1 00:00:03,200 --> 00:00:07,960 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:09,000 --> 00:00:11,080 Speaker 1: You know, if anyone knows a con I guess it 3 00:00:11,080 --> 00:00:15,160 Speaker 1: would be Donald Trump. California lawyer Michael Avenatti gained a 4 00:00:15,240 --> 00:00:19,360 Speaker 1: national profile in eighteen as a fierce critic of former 5 00:00:19,400 --> 00:00:22,880 Speaker 1: President Donald Trump. Of a Nati asked Americans to believe 6 00:00:22,880 --> 00:00:26,800 Speaker 1: that his client, adult film stars Stormy Daniels, had an 7 00:00:26,800 --> 00:00:31,440 Speaker 1: affair with Trump. But now Avenati's freedom hinges on convincing 8 00:00:31,440 --> 00:00:34,920 Speaker 1: a jury that Daniels is a liar. The lawyer is 9 00:00:34,960 --> 00:00:38,319 Speaker 1: on trial for allegedly stealing three hundred thousand dollars from 10 00:00:38,400 --> 00:00:42,159 Speaker 1: Daniels by intercepting advanced payments for a book deal she 11 00:00:42,280 --> 00:00:47,479 Speaker 1: struck while suing Trump. The prosecution's star witness is Daniels herself, 12 00:00:48,000 --> 00:00:52,120 Speaker 1: and Avnati, who's representing himself, got the chance to grill 13 00:00:52,240 --> 00:00:56,320 Speaker 1: his former client. Joining me is Bloomberg Legal reporter Eric Larson. 14 00:00:57,160 --> 00:01:00,120 Speaker 1: Tell us a little about the case, Eric, or the 15 00:01:00,240 --> 00:01:04,280 Speaker 1: criminal case accusing Michael Avanati of stealing about three hundred 16 00:01:04,280 --> 00:01:08,200 Speaker 1: thousand dollars from the book advance from his former clients, 17 00:01:08,800 --> 00:01:11,720 Speaker 1: the porn star Stormy Daniels. So he is charged with 18 00:01:11,840 --> 00:01:16,000 Speaker 1: wire fraud and identity theft for basically intercepting these electronic 19 00:01:16,080 --> 00:01:19,640 Speaker 1: payments when I'm the publisher St. Martin's Press. So now 20 00:01:19,680 --> 00:01:21,920 Speaker 1: for someone who might have been living in a hut 21 00:01:22,040 --> 00:01:25,040 Speaker 1: during the Trump years, remind us of how they both 22 00:01:25,120 --> 00:01:28,759 Speaker 1: came to fame. It's a pretty bizarre a criminal trial 23 00:01:28,800 --> 00:01:31,600 Speaker 1: if you think about it, because Michael Avenati was representing 24 00:01:31,640 --> 00:01:36,039 Speaker 1: Stormy Daniels in a pretty explosive lawsuit against Donald Trump 25 00:01:36,080 --> 00:01:38,959 Speaker 1: when he was president. She had sued to try to 26 00:01:39,000 --> 00:01:41,800 Speaker 1: get out of a non disclosure deal that she had 27 00:01:41,840 --> 00:01:46,160 Speaker 1: struck with Trump to stay quiet about and alleged sexual 28 00:01:46,400 --> 00:01:49,080 Speaker 1: affair that she had with Trump, and to stay quiet 29 00:01:49,080 --> 00:01:52,240 Speaker 1: about the hundred and thirty thousand dollar payment that she 30 00:01:52,360 --> 00:01:54,520 Speaker 1: received to keep quiet about it just before the two 31 00:01:54,520 --> 00:01:57,960 Speaker 1: thousand sixteen election. So you might remember we saw Abanati 32 00:01:58,080 --> 00:02:02,840 Speaker 1: and Stormy Daniels pretty frequently TV standing outside court. Aubanati 33 00:02:02,960 --> 00:02:05,600 Speaker 1: was doing lots and lots of television appearances to talk 34 00:02:05,640 --> 00:02:08,639 Speaker 1: about Stormy Daniels. She was on sixty Minutes. So they 35 00:02:08,639 --> 00:02:12,040 Speaker 1: were a pretty interesting pair trying to take down Trump. 36 00:02:12,400 --> 00:02:15,760 Speaker 1: They had a big falling out over this book deal 37 00:02:16,200 --> 00:02:19,880 Speaker 1: when Stormy Daniels found out that Aubanati had been intercepting 38 00:02:19,880 --> 00:02:22,400 Speaker 1: these payments, and she had been asking him where is 39 00:02:22,440 --> 00:02:25,240 Speaker 1: this money from the publisher? You know, all along recording 40 00:02:25,280 --> 00:02:27,240 Speaker 1: to this criminal case. He knew that where the money was. 41 00:02:27,280 --> 00:02:29,760 Speaker 1: He had taken it and spent it for his own 42 00:02:29,760 --> 00:02:32,960 Speaker 1: personal expenses on things like payments on a ferrari and 43 00:02:33,000 --> 00:02:35,440 Speaker 1: everything for you know, even going to Starbucks. Things like 44 00:02:35,480 --> 00:02:38,880 Speaker 1: this is prosecutors together where the money went, and it 45 00:02:38,960 --> 00:02:41,920 Speaker 1: didn't go to her. So she got an eight hundred 46 00:02:41,960 --> 00:02:44,840 Speaker 1: thousand dollar advance on the book. Well, it was an 47 00:02:44,840 --> 00:02:48,120 Speaker 1: eight hundred book deal, and she was getting some of 48 00:02:48,160 --> 00:02:51,400 Speaker 1: the money in installments as the deal was progressing, like 49 00:02:51,480 --> 00:02:54,600 Speaker 1: when it actually was published and she was doing enough 50 00:02:54,639 --> 00:02:56,639 Speaker 1: publicity and things for this, they were supposed to be 51 00:02:56,720 --> 00:02:59,400 Speaker 1: giving her installments about a little over a hundred thousand 52 00:02:59,400 --> 00:03:03,280 Speaker 1: dollars at a time. But two of those payments Abanati 53 00:03:03,560 --> 00:03:07,120 Speaker 1: is accused of intercepting. Um. Of course, he has a 54 00:03:07,160 --> 00:03:09,440 Speaker 1: defense saying that he was entitled to that money and 55 00:03:09,440 --> 00:03:12,040 Speaker 1: that he didn't do anything wrong. But when she found 56 00:03:12,040 --> 00:03:15,240 Speaker 1: out about this, she went to the publisher herself and 57 00:03:15,280 --> 00:03:17,200 Speaker 1: demanded where is this money? And they said, well, we've 58 00:03:17,280 --> 00:03:20,320 Speaker 1: been sending it here's the proof of that. And so 59 00:03:20,440 --> 00:03:23,320 Speaker 1: that's when it all fell apart. For those two. I 60 00:03:23,360 --> 00:03:25,800 Speaker 1: always ask about the size of the book deals because 61 00:03:25,800 --> 00:03:29,000 Speaker 1: I cannot believe the amount of money that that goes 62 00:03:29,040 --> 00:03:31,440 Speaker 1: into advances on a book you don't even know how 63 00:03:31,600 --> 00:03:35,200 Speaker 1: well it will do. So he had a federal public defender, 64 00:03:35,840 --> 00:03:39,400 Speaker 1: he did, and that the public defender gave the opening 65 00:03:39,440 --> 00:03:42,720 Speaker 1: statement to the jury from a week ago. But shortly 66 00:03:42,800 --> 00:03:47,360 Speaker 1: after that, Amanati decided to represent himself. So that was 67 00:03:47,480 --> 00:03:49,400 Speaker 1: sort of a new twist on this case that was 68 00:03:49,440 --> 00:03:52,280 Speaker 1: already kind of strange to begin with. So that put 69 00:03:52,360 --> 00:03:57,120 Speaker 1: him in a position to personally cross examine Dormy Daniels, 70 00:03:57,240 --> 00:04:01,520 Speaker 1: who's the government star witness, And that's what happens on Friday, 71 00:04:01,560 --> 00:04:05,720 Speaker 1: So tell us about her testimony on direct examination with 72 00:04:05,840 --> 00:04:09,280 Speaker 1: the questioning by the prosecutor. Right, So that's where they spelled, 73 00:04:09,480 --> 00:04:13,080 Speaker 1: you know, laid out this whole story about how Aubenatti 74 00:04:13,320 --> 00:04:17,279 Speaker 1: had been communicating with Stormy Daniels every day, you know, 75 00:04:17,320 --> 00:04:20,680 Speaker 1: by phone and text. So naturally, when these payments from 76 00:04:20,680 --> 00:04:23,640 Speaker 1: the publisher were supposed to start coming in, Stormy Daniels 77 00:04:23,640 --> 00:04:25,719 Speaker 1: was looking at her bank account and wondering where that 78 00:04:25,760 --> 00:04:28,040 Speaker 1: money was because, according to her, she had lots of 79 00:04:28,040 --> 00:04:30,800 Speaker 1: expenses at the time, she travels a lot, she has 80 00:04:30,839 --> 00:04:34,520 Speaker 1: a lot of security detail things like that. So the 81 00:04:34,640 --> 00:04:37,560 Speaker 1: prosecution had her read out these text messages that were 82 00:04:37,560 --> 00:04:39,839 Speaker 1: shown to the jury, and it just showed her getting 83 00:04:39,880 --> 00:04:43,800 Speaker 1: increasingly upset, you know, wondering where the money was and 84 00:04:44,160 --> 00:04:48,520 Speaker 1: venting her frustration to Aubenati. And then the prosecutor showed 85 00:04:48,520 --> 00:04:51,440 Speaker 1: the evidence that Abanati had actually already received the money 86 00:04:51,560 --> 00:04:54,479 Speaker 1: and kept asking, you know, Storm McDaniels, well, at what 87 00:04:54,640 --> 00:04:56,919 Speaker 1: point did he say I have the money? And she 88 00:04:56,920 --> 00:05:00,120 Speaker 1: would say, he never said that, So they're just and 89 00:05:00,480 --> 00:05:03,120 Speaker 1: they spent that time trying to illustrate all of the 90 00:05:03,200 --> 00:05:05,760 Speaker 1: different opportunities that Abanati would have had to tell her 91 00:05:05,880 --> 00:05:07,960 Speaker 1: where the money was and then failed to do so. 92 00:05:08,360 --> 00:05:11,000 Speaker 1: And she said he lied to me every day for 93 00:05:11,040 --> 00:05:15,240 Speaker 1: almost five months, that's correct. There were two payments that 94 00:05:15,320 --> 00:05:18,559 Speaker 1: had disappeared, so you could tell that she was every 95 00:05:18,600 --> 00:05:20,680 Speaker 1: day asking him about it, which is why I think 96 00:05:20,680 --> 00:05:23,400 Speaker 1: she was so felt so betrayed. According to her, when 97 00:05:23,480 --> 00:05:25,920 Speaker 1: when she found out where the money had gone. So 98 00:05:26,000 --> 00:05:30,160 Speaker 1: you have Alvanati cross examining his former client. It must 99 00:05:30,160 --> 00:05:33,400 Speaker 1: have been high drama in the courtroom just to see that. Yeah, 100 00:05:33,440 --> 00:05:36,040 Speaker 1: it was pretty bizarre when you think about the falling 101 00:05:36,080 --> 00:05:39,080 Speaker 1: out that these two had. I mean, Albanati spent a 102 00:05:39,120 --> 00:05:42,000 Speaker 1: lot of time, you know, several years ago telling Americans 103 00:05:42,000 --> 00:05:44,400 Speaker 1: they needed to believe this woman, that she had a 104 00:05:44,440 --> 00:05:48,280 Speaker 1: pretty salicious tale to tell about Donald Trump, and they 105 00:05:48,320 --> 00:05:50,960 Speaker 1: really were trying to take the president down based on 106 00:05:51,080 --> 00:05:54,359 Speaker 1: her word. And now he's here telling this jury that 107 00:05:54,400 --> 00:05:57,520 Speaker 1: she's a liar and can't be trusted. So he used 108 00:05:57,520 --> 00:06:00,840 Speaker 1: his cross examination to try to pull out various times 109 00:06:00,839 --> 00:06:04,200 Speaker 1: that he thinks showed that she had been untruthful about 110 00:06:04,240 --> 00:06:07,960 Speaker 1: various things, and also questioned her about various times that 111 00:06:08,000 --> 00:06:11,360 Speaker 1: she had accused other people of stealing from her. I 112 00:06:11,400 --> 00:06:13,479 Speaker 1: think he was trying to sort of suggest that she 113 00:06:13,640 --> 00:06:17,120 Speaker 1: was paranoid and accuse people of sess frequently that sort 114 00:06:17,160 --> 00:06:20,559 Speaker 1: of thing. But it really wasn't bizarre questioning because Dormy 115 00:06:20,680 --> 00:06:24,560 Speaker 1: Daniels is a pretty interesting character. She is working on 116 00:06:24,560 --> 00:06:28,839 Speaker 1: a TV show about the paranormal paranormal activities, so she's 117 00:06:28,960 --> 00:06:32,080 Speaker 1: on record telling her viewers and fans and things like 118 00:06:32,120 --> 00:06:35,320 Speaker 1: this that she can see ghosts, that she can see 119 00:06:35,360 --> 00:06:39,559 Speaker 1: into people's houses, basically through their walls, that she's even 120 00:06:40,040 --> 00:06:44,359 Speaker 1: in communication with a hunted doll. So he was trying 121 00:06:44,400 --> 00:06:47,400 Speaker 1: to obviously make her look a little bit bonkers and 122 00:06:47,480 --> 00:06:50,400 Speaker 1: wanted a jury to see that she can essentially make 123 00:06:50,480 --> 00:06:51,960 Speaker 1: things up a lot, I think is what he was 124 00:06:52,000 --> 00:06:56,480 Speaker 1: trying to suggest. Has she made contradictory public statements about 125 00:06:56,480 --> 00:07:01,120 Speaker 1: her relationship with Trump, because I got very confused about 126 00:07:01,200 --> 00:07:05,400 Speaker 1: what her position was, right, It was a little confusing, 127 00:07:05,400 --> 00:07:09,240 Speaker 1: and that was actually brought up by Amanati. He asked 128 00:07:09,240 --> 00:07:11,800 Speaker 1: her about a statement that she had made about a 129 00:07:11,800 --> 00:07:14,040 Speaker 1: month before she hired him back when they were non 130 00:07:14,080 --> 00:07:17,760 Speaker 1: just Her nondisclosure deal with Trump was in force in 131 00:07:17,880 --> 00:07:21,640 Speaker 1: January two eighteen, and when reports were coming out about 132 00:07:21,680 --> 00:07:24,680 Speaker 1: her affair with Trump and the hush money payment, she 133 00:07:24,800 --> 00:07:28,360 Speaker 1: put out a statement saying that there was no fair 134 00:07:28,440 --> 00:07:31,680 Speaker 1: between her and Trump. Of course, then she changed her 135 00:07:31,680 --> 00:07:36,120 Speaker 1: tune on that and basically said the opposite, and Abanati 136 00:07:36,280 --> 00:07:39,000 Speaker 1: asked her about that and basically was saying, you lie. 137 00:07:39,040 --> 00:07:41,560 Speaker 1: You put out this statement, it was a lie, trying 138 00:07:41,560 --> 00:07:43,760 Speaker 1: to show that she was capable of lying because she 139 00:07:43,840 --> 00:07:47,680 Speaker 1: now says that she did have interactions with Trump. But 140 00:07:47,720 --> 00:07:50,040 Speaker 1: then it got even stranger because she still says, no, 141 00:07:50,160 --> 00:07:52,720 Speaker 1: I didn't have an affair. It was just a sexual encounter. 142 00:07:53,280 --> 00:07:55,000 Speaker 1: So she was trying to mince words there and say, 143 00:07:55,080 --> 00:07:58,200 Speaker 1: no, no no, it wasn't affair. Um, but at any rate, 144 00:07:58,240 --> 00:08:01,200 Speaker 1: you're right it was a sort of a strange contradictory statement. 145 00:08:01,880 --> 00:08:06,040 Speaker 1: So he said, Ms. Daniels, do have a single text message, email, 146 00:08:06,200 --> 00:08:09,800 Speaker 1: voicemail or recording that says I would not take any 147 00:08:09,880 --> 00:08:14,560 Speaker 1: money from your book deal. What was that about, right? 148 00:08:14,680 --> 00:08:16,680 Speaker 1: So that was kind of the heart of the matter. 149 00:08:16,720 --> 00:08:18,520 Speaker 1: All this other stuff was a little bit of a 150 00:08:18,920 --> 00:08:22,160 Speaker 1: maybe a distraction or just trying to make Stormy Daniels 151 00:08:22,200 --> 00:08:24,360 Speaker 1: look a little nuts. But what it really got down 152 00:08:24,360 --> 00:08:27,720 Speaker 1: to is when she hired him, they signed an agreement 153 00:08:28,200 --> 00:08:30,760 Speaker 1: that said that he would be entitled to his share 154 00:08:30,760 --> 00:08:35,280 Speaker 1: of any future book or media deals. But this agreement 155 00:08:35,520 --> 00:08:38,640 Speaker 1: then says the amount will be determined by the parties later. 156 00:08:39,080 --> 00:08:41,320 Speaker 1: So he's saying, look, you knew all along that I 157 00:08:41,400 --> 00:08:44,200 Speaker 1: was entitled to some of this book money, and that 158 00:08:44,280 --> 00:08:47,400 Speaker 1: I had lots and lots of expenses from representing you 159 00:08:47,440 --> 00:08:51,560 Speaker 1: in this huge lawsuit. And she claims that he verbally 160 00:08:51,600 --> 00:08:53,480 Speaker 1: told her that he would not take any of the 161 00:08:53,520 --> 00:08:57,160 Speaker 1: money after even though they signed that agreement, So they're 162 00:08:57,160 --> 00:09:01,080 Speaker 1: interpreting the agreement differently. You know, Yes, I think Anadi 163 00:09:01,320 --> 00:09:05,079 Speaker 1: acknowledges they never did specifically agree to an amount from 164 00:09:05,080 --> 00:09:07,760 Speaker 1: the book deal that would he'd be entitled to. But 165 00:09:07,920 --> 00:09:10,720 Speaker 1: he's arguing that she knew all alone that he was 166 00:09:10,760 --> 00:09:14,520 Speaker 1: going to be entitled to that money. So what happened 167 00:09:14,520 --> 00:09:18,760 Speaker 1: with her defamation lawsuit against Trump? Yeah, so that was 168 00:09:18,800 --> 00:09:22,680 Speaker 1: a separate lawsuit, um, separate from the non disclosure agreement 169 00:09:22,720 --> 00:09:26,400 Speaker 1: lawsuits that was in California. She lost it, and she 170 00:09:26,559 --> 00:09:29,520 Speaker 1: was also ordered to pay Trump's legal fees of almost 171 00:09:29,600 --> 00:09:34,440 Speaker 1: three hundred thousand dollars. So she was pretty upset about that. UM. 172 00:09:34,480 --> 00:09:38,320 Speaker 1: I think she blames Anti for some of that, and he, 173 00:09:39,000 --> 00:09:41,760 Speaker 1: you know, had suggested that it was her um that 174 00:09:41,880 --> 00:09:45,560 Speaker 1: she ended up falsely accusing him of stealing her you know, 175 00:09:45,600 --> 00:09:48,400 Speaker 1: this book money, um sort of his paybacks for that 176 00:09:48,559 --> 00:09:50,680 Speaker 1: or you know, so that she'd have money to pay 177 00:09:50,720 --> 00:09:55,000 Speaker 1: the three dollars. Is he as dramatic in the courtroom 178 00:09:55,120 --> 00:09:58,040 Speaker 1: as he used to be when he was doing TV appearances? 179 00:09:58,520 --> 00:10:01,760 Speaker 1: I would say, yes, know he is, or he was 180 00:10:01,800 --> 00:10:05,600 Speaker 1: a very successful, you know lawyer. He said on his 181 00:10:05,679 --> 00:10:09,720 Speaker 1: website that he had secured hundreds of millions of dollars 182 00:10:09,720 --> 00:10:12,600 Speaker 1: and settlements for clients and lots of cases before he 183 00:10:12,679 --> 00:10:16,160 Speaker 1: ever represented Stormy Daniel. So of course all that has 184 00:10:16,200 --> 00:10:18,920 Speaker 1: come crashing down his law firm, you know, it's gone, 185 00:10:18,960 --> 00:10:24,200 Speaker 1: and he's been convicted in another criminal case separate from this, 186 00:10:24,280 --> 00:10:28,559 Speaker 1: of course, he was convicted of trying to extort Nike 187 00:10:29,040 --> 00:10:31,920 Speaker 1: out of five million dollars on behalf of another client 188 00:10:32,040 --> 00:10:34,439 Speaker 1: during settlements talks. He was sentenced to two and a 189 00:10:34,480 --> 00:10:36,680 Speaker 1: half years for that, and he hasn't even started serving 190 00:10:36,679 --> 00:10:39,760 Speaker 1: that prison term. Then there was a third criminal case 191 00:10:39,960 --> 00:10:43,000 Speaker 1: in California where he was accused of ripping off other 192 00:10:43,280 --> 00:10:46,679 Speaker 1: law firm clients of his, and that ended in a mistrial, 193 00:10:47,000 --> 00:10:50,000 Speaker 1: although they're going to retry that case. He's out on 194 00:10:50,120 --> 00:10:54,320 Speaker 1: bail from the California cases while he's here in New 195 00:10:54,400 --> 00:11:00,000 Speaker 1: York right right, He's been basically under homes infinement in Califor, 196 00:11:00,000 --> 00:11:04,240 Speaker 1: Mornia for quite some time, staying with a friend in Venice, California. 197 00:11:04,679 --> 00:11:07,560 Speaker 1: But because of this trial, he's now been allowed to travel. 198 00:11:07,600 --> 00:11:10,280 Speaker 1: And it's it is here for that, you know, with 199 00:11:10,840 --> 00:11:13,880 Speaker 1: a lawyer owes a client money, it seems like it 200 00:11:13,960 --> 00:11:16,400 Speaker 1: might this might have been a civil case. Did his 201 00:11:16,480 --> 00:11:21,320 Speaker 1: celebrity play into this becoming a criminal case? Well, I 202 00:11:21,320 --> 00:11:24,200 Speaker 1: mean it's hard to know exactly what, you know, the 203 00:11:24,280 --> 00:11:27,800 Speaker 1: Justice Department is thinking or the U. S. Attorney's Office 204 00:11:27,800 --> 00:11:29,880 Speaker 1: here when they decided to bring a case. But you know, 205 00:11:29,960 --> 00:11:33,280 Speaker 1: of course, Avanatti has claimed, you know, all along the 206 00:11:33,400 --> 00:11:35,640 Speaker 1: all three of these criminal cases, you know, they were 207 00:11:35,640 --> 00:11:38,120 Speaker 1: brought during the Trump administration, and he claims that that 208 00:11:38,160 --> 00:11:42,120 Speaker 1: he was targeted by from Justice Department specifically because of 209 00:11:42,400 --> 00:11:45,200 Speaker 1: his lawsuit on behalf of the Stormy Daniels So you're right, 210 00:11:45,200 --> 00:11:47,439 Speaker 1: I guess it could have been a civil matter, but 211 00:11:47,559 --> 00:11:50,800 Speaker 1: just between Stormy Daniels and Aminatti. But he argues that 212 00:11:51,400 --> 00:11:53,559 Speaker 1: because of who he is. You know, I don't know 213 00:11:53,600 --> 00:11:56,079 Speaker 1: if Stormy Daniels went to the sider was the other 214 00:11:56,080 --> 00:11:59,040 Speaker 1: way around. But they put together, you know, three completely 215 00:11:59,080 --> 00:12:02,520 Speaker 1: separate cases against him and really sort of turned his 216 00:12:02,520 --> 00:12:06,000 Speaker 1: world upside down. So he's actually filed a claim with 217 00:12:06,200 --> 00:12:10,760 Speaker 1: the Justice Department accusing the Dustice Department of improperly having 218 00:12:10,840 --> 00:12:14,760 Speaker 1: him thrown into solitary confinement when he was first arrested. 219 00:12:14,960 --> 00:12:17,480 Speaker 1: He says that he spent weeks and weeks and weeks 220 00:12:17,480 --> 00:12:21,360 Speaker 1: in solitary confinement and horrible conditions. Again, he says that 221 00:12:21,400 --> 00:12:25,760 Speaker 1: Trump and former Attorney General William Barr did that intentionally 222 00:12:25,840 --> 00:12:29,040 Speaker 1: to punish him. And so he's seeking about ninety million 223 00:12:29,080 --> 00:12:32,800 Speaker 1: dollars from the government for that, and that's the appending 224 00:12:32,880 --> 00:12:35,440 Speaker 1: claim before the Justice Department just filed a few weeks ago. 225 00:12:36,000 --> 00:12:37,440 Speaker 1: Eric I also want to talk to you about the 226 00:12:37,559 --> 00:12:42,880 Speaker 1: January sixth prosecutions, and we've seen that the defendants are 227 00:12:43,559 --> 00:12:49,320 Speaker 1: a very bunch. Tell us about the former influencer Brandon Straca. So, 228 00:12:49,559 --> 00:12:56,120 Speaker 1: Brandon Straca is described as a pro Trump social media influencer. Basically, 229 00:12:56,160 --> 00:13:00,760 Speaker 1: he's a former liberal, self described gay, former role from 230 00:13:00,800 --> 00:13:04,160 Speaker 1: New York City. He reportedly was a hair stylist um 231 00:13:04,200 --> 00:13:08,319 Speaker 1: and at some point he decided to switch to becoming 232 00:13:08,480 --> 00:13:12,200 Speaker 1: a Republican and supporting Trump and started a social media 233 00:13:12,280 --> 00:13:16,840 Speaker 1: campaign all about trying to convince other Democrats to switch parties. 234 00:13:17,080 --> 00:13:19,280 Speaker 1: So he became a bit of a social media star 235 00:13:19,360 --> 00:13:24,719 Speaker 1: on the right, very popular with conservatives, and he ended up, 236 00:13:25,000 --> 00:13:28,800 Speaker 1: you know, participating in some rallies after the election, claiming 237 00:13:28,800 --> 00:13:31,120 Speaker 1: that it was stolen, that sort of thing. He spoke 238 00:13:31,160 --> 00:13:34,599 Speaker 1: at a big rally of conspiracy theorists in Washington, d C. 239 00:13:35,160 --> 00:13:38,640 Speaker 1: On January five one, just the day before. And then 240 00:13:38,679 --> 00:13:41,640 Speaker 1: he also participated in the assault on the Capitol of 241 00:13:41,679 --> 00:13:45,679 Speaker 1: a live stream that to his to his followers, about 242 00:13:45,679 --> 00:13:49,360 Speaker 1: six hundred and sixty thousand followers um. And at one point, 243 00:13:49,480 --> 00:13:53,280 Speaker 1: you know, he's caught on camera encouraging people to violently 244 00:13:53,400 --> 00:13:56,720 Speaker 1: steal take his shield of protective shields from a riot officer. 245 00:13:56,960 --> 00:14:00,360 Speaker 1: So very bizarre case. He's forty five years old. He 246 00:14:00,920 --> 00:14:05,760 Speaker 1: pleaded guilty to disorderly conduct in October um and was 247 00:14:05,880 --> 00:14:09,520 Speaker 1: just spent in last week to three years of probation. 248 00:14:09,960 --> 00:14:12,960 Speaker 1: He had been cooperating with the BED. He had about 249 00:14:12,960 --> 00:14:16,079 Speaker 1: three meetings with them, I think according to the court papers, 250 00:14:16,200 --> 00:14:20,520 Speaker 1: the prosecutors had wanted a period of home confinement as 251 00:14:20,560 --> 00:14:22,920 Speaker 1: part of that sentence, but as they didn't end up 252 00:14:22,960 --> 00:14:25,600 Speaker 1: getting that for just three years of probation for this guy. 253 00:14:26,120 --> 00:14:28,520 Speaker 1: And yeah, as you said, there's a lot of sort 254 00:14:28,520 --> 00:14:31,560 Speaker 1: of interesting characters who participated in that, and he certainly 255 00:14:31,600 --> 00:14:33,800 Speaker 1: seems to be one of them. What's the civil suit 256 00:14:34,680 --> 00:14:39,280 Speaker 1: against him? Yeah, there's a civil lawsities filed against him 257 00:14:39,520 --> 00:14:43,600 Speaker 1: by a group of Capital police officers who were injured 258 00:14:43,800 --> 00:14:48,320 Speaker 1: during the insurrection, and the defendants in the suit include 259 00:14:48,600 --> 00:14:53,080 Speaker 1: Trump as well as Roger Stone at the Political Operative 260 00:14:53,400 --> 00:14:56,880 Speaker 1: and several members of different right wing militia groups like 261 00:14:56,960 --> 00:15:00,280 Speaker 1: the Proud Boys and Oathkeepers. So he stands that is 262 00:15:00,360 --> 00:15:03,360 Speaker 1: kind of an unusual defendant in that case. But they 263 00:15:03,680 --> 00:15:06,520 Speaker 1: alleged that he was part of a conspiracy to deprive 264 00:15:06,640 --> 00:15:09,840 Speaker 1: these Capital police that they're still rights and to you know, 265 00:15:09,960 --> 00:15:13,640 Speaker 1: basically alleged that because of all of their conduct together, 266 00:15:13,760 --> 00:15:17,520 Speaker 1: that they're liable for these officers injuries. And he of 267 00:15:17,520 --> 00:15:20,600 Speaker 1: course denied that in speaking dismissal of the suit, as 268 00:15:20,640 --> 00:15:23,400 Speaker 1: are the other defendants. The people who marched on the 269 00:15:23,440 --> 00:15:26,960 Speaker 1: Capitol were a diverse group of people, more than one 270 00:15:27,000 --> 00:15:30,240 Speaker 1: would have expected. Perhaps there was also a Yale Law 271 00:15:30,280 --> 00:15:34,760 Speaker 1: school graduate. He's actually the head of the Oathkeepers, right 272 00:15:34,800 --> 00:15:38,400 Speaker 1: wing militia, and he's fighting, uh, he's fighting those charges. 273 00:15:38,480 --> 00:15:41,560 Speaker 1: He's pleaded not guilty. All of those Oathkeepers members that 274 00:15:41,600 --> 00:15:44,280 Speaker 1: pleaded not guilty. I think it was just last week. 275 00:15:44,520 --> 00:15:47,280 Speaker 1: So they're definitely going to be putting up a big 276 00:15:47,320 --> 00:15:51,120 Speaker 1: fight here. They all have separate lawyers and they're putting 277 00:15:51,160 --> 00:15:54,520 Speaker 1: together what I think they're you know, suggesting is going 278 00:15:54,560 --> 00:15:58,040 Speaker 1: to be a pretty big defense here that could lead 279 00:15:58,080 --> 00:16:02,000 Speaker 1: to a very interesting trial. Um I think is in July. 280 00:16:02,760 --> 00:16:06,320 Speaker 1: Thanks so much, Eric. That's Bloomberg Legal reporter Eric Larson. 281 00:16:08,120 --> 00:16:11,320 Speaker 1: Google and Facebook make billions of dollars a year from 282 00:16:11,360 --> 00:16:15,520 Speaker 1: their digital ad businesses, but they face data privacy legal 283 00:16:15,600 --> 00:16:20,119 Speaker 1: risks on multiple fronts from Congress, from the Federal Trade Commission, 284 00:16:20,160 --> 00:16:24,440 Speaker 1: and from lawsuits. Joining me is Matthew Chettenhelm, litigation and 285 00:16:24,480 --> 00:16:28,120 Speaker 1: government analysts for Bloomberg Intelligence tell us broadly about the 286 00:16:28,200 --> 00:16:32,440 Speaker 1: data privacy legal risks that Google and Facebook are facing. 287 00:16:32,920 --> 00:16:36,120 Speaker 1: Google and Facebook make billions of dollars a year from 288 00:16:36,320 --> 00:16:41,240 Speaker 1: their digital ad business and they now face you know, really, 289 00:16:41,280 --> 00:16:44,320 Speaker 1: I think a myriad of different legal risks on many 290 00:16:44,320 --> 00:16:49,400 Speaker 1: different fronts. It's really a story about one legislation. Congress 291 00:16:49,560 --> 00:16:54,760 Speaker 1: is looking at making laws here as they never have before. Regulation, 292 00:16:54,960 --> 00:17:00,080 Speaker 1: the Federal Trade Commission is looking at creating rules to 293 00:17:00,400 --> 00:17:04,679 Speaker 1: potentially govern these businesses, and litigation. And you see your 294 00:17:04,720 --> 00:17:09,119 Speaker 1: attorneys general in states across the US bringing more lawsuits. 295 00:17:09,160 --> 00:17:15,080 Speaker 1: You see class action attorneys pursuing litigation against these companies 296 00:17:15,119 --> 00:17:18,080 Speaker 1: as they never have before. And so it's really on 297 00:17:18,240 --> 00:17:22,359 Speaker 1: those three fronts where you're seeing major legal risks for 298 00:17:22,400 --> 00:17:26,760 Speaker 1: this very lucrative business for these companies. Let's start with 299 00:17:27,119 --> 00:17:30,199 Speaker 1: the possibility of a law from Congress. I know that 300 00:17:30,200 --> 00:17:34,200 Speaker 1: people from both sides of the aisle are on board 301 00:17:34,400 --> 00:17:38,680 Speaker 1: for tightening the rules for Internet platforms, but is there 302 00:17:38,680 --> 00:17:43,199 Speaker 1: any consensus in Congress about a data privacy law? So 303 00:17:43,359 --> 00:17:46,280 Speaker 1: that's really the stumbling block. And as you said, I 304 00:17:46,280 --> 00:17:49,360 Speaker 1: mean this is really a change. For the past twenty 305 00:17:49,440 --> 00:17:53,320 Speaker 1: years or so, there's sort of been this bipartisan consensus 306 00:17:53,320 --> 00:17:56,439 Speaker 1: that the Internet works best when we stay out of 307 00:17:56,480 --> 00:18:00,600 Speaker 1: the way as lawmakers. That's changed very quickly in the 308 00:18:00,680 --> 00:18:04,000 Speaker 1: in the last five years, where I think now there's 309 00:18:04,000 --> 00:18:07,120 Speaker 1: a bipartisan consensus that well, maybe we went too far 310 00:18:07,200 --> 00:18:10,120 Speaker 1: there and maybe if we have no rules of the road, 311 00:18:10,440 --> 00:18:13,959 Speaker 1: that leads to problems. Now, where lawmakers are having an 312 00:18:13,960 --> 00:18:18,000 Speaker 1: issue is identifying exactly what is the problem and then 313 00:18:18,040 --> 00:18:21,760 Speaker 1: agreeing on fixes on it. And I think we're still 314 00:18:21,840 --> 00:18:25,720 Speaker 1: pretty far away here. When you look at directly regulating 315 00:18:26,040 --> 00:18:29,119 Speaker 1: the digital ad business, which is the core business of 316 00:18:29,440 --> 00:18:35,480 Speaker 1: these companies, there isn't really consensus across Democrats and Republicans 317 00:18:35,600 --> 00:18:39,240 Speaker 1: or even within the parties themselves about exactly how to 318 00:18:39,440 --> 00:18:43,359 Speaker 1: do that. And the big hurdle is in the Senate, 319 00:18:43,400 --> 00:18:47,240 Speaker 1: you need sixty votes to make legislation into law, and 320 00:18:47,280 --> 00:18:50,920 Speaker 1: that requires you know, often fifty Democrats and ten Republicans. 321 00:18:51,000 --> 00:18:54,080 Speaker 1: And when you have the parties disagreeing about what is 322 00:18:54,119 --> 00:18:57,679 Speaker 1: the problem, it's hard to agree on a solution. So 323 00:18:57,720 --> 00:19:00,480 Speaker 1: we're not there yet, at least on any sort of 324 00:19:00,560 --> 00:19:04,720 Speaker 1: comprehensive data privacy legislation. You're gonna keep seeing headlines hearings 325 00:19:04,760 --> 00:19:07,200 Speaker 1: about it. I'm not sure that in the near term 326 00:19:07,240 --> 00:19:11,400 Speaker 1: you're going to face comprehensive legislation. You might see sort 327 00:19:11,400 --> 00:19:15,040 Speaker 1: of targeted legislation, maybe for children's data, but I think 328 00:19:15,040 --> 00:19:18,200 Speaker 1: we're still pretty far away on that consensus on direct 329 00:19:18,280 --> 00:19:20,679 Speaker 1: regulation of the core business. So then you have the 330 00:19:20,760 --> 00:19:26,960 Speaker 1: Federal Trade Commission, which hasn't historically made rules for internet companies. 331 00:19:27,119 --> 00:19:30,680 Speaker 1: What's the danger there? Yeah, So that's like I think 332 00:19:30,760 --> 00:19:33,359 Speaker 1: what might be one of the big stories to watch 333 00:19:33,640 --> 00:19:37,959 Speaker 1: this year. If Congress can't agree on how to go 334 00:19:38,000 --> 00:19:40,960 Speaker 1: after these businesses and can't make a new law, it 335 00:19:41,040 --> 00:19:43,680 Speaker 1: doesn't necessarily mean that the companies are going to continue 336 00:19:43,680 --> 00:19:46,000 Speaker 1: to get to make the rules of the road for themselves. 337 00:19:46,040 --> 00:19:49,679 Speaker 1: The Federal Trade Commission usually historically, as you said, hasn't 338 00:19:49,720 --> 00:19:52,800 Speaker 1: been in the business of making rules on the front end. 339 00:19:52,880 --> 00:19:56,320 Speaker 1: It goes after companies after the fact and says what 340 00:19:56,400 --> 00:19:59,320 Speaker 1: you did there was unfair, and it brings an enforcement 341 00:19:59,320 --> 00:20:02,520 Speaker 1: action again. Sit Now there's sort of a change in 342 00:20:02,640 --> 00:20:06,480 Speaker 1: thinking at the Federal Trade Commission under new Chairwoman Lena Khan. 343 00:20:07,160 --> 00:20:09,720 Speaker 1: And so in the middle of one the Federal Trade 344 00:20:09,760 --> 00:20:14,720 Speaker 1: Commission went through and streamlined its process for making rules generally, 345 00:20:14,960 --> 00:20:17,479 Speaker 1: which has been very difficult, and so they've kind of 346 00:20:17,560 --> 00:20:20,680 Speaker 1: simplified that a little bit, sort of clearing the deck 347 00:20:20,720 --> 00:20:23,480 Speaker 1: and getting things ready to go. Once the Federal Trade 348 00:20:23,520 --> 00:20:26,280 Speaker 1: Commission has five commissioners in place, we're still waiting for 349 00:20:26,320 --> 00:20:29,560 Speaker 1: the Senate to confirm a fifth member. But when it does, 350 00:20:30,160 --> 00:20:33,600 Speaker 1: I think you could see Lena Kahn lead an effort 351 00:20:33,840 --> 00:20:37,119 Speaker 1: to create rules on the front end for these Internet businesses. 352 00:20:37,600 --> 00:20:41,240 Speaker 1: Now there's lots of questions about the Federal Trade Commission's authority. 353 00:20:41,560 --> 00:20:44,479 Speaker 1: The Federal Trade Commission isn't Congress. It can't do whatever 354 00:20:44,520 --> 00:20:47,320 Speaker 1: it wants. It's limited in its jurisdiction and to what 355 00:20:47,440 --> 00:20:49,760 Speaker 1: it can reach. But I think there's gonna be significant 356 00:20:49,800 --> 00:20:53,000 Speaker 1: pressure on the Democrats at the Federal Trade Commission to 357 00:20:53,000 --> 00:20:56,280 Speaker 1: be aggressive in making new rules like that. And we 358 00:20:56,320 --> 00:20:58,520 Speaker 1: don't know what exactly they have in mind yet and 359 00:20:58,520 --> 00:21:00,960 Speaker 1: what we'll get to see them as the process plays out, 360 00:21:01,000 --> 00:21:03,159 Speaker 1: but there's a chance that they start to go in 361 00:21:03,200 --> 00:21:07,199 Speaker 1: that direction of trying to go after core elements of 362 00:21:07,480 --> 00:21:11,480 Speaker 1: the digital ad business, and that would surely face lawsuits, 363 00:21:11,520 --> 00:21:15,680 Speaker 1: wouldn't it. Any rules the FTC makes, Absolutely, there's major 364 00:21:15,760 --> 00:21:19,760 Speaker 1: procedural hurdles just as a matter of making those rules. 365 00:21:19,760 --> 00:21:22,000 Speaker 1: They have to jump through a number of hoops in 366 00:21:22,040 --> 00:21:25,680 Speaker 1: the law to make that happen. But then substantively, you're 367 00:21:25,720 --> 00:21:30,240 Speaker 1: exactly right, whatever rules they make, if they're disruptive to 368 00:21:30,640 --> 00:21:33,879 Speaker 1: the industry, you're surely going to see an immediate legal 369 00:21:33,960 --> 00:21:36,960 Speaker 1: challenge to those rules. And the question then is did 370 00:21:37,040 --> 00:21:40,440 Speaker 1: the Federal Trade Commission have the authority to make fools 371 00:21:40,560 --> 00:21:42,840 Speaker 1: like that that interfere with the business. The Federal Trade 372 00:21:42,880 --> 00:21:48,720 Speaker 1: Commission's power is limited to policing unfair and deceptive practices, 373 00:21:48,840 --> 00:21:52,200 Speaker 1: and that's what they've historically done through after the fact adjudication. 374 00:21:52,560 --> 00:21:54,919 Speaker 1: If they go on the front end and say X 375 00:21:55,080 --> 00:21:58,680 Speaker 1: y Z practices are unfair or deceptive. There's a real 376 00:21:58,800 --> 00:22:01,760 Speaker 1: risk that the courts will step in and say, yes, 377 00:22:02,119 --> 00:22:05,040 Speaker 1: you have that power to police unfair and deceptive practices, 378 00:22:05,080 --> 00:22:08,920 Speaker 1: but you don't have the power to make major rules 379 00:22:09,000 --> 00:22:13,560 Speaker 1: about a core element of American business. Congress didn't give 380 00:22:13,600 --> 00:22:16,639 Speaker 1: you that power clearly. And there's a real risk that 381 00:22:16,720 --> 00:22:20,520 Speaker 1: the FTC goes beyond its narrow grant of authority and 382 00:22:20,560 --> 00:22:23,840 Speaker 1: then ends up stumbling in the courts. We don't know 383 00:22:23,920 --> 00:22:27,400 Speaker 1: exactly how aggressive the Federal Trade Commission will be. There's 384 00:22:27,400 --> 00:22:29,800 Speaker 1: a risk that it's pretty aggressive, but as you said 385 00:22:29,840 --> 00:22:33,600 Speaker 1: there on the back end, the courts will serve as 386 00:22:33,720 --> 00:22:36,920 Speaker 1: somewhat of a protection for the company. Now let's turn 387 00:22:37,000 --> 00:22:39,960 Speaker 1: to the risks from litigation. And there's already a lot 388 00:22:40,000 --> 00:22:43,080 Speaker 1: of litigation against the companies. So how big a risk 389 00:22:43,160 --> 00:22:47,480 Speaker 1: is litigation in general? Yeah, in general, this is a problem. 390 00:22:47,920 --> 00:22:51,520 Speaker 1: I think it's growing in scale because so many class 391 00:22:51,560 --> 00:22:55,480 Speaker 1: action attorneys and so many attorneys generals have have realized 392 00:22:55,560 --> 00:22:59,560 Speaker 1: that these are good targets. And and one reason that 393 00:22:59,640 --> 00:23:03,840 Speaker 1: they are good targets for litigation is because the companies 394 00:23:03,840 --> 00:23:08,520 Speaker 1: have so many users. And and for example, um last 395 00:23:08,520 --> 00:23:12,920 Speaker 1: week we saw DC and three other states bring lawsuits 396 00:23:12,960 --> 00:23:17,679 Speaker 1: against Google for its use of location data, that it 397 00:23:17,800 --> 00:23:21,400 Speaker 1: was trying to collect people's data about their location even 398 00:23:21,400 --> 00:23:23,960 Speaker 1: though they tried to turn it off, Google was taking 399 00:23:23,960 --> 00:23:27,000 Speaker 1: that data anyway. I don't think that's a huge deal 400 00:23:27,080 --> 00:23:30,840 Speaker 1: for the company when you're talking about three to four states. Um. 401 00:23:30,840 --> 00:23:33,040 Speaker 1: When it becomes a problem is when you look at 402 00:23:33,200 --> 00:23:36,639 Speaker 1: nationwide class actions and potentially, as we said earlier, the 403 00:23:36,680 --> 00:23:40,879 Speaker 1: Federal Trade Commission enforcement authority. The Federal Trade Commission can 404 00:23:41,200 --> 00:23:44,600 Speaker 1: in some cases collect civil penalties of forty six thousand 405 00:23:44,680 --> 00:23:47,600 Speaker 1: dollars or more per violation. And when you do forty 406 00:23:47,640 --> 00:23:51,879 Speaker 1: six thousand dollars per violation times millions of users, the 407 00:23:52,000 --> 00:23:57,560 Speaker 1: math gets astounding. And so you saw Facebook in It's 408 00:23:57,560 --> 00:24:01,359 Speaker 1: settled an FTC investigate and like that for for five 409 00:24:01,480 --> 00:24:04,600 Speaker 1: billion dollars, and a lot of Democrats said that was 410 00:24:04,640 --> 00:24:07,560 Speaker 1: a slap on the risk. You let Facebook off too easy. 411 00:24:07,720 --> 00:24:11,119 Speaker 1: So every time there's there's some sort of issue about 412 00:24:11,160 --> 00:24:14,320 Speaker 1: their data practices, you run the risk of the Federal 413 00:24:14,359 --> 00:24:19,760 Speaker 1: Trade Commission and class action attorneys and potentially states attorneys 414 00:24:19,800 --> 00:24:24,040 Speaker 1: general banding together to bring these sorts of enforcement actions. 415 00:24:24,040 --> 00:24:26,800 Speaker 1: And even if you're just talking a hundred dollars per user. 416 00:24:27,440 --> 00:24:30,679 Speaker 1: The math adds up when you when you have UM 417 00:24:30,920 --> 00:24:34,359 Speaker 1: that many users. And that's just a piece of it. 418 00:24:34,440 --> 00:24:37,720 Speaker 1: The other pieces shareholder lawsuits. Every time you see a 419 00:24:37,760 --> 00:24:41,400 Speaker 1: big scandal and you saw this Facebook whistleblower last year 420 00:24:41,480 --> 00:24:45,040 Speaker 1: led to a big drop in Facebook's UH share prices, 421 00:24:45,600 --> 00:24:49,400 Speaker 1: you see litigation over that, and that threatens billions of dollars. 422 00:24:49,440 --> 00:24:53,240 Speaker 1: So it's really multiple fronts um on the litigation side. 423 00:24:53,760 --> 00:24:56,000 Speaker 1: These are big companies. They can handle the cost, but 424 00:24:56,080 --> 00:24:58,920 Speaker 1: it's a it's a rising and persistent threat. I think 425 00:24:59,440 --> 00:25:02,120 Speaker 1: the Super I d C in the States is that 426 00:25:02,240 --> 00:25:05,159 Speaker 1: likely to be settled. I do think it will. So 427 00:25:05,240 --> 00:25:09,439 Speaker 1: we have one case that was brought by Arizona a 428 00:25:09,480 --> 00:25:12,320 Speaker 1: couple of years ago, which is a very similar suit, 429 00:25:12,840 --> 00:25:15,560 Speaker 1: and it's still playing out where we're two years into 430 00:25:15,600 --> 00:25:19,080 Speaker 1: it and they're still litigating it. So I suspect that 431 00:25:19,400 --> 00:25:23,000 Speaker 1: Google will bite each of these these three lawsuits, just 432 00:25:23,119 --> 00:25:25,720 Speaker 1: as it's fought the Arizona lawsuits, and so far Google 433 00:25:25,760 --> 00:25:28,480 Speaker 1: hasn't been able to knock that out. But as I said, 434 00:25:28,760 --> 00:25:31,440 Speaker 1: I do think if it can't knock any of them out, 435 00:25:31,520 --> 00:25:33,800 Speaker 1: and and one good thing for the company here is 436 00:25:33,880 --> 00:25:35,920 Speaker 1: each one is going to be fought in its own 437 00:25:36,000 --> 00:25:38,280 Speaker 1: state court, so it's not like they all rise or 438 00:25:38,320 --> 00:25:41,400 Speaker 1: fall together. And so that kind of helps contain the risk. 439 00:25:41,880 --> 00:25:44,480 Speaker 1: And so it can try to knock off each individual 440 00:25:44,520 --> 00:25:48,320 Speaker 1: one based on state laws in that state. But then 441 00:25:48,400 --> 00:25:51,439 Speaker 1: even if it can't knock them off, I think Google 442 00:25:51,480 --> 00:25:54,160 Speaker 1: can settle suits by you know, by three or four 443 00:25:54,240 --> 00:25:56,920 Speaker 1: states like this, um, you know, for in the mid 444 00:25:57,000 --> 00:26:00,240 Speaker 1: hundred million dollar range. I think I said foreignern fifty 445 00:26:00,320 --> 00:26:02,639 Speaker 1: million dollars when I did some estimates of it, and 446 00:26:02,680 --> 00:26:06,560 Speaker 1: for for Google, that's that's something that is not real disruptive. 447 00:26:07,080 --> 00:26:09,159 Speaker 1: What when it becomes a risk, as I said, is 448 00:26:09,200 --> 00:26:12,960 Speaker 1: when it when it goes nationwide and the FTC or 449 00:26:13,119 --> 00:26:16,879 Speaker 1: class action lawyers go go bigger, or more attorneys general 450 00:26:17,160 --> 00:26:20,520 Speaker 1: baned together to do this. That's when it becomes you know, 451 00:26:20,760 --> 00:26:23,840 Speaker 1: billions of dollars of potential risk, and it's that's a 452 00:26:23,880 --> 00:26:27,600 Speaker 1: harder thing UM to control. Is there a class action 453 00:26:27,680 --> 00:26:31,240 Speaker 1: lawsuit or a proposed class action lawsuit already against Google 454 00:26:31,359 --> 00:26:35,200 Speaker 1: for the tracking? So yes, so I think there are 455 00:26:35,320 --> 00:26:37,479 Speaker 1: a number of them. So there there is already an 456 00:26:37,480 --> 00:26:42,720 Speaker 1: existing class action lawsuit out there about private browsing. That's 457 00:26:42,760 --> 00:26:46,840 Speaker 1: been been pending in a federal court in California for 458 00:26:46,920 --> 00:26:49,320 Speaker 1: some time now, and and there are are a handful 459 00:26:49,359 --> 00:26:51,600 Speaker 1: of other suits that that are out there as well. 460 00:26:51,680 --> 00:26:55,520 Speaker 1: Facebook as well, UM has you know, you can go 461 00:26:55,600 --> 00:27:00,280 Speaker 1: back to the Cambridge Analytica matter. Um it's settled, book 462 00:27:00,359 --> 00:27:03,920 Speaker 1: settled that five billion dollar investigation at the Federal Trade Commission. 463 00:27:03,960 --> 00:27:07,920 Speaker 1: But there's still a class action lawsuits from from users 464 00:27:08,480 --> 00:27:11,240 Speaker 1: that Facebook tried to get a dismissal of a couple 465 00:27:11,240 --> 00:27:14,280 Speaker 1: of years ago and the court refused. Now that takes forever. 466 00:27:14,400 --> 00:27:17,159 Speaker 1: We're we've been in discovery for I think two years 467 00:27:17,200 --> 00:27:20,840 Speaker 1: now with with no movement on the case. But again, 468 00:27:21,680 --> 00:27:25,160 Speaker 1: every time there's a big, big, you know, data scandal 469 00:27:25,240 --> 00:27:30,119 Speaker 1: like this, you're inviting class action lawsuits and potentially you know, 470 00:27:30,520 --> 00:27:33,080 Speaker 1: significant settlements. We still don't have a resolution on that 471 00:27:33,160 --> 00:27:35,840 Speaker 1: Facebook one. And as I said, Google as well has 472 00:27:35,920 --> 00:27:38,840 Speaker 1: cases out there that are still pending. Is there any 473 00:27:38,880 --> 00:27:42,160 Speaker 1: doubt that Google does the tracking that they're accused of, 474 00:27:42,720 --> 00:27:44,560 Speaker 1: you know, I think that's going to play out in 475 00:27:45,000 --> 00:27:48,000 Speaker 1: the cases. What Google I think pushed back when when 476 00:27:48,200 --> 00:27:52,199 Speaker 1: the when the litigation was immediately filed and said this 477 00:27:52,359 --> 00:27:56,760 Speaker 1: sort of misstates um our practices, and it deals with 478 00:27:56,880 --> 00:28:01,359 Speaker 1: outdated practices. I think this is really uh, you know 479 00:28:01,640 --> 00:28:06,359 Speaker 1: about a question of how clear were their policies. And 480 00:28:06,400 --> 00:28:11,520 Speaker 1: there's an allegation that, um, Google let people opt out 481 00:28:11,680 --> 00:28:15,720 Speaker 1: of tracking in one way but actually kept some other 482 00:28:15,800 --> 00:28:18,560 Speaker 1: setting on the back end that that consumers wouldn't know 483 00:28:18,800 --> 00:28:21,520 Speaker 1: that they need to turn off as well. And so 484 00:28:21,560 --> 00:28:24,959 Speaker 1: there's I think they're Google will push back and say, look, no, 485 00:28:25,040 --> 00:28:29,600 Speaker 1: this is not nearly as confusing as as users make 486 00:28:29,680 --> 00:28:32,160 Speaker 1: it sound like. So I think there is a fight 487 00:28:32,280 --> 00:28:36,520 Speaker 1: to be fought there, but um, in some cases the 488 00:28:36,560 --> 00:28:39,400 Speaker 1: companies haven't done very well with that. Lately, there there's 489 00:28:39,440 --> 00:28:42,840 Speaker 1: been a push um from the courts to say, look, 490 00:28:43,080 --> 00:28:46,160 Speaker 1: you have to be pretty clear. Um, you can't. You know, 491 00:28:46,280 --> 00:28:48,920 Speaker 1: the users aren't going to read there, you know, their 492 00:28:49,040 --> 00:28:51,640 Speaker 1: terms of service every time they click this stuff. You've 493 00:28:51,640 --> 00:28:54,480 Speaker 1: gotta you can't make this stuff confusing. And I think 494 00:28:55,000 --> 00:28:57,280 Speaker 1: I think it's it would be a tough hurdle to 495 00:28:57,400 --> 00:28:59,560 Speaker 1: get through. So that's where you kind of think that 496 00:28:59,640 --> 00:29:01,760 Speaker 1: there is a real risk that the company would need 497 00:29:01,800 --> 00:29:05,800 Speaker 1: to settle this because um, you know, in some cases, 498 00:29:05,880 --> 00:29:09,080 Speaker 1: their their settings aren't very clear. And as I said, 499 00:29:09,120 --> 00:29:12,680 Speaker 1: there aren't overall legal standards about how they need to be. 500 00:29:12,800 --> 00:29:14,760 Speaker 1: The companies kind of get to do it on their own, 501 00:29:15,280 --> 00:29:17,600 Speaker 1: and so this is the only check that you get 502 00:29:17,640 --> 00:29:19,760 Speaker 1: to make your own terms of service. You just have 503 00:29:19,840 --> 00:29:22,040 Speaker 1: to be clear about it. And I think there is 504 00:29:22,280 --> 00:29:25,360 Speaker 1: room to to litigate over that and risk for the company. 505 00:29:25,520 --> 00:29:28,640 Speaker 1: I'm not particularly tech savvy, but I have been getting 506 00:29:28,760 --> 00:29:31,800 Speaker 1: notices when I open different apps, do you want to 507 00:29:31,800 --> 00:29:34,840 Speaker 1: allow this app to track your location? And I always 508 00:29:34,880 --> 00:29:37,240 Speaker 1: say no. So I think if people are offered the 509 00:29:37,280 --> 00:29:40,440 Speaker 1: opportunity one way or the other, they're going to say no, Right, 510 00:29:40,560 --> 00:29:43,560 Speaker 1: why would you say yes? Yeah? I think that's that's 511 00:29:43,600 --> 00:29:46,120 Speaker 1: exactly it. And and and that's sort of like the 512 00:29:46,280 --> 00:29:49,800 Speaker 1: one of the biggest questions is they'll offer you that 513 00:29:49,880 --> 00:29:54,280 Speaker 1: opportunity on location data. And I think one of the 514 00:29:54,320 --> 00:29:57,840 Speaker 1: biggest risks as you think about what could you know 515 00:29:58,080 --> 00:30:04,360 Speaker 1: legislation look like here, It would be more questions like that, 516 00:30:04,680 --> 00:30:09,440 Speaker 1: more empowering of users to say, um, do you want 517 00:30:09,480 --> 00:30:12,080 Speaker 1: this or do you not? And making it easy for 518 00:30:12,120 --> 00:30:15,400 Speaker 1: them to say no, or Congress could say here's the 519 00:30:15,440 --> 00:30:19,840 Speaker 1: default rule Google, Facebook, you can't take any data unless 520 00:30:19,960 --> 00:30:23,480 Speaker 1: users go through jump through all these hoops to turn 521 00:30:23,520 --> 00:30:27,440 Speaker 1: it on. And so that's the real risk I think 522 00:30:27,480 --> 00:30:31,040 Speaker 1: for the companies is moving down that road. Right now, 523 00:30:31,080 --> 00:30:34,440 Speaker 1: we have some steps there and allegations that even when 524 00:30:34,480 --> 00:30:38,360 Speaker 1: when they give those options, they're not really giving those options, 525 00:30:38,560 --> 00:30:41,840 Speaker 1: and so there's litigation over that. But but the bigger story, 526 00:30:41,880 --> 00:30:46,080 Speaker 1: I think is the potential legislation making that the standard 527 00:30:46,160 --> 00:30:48,920 Speaker 1: and really cutting off the flow of data that fuels 528 00:30:49,040 --> 00:30:55,240 Speaker 1: these businesses. Not how important is the location data for Google? 529 00:30:55,280 --> 00:30:57,640 Speaker 1: I mean, how important is it that they know where 530 00:30:57,680 --> 00:31:01,640 Speaker 1: you are? Yeah, I think the great source of data 531 00:31:01,760 --> 00:31:04,360 Speaker 1: for the companies. And that's that's the point that the 532 00:31:04,440 --> 00:31:07,360 Speaker 1: DC Attorney General and others made when they filed these 533 00:31:07,440 --> 00:31:11,200 Speaker 1: lawsuits that when when you're trying to appeal to advertisers, 534 00:31:11,280 --> 00:31:13,960 Speaker 1: it's it's a great thing to be able to tell them. Look, 535 00:31:14,480 --> 00:31:18,280 Speaker 1: we can pitch a product to these users based on 536 00:31:19,000 --> 00:31:22,240 Speaker 1: our knowledge of where they are, where they're driving, where 537 00:31:22,240 --> 00:31:25,840 Speaker 1: they're taking their phone every day, and then taylor the 538 00:31:25,920 --> 00:31:30,280 Speaker 1: advertising based on that location. That's a key piece of 539 00:31:30,320 --> 00:31:34,160 Speaker 1: knowledge that users are often giving away, maybe without fully 540 00:31:34,200 --> 00:31:38,040 Speaker 1: realizing it. And um, so I think it's an important, 541 00:31:38,200 --> 00:31:40,960 Speaker 1: you know, part of the story. If that gets targeted 542 00:31:41,040 --> 00:31:44,200 Speaker 1: and the rules about how the companies can collect that 543 00:31:44,280 --> 00:31:48,880 Speaker 1: data get tighter. Then, uh, digital ads become a little 544 00:31:48,880 --> 00:31:51,640 Speaker 1: bit less effective because it can't be as tailored to 545 00:31:51,920 --> 00:31:56,240 Speaker 1: exactly where users are. So to sum up, what is 546 00:31:56,760 --> 00:32:00,960 Speaker 1: the greatest risk to Google and Facebook? Is it from Congress, 547 00:32:01,040 --> 00:32:05,959 Speaker 1: from the FTC, or from lawsuits? So it's a great question. 548 00:32:06,040 --> 00:32:08,800 Speaker 1: I think it's all of the above. In theory, the 549 00:32:08,880 --> 00:32:12,920 Speaker 1: biggest risk is a law, you know, because Congress has 550 00:32:13,000 --> 00:32:17,160 Speaker 1: power to impact these businesses in a way that that 551 00:32:17,640 --> 00:32:22,640 Speaker 1: regulators or litigators can't. Uh. The problem there, as we said, 552 00:32:22,680 --> 00:32:25,160 Speaker 1: is it's very difficult to do. We're not there yet, 553 00:32:25,480 --> 00:32:27,920 Speaker 1: doesn't mean we won't get there, But that's the biggest 554 00:32:28,000 --> 00:32:30,880 Speaker 1: risk going forward. In the meantime, you're seeing you're going 555 00:32:30,920 --> 00:32:35,880 Speaker 1: to see, you know, rising costs and risks from regulation 556 00:32:36,240 --> 00:32:40,120 Speaker 1: and from litigation, but those are unlikely to be business 557 00:32:40,200 --> 00:32:42,880 Speaker 1: model disruptive in the way that a new law from 558 00:32:42,880 --> 00:32:45,000 Speaker 1: Congress would be. Thanks so much for being on the 559 00:32:45,000 --> 00:32:49,360 Speaker 1: Bloomberg Laws Show. Matt that's Matthew Chettenhelm, Litigation and government 560 00:32:49,400 --> 00:32:52,800 Speaker 1: analysts for Bloomberg Intelligence. And that's it for this edition 561 00:32:52,800 --> 00:32:55,480 Speaker 1: of the Bloomberg Law Show. Remember you can always get 562 00:32:55,480 --> 00:32:58,640 Speaker 1: the latest legal news on our Bloomberg Law Podcast. You 563 00:32:58,680 --> 00:33:01,560 Speaker 1: can find them on Apple pod Casts, Spotify, and at 564 00:33:01,760 --> 00:33:06,760 Speaker 1: www dot bloomberg dot com, slash podcast slash Law, and 565 00:33:06,840 --> 00:33:09,560 Speaker 1: remember to tune into The Bloomberg Law Show every week 566 00:33:09,680 --> 00:33:13,240 Speaker 1: night at ten pm Wall Street Time. I'm June Grosso 567 00:33:13,400 --> 00:33:14,960 Speaker 1: and you're listening to Bloomberg