WEBVTT - Trump Blocks Broadcom’s Bid for Qualcomm

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. President Trump has

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<v Speaker 1>blocked what would have been the largest tech deal in

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<v Speaker 1>US history, Broadcom's one seventeen billion dollar hostel takeover of Qualcom.

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<v Speaker 1>This was just the fifth time since that a US

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<v Speaker 1>president stopped a foreign take over an American firm on

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<v Speaker 1>national security grounds. Trump issued the executive order after a

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<v Speaker 1>recommendation from the Committee on Foreign Investment in the US

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<v Speaker 1>Joining me from our Bloomberg San Francisco Studios is Matt Lawson,

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<v Speaker 1>Bloomberg Intelligence litigation analyst Matt. In his executive order, Trump said,

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<v Speaker 1>there's credible evidence that leads me to believe that Broadcom,

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<v Speaker 1>by acquiring called Welcome, might take action that threatens to

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<v Speaker 1>impair the national security of the United States. What is

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<v Speaker 1>that evidence? You know. The one of the problems with

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<v Speaker 1>with these investigations, the CIFIUS Investigations Committee Foreign Investment in

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<v Speaker 1>the U S is there's not a whole lot of

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<v Speaker 1>transparency as to what they're looking at. Specifically, it's largely

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<v Speaker 1>it looks to be largely directed to the development of

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<v Speaker 1>five G and next generation wireless communication devices. UM. There's

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<v Speaker 1>a lot of concern about who is leading the way

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<v Speaker 1>and developing this these technologies, what it could mean for UM,

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<v Speaker 1>for data privacy, for security, for espionage, etcetera. And so

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<v Speaker 1>I think that there's there's large concern that consolidation among

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<v Speaker 1>either businesses that do of a lot of work in

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<v Speaker 1>China or Chinese own businesses. Not that Broadcom is a

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<v Speaker 1>Chinese own business, but there's a concern that UM that

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<v Speaker 1>movements of those technologies abroad would compromise US interests. So

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<v Speaker 1>this does come in the wake of Trump's announced of

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<v Speaker 1>tariffs on steel and aluminum. But are you saying that

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<v Speaker 1>blocking the Broadcom takeover has less to do with his

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<v Speaker 1>general protectionist stance and is more focused on technology or

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<v Speaker 1>on China. I would say it's a little bit of both.

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<v Speaker 1>I mean, there's certainly a protectionist flavor to it. You know,

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<v Speaker 1>Qualcom is you know US company. They have a very

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<v Speaker 1>strong foothold in the development of five G and next

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<v Speaker 1>generation technologies. They are UM the leader in developing the

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<v Speaker 1>chip sets that will drive next generation devices, and so

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<v Speaker 1>given the Trump administration's focus on developing infrastructure and leading

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<v Speaker 1>the way in five G in the US, it makes

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<v Speaker 1>sense to to keep those businesses isolated from from foreign interests.

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<v Speaker 1>So it has a little bit to do with the

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<v Speaker 1>tech and it also has a little bit to do

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<v Speaker 1>with the with the overall economic goals of the administration

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<v Speaker 1>to be a little bit more protectionist and a little

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<v Speaker 1>bit more US focused. This move by a president to

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<v Speaker 1>stop a hostile bid for a company was unprecedented in

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<v Speaker 1>that Ciffius intervened in the middle of a proxy fight

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<v Speaker 1>rather than waiting for a formal purchase agreement. Are there

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<v Speaker 1>any concerns that could set a precedent for future deals? Yeah,

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<v Speaker 1>I think that's That's largely everyone's concern right now. Is

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<v Speaker 1>you know, the president jumped the gun a little bit.

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<v Speaker 1>I think is is kind of how people are viewing this. Typically,

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<v Speaker 1>CIFIUS will review, they'll issue UM a ruling or suggested

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<v Speaker 1>remedial order. Sometimes companies can can siphon off business segments

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<v Speaker 1>to UH to address any national security concerns. But here

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<v Speaker 1>you kind of had the president hop in and just

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<v Speaker 1>put an end to the deal before a complete Siffius,

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<v Speaker 1>before the the CIFIUS process could run its run its course.

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<v Speaker 1>And so as you're looking at future M and A activity,

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<v Speaker 1>future joint ventures, etcetera, I think, you know, tech companies

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<v Speaker 1>are going to be scratching their heads a little bit

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<v Speaker 1>and and being overly cautious before they enter into these

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<v Speaker 1>kind of deals for fear that the president or or

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<v Speaker 1>SIPHIUS may take a more aggressive stance on blocking the deals.

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<v Speaker 1>At least a half dozen tech deals have collapsed during

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<v Speaker 1>the Trump administration in the face of concerns raised by CIPHIUS.

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<v Speaker 1>So do you expect that any deal that could give

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<v Speaker 1>China and edge in critical technology will be blocked in

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<v Speaker 1>the name of national security? You know, certainly as we're

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<v Speaker 1>looking at developments in five G, there's been a lot

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<v Speaker 1>of skepticism looking at you know, Chinese handset makers and

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<v Speaker 1>ship makers and network infrastructure companies like Huawei Zte have

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<v Speaker 1>been explicitly called out by by lawmakers, UM and government officials.

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<v Speaker 1>So it's it's going to be a touchy subject moving forward, UM.

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<v Speaker 1>You know, especially if there's a lot of development in

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<v Speaker 1>next generation wireless, both in UH in a pack and

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<v Speaker 1>and in the US kind of moving in parallel. Will

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<v Speaker 1>be interesting to see how policymakers decide to to approach

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<v Speaker 1>this moving forward. And is there a move by policymakers

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<v Speaker 1>to actually expand the reach of Scythius There is, there's

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<v Speaker 1>there's discussion about expanding UM the scope and a little

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<v Speaker 1>bit of the authority of Scifius moving forward. UM. You know,

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<v Speaker 1>Cifius already has pretty broad jurisdiction UM when it comes

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<v Speaker 1>to looking at foreign investments and potential control over US

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<v Speaker 1>interests UM. And so lawmakers are you know, have considered

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<v Speaker 1>expanding that, especially as there are growing concerns over different

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<v Speaker 1>types of data security technology, access to information kind of

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<v Speaker 1>who can UM influence the tech on on both sides,

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<v Speaker 1>both the developments and then also the utilization. So lawmakers

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<v Speaker 1>are certainly looking at expanding their their grip on controlling

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<v Speaker 1>those types of technologies and investments moving forward. So, Matt,

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<v Speaker 1>what's next for Qualcom? Yeah, So with the with the

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<v Speaker 1>broad Calm drama out of the way, UM qual calms shareholders,

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<v Speaker 1>I think we'll start focusing back on the licensing business.

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<v Speaker 1>Qual Com has been in a global licensing dispute with

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<v Speaker 1>Apple over appropriate royalty rates. About a third of Qualcom's

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<v Speaker 1>revenue and two thirds of its profitability prior to this

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<v Speaker 1>dispute came from patent licensing. Apple says Qualcom is charging

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<v Speaker 1>rates that are too high on these assets, and as

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<v Speaker 1>a result, Qualcom is being bled out by about four

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<v Speaker 1>billion a year in unpaid royalties from Apple and Apples

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<v Speaker 1>contract manufacturers. So the focus is now on this dispute.

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<v Speaker 1>Can Qualcom turn the corner? Can they do a deal

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<v Speaker 1>with Apple and resolve this widespread litigation um and kind

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<v Speaker 1>of move the company forward. I think that's what a

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<v Speaker 1>lot of people are gonna be focusing on for you

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<v Speaker 1>have a very tough job. You have a very tough

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<v Speaker 1>job keeping track of technology litigation today because there's so

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<v Speaker 1>much of it. Just in in about forty five seconds,

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<v Speaker 1>when could we see progress in the Apple lawsuits? Yeah?

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<v Speaker 1>So overall their forty four Apple lawsuits, there maybe a

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<v Speaker 1>couple more that I'm that I'm missing across eight different countries.

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<v Speaker 1>We're looking at trials and some initial decisions either at

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<v Speaker 1>the end of the second quarter and probably in the

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<v Speaker 1>second half of the year. From We're looking at Germany, China,

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<v Speaker 1>and there should be a US International Trade Commission trial

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<v Speaker 1>in June. So those are the next catalyst coming up.

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<v Speaker 1>Sure to keep you busy and me busy as well.

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<v Speaker 1>Thanks so much, Matt, Always a pleasure to have you on.

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<v Speaker 1>That's Matt Larsenit's Bloomberg Intelligence Litigation Analyst. For more of

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<v Speaker 1>his analysis, you can go to d I go on

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<v Speaker 1>the Bloomberg terminal. Polls are open in Pennsylvania's eighteen district

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<v Speaker 1>as a national political spotlight, Shaun's on a special election

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<v Speaker 1>in a district that may not exist soon. The first

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<v Speaker 1>special House election of the year pits Democrat Connor Lamb

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<v Speaker 1>against Republican ricks A Cone in a district that President

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<v Speaker 1>Trump won by twenty points, but the race is too

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<v Speaker 1>close to call. The special election was triggered by the

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<v Speaker 1>resignation of Republican Congressman Tim Murphy following allegations he asked

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<v Speaker 1>a woman to end her pregnancy. Joining me as its fault.

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<v Speaker 1>Professor at Columbia Law School and an expert in election law,

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<v Speaker 1>rich This is a district where the Democrats didn't even

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<v Speaker 1>field a candidate in the last two congressional elections. If

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<v Speaker 1>Lamb wins or even comes close, what does that indicate well,

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<v Speaker 1>it indicates uh, he continuing trend in a number of

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<v Speaker 1>the special elections we've seen over the last year or so.

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<v Speaker 1>Gewargia Democrats, all the Democrats in general have They haven't

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<v Speaker 1>always won, but they have almost consistently outperformed their prior

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<v Speaker 1>records and almost all the special elections that have been held,

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<v Speaker 1>uh in since the middle of last year. This is

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<v Speaker 1>a district that Republicans have won for I don't know

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<v Speaker 1>about twenty years. And Trump went down there and over

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<v Speaker 1>the weekend and really did some heavy campaigning for the candidate.

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<v Speaker 1>So he really does he really have a lot at

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<v Speaker 1>stake here. Well, it would be a big embarrassment to

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<v Speaker 1>lose this district. As you point out, the district has

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<v Speaker 1>been in Republican hands for about twenty years. Uh. Last

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<v Speaker 1>time in the Democrats didn't even put up a nominee. Uh.

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<v Speaker 1>Trump took the district by twenty points. Romney took it

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<v Speaker 1>by about the same in twelve UM. It is on

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<v Speaker 1>average about more Republican than the country as a whole,

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<v Speaker 1>So to lose it would be quite embarrassing. Now people

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<v Speaker 1>are talking about this and other elections as an indicator

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<v Speaker 1>for the mid terms, but the mid terms are still

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<v Speaker 1>eight months away and a lot can happen between them.

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<v Speaker 1>And now do you look at these elections as indicators.

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<v Speaker 1>It's premature. I mean, um, I mean they tell us

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<v Speaker 1>what they tell us. They tell us that as these

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<v Speaker 1>other elections have shown this that in the recent months

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<v Speaker 1>there are the Republicans are not as popular as they

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<v Speaker 1>once were, and the president may be pulling things down again.

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<v Speaker 1>They've they've won a lot of their special elections, but

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<v Speaker 1>they've simply won them by an hour of margins than

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<v Speaker 1>in the past. And of course they say this, they

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<v Speaker 1>lost the Alabama seat. Now, unless there's last minute reversal

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<v Speaker 1>by the courts, the eighteenth district will soon cease to

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<v Speaker 1>exist in its current form. Explain what's happened there? Sure so, um,

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<v Speaker 1>there was a lawsuit was brought challenging the Pennsylvania Congressional

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<v Speaker 1>district plan as heavily gerrymander in favor of the Republicans. Uh.

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<v Speaker 1>Since the plan was adopted back in the beginning of

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<v Speaker 1>this decade, Republicans of the state has eighteen districts. Republicans

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<v Speaker 1>have consistently won thirteen, leaving the Democrats five. This is

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<v Speaker 1>a state which is pretty much a swing state and

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<v Speaker 1>when Democratics for president the less several elections until the

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<v Speaker 1>most recently until sixteen when Trump took it. It currently

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<v Speaker 1>has a Democratic governor. It has one Democratic senator. Pennsylvania

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<v Speaker 1>is a classic swing state, but it's congressional delegation has

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<v Speaker 1>been heavily weighted Republican, largely due to the nature of

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<v Speaker 1>the map and so the Pennsylvania courts. The Pennsylvania this

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<v Speaker 1>was litigated in the Pennsylvania state courts under their their

0:10:54.440 --> 0:10:58.240
<v Speaker 1>state constitutions guarantees of free speech and equal protection. That

0:10:58.360 --> 0:11:03.480
<v Speaker 1>court concluded that this district was impermissively unconstitutionally gerrymandered and

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<v Speaker 1>ordered a new plan to be developed. The legislature didn't

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<v Speaker 1>do that. They pointed a special master. He came up

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<v Speaker 1>with a plan which they reproved, which would, as you say,

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<v Speaker 1>it's basically eliminate this district in its current form, in

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<v Speaker 1>effect dividing it amongst so splitting it uh in two

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<v Speaker 1>different ways. The district which is kind of a hybrid

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<v Speaker 1>suburban and rural district, and the suburban part would become

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<v Speaker 1>more more suburban, the rural part become more rural. Now,

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<v Speaker 1>is there any likelihood that that Pennsylvania Supreme Court decision

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<v Speaker 1>would be reversed. It's possible. Republicans have been challenging the

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<v Speaker 1>Pennsylanian Supreme Court is of course the highest court in

0:11:41.480 --> 0:11:44.679
<v Speaker 1>the state, so no state court can reverse it. Reublicans

0:11:44.720 --> 0:11:46.439
<v Speaker 1>have tried to get the U. S. Supreme Court to

0:11:46.480 --> 0:11:49.040
<v Speaker 1>take on the case. So far the court has declined.

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<v Speaker 1>The Court declined to enter it by issuing a temporary

0:11:52.520 --> 0:11:57.720
<v Speaker 1>restraining order blocking the thus the Pennsylvania Court to add decision. Uh,

0:11:57.760 --> 0:12:01.880
<v Speaker 1>there's now another appeal pending. It would be unusual to

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<v Speaker 1>step in, but you know it's not out of the question. Um.

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<v Speaker 1>The new map that you've been talking about will slit,

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<v Speaker 1>as you said, most of the current eighteenth district into

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<v Speaker 1>the four and the seventeenth district. If Scone wins, he

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<v Speaker 1>said he would seek re election in the fourteenth district.

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<v Speaker 1>Is that a good choice for him? That I believe

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<v Speaker 1>is the more rural one as the rural part of

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<v Speaker 1>the districts. I understand that the district has a is

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<v Speaker 1>about in a suburban area and about in a rural area.

0:12:32.640 --> 0:12:35.840
<v Speaker 1>And I think, um, and this is how Republicans because

0:12:35.840 --> 0:12:39.000
<v Speaker 1>it's kind of uh, sort of deluded the suburban vote,

0:12:39.040 --> 0:12:42.480
<v Speaker 1>which is pretty evenly balanced between Republicans and Democrats, by

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<v Speaker 1>combining with a much more Republican area. So most yes,

0:12:45.960 --> 0:12:48.520
<v Speaker 1>he would most likely one in the rural district, uh,

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<v Speaker 1>leaving um and and in effect r probably become better

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<v Speaker 1>for him. Uh if if he, if he wins and

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<v Speaker 1>then become and runs in the new fourteen, we should

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<v Speaker 1>say that the winner will still have to run again

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<v Speaker 1>in November. That's right, right? Whoever will take office? I

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<v Speaker 1>guess Wednesday. Maybe he says, how quickly they concertify the results,

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<v Speaker 1>Maybe it's like a little longer than that will only

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<v Speaker 1>serve until the end of this year. They will the

0:13:11.880 --> 0:13:16.000
<v Speaker 1>regularly scheduled election in November will be held in this

0:13:16.040 --> 0:13:17.800
<v Speaker 1>person will only serve until the end of the year,

0:13:18.040 --> 0:13:21.720
<v Speaker 1>So Lamb. Though he hasn't said anything, some election experts

0:13:21.720 --> 0:13:25.000
<v Speaker 1>say he's likely to run in the sevente district, where

0:13:25.040 --> 0:13:28.800
<v Speaker 1>there is an incumbent Republicans. Will that be a tough

0:13:28.840 --> 0:13:33.120
<v Speaker 1>battle for him, probably, but that district will become more

0:13:33.160 --> 0:13:36.200
<v Speaker 1>democratic entities now and he will be able to take

0:13:36.280 --> 0:13:39.920
<v Speaker 1>with him part of the current district. So in other words,

0:13:39.960 --> 0:13:43.600
<v Speaker 1>that that all the districts will have the same names

0:13:43.600 --> 0:13:47.880
<v Speaker 1>but different contents. So the seventeenth district that will that

0:13:47.960 --> 0:13:51.160
<v Speaker 1>will be whether be an election in November, will not

0:13:51.200 --> 0:13:53.600
<v Speaker 1>be today's seventeenth district. And there is a belief that

0:13:54.320 --> 0:13:57.280
<v Speaker 1>once UH, if the districts go forward as under the

0:13:57.280 --> 0:14:00.280
<v Speaker 1>new plan, that district will be a lot more democt,

0:14:00.440 --> 0:14:02.679
<v Speaker 1>a lot more balance than maybe more pro democratic than

0:14:02.720 --> 0:14:07.640
<v Speaker 1>it is now. Rich Just UH, briefly, what cases are

0:14:07.840 --> 0:14:12.080
<v Speaker 1>involving voting are we waiting for Supreme Court decisions in Well,

0:14:12.120 --> 0:14:15.080
<v Speaker 1>basically there are two cases that the Supreme Court has taken.

0:14:15.120 --> 0:14:18.200
<v Speaker 1>One of the Wisconsin case, the Guild case, which was

0:14:18.320 --> 0:14:21.720
<v Speaker 1>a challenge to the entire map of the state legislative

0:14:21.720 --> 0:14:25.080
<v Speaker 1>map in Wisconsin and brings the most comprehensive UH proposal

0:14:25.160 --> 0:14:27.520
<v Speaker 1>for the Supreme Court to get into the reviewing of

0:14:27.560 --> 0:14:31.360
<v Speaker 1>partisan gerrymandering. There's also a challenge to a specific district

0:14:31.360 --> 0:14:35.400
<v Speaker 1>in Maryland. So the district in Wisconsin was a Republican gerrymanager,

0:14:35.640 --> 0:14:37.600
<v Speaker 1>the one in Maryland was a democratic one in which

0:14:37.600 --> 0:14:41.720
<v Speaker 1>a previously Republican congressional district was reconfigured to allow Democrats

0:14:41.720 --> 0:14:45.400
<v Speaker 1>to win. That that case has a different theory targeting

0:14:45.440 --> 0:14:48.680
<v Speaker 1>just a specific district Uh, and focuses on the district

0:14:48.720 --> 0:14:51.360
<v Speaker 1>lines and on the stated intent. And then there is

0:14:51.400 --> 0:14:54.960
<v Speaker 1>the possibility that they might take on this reviewing the

0:14:54.960 --> 0:14:58.880
<v Speaker 1>Pennsylvania decision with going to the Pennsylvania a congressional plan,

0:14:59.160 --> 0:15:02.560
<v Speaker 1>which would make things even more complicated. Uh, if they

0:15:02.600 --> 0:15:05.120
<v Speaker 1>had to, if they took it on, how could they

0:15:05.120 --> 0:15:08.520
<v Speaker 1>really take it on and uh make it make it

0:15:08.920 --> 0:15:12.120
<v Speaker 1>work before they could do it now? In other words,

0:15:12.360 --> 0:15:15.000
<v Speaker 1>the most likely they would is that they would block

0:15:15.080 --> 0:15:18.560
<v Speaker 1>the court decision, let the district continue on its current lines,

0:15:18.600 --> 0:15:21.280
<v Speaker 1>and probably hear it next Hall. It's hard to imagine

0:15:21.280 --> 0:15:24.200
<v Speaker 1>that they could actually have a full blown hearing on

0:15:24.320 --> 0:15:27.400
<v Speaker 1>at this point. So again, you never know. We we'll

0:15:27.480 --> 0:15:31.320
<v Speaker 1>talk again soon. Thank you, rich that's Richard for Fault, Professor,

0:15:31.400 --> 0:15:35.239
<v Speaker 1>Columbia Law School. Thanks for listening to the Bloomberg Law Podcast.

0:15:35.560 --> 0:15:39.640
<v Speaker 1>You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

0:15:39.720 --> 0:15:43.600
<v Speaker 1>and on Bloomberg dot com slash podcast. I'm June Brosso.

0:15:44.080 --> 0:15:47.960
<v Speaker 1>This is Bloomberg yea