for almost fifteen years now, and so you know, there's a lot more clarity, there's a lot more comfort level with some of those rules. So I'm not thinking he's going to be bringing a sledgehammer to it, but I think incrementally you could see a scalpel maybe a little bit of tweaks and amendments over the next few years.
The other thing that sort of cracked me up a few weeks ago was that so Atkins was an expert retained by Virtue, the market maker, and it's in a lawsuit that the sec brought against Vertuo last year, and
I sort of cracked up. It was some time in January or February where Virtue had to write the court and ask for more time to complete discovery because they needed to get a new expert because their previous expert was Paul Atkins, who obviously will have to be recused in the litigation going forward.
And we also learned that he was a roommate with Senator Haggerty at the Vanderbilt Law School.
So right, yeah, I always love those random roommate connections. So just one other thing I'm watching with the SEC is that tomorrow or maybe today, but by tomorrow, the SEC has to update the Eighth Circuit Court of Appeals on where it stands with the SEC Climate Disclosure Rule, which is in litigation. It's been fully briefed in the Eighth Circuit and they're just waiting for or arguments to
be scheduled. But the SEC wrote the court back in February saying, hey, don't don't schedule anything yet because we're still trying to figure out what we're doing with this rule. So I'm looking for that update today or tomorrow. All right, Cool? Anything else from the hearing, Nathan, No, I think that's about it for today. All right, Cool? All right, Holly, let's bring you in. Holly from has become our resident
tariffs Maven, especially on the legal side of things. So Holly, obviously a lot of news yesterday with the auto tariffs next week. You know we're anticipating in reciprocal tariffs on Liberation Day April. Second, you've written a lot about the different statutes that are involved the different processes and what you know, what potential legal challenges might look like. Any thoughts on what's happening with all these tariffs.
Well, sure, heir so Trump yesterday, just just yesterday, said that he was going to impose a twenty five percent tariff on autos and the basis, the purported basis for that was that it the imports foreign import's threatened or threatened to a pair national security.
I think what's interesting about his use of that statue, which is Section two thirty two of the Trade Expansion Act, is that that requires an investigation. Unlike some other statutes that he could use, that one requires an investigation by
his Commerce department. So what he did was he relied on a seven year old investigation that was done when he was president in twenty nineteen, and in the executive order that he signed yesterday saying that he's going to implement this tariff on April second, he said, you know, my Commerce department says that nothing has changed, and it's not clear whether that's sufficient under the law. I could envision a scenario where a challengers will say circumstances changed
and they need a new investigation. So that's something that I think you know is a potential interesting argument. And then with respect to reciprocal tariffs, generally, the president can use what you said was he's going to impose on Liberation Day on April second. The president can use different statutes, and two of the statutes we think he may invoke are section three thirty eight of the Trade Act of nineteen thirty That's an interesting one because it's never been
used before to impose tariffs and a trading partner. But that statute allows the president to impose tariffs if he finds that a country is discriminating against US commerce, are burdening US commerce. And what's what's I guess appealing could be appealing to him about that statute is that also doesn't require an agency investigation.
He could do it by proclamation.
So another section set three oho one, which is very very similar in the justification for tariffs, like burdening US commerce, is also requires an investigation, so that one could take some time. So there was an interesting article in the Financial Times on I think Monday that said the president may use section three thirty eight, which which requires no investigation, and then back up his that tarriff with an investigation.
That he puts out later.
Very interesting. So so wait, so he would impose the three thirty eight terrorsts based on an investigation, but why would then why would he then need the three oho one section terrorifs.
In addition, it's sort of a dual cover. So three thirty eight requires no investigation. He could do it bright proclamation and he could do it immediately, and then the three oh one, which requires an investigation, he could say to his US Trade rep. And I think he has already look into all these countries. Are they burning US commerce?
Are they discriminating against US commerce? And then if they have a full investigation, that's where it gives him cover to say, yes, our US Trade Rep investigated this and he found indeed that I was right, they're discriminating against US commerce.
Interesting, so sort of like a suspenders approach exactly. Wow, really interesting. Have you heard any rumblings though, of anyone threatening to sue, because I haven't really seen anything. So I wonder if you know how realistic it is that we might see litigation around this stuff.
I think it's realistic that we'll see litigation.
But it's funny that you mentioned that, because I did look the other day and I saw nothing, so you know, these these would go to the US Court of International Trade, and so far I haven't seen any cases filed. And the one that we would have seen is the one that was imposed on Mexico, Canada and China, because that's already happened, or perhaps steel which are already into a feft.
And who do you think would too, like companies or trade groups on behalf of some of these other countries.
We could be trade groups on behalf the industries or companies.
Last time, in twenty eighteen, when Trump and posted tariffs on China under section three oh one, the companies, through the whole bunch of companies sued. So dozens of companies sued US Court of International Trade.
If if.
If a country were to sue, say, say because that violates a trade agreement, I think they'd have to sue the World Trade Organization. But the dispute, the dispute resolution process there is different because you know, the president has been very critical of the WTO, He's been very critical
of the dispute resolution process there. And I think also there's you know, there may be an indication that he's not going to abide by what they what they rule, whereas if a court in the US rules a certain way, I think he you know, he would have to buy it theoretically.
Yeah. So the other trade related note you put out this week, it was also really interesting. You wrote this with a transport channalyst, Lee Clascow, on these fees that the US government wants to impose on Chinese built or Chinese operated vessels that are using US ports. You know, the headline that lero was US fees on Chinese ships a self and inflicted supply chain shock, which is, you know,
really interesting. But anything you wanted to say about that sort of in terms of, you know, the process and the legality around that.
Sure.
So, yeah, the US Trade Rep has proposed imposing fees of five hundred thousand to one point five million dollars per port call for Chinese built ships or Chinese operated
ships calling on US ports. Interestingly, the investigation was initiated under Biden, that was April of last year, and the Trade Rep found d that that China was dominating the shipping industry unfairly so, and he's recommending that these fees be imposed under Section three oh one, which again allows the President to impose tariffs if a country is burdening
US commerce or is unfairly restricting commerce. So I think it's you know, pretty clear in the statute that these that that the President can impose these fees, and the statute was amended to allow uh fees to be imposed on shipping in the event that a government is subsidizing shipping, which is considered unfair and that and that's what it is alleged here. I haven't seen the Trade Rep make that finding yet that you know, China's subsidizing their shipping industry.
But that's what the petitioners who filed the petition to get to have the Trade Rep initiated investigation alleged.
And so that's why you're waiting for a next the US Trade Rep to come out with that finalized determination basically.
Exactly, so he the Trade Rep, has a year to make that determination, but he could ask for an extension
for six months. So if he makes the determination within a year, that would put us at April, and then the determination has to be implemented within thirty days of the action has to be implemented within thirty days of the determination, so that would put us at May potentially, where you see these these imposed, but if they ask for an extension, the outside date for implementation these fees would be November.
Got it? All right? Great stuff? All right, thanks Holly, all right, justin TERESI, let's bring you in. You follow a lot of cases that the FTC has brought Yeah, so many? Yeah, right, Well, certainly in the last administration, we'll see, well and maybe in this administration too, but you following cases against Meta Amazon, the pharmacy benefit managers.
But what I want to talk about is, well, last week President Trump fired two FTC commissioners, the two that were appointed by Democrats, you know, sort of consistent with what he's been doing with other other agencies, including the National Labor Relations Board and the Merit Systems Protection Board, you know, sort of taking an aggressive approach in terms of how much control the president has over what used to be considered independent agencies but might no longer be.
Just before we started recording this, uh, those two FTC commissioners, Slaughter and Badoya, sued the Trump administration, so we'll be following those as well. They are challenging their terminations. But why don't you come in tell us you know what you think it means for these FTC cases that you're watching.
Yeah, yeah, definitely, you're right fresh off the press here, it looks like Commissioners Slaughter and Badoia are going to challenge their firings. I think no surprise there. I think everybody's kind of expected is going to happen. You know, I know you've been tracking the read through on this to Humphrey's executor and perhaps you know, might happen to
Drome Paul over with the FED. But yeah, you know, in terms of actual day to day business and existing cases, new investigations at the FTC, the impact from this really there's really not too not much of one at all, And I think the reason being that with the new administration coming in with the expiring term of former chair Lena Khan, the setup was going to be a three to two split at the FTC already anyway was led by Republican Chair Andrew Ferguson, so that control of the
agenda was already the Republicans to have with that firm majority there in place, So anything that could have happened in terms of voting to initiate a new lawsuit or a new investigation, voting to block a deal, all of that already had that Republican majority in place, or would be in place with the confirmation of Mark Mader, who's right now up first, and of confirmation as the third
a third Republican FTC commissioner. So in terms of the read through to the cases investigations, not that much of a difference from what would have been the case anyway, you know, had the two Democratic commissioners state, maybe less tossents, maybe less transparency, but in terms of actual business kind of the same stuff over at the FTC.
What's the status of the confirmation of the heavy pnounces as they made or yeah, yeah.
So he's been reported out of committee, he's on the floor calendar well, so could be really any day now. Not not sure what the particular delay on his nomination might be in the Senate, but I think overwhelmingly we're expecting that to be approved. I think there's been you know, very support from both parties on his nomination. Obviously, the firings probably shake things up a little bit among the Senate Democrats, but you know, I think we're expecting that
to move forward. But you know, looking at the kind of the cases the FTC has right now against Meta and Amazon, cher Ferguson's been really out there supporter of those efforts against big tech and in interviews he's done recently, So we don't really think there's going to be much of a difference with the way that those proceed And there's also been some speculation that because Commissioners Buduya and Slaughter, the two were fired, were the only two who voted
to approve that the case against PBMs the Pharmacy Benefit Managers, that that kind of leaves the case in limbos somehow because Jerff Ferguson and Commissioner Holyoke, the other Republican had recused themselves from the case when it was filed back at September. That's not our reading of the rules though that case is already deep into discovery. There's not really a need for the Commission to take action and anything
right this moment. And once major's in the rule is the rules that CCFTC are is that a quorum is constituted by a majority of whatever commissioners aren't recused from the matter. So in this case, you know that that's one.
Of one.
So there you go.
Wait, so, but what do they need the quorum for at this point? I mean at this point, it would just be to like.
Right, if there was any lawsuit exactly exactly, if there were any move to a mend or withdraw the lawsuit or you know, perhaps agree to a settlement coming in from a different lawsuit or something like that, that's what they need a majority for. But again, you know, but that suit's proceeding, it's deep in discovery. You know, the FTC is looking to move the date of the internal trial they have for that lawsuit a little bit later into January of next year. So what is it currently
scheduled for schedule for August? They're looking for January. The PBMs are saying, hey, wait, you guys chose to bring this case in the in the tribunal.
You did.
You've got to live with the timeline now. But you know, reality is being what they are with discovery. I think it's probably slated to happen at least don until fourth quarter.
And we know why and Ferguson were recused. I think we don't. And that's the thing.
I mean, you know, it could be a personal reason, it could be an actual conflict, but we're also you know, we can't just assume that whatever caused them to recuse themselves in September is still the case today. They could very well have removed whatever issue was in place to stop them from voting to approve the suit in September if they if they had, you know, if they wanted to.
And I'll say too, they've both been supportive of action against health insurance and PBMs in the past two in their own right, So it's not as if they had this perhaps you know, moral obligation to the actual you know, the actual crux of that lawsuit when it was rolling out last fall.
Either And do you think Trump just keeps the FTC with three commissioners or do you think you'll appoint to fourth and fifth? You know, that's that's a great question.
I mean at this point, you know, you know what I'm thinking about more from this perspective of the FTC and what it means for the FDC from this standpoint is, you know, we're seeing legislation on Capitol Hill right now where folks are saying, hey, wait a minute, this anti trust function at the FTC, it's duplicative and it should
be rolled into DOJ. And we've seen Chaerf Ferguson out there really pounded the pavement talking about all these strengths and reasons why you know, the FDC has this relevant
place and anti trust. But you know, if we're removing this independence of the FTC and we're not going to fully staff the commissioners, and really if the FDC is just proceeding as you know, a tool of the executive anyway, to me that that really makes the case even more that the actual anti trust enforcement powers at the FDC are in fact duplicative of those in place at the
at the DOJ. I think it makes that whole Doughe consolidation argument a bit stronger for those looking to to actually meld things together and take two enforcement powers and roll them into one.
Oh, that would be interesting. Yeah, you know, I think it's so interesting because you know, I, like you said, I've been following these other cases involving term, you know, firing of commissioners at independent and so called independent agencies, and you know, I read about I'm really curious about what it means for Jerome Powell at the FED. And I think it's so interesting that both Slaughter and but Doya have said, Look, you know, if if it's legal
to fire us, the president can fire Jerome Powell. And you know, my my reaction to that is careful, careful what you say, because you know, I I don't think they're going to win their cases against uh Persian Trump. You know, it might be a closer call with Jerome Powell, just because even the current Justice Department has conceded that the Fed's monetary policy responsibilities are independent of the president.
But but do take a firm position that the Fed's regulatory responsibilities fall under the president's you know, jurisdiction, under the executive authority. So you know, I'm not optimistic that any of these people will be able to win their lawsuits if they get fired.
So yeah, I think you're right. I have to say too, I'm curious, you know, I think it's definitely true. I think this is probably your point of view as well, that there's a Supreme Court in place that certainly has been perhaps itching to overturn Humphreys or interested in the idea of overturning Humphreys executor for a long time.
But you know, I think, you know, is there a little bit.
More hesitancy or perhaps a carve out in some way because the stakes are higher. I think for overturning Humphries now than they would have been even a year ago, or I were talking about big stuff that maybe wasn't you know, at the central you know, underpinning of trying to overturn that the ruling even just a year agon hour confronted was a really crazy kind of thing.
So yeah, And I think it was Gorsech and Thomas who voted in the Sale of Law case. They in their descent they said they would overturn Humphries. But I don't even think you need to overrule Humphries for the president to win these cases, because the Supreme Court and Sale of Law basically, you know, said Humphries was just one of two exceptions to the general rule that the
president can fire anyone in the executive branch. And the two exceptions are one for inferior officers, which doesn't apply here, and the second is for principal officers, which these folks are,
but principal officers who don't exercise any executive authority. And you know, in these cases you have to see in particular, I think is going to be found to exercise executive authority because it has enforcement power and it has rule making authority, and so you can carve it out from the Humphries exception, and you arguably could do the same for j Run Powell at the FED, and you could say the FED has you know, exercises executive powers because
it also has rule making authority and enforcement authority. So right, I see where all these cases go. They're fun, they're fun to watch. It's fun. It's like a front row seat to history for better or words. That's right, Yeah, yeah, exactly, all right, justin good stuff. Thanks, all right, Matt Schanan. Hell, let's bring you in to round out the discussion today. You so, Matt is our TMT policy and litigation analyst also based in DC. You watched a Supreme Court argument yesterday.
I assume virtually maybe you went, I know, sometimes you go. Did you go?
Uh no, Actually I was.
I was there in the courtroom in the in the bar seating section right behind the podium, so one of the best best seats in Washington. A.
Yeah, that's always it's always fun, except you have to check your phone. That always gives me a little adjutant.
It's a little bit of a hassle and uh yeah, but it's it's so worth it to be you know, twenty feet away from the justices there watching watching history be made.
Agree, So tell us about the case. It's a six billion dollar FCC program to subsidize tell own in Higstol.
Even more than that in some years, I think it's eight eight eight to nine billion. It can reach and and basically, this is a rural broadband program, a rural telephone program that the FCC has administered since the nineteen ninety six Act, and and and and in part even
before that, it's had similar programs in place. But but basically, a group, an advocacy group brought a legal challenge to the program and sued in multiple courts of appeals and said that this program, when Congress passed it, Congress was was not clear enough in giving direction to the FCC
and how to administer it. And the claim was, this violates the Constitution, the non delegation doctrine for the FCC to be given this power basically legislative power by Congress UH to to administer this this rural broadband program that collect money from telecom carriers then passes it back out. And basically the claim was Congress needed to be more clear if it wanted this program to go ahead. That argument failed in most courts of appeals, three or four
of them, maybe at least two or three. It succeeded on bank in the Fifth Circuit by a very narrow vote, and then this case ended up by before the Supreme Court because there was a circuit split between the courts of appeals. And so that was the argument tomorrow or yesterday, whether the law is constitutional, whether this universal service program is constitution.
Just based on the non delegation doctrine. There were no other like statutory arguments.
Or anything exactly. This was pretty focused on the non delegation doctriment. There were two components to it, sort of the public non delegation doctrine Congress to the FCC. Then there was a private non delegation doctrine claim the FCC gave too much power to an administrator, a private administrator u sac organization that actually does the paperwork in the administration. And both pieces of that were challenged. The Fifth Circuit kind of combined them and said, put them together, and
this is this is somehow on constitution. Always strike it down.
What was your takeaway, I mean from you know, our sidebar conversations that we've had it sounds like you think the rule will survive and that there's not a majority of justices you know, to vote against it based on either the non delegation.
Yeah, that's where I that's where I came came away yesterday. It's hard to see the challenge the FCC's challengers here getting to five votes. Justice Gorstch clearly feels strongly that he wants to give new teeth to the non delegation doctrine, and he's likely to come out against the FCC. He might have Justice as Alito and Thomas with him, but like in so many cases, it's the middle of the court that we're really watching to determine outcomes. And the
Chief Justice, Justice Barrett and Justice Kavanaugh. I really have a hard time seeing any of them, and certainly not to two of them joining Justice Gorsic's side on this.
It was a fascinating argument in a lot of respects, you know, given where the Court has been recently and cutting back on administrative powers with the undoing of the Chevron doctrine, uh just just last term and now the chance to kind of go further and and again cut away at agency powers and and Paul Clement making the argument actually in favor of the FCC program, when he was the one making the argument against agency power in the Lower Bright series of cases. It just just fascinating
how it all, how it all went. And to see him going up against Justice gorsic On on the point was was was just really high level legal advocacy there, and and and fascinating and and and I thought, he just you know, I've seen him make very strong arguments
in the past. This was this was you know, one of his best, I thought, and very convincing that basically speaking to the conservative justices and saying, look, maybe we can use the non delegation doctrine to make changes here in the future, we can reinvigorate it, but this is not the case to do it. And and I really think he had a lot of heads nodding and in agreements with him.
That's what I was wondering about, Like the you know, the Roberts and the Barretts and the Kavanaughs, were they did you get a sense that there's any appetite on their part to revisit to revive the non delegation doctrine And it just wasn't this case. But but on the other hand, they took it.
Right, right, so they need they had four votes to take the case when when they when they took it, they also added a question about mootness, like basically a way to get out of this, which already signaled, hey, maybe we don't have four that are real excited about taking this case. Those three justices, you know, weren't as clearly on one side or the other as is typical typically the case. Their questions were more exploratory. And but and so I think there is openness down the road
if you found the right case. I can imagine Paul Clement bringing that case. And you know, but and and and I think there is potential to get to five. But I don't think it with a program that has so much history like the FCC program, where the FCC was effectively drawing from like a common law that it
had established. The justices I think on the whole, where we're okay and not really worried about the consequences of if we second guess this one, we're gonna have to undo a bunch of stuff and we're going to have a mess on our hands with a whole slew of statutes getting challenged, and we can go after you know, statutes in other ways, you know, under the APA, we don't need to you know, use this non delegation doctrine here.
So I think there there's probably room for it, but I don't think there's going to be a real big drive from the justices to use this tool to go after regulation.
Got it, And I assume you expect a decision probably towys En it seems.
Most likely, unless they make real quick work of it on some other races. Yeah, it's as possible.
All right, great, all right, thanks Matt. All right, I think with that we will wrap up this episode of Votes and Verdicts. As always, thank you for listening. If you have any questions about any of the matters we discussed on this episode, please don't hesitate to reach out
at your convenience with 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 space laws Go, and we also encourage you to listen to other episodes of Votes and Verdicts on whatever platform you'd like to get your favorite podcasts. Thank you for listening, and have a great day.