1 00:00:03,200 --> 00:00:08,000 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:09,160 --> 00:00:13,400 Speaker 2: The evidence is in in the US government's landmark antitrust 3 00:00:13,480 --> 00:00:17,279 Speaker 2: case against Google. During a ten week trial, DC Federal 4 00:00:17,360 --> 00:00:21,560 Speaker 2: Judge Amitt Meta heard from more than fifty witnesses, including 5 00:00:21,640 --> 00:00:26,279 Speaker 2: Google's CEO, Microsoft's CEO, and Apple executives. But the most 6 00:00:26,440 --> 00:00:30,760 Speaker 2: damning evidence may be the internal documents. The Justice Department 7 00:00:30,880 --> 00:00:35,040 Speaker 2: introduced the email slides and other records to show how 8 00:00:35,080 --> 00:00:39,760 Speaker 2: Google's lavish payments to other companies ensured its search engine 9 00:00:39,800 --> 00:00:44,440 Speaker 2: became the pre selected option almost everywhere that people access 10 00:00:44,520 --> 00:00:48,800 Speaker 2: the Internet. Joining me is Bloomberg Intelligence Senior litigation analyst 11 00:00:48,960 --> 00:00:54,000 Speaker 2: Jennifer ree Jen. Were the documents more convincing than the testimony? 12 00:00:54,440 --> 00:00:56,240 Speaker 3: You know, I think so, And I actually tend to 13 00:00:56,240 --> 00:00:58,240 Speaker 3: agree that that is the case most of the time 14 00:00:58,280 --> 00:01:01,280 Speaker 3: in the anti trust trials, because the testimony as to 15 00:01:01,720 --> 00:01:04,840 Speaker 3: whether something causes harm or whether a business strategy is 16 00:01:04,840 --> 00:01:07,679 Speaker 3: pro competitive and legitimate. You know, the testimony will be 17 00:01:07,920 --> 00:01:09,959 Speaker 3: whatever it will be, and it's as good as the 18 00:01:09,959 --> 00:01:12,880 Speaker 3: trustworthiness of the witness. But the documents tell the truth. 19 00:01:13,000 --> 00:01:16,000 Speaker 3: I mean, the documents show what the business was thinking about, 20 00:01:16,040 --> 00:01:18,440 Speaker 3: what was presented to the board, how it was viewed, 21 00:01:18,480 --> 00:01:21,000 Speaker 3: how competition was viewed, and what the intention of certain 22 00:01:21,000 --> 00:01:23,720 Speaker 3: strategies are. And those speak the truth because they're made 23 00:01:23,760 --> 00:01:26,400 Speaker 3: in the ordinary course, they're not made with litigation in mind. 24 00:01:26,680 --> 00:01:29,600 Speaker 3: So I do think, particularly in this case, these documents 25 00:01:29,600 --> 00:01:30,400 Speaker 3: are very important. 26 00:01:30,600 --> 00:01:33,360 Speaker 2: This got so much attention that Google spends twenty six 27 00:01:33,560 --> 00:01:39,039 Speaker 2: billion dollars to be the default. So what documentary evidence 28 00:01:39,080 --> 00:01:40,039 Speaker 2: are we talking about there? 29 00:01:40,480 --> 00:01:43,360 Speaker 4: Well, I mean this is just their profit law statements. 30 00:01:43,400 --> 00:01:45,200 Speaker 3: I mean it was a document that showed what they 31 00:01:45,240 --> 00:01:47,600 Speaker 3: call their traffic acquisition costs, and this is sort of 32 00:01:47,600 --> 00:01:50,120 Speaker 3: translates into you know, what they have to pay to 33 00:01:50,160 --> 00:01:52,720 Speaker 3: be the default search engine in many different places where 34 00:01:52,760 --> 00:01:55,320 Speaker 3: somebody might go to search like Safari, let's say, or 35 00:01:55,320 --> 00:01:57,680 Speaker 3: you're going to Chrome and you're searching something on the Internet, 36 00:01:57,840 --> 00:02:01,160 Speaker 3: the default that's set is basically Google Search. So the 37 00:02:01,200 --> 00:02:04,160 Speaker 3: twenty six billion was this cost, and what that is 38 00:02:04,200 --> 00:02:06,200 Speaker 3: are payments that are made in order to have that 39 00:02:06,280 --> 00:02:09,360 Speaker 3: default position. One to Apple, there are payments made to 40 00:02:09,400 --> 00:02:12,280 Speaker 3: the phone makers like Samsung that make the Android mobile devices, 41 00:02:12,280 --> 00:02:14,440 Speaker 3: and I should say mobile devices because it's not just phones, 42 00:02:14,680 --> 00:02:17,640 Speaker 3: it's tablets and computers as well, so there was a 43 00:02:17,680 --> 00:02:20,120 Speaker 3: document that showed this number, and Google was actually trying 44 00:02:20,120 --> 00:02:22,639 Speaker 3: to keep this hidden in trial, but the judge decided, no, 45 00:02:22,720 --> 00:02:24,720 Speaker 3: We're going to make it public. And I think it 46 00:02:24,760 --> 00:02:26,600 Speaker 3: was a bit of a shock because there were some 47 00:02:26,800 --> 00:02:28,960 Speaker 3: estimates of what this number might be and people were 48 00:02:28,960 --> 00:02:32,400 Speaker 3: talking about eighteen billion, maybe ten billion paid to Apple, 49 00:02:32,560 --> 00:02:35,120 Speaker 3: maybe another eight So this was a surprise when we 50 00:02:35,160 --> 00:02:36,240 Speaker 3: got to that twenty six. 51 00:02:36,520 --> 00:02:37,600 Speaker 4: It's a very high number. 52 00:02:38,400 --> 00:02:41,400 Speaker 2: We all know about search ads because they're annoying, and 53 00:02:41,440 --> 00:02:44,720 Speaker 2: there were notes prepared for a speech by a Google 54 00:02:44,800 --> 00:02:49,640 Speaker 2: finance executive in twenty seventeen talking about just how lucrative 55 00:02:49,800 --> 00:02:50,880 Speaker 2: search ads are. 56 00:02:51,680 --> 00:02:54,680 Speaker 3: They are annoying and in fact getting more and more 57 00:02:54,720 --> 00:02:56,840 Speaker 3: prevalent June, and this is one of the things that 58 00:02:56,919 --> 00:02:59,880 Speaker 3: DJ is saying, Look, Google, you have this monopoly on 59 00:03:00,120 --> 00:03:03,000 Speaker 3: general search. And because of the monopoly on general search, 60 00:03:03,520 --> 00:03:07,760 Speaker 3: that means that advertisers feel they must advertise via your 61 00:03:07,800 --> 00:03:09,880 Speaker 3: search results. And I don't know if you've noticed most 62 00:03:09,880 --> 00:03:13,320 Speaker 3: people have, but sometimes the top results that come up 63 00:03:13,320 --> 00:03:15,560 Speaker 3: when you do a search, they look like their search results, 64 00:03:15,560 --> 00:03:18,000 Speaker 3: but they are actually sponsored ads. And so this is 65 00:03:18,040 --> 00:03:20,480 Speaker 3: part of what the DJ says is degradation of quality. 66 00:03:20,520 --> 00:03:23,040 Speaker 3: And I think that we saw in the Google documents. 67 00:03:23,240 --> 00:03:25,800 Speaker 3: You know that they make this huge profit and what 68 00:03:25,840 --> 00:03:28,480 Speaker 3: they charge for advertising, and there were also some documents 69 00:03:28,480 --> 00:03:31,160 Speaker 3: that supported the idea that they could kind of raise 70 00:03:31,200 --> 00:03:33,640 Speaker 3: the prices to advertisers as they saw fit and not 71 00:03:33,680 --> 00:03:35,840 Speaker 3: really suffer from it. I mean, one of the ways 72 00:03:36,040 --> 00:03:38,440 Speaker 3: that you can understand that a company has a monopoly 73 00:03:38,680 --> 00:03:41,000 Speaker 3: is that it can raise its prices and not see 74 00:03:41,000 --> 00:03:43,520 Speaker 3: demand go down, but demand stays the same. When the 75 00:03:43,560 --> 00:03:46,240 Speaker 3: prices are raised, it means, you know, the advertisers don't 76 00:03:46,240 --> 00:03:48,960 Speaker 3: go somewhere else they need to advertise there. So there 77 00:03:48,960 --> 00:03:51,800 Speaker 3: were documents that bore that out. They bore the enormous 78 00:03:51,840 --> 00:03:54,200 Speaker 3: amount of profit they make from advertising, but they also 79 00:03:54,280 --> 00:03:56,760 Speaker 3: showed that when they needed to show a little bit 80 00:03:56,760 --> 00:03:58,520 Speaker 3: of a better margin, at one point, they were able 81 00:03:58,520 --> 00:04:00,800 Speaker 3: to just raise advertising prices and it didn't hurt them. 82 00:04:01,080 --> 00:04:05,120 Speaker 2: Google's most important default deal was with Apple, and there 83 00:04:05,200 --> 00:04:09,280 Speaker 2: was a provision negotiated in twenty sixteen that the two 84 00:04:09,320 --> 00:04:14,880 Speaker 2: would support and defend their packed against antitrust scrutiny. Yeah. 85 00:04:14,920 --> 00:04:16,800 Speaker 3: I mean that showed up in the documents too, and 86 00:04:16,839 --> 00:04:19,599 Speaker 3: that's why those documents are so important because I'm not 87 00:04:19,640 --> 00:04:21,680 Speaker 3: so sure that that's something that would have been elicited 88 00:04:21,680 --> 00:04:25,000 Speaker 3: through testimony. There was an agreement that if there was 89 00:04:25,040 --> 00:04:29,520 Speaker 3: some antitrust challenge to the default agreement that was struck 90 00:04:29,560 --> 00:04:32,200 Speaker 3: between Google and Apple, that they would both defend it 91 00:04:32,279 --> 00:04:34,880 Speaker 3: in cord or defend it as needed. Now, let me 92 00:04:34,880 --> 00:04:37,840 Speaker 3: say one thing about that, because it sounds really bad, right, Yeah, 93 00:04:37,880 --> 00:04:39,839 Speaker 3: it sounds bad. But at the end of the day, 94 00:04:40,080 --> 00:04:44,080 Speaker 3: antitrust monopolistic conduct is adjudged by a reasonableness standard. 95 00:04:44,080 --> 00:04:46,400 Speaker 4: I know that sounds kind of strange, but it's very 96 00:04:46,520 --> 00:04:48,080 Speaker 4: very much of a gray area. 97 00:04:48,160 --> 00:04:51,279 Speaker 3: So companies are often asking lawyers, well, we would like 98 00:04:51,360 --> 00:04:53,800 Speaker 3: to do X, we want this new strategy. Is this 99 00:04:53,839 --> 00:04:55,760 Speaker 3: going to violate the anti trust laws? And a lot 100 00:04:55,800 --> 00:04:57,760 Speaker 3: of times the answer is, well, maybe and maybe not. 101 00:04:58,160 --> 00:05:00,880 Speaker 3: You might get challenged. We think this is OA, We 102 00:05:00,960 --> 00:05:03,400 Speaker 3: think that the benefits of this outweigh the harms that 103 00:05:03,400 --> 00:05:05,480 Speaker 3: could come from this. But it doesn't mean you won't 104 00:05:05,520 --> 00:05:09,040 Speaker 3: be challenged. So just the fact that they've decided they 105 00:05:09,080 --> 00:05:11,880 Speaker 3: had this side agreement where they will both defend this 106 00:05:12,000 --> 00:05:16,359 Speaker 3: agreement if they are challenged doesn't necessarily mean that it's illegal. 107 00:05:16,640 --> 00:05:19,479 Speaker 2: I know, we talked about being the default before and 108 00:05:19,880 --> 00:05:22,479 Speaker 2: whether it matters. I think it matters to most people. 109 00:05:22,520 --> 00:05:25,480 Speaker 2: But what kind of testimony or documentary evidence was there 110 00:05:25,520 --> 00:05:25,960 Speaker 2: about that? 111 00:05:26,680 --> 00:05:29,440 Speaker 3: You know, first of all, I think that the fact 112 00:05:29,480 --> 00:05:32,480 Speaker 3: that Google's paying twenty six billion dollars a year in 113 00:05:32,560 --> 00:05:35,600 Speaker 3: order to have that position suggests there's some serious value 114 00:05:35,640 --> 00:05:38,520 Speaker 3: to being there. And if people willing nearly were changing 115 00:05:38,520 --> 00:05:40,640 Speaker 3: their default search engine to Being or DUC dot Go, 116 00:05:40,720 --> 00:05:43,560 Speaker 3: which are the two main competitors to Google Search, I 117 00:05:43,560 --> 00:05:45,919 Speaker 3: don't think they'd be paying that kind of money. So 118 00:05:46,400 --> 00:05:49,120 Speaker 3: that's one thing that speaks for itself. But the other thing, 119 00:05:49,200 --> 00:05:52,000 Speaker 3: I thought there was really compelling evidence from a Department 120 00:05:52,000 --> 00:05:56,080 Speaker 3: of Justice expert who was an expert in behavioral economics, 121 00:05:56,200 --> 00:05:58,840 Speaker 3: and he has spent his time studying how people behave 122 00:05:58,880 --> 00:06:01,479 Speaker 3: when they're confronted with the default, not just in the 123 00:06:01,520 --> 00:06:04,560 Speaker 3: digital world, but in many types of different examples. 124 00:06:04,680 --> 00:06:06,160 Speaker 4: He was even looking at organ. 125 00:06:05,960 --> 00:06:10,200 Speaker 3: Donation right, And I thought his testimony was really compelling 126 00:06:10,279 --> 00:06:12,960 Speaker 3: because my personal position going into this was. 127 00:06:12,920 --> 00:06:15,160 Speaker 4: Well, I changed the defaults. I think it's easy to do. 128 00:06:15,279 --> 00:06:16,039 Speaker 4: I think it's quick. 129 00:06:16,279 --> 00:06:18,839 Speaker 3: I use Microsoft and I change from Being which is 130 00:06:18,880 --> 00:06:21,680 Speaker 3: set to Google because I like it better people can 131 00:06:21,760 --> 00:06:23,839 Speaker 3: just do this and there's nothing exclusive about it. But 132 00:06:23,880 --> 00:06:26,120 Speaker 3: you know, he kind of changed my mind on it 133 00:06:26,320 --> 00:06:30,680 Speaker 3: because he showed how people simply don't change defaults. That 134 00:06:31,120 --> 00:06:33,520 Speaker 3: a very small percentage, I think, I don't remember the 135 00:06:33,520 --> 00:06:36,520 Speaker 3: exact numbers, but it's low people who know and actually 136 00:06:36,640 --> 00:06:40,240 Speaker 3: would change the default. And he had studies that showed 137 00:06:40,240 --> 00:06:42,800 Speaker 3: even if somebody knows they can change the default, if 138 00:06:42,800 --> 00:06:44,919 Speaker 3: they're going to have to do something to figure out. 139 00:06:44,720 --> 00:06:46,080 Speaker 4: How to do it, they don't do it. 140 00:06:46,920 --> 00:06:50,040 Speaker 3: So sadly, I think the upshot of his testimony was 141 00:06:50,080 --> 00:06:52,599 Speaker 3: that people tend to be uninformed and a little lazy. 142 00:06:52,920 --> 00:06:55,640 Speaker 4: But that was his testimony and it was pretty compelling. 143 00:06:57,000 --> 00:07:00,280 Speaker 2: There's an argument that the more and more people are 144 00:07:00,320 --> 00:07:04,800 Speaker 2: on Google and inputting information, the better and better Google 145 00:07:04,880 --> 00:07:08,919 Speaker 2: gets and that's an advantage over other search engines. Was 146 00:07:08,920 --> 00:07:09,880 Speaker 2: that part of the trial. 147 00:07:10,360 --> 00:07:12,160 Speaker 3: Oh yeah, that is a big part of the trial 148 00:07:12,280 --> 00:07:15,200 Speaker 3: because that is one of the issues that the reason 149 00:07:15,280 --> 00:07:18,240 Speaker 3: that Google wanted to hold down, let's say, wanted to 150 00:07:18,360 --> 00:07:20,920 Speaker 3: have these default positions and sort of not provide a 151 00:07:20,920 --> 00:07:23,640 Speaker 3: place in the marketplace for being or for ductut go 152 00:07:23,760 --> 00:07:25,840 Speaker 3: to have a lot of search activity is because they're 153 00:07:25,880 --> 00:07:29,280 Speaker 3: aware of this wheel right where the more searches you have, 154 00:07:29,360 --> 00:07:30,920 Speaker 3: the better you get, and it was a way for 155 00:07:30,960 --> 00:07:33,600 Speaker 3: them to keep the quality of those two rivals down 156 00:07:34,200 --> 00:07:36,200 Speaker 3: and improve its own quality at the same time. And 157 00:07:36,280 --> 00:07:39,600 Speaker 3: absolutely the Department of Justice has made that allegation. Google 158 00:07:39,680 --> 00:07:41,480 Speaker 3: has said we are the best and we are better, 159 00:07:41,520 --> 00:07:43,480 Speaker 3: and they have also said, oh, by the way, it's 160 00:07:43,520 --> 00:07:45,760 Speaker 3: not just about the data, it's about the algorithm. 161 00:07:45,760 --> 00:07:48,400 Speaker 4: We have a great algorithm. We put in loads of resources. 162 00:07:48,440 --> 00:07:51,120 Speaker 3: We've spent billions of dollars over the years with R 163 00:07:51,160 --> 00:07:54,000 Speaker 3: and D, we hire great people, we put loads of 164 00:07:54,040 --> 00:07:56,280 Speaker 3: resources towards this, and that's why we're great. And you 165 00:07:56,360 --> 00:07:59,000 Speaker 3: know what, Microsoft hasn't put those same kind of resources 166 00:07:59,000 --> 00:08:01,400 Speaker 3: toward it. But on the other side, the Department of 167 00:08:01,560 --> 00:08:04,320 Speaker 3: Justice would argue, well, Microsoft wouldn't put the resources when 168 00:08:04,320 --> 00:08:06,000 Speaker 3: there's no place for them to get out there and 169 00:08:06,160 --> 00:08:08,280 Speaker 3: get people to use being other than maybe on some 170 00:08:08,400 --> 00:08:09,720 Speaker 3: Microsoft computers. 171 00:08:10,280 --> 00:08:13,920 Speaker 2: But there was a presentation by a Google engineer called 172 00:08:14,320 --> 00:08:15,640 Speaker 2: Google is Magical. 173 00:08:16,200 --> 00:08:18,600 Speaker 3: Well, I will say that from the testimony, many who 174 00:08:18,640 --> 00:08:20,720 Speaker 3: work for Google and have worked on the search engine 175 00:08:20,720 --> 00:08:23,120 Speaker 3: are very proud of what they've done. And no one 176 00:08:23,200 --> 00:08:25,200 Speaker 3: is saying that they shouldn't be, and no one was 177 00:08:25,200 --> 00:08:28,720 Speaker 3: saying that it wasn't completely innovated. Google's very innovative and 178 00:08:28,800 --> 00:08:31,840 Speaker 3: that you know, years ago when it first introduced a 179 00:08:31,840 --> 00:08:34,959 Speaker 3: search engine, that it wasn't innovative. It's just a fantastic, 180 00:08:35,200 --> 00:08:37,040 Speaker 3: useful product for consumers. 181 00:08:37,600 --> 00:08:39,680 Speaker 4: But what the DJ has alleged is that. 182 00:08:39,600 --> 00:08:43,199 Speaker 3: At some point in time, along the road of developing 183 00:08:43,240 --> 00:08:46,800 Speaker 3: and becoming this massively popular search engine, I mean a verb, 184 00:08:47,000 --> 00:08:50,840 Speaker 3: you know, that along the time they decided, not only 185 00:08:50,880 --> 00:08:53,400 Speaker 3: have we developed this great search engine and we're fantastic 186 00:08:53,880 --> 00:08:56,760 Speaker 3: and we're innovative, but now we're going to stop any threats. 187 00:08:56,840 --> 00:08:58,880 Speaker 3: We want to stay where we are and we want 188 00:08:58,920 --> 00:09:01,240 Speaker 3: to block any threats. That's really what they're claiming, not 189 00:09:01,320 --> 00:09:03,640 Speaker 3: that it's not a great search engine and not an 190 00:09:03,640 --> 00:09:04,520 Speaker 3: innovative company. 191 00:09:04,920 --> 00:09:07,800 Speaker 2: I'm sure we've spoken before about things being put in 192 00:09:07,800 --> 00:09:11,360 Speaker 2: writing that shouldn't be put in writing, and I always 193 00:09:11,480 --> 00:09:14,840 Speaker 2: wonder why in companies they put things in writing. So 194 00:09:15,120 --> 00:09:19,679 Speaker 2: Google actually told its employees what not to say, and 195 00:09:19,720 --> 00:09:24,000 Speaker 2: the Jaluas department has quote Google's five rules of Thumb 196 00:09:24,080 --> 00:09:26,680 Speaker 2: for written communications. 197 00:09:26,040 --> 00:09:29,320 Speaker 4: To prove it that's exactly right. But let me say 198 00:09:29,320 --> 00:09:30,440 Speaker 4: this that looks awful. 199 00:09:30,440 --> 00:09:32,720 Speaker 3: But as an ex anti trust lawyer, I'll make one 200 00:09:32,760 --> 00:09:35,520 Speaker 3: comment about this, or maybe many comments about this, But 201 00:09:35,800 --> 00:09:39,160 Speaker 3: this is one of the jobs of outside council two big, 202 00:09:39,400 --> 00:09:42,760 Speaker 3: huge companies. They do what's called anti trust compliance training, 203 00:09:43,120 --> 00:09:47,120 Speaker 3: and many companies are actually advised and in writing exactly 204 00:09:47,559 --> 00:09:51,320 Speaker 3: as Alphabet employees were advised. You shouldn't talk about dominance, 205 00:09:51,360 --> 00:09:54,800 Speaker 3: you shouldn't talk about your market power, you shouldn't say, hey, 206 00:09:54,840 --> 00:09:58,400 Speaker 3: you're number one in the market. It's actually pretty commonplace. 207 00:09:58,800 --> 00:10:01,960 Speaker 3: So that kind of advice that came from I'm guessing 208 00:10:01,960 --> 00:10:05,880 Speaker 3: the Anti Trust Council for Alphabet, I think for very 209 00:10:05,960 --> 00:10:08,160 Speaker 3: very big companies is fairly common. 210 00:10:08,800 --> 00:10:09,480 Speaker 4: But don't use the. 211 00:10:09,520 --> 00:10:13,440 Speaker 2: Terms like crush, kill, hurt, or block when talking about rival. 212 00:10:13,520 --> 00:10:17,440 Speaker 3: That's I myself have written compliance manuals that said almost 213 00:10:17,520 --> 00:10:21,400 Speaker 3: that exact same thing. They're even online and maybe some 214 00:10:21,440 --> 00:10:23,920 Speaker 3: compliance attorneys go online and see, hey, what are all 215 00:10:23,960 --> 00:10:26,959 Speaker 3: the words that a big dominant company shouldn't use. 216 00:10:27,559 --> 00:10:29,520 Speaker 4: So honestly, it looked so bad. 217 00:10:29,880 --> 00:10:32,040 Speaker 3: I get that, But at the end of the day, 218 00:10:32,120 --> 00:10:34,400 Speaker 3: it is pretty common practice for a really big company 219 00:10:34,440 --> 00:10:35,960 Speaker 3: to have that kind of guidance internally. 220 00:10:36,840 --> 00:10:41,240 Speaker 2: So how did Google do on defense or on defense, 221 00:10:41,280 --> 00:10:43,080 Speaker 2: I should say. 222 00:10:42,760 --> 00:10:46,120 Speaker 3: Well, I think actually they did fairly well, because you know, 223 00:10:46,200 --> 00:10:47,880 Speaker 3: I'm going to go back to something I said earlier 224 00:10:47,920 --> 00:10:51,840 Speaker 3: that monopolization cases are judged on what's called reasonableness, and 225 00:10:51,880 --> 00:10:54,360 Speaker 3: it's called the rule of reason. That's the standard. And 226 00:10:54,400 --> 00:10:56,360 Speaker 3: what the rule of reason asks the judge to do, 227 00:10:56,400 --> 00:10:59,640 Speaker 3: which sounds incredibly difficult and I'd never want to be 228 00:10:59,679 --> 00:11:02,040 Speaker 3: faced with this as a judge, is to ask does 229 00:11:02,080 --> 00:11:04,520 Speaker 3: the conduct cause harm? That the conduct that's highlighted by 230 00:11:04,520 --> 00:11:06,679 Speaker 3: the DJ is anti competitive? Has it caused harm to 231 00:11:06,679 --> 00:11:08,880 Speaker 3: a market? And the DJ has to prove that. But 232 00:11:09,000 --> 00:11:11,320 Speaker 3: once the DJ has proved that, the other side, the 233 00:11:11,360 --> 00:11:13,240 Speaker 3: defense and this is an any case, not just this 234 00:11:13,280 --> 00:11:15,800 Speaker 3: Google search case, has to show well, what are the 235 00:11:15,840 --> 00:11:18,560 Speaker 3: pro competitive aspects of what we do? And once they've 236 00:11:18,559 --> 00:11:20,679 Speaker 3: shown that there are pro competitive aspects and they've kind 237 00:11:20,720 --> 00:11:23,120 Speaker 3: of verified those through the evidence it's not just made 238 00:11:23,160 --> 00:11:26,280 Speaker 3: up or pretextual, the judge they have to weigh it. 239 00:11:26,320 --> 00:11:29,199 Speaker 3: They have to ask which one is stronger, there's some harm, 240 00:11:29,280 --> 00:11:32,319 Speaker 3: there's some benefit, which one stronger, and whichever one wins 241 00:11:32,320 --> 00:11:35,360 Speaker 3: out that's the answer. It's really it sounds like a 242 00:11:35,400 --> 00:11:37,439 Speaker 3: crazy thing. To have to do and very difficult, and 243 00:11:37,720 --> 00:11:40,400 Speaker 3: it sounds really subjective, and I think this judge knows 244 00:11:40,400 --> 00:11:41,600 Speaker 3: that he's going to be faced with that. 245 00:11:41,559 --> 00:11:42,520 Speaker 4: And it's going to be difficult. 246 00:11:42,520 --> 00:11:45,120 Speaker 3: And what Google did, which I think is a good defense, 247 00:11:45,240 --> 00:11:47,200 Speaker 3: is they said, look, you know, we have some of 248 00:11:47,240 --> 00:11:50,360 Speaker 3: these agreements because we want ease of consumer use. We 249 00:11:50,400 --> 00:11:51,839 Speaker 3: want them to be able to take out a new 250 00:11:51,880 --> 00:11:53,720 Speaker 3: phone that they just bought and. 251 00:11:53,800 --> 00:11:54,959 Speaker 4: Have a great experience. 252 00:11:55,000 --> 00:11:56,720 Speaker 3: We don't want them to be faced with a million 253 00:11:56,800 --> 00:11:59,320 Speaker 3: things they have to pick, like a choice screen going okay, 254 00:11:59,400 --> 00:12:01,120 Speaker 3: you have a default search engine here, which one do 255 00:12:01,120 --> 00:12:02,600 Speaker 3: you want? You have a default search engine in this 256 00:12:02,679 --> 00:12:04,839 Speaker 3: other place, which one do you want. We want these 257 00:12:04,880 --> 00:12:07,680 Speaker 3: phones to come pre installed with all the Google apps 258 00:12:07,679 --> 00:12:11,240 Speaker 3: that somebody really wants an Android phone, like YouTube and 259 00:12:11,360 --> 00:12:15,800 Speaker 3: Google Play, Stoor and Chrome. And it's a really seamless 260 00:12:15,960 --> 00:12:19,880 Speaker 3: consumer experience to just automatically use Google Search because it's 261 00:12:19,880 --> 00:12:22,360 Speaker 3: the best. And Apple would say the same thing. They'd say, hey, 262 00:12:22,559 --> 00:12:25,000 Speaker 3: we looked into it, we thought about it, we looked 263 00:12:25,000 --> 00:12:26,880 Speaker 3: at some of the other options. We've even talked to 264 00:12:26,920 --> 00:12:29,600 Speaker 3: Microsoft at some point about having being but we also 265 00:12:29,720 --> 00:12:32,360 Speaker 3: want our users to have the best experience and having 266 00:12:32,400 --> 00:12:35,720 Speaker 3: the best experience is having Google Search installed as default, 267 00:12:35,920 --> 00:12:38,480 Speaker 3: and that's certainly pro competitive. And they've also said, look, 268 00:12:38,480 --> 00:12:42,160 Speaker 3: we're just the best. We put loads of money into this, 269 00:12:42,480 --> 00:12:45,160 Speaker 3: loads of time, loads of people, loads of resources, and 270 00:12:45,200 --> 00:12:48,400 Speaker 3: we're constantly innovating to get better. So, you know what, 271 00:12:48,559 --> 00:12:52,240 Speaker 3: even if our advertising prices are going up and some 272 00:12:52,320 --> 00:12:55,120 Speaker 3: companies believe they have to advertise through general search, it 273 00:12:55,160 --> 00:12:56,720 Speaker 3: pops up when somebody does a search. 274 00:12:57,120 --> 00:12:58,440 Speaker 4: They're getting better value, They're. 275 00:12:58,280 --> 00:13:01,000 Speaker 3: Getting more clicks there, maybe getting more buys from that 276 00:13:01,080 --> 00:13:03,120 Speaker 3: because of all the innovation that we do. 277 00:13:03,400 --> 00:13:05,840 Speaker 4: So I think they did a good job. 278 00:13:05,920 --> 00:13:08,480 Speaker 3: Face with some not so great facts like twenty six 279 00:13:08,520 --> 00:13:10,880 Speaker 3: billion a year you know, paid for this. They did 280 00:13:10,880 --> 00:13:12,720 Speaker 3: a good job of showing that there was this pro 281 00:13:12,760 --> 00:13:14,840 Speaker 3: competitive side and that the judge is really going to 282 00:13:14,840 --> 00:13:16,080 Speaker 3: have to weigh them against each other. 283 00:13:16,800 --> 00:13:20,080 Speaker 2: Closing arguments will take place in early May, and the 284 00:13:20,200 --> 00:13:23,480 Speaker 2: judge has actually said that he has no idea what 285 00:13:23,600 --> 00:13:27,120 Speaker 2: he's going to do. Thanks so much, Jen, that's Bloomberg 286 00:13:27,200 --> 00:13:31,200 Speaker 2: Intelligence Senior litigation analyst Jennifer Ree. What should you do 287 00:13:31,280 --> 00:13:34,760 Speaker 2: when a regulator doesn't respond to your petition? Well, you 288 00:13:34,840 --> 00:13:39,280 Speaker 2: could just proceed as planned but one cryptocurrency exchange has 289 00:13:39,360 --> 00:13:43,120 Speaker 2: taken a less used path. Coinbase Global, has decided to 290 00:13:43,120 --> 00:13:46,680 Speaker 2: sue the sec over its alleged foot dragging on the 291 00:13:46,760 --> 00:13:50,760 Speaker 2: company's request for crypto ruling, and it's asking an appellate 292 00:13:50,840 --> 00:13:53,920 Speaker 2: court to order the agency to respond. Joining me is 293 00:13:53,920 --> 00:13:56,760 Speaker 2: Anthony Sabino, a professor in the law department at the 294 00:13:56,800 --> 00:14:01,199 Speaker 2: Peter Tubin College of Business at Saint John's Universe. How 295 00:14:01,559 --> 00:14:06,240 Speaker 2: unusual is it to sue a securities regulator to get 296 00:14:06,240 --> 00:14:07,520 Speaker 2: them to make rules. 297 00:14:08,440 --> 00:14:11,719 Speaker 5: It is highly unusual. But what we're witnessing here is 298 00:14:11,760 --> 00:14:13,520 Speaker 5: it might be the beginning of a trend where it 299 00:14:13,559 --> 00:14:16,240 Speaker 5: becomes a little more frequent, although I don't think it 300 00:14:16,280 --> 00:14:20,520 Speaker 5: would ever become commonplace, because essentially, for business, the best 301 00:14:20,640 --> 00:14:24,440 Speaker 5: mode of operations to say, okay, don't prod these securities 302 00:14:24,440 --> 00:14:28,080 Speaker 5: in Exchange Commission or for that matter, any other governmental regulator, 303 00:14:28,160 --> 00:14:31,120 Speaker 5: especially at the federal level. Never bother them, don't post 304 00:14:31,120 --> 00:14:33,840 Speaker 5: the sleeping bear, leave them alone, okay, and let them 305 00:14:33,840 --> 00:14:36,520 Speaker 5: make rulemaking on their own. However, we're seen in the 306 00:14:36,560 --> 00:14:39,480 Speaker 5: cases that we've been discussing here June is the fact 307 00:14:39,520 --> 00:14:43,120 Speaker 5: that these are companies that are more innovative, more on 308 00:14:43,160 --> 00:14:46,360 Speaker 5: the cutting edge again, especially in the crypto space, and 309 00:14:46,680 --> 00:14:50,000 Speaker 5: they really are impatient. They can't wait, and one can 310 00:14:50,120 --> 00:14:52,200 Speaker 5: sympathize with that, and one can understand it to a 311 00:14:52,240 --> 00:14:54,680 Speaker 5: fair degree. But by the same token, you know, the 312 00:14:54,760 --> 00:14:56,960 Speaker 5: possibility is they may get a result that they don't 313 00:14:57,000 --> 00:15:00,200 Speaker 5: really want, and this may rebound to their detriment. But 314 00:15:00,280 --> 00:15:02,560 Speaker 5: again it remains to be seen. But the good news, 315 00:15:02,600 --> 00:15:05,240 Speaker 5: if you will, is the fact that under the Administrative 316 00:15:05,240 --> 00:15:08,800 Speaker 5: Procedure Act, which was inaugurated in the nineteen fifties to 317 00:15:08,840 --> 00:15:12,480 Speaker 5: deal with the plethora of administrative agencies that had cropped 318 00:15:12,560 --> 00:15:15,280 Speaker 5: up thirty years before into Franklin, Ellen or Roosevelt, it 319 00:15:15,320 --> 00:15:17,800 Speaker 5: does provide an avenue of relief where by a party 320 00:15:17,800 --> 00:15:20,680 Speaker 5: can say, look, dear agency, all right, we're in such 321 00:15:20,720 --> 00:15:23,480 Speaker 5: and such business. We're not sure what to do here. 322 00:15:23,520 --> 00:15:25,640 Speaker 5: We would like you to promulgate a rule about that. 323 00:15:26,040 --> 00:15:29,640 Speaker 5: And it is basically Americans and American businesses saying, look, okay, 324 00:15:29,760 --> 00:15:32,680 Speaker 5: we understand there has to be some modicum of government regulation, 325 00:15:33,120 --> 00:15:37,000 Speaker 5: but we need clarity, we need predictability. Otherwise the wheels 326 00:15:37,000 --> 00:15:39,360 Speaker 5: of free enterprise grind to a halt. And we're going 327 00:15:39,400 --> 00:15:41,880 Speaker 5: to exercise our rights to say, okay, look, government works 328 00:15:41,920 --> 00:15:44,720 Speaker 5: for the people, Government works for us, so therefore we 329 00:15:44,760 --> 00:15:46,360 Speaker 5: want to get a result here. You just can't sit 330 00:15:46,400 --> 00:15:48,440 Speaker 5: around and keep us waiting in Limba. 331 00:15:48,560 --> 00:15:51,840 Speaker 2: Do you think the SEC hasn't written the rules for 332 00:15:51,960 --> 00:15:56,280 Speaker 2: crypto because they're not quite sure how it works yet 333 00:15:56,280 --> 00:15:57,880 Speaker 2: and what the problems. 334 00:15:57,360 --> 00:16:01,160 Speaker 5: Are, June, I could not agree with you more exactly right, okay, 335 00:16:01,200 --> 00:16:04,080 Speaker 5: because let's face it, okay, crypto is brand new for everybody, 336 00:16:04,080 --> 00:16:07,320 Speaker 5: and again that's both good and bad. The crypto industry 337 00:16:07,360 --> 00:16:10,840 Speaker 5: itself is constantly innovating. They're inventing new stuff up on 338 00:16:10,880 --> 00:16:12,640 Speaker 5: the guardment. I'm sure as we're sitting here, in the 339 00:16:12,680 --> 00:16:15,120 Speaker 5: next few minutes, some crypto entrepreneur is going to come 340 00:16:15,120 --> 00:16:18,160 Speaker 5: out with a new device, okay, a new form of cryptocurrency. 341 00:16:18,400 --> 00:16:21,200 Speaker 5: And that's wonderful because that's free enterprise and freedom at 342 00:16:21,200 --> 00:16:23,520 Speaker 5: its best. But on the other hand, what that means 343 00:16:23,600 --> 00:16:25,560 Speaker 5: is the SEC isn't sure what to do. And I 344 00:16:25,600 --> 00:16:27,960 Speaker 5: think really that's the danger here for the agency, and 345 00:16:28,000 --> 00:16:30,320 Speaker 5: this I can sympathize with the agency on this account, 346 00:16:30,600 --> 00:16:33,640 Speaker 5: is the fact that how can they make rules for 347 00:16:33,760 --> 00:16:36,280 Speaker 5: things that they do not yet fully understand? How can 348 00:16:36,320 --> 00:16:40,640 Speaker 5: they make comprehensive rules for situations that are constantly cropping up. Okay, 349 00:16:40,720 --> 00:16:43,160 Speaker 5: is newer things come up, There is yet to know 350 00:16:43,240 --> 00:16:45,280 Speaker 5: who's on the on the playing field, if you will, 351 00:16:45,560 --> 00:16:47,560 Speaker 5: and to understand what rules need to be made. So 352 00:16:47,640 --> 00:16:50,640 Speaker 5: the agency to some extent is in the right when 353 00:16:50,640 --> 00:16:53,080 Speaker 5: they say, look, we've got to look at this, we've 354 00:16:53,080 --> 00:16:55,480 Speaker 5: got to analyze, et cetera. Because certainly no one in 355 00:16:55,520 --> 00:16:59,040 Speaker 5: any industry wants to have rules that will stifle innovations, 356 00:16:59,080 --> 00:17:03,080 Speaker 5: stifle competition in other ways, basically be detrimental to business. 357 00:17:03,440 --> 00:17:06,719 Speaker 5: You want agencies to take a measured, logical approach and 358 00:17:06,800 --> 00:17:09,640 Speaker 5: to act on a fully informed basis. And again, as 359 00:17:09,680 --> 00:17:12,919 Speaker 5: we have all these innovations cropping up like weeds in 360 00:17:12,960 --> 00:17:15,280 Speaker 5: a field, the bottom line is you have to give 361 00:17:15,280 --> 00:17:17,120 Speaker 5: them some space to do that, which I also think 362 00:17:17,200 --> 00:17:20,359 Speaker 5: explains to some extent why as a general matter, and 363 00:17:20,400 --> 00:17:22,439 Speaker 5: again this could be evolving into something else, but as 364 00:17:22,440 --> 00:17:25,600 Speaker 5: a general matter, today courts are reluctant to push agencies 365 00:17:25,640 --> 00:17:28,879 Speaker 5: to act because they understand the limitations agencies have in 366 00:17:28,960 --> 00:17:32,520 Speaker 5: terms of personnel, resources, budget and also the fact that 367 00:17:32,560 --> 00:17:35,720 Speaker 5: again they need to make informed decisions because a rule 368 00:17:35,760 --> 00:17:38,240 Speaker 5: that's made on a poorly informed basis is the one 369 00:17:38,240 --> 00:17:40,959 Speaker 5: that's going to be challenged and most likely successfully in 370 00:17:41,000 --> 00:17:41,680 Speaker 5: a court of law. 371 00:17:42,160 --> 00:17:46,040 Speaker 2: Tell us what Coinbase is asking for here? What happened here? 372 00:17:46,160 --> 00:17:48,800 Speaker 5: Yeah, well, as I understand it, basically, they had put 373 00:17:48,840 --> 00:17:51,640 Speaker 5: forth a proposal to the SEC say look, we want 374 00:17:51,640 --> 00:17:53,920 Speaker 5: some clarity here because we want to know whether you're 375 00:17:53,960 --> 00:17:56,080 Speaker 5: going to regulate us or not. And again, the essence 376 00:17:56,119 --> 00:17:57,960 Speaker 5: of that is something that we've been dealing with now 377 00:17:58,000 --> 00:17:59,600 Speaker 5: for a couple of years, and we'll continue to deal 378 00:17:59,640 --> 00:18:02,320 Speaker 5: with the need more years to come. Is that is 379 00:18:02,440 --> 00:18:06,760 Speaker 5: crypto a commodity which would be put under CFTC Commodity 380 00:18:06,800 --> 00:18:10,080 Speaker 5: Futures Trading Commission jurisdiction or is it a security as 381 00:18:10,119 --> 00:18:12,600 Speaker 5: to find under the long standing Supreme Court test of 382 00:18:12,600 --> 00:18:16,040 Speaker 5: how we from decades ago and therefore in the SEC jurisdiction. 383 00:18:16,400 --> 00:18:18,920 Speaker 5: And so they want some clarification here. But that's part 384 00:18:18,960 --> 00:18:22,480 Speaker 5: of the problem because again, as Coinbase continues to innovate, 385 00:18:22,520 --> 00:18:25,399 Speaker 5: as any crypto merchant continues to innovate, they come up 386 00:18:25,440 --> 00:18:27,720 Speaker 5: with new things. In the SEC isn't too sure what 387 00:18:27,800 --> 00:18:30,080 Speaker 5: to do. Also, let's keep in mind that the SEC 388 00:18:30,160 --> 00:18:35,359 Speaker 5: is absorbing the continued school diversity of court opinions. We 389 00:18:35,480 --> 00:18:38,720 Speaker 5: had a few months ago, District Judge Anna Lisa Torres 390 00:18:38,720 --> 00:18:41,360 Speaker 5: here in the southerns of New York, again the financial 391 00:18:41,359 --> 00:18:44,680 Speaker 5: capital of America, if not the world, saying okay, this 392 00:18:44,760 --> 00:18:47,800 Speaker 5: particular crypto product, I think it was a non fungible token, 393 00:18:47,960 --> 00:18:51,920 Speaker 5: This digital token is not a security, so SEC, it's 394 00:18:51,960 --> 00:18:55,000 Speaker 5: not within your bailiwick. CFTC can regulate this as a commodity. 395 00:18:55,320 --> 00:18:58,480 Speaker 5: But in other instances, a different kind of investment is 396 00:18:58,760 --> 00:19:01,359 Speaker 5: a security. Therefore it's being offered. Therefore it's like an 397 00:19:01,359 --> 00:19:05,320 Speaker 5: IPO in this instance, the corollary the ico initial coin offering. 398 00:19:05,600 --> 00:19:06,800 Speaker 5: SEC go ahead and regulate this. 399 00:19:07,240 --> 00:19:07,440 Speaker 6: Now. 400 00:19:07,480 --> 00:19:10,200 Speaker 5: A couple of months after that, okay, we had Judge 401 00:19:10,280 --> 00:19:13,760 Speaker 5: Raycoff Jed ray Coloff, the eminent securities expert, eminent judge 402 00:19:13,760 --> 00:19:16,720 Speaker 5: of the Southern District, basically in the same building saying no, no, 403 00:19:16,600 --> 00:19:19,439 Speaker 5: here's the case. I believe the name was terrorform and said, no, 404 00:19:19,560 --> 00:19:22,359 Speaker 5: this is definitely a security under the Howie test, it's 405 00:19:22,400 --> 00:19:25,600 Speaker 5: an investment made then exposition of profit, those profits derived 406 00:19:25,600 --> 00:19:29,840 Speaker 5: from the efforts of others. So therefore, SEC, you regulate this. 407 00:19:29,840 --> 00:19:32,359 Speaker 5: This is your job to do, and the SEC is 408 00:19:32,520 --> 00:19:34,440 Speaker 5: currently trying to absorb that. We all are trying to 409 00:19:34,480 --> 00:19:36,760 Speaker 5: absorb that, and we don't know what the next judge, 410 00:19:36,800 --> 00:19:38,720 Speaker 5: not necessarily in New York, but anywhere in the country 411 00:19:38,800 --> 00:19:41,879 Speaker 5: June is going to say about this. And until we 412 00:19:41,920 --> 00:19:45,000 Speaker 5: have further judicial clarification, the SEC is going to be 413 00:19:45,040 --> 00:19:48,800 Speaker 5: reluctant to basically issue its own rules in that process. 414 00:19:49,280 --> 00:19:51,960 Speaker 2: Didn't Gary Gensler say it was a security? 415 00:19:52,520 --> 00:19:55,000 Speaker 5: He did? He did? And again that's interesting because and 416 00:19:55,040 --> 00:19:57,560 Speaker 5: I say this with respect for mister Gensler, because I 417 00:19:57,720 --> 00:19:59,720 Speaker 5: think pretty much he's doing a very good job, and 418 00:19:59,760 --> 00:20:02,240 Speaker 5: he did a very good job at the CFTC where 419 00:20:02,280 --> 00:20:04,439 Speaker 5: he was saying, crypto is a commodity, so my agency 420 00:20:04,480 --> 00:20:07,320 Speaker 5: regulates it. Now he changed task in an office addresses. 421 00:20:07,320 --> 00:20:10,359 Speaker 5: Now he's at the SECC. No, no, crypto is a security. 422 00:20:10,400 --> 00:20:13,119 Speaker 5: So now my agency, my new agency, we get to 423 00:20:13,160 --> 00:20:15,119 Speaker 5: regulate that. And again, this is one of the reasons 424 00:20:15,200 --> 00:20:20,320 Speaker 5: why we can understand the Commission's reluctance to promulgate comprehensive rules, 425 00:20:20,480 --> 00:20:23,959 Speaker 5: or maybe even the inability to do so, because they're 426 00:20:24,119 --> 00:20:28,480 Speaker 5: still not sure their contention is. Look by and large, 427 00:20:28,560 --> 00:20:31,639 Speaker 5: as I understand, if mister Genzu's contention is basically, it 428 00:20:31,720 --> 00:20:34,280 Speaker 5: doesn't matter what form, what iteration of crypto it is. 429 00:20:34,320 --> 00:20:38,320 Speaker 5: Crypto is a security under our long standing definition, and 430 00:20:38,359 --> 00:20:40,560 Speaker 5: therefore we get to regulate it. But he's got to 431 00:20:40,600 --> 00:20:44,000 Speaker 5: reconcile that position, because really that's nothing thing more than 432 00:20:44,040 --> 00:20:47,119 Speaker 5: a position of the Commission the SEC with what the 433 00:20:47,160 --> 00:20:49,800 Speaker 5: courts are telling him and trying to find a balance here. 434 00:20:49,800 --> 00:20:52,199 Speaker 5: And once again, the agency doesn't want to over commit. 435 00:20:52,720 --> 00:20:55,119 Speaker 5: And as Americans and especially those of us in interesting 436 00:20:55,160 --> 00:20:57,800 Speaker 5: free market, we don't want the agency to over commit 437 00:20:57,880 --> 00:21:03,080 Speaker 5: because if they again have these overly stricts, okay and 438 00:21:03,160 --> 00:21:07,439 Speaker 5: poorly informed rules, that's going to stifle innovation in the 439 00:21:07,480 --> 00:21:09,720 Speaker 5: market and it's going to create more regulatory problems for 440 00:21:09,760 --> 00:21:11,640 Speaker 5: folks who honestly don't deserve it. 441 00:21:11,920 --> 00:21:15,520 Speaker 2: The SEC has received eighteen petitions for rulemaking so far 442 00:21:15,560 --> 00:21:18,840 Speaker 2: in twenty twenty three, which is in line with previous years. 443 00:21:19,240 --> 00:21:22,520 Speaker 2: Cara Rowlands of the New Civil Liberties Alliance, which is 444 00:21:22,560 --> 00:21:26,399 Speaker 2: a Washington, DC based civil rights group, in a recent study, 445 00:21:26,440 --> 00:21:30,040 Speaker 2: found the SEC substantively responded to only five of the 446 00:21:30,080 --> 00:21:34,640 Speaker 2: nearly eighty petitions filed from January twenty eighteen to May 447 00:21:34,720 --> 00:21:38,119 Speaker 2: twenty twenty three. Right is that too much, even for 448 00:21:38,160 --> 00:21:40,200 Speaker 2: an agency that's maybe overworked. 449 00:21:40,640 --> 00:21:42,359 Speaker 5: Yeah, and I would have to say this, I have 450 00:21:42,480 --> 00:21:45,000 Speaker 5: not studied ms Rollin's research, but I have no reason 451 00:21:45,000 --> 00:21:47,800 Speaker 5: to assume it's other than valid. So assuming that it 452 00:21:47,840 --> 00:21:50,000 Speaker 5: is valid research, then I give for the right of 453 00:21:50,040 --> 00:21:53,960 Speaker 5: that argument, because that's correct. The SEC is there too, again, 454 00:21:54,200 --> 00:21:58,159 Speaker 5: a sure provide for investor confidence, provided for integrating the 455 00:21:58,240 --> 00:22:00,960 Speaker 5: market to punish the wrongdoers. Part and parcel of that 456 00:22:01,200 --> 00:22:04,679 Speaker 5: is making rules. And when you have petitions where are 457 00:22:04,720 --> 00:22:09,320 Speaker 5: specific parties asking for rulemaking in certain areas, then the 458 00:22:09,400 --> 00:22:12,240 Speaker 5: agency is supposed to respond to that. And quite frankly, 459 00:22:12,280 --> 00:22:15,560 Speaker 5: just based on that quantitative analysis by Ms Rollins, I 460 00:22:15,640 --> 00:22:18,640 Speaker 5: have to say that that is an inadequate response by 461 00:22:18,640 --> 00:22:20,639 Speaker 5: the agencies. Okay, they've got to get their numbers up. 462 00:22:20,960 --> 00:22:25,520 Speaker 5: And yes, the SEC does have a limited budget, limited personnel. Okay, 463 00:22:25,560 --> 00:22:27,240 Speaker 5: they've got a lot of irons in the fire to 464 00:22:27,320 --> 00:22:30,000 Speaker 5: use that expression. But again that's nothing new. The agency 465 00:22:30,000 --> 00:22:32,760 Speaker 5: has always been in that mode of operation, always playing 466 00:22:32,760 --> 00:22:35,160 Speaker 5: catch up since it was formed in nineteen thirty four. 467 00:22:35,440 --> 00:22:37,400 Speaker 5: So they have to deal with these issues. And once again, 468 00:22:37,480 --> 00:22:40,560 Speaker 5: if they want to instill confidence in the market, a 469 00:22:40,680 --> 00:22:43,520 Speaker 5: sure market integrity. They've got to be proactive on this, 470 00:22:44,000 --> 00:22:45,720 Speaker 5: and I think the bottom line is they've got to 471 00:22:45,720 --> 00:22:47,400 Speaker 5: do better. They've got to do better. So I would 472 00:22:47,400 --> 00:22:50,080 Speaker 5: agree with the critics than what the research is saying 473 00:22:50,119 --> 00:22:53,080 Speaker 5: in that regard. And so it's fine. And I think 474 00:22:53,359 --> 00:22:54,840 Speaker 5: this is going back to your point, if I may, 475 00:22:54,880 --> 00:22:56,840 Speaker 5: I understand it a little better now, is that if 476 00:22:56,840 --> 00:23:00,199 Speaker 5: mister Gogeler says, look, okay, crypto is a security, we 477 00:23:00,240 --> 00:23:02,320 Speaker 5: want to regulate it. Well, by golly, if you say 478 00:23:02,320 --> 00:23:06,040 Speaker 5: it's a security, then promulgate some rules. And the rulemaking process, 479 00:23:06,040 --> 00:23:08,720 Speaker 5: by itself, as I'm sure many of your listeners know, 480 00:23:09,160 --> 00:23:11,840 Speaker 5: is quite complicated. It's a three step process. Provide a 481 00:23:11,880 --> 00:23:15,439 Speaker 5: full buy again the administrative proced Director of the fifties. First, 482 00:23:15,560 --> 00:23:18,560 Speaker 5: the agency, any agency, and will be specific the SEC 483 00:23:18,680 --> 00:23:21,640 Speaker 5: in this regard. They have to propose a new rule 484 00:23:22,080 --> 00:23:25,200 Speaker 5: and allow for public commentary. Then they have to allow 485 00:23:25,240 --> 00:23:27,560 Speaker 5: the public commentary to come in typically over a period 486 00:23:27,800 --> 00:23:31,400 Speaker 5: usually ninety days, and listen to that commentary and take 487 00:23:31,440 --> 00:23:35,360 Speaker 5: it into their calculus and as necessary, revised the rule, amended, 488 00:23:35,400 --> 00:23:38,000 Speaker 5: tweak it a little bit, whatever. Then they promulgate a 489 00:23:38,040 --> 00:23:40,800 Speaker 5: final rule, and then that goes through the SSET test. Again, 490 00:23:40,840 --> 00:23:42,800 Speaker 5: if somebody challenges and court so on and so forth. 491 00:23:43,000 --> 00:23:46,880 Speaker 5: But once again, since that rulemaking process is already laborious 492 00:23:47,080 --> 00:23:50,480 Speaker 5: and already close for public involvements, then I honestly think 493 00:23:50,520 --> 00:23:53,280 Speaker 5: that the SEC has got to put more people into 494 00:23:53,320 --> 00:23:57,120 Speaker 5: this push. Okay, get more folks involved and be responsive 495 00:23:57,480 --> 00:24:01,199 Speaker 5: and get that big machinery known as the going to 496 00:24:01,240 --> 00:24:03,600 Speaker 5: make these rules when they need it. Because again, when 497 00:24:03,680 --> 00:24:07,880 Speaker 5: you have a petition for rulemaking, you're having someone coming forward, 498 00:24:07,960 --> 00:24:10,879 Speaker 5: and again, to their credit, they're not trying to play 499 00:24:10,880 --> 00:24:13,040 Speaker 5: with the rules as they're not trying to guess. They're 500 00:24:13,040 --> 00:24:16,199 Speaker 5: go into the Commission saying, look, you're the regulators in 501 00:24:16,240 --> 00:24:18,879 Speaker 5: the securities domain, all right, help us out here. Okay, 502 00:24:19,160 --> 00:24:21,200 Speaker 5: we want to follow the law, but we're not sure 503 00:24:21,240 --> 00:24:23,480 Speaker 5: what your position is. We want you to make some 504 00:24:23,600 --> 00:24:26,160 Speaker 5: rules here. Okay. If they're asking for a rule, then again, 505 00:24:26,200 --> 00:24:27,520 Speaker 5: try to satisfy that need. 506 00:24:28,080 --> 00:24:31,800 Speaker 2: I've done so many stories about challenges because an agency 507 00:24:31,840 --> 00:24:37,040 Speaker 2: didn't follow the rule making process exactly as required. How 508 00:24:37,080 --> 00:24:40,400 Speaker 2: long does it take the SEC from start to finish 509 00:24:40,520 --> 00:24:42,920 Speaker 2: to draft a rule and put it into effect. 510 00:24:44,000 --> 00:24:46,199 Speaker 5: It varies, and I have no empirical evidence on that 511 00:24:46,359 --> 00:24:48,159 Speaker 5: to share with your Jim. But the bottom line is 512 00:24:48,600 --> 00:24:50,840 Speaker 5: it takes a lot longer than that ninety the typical 513 00:24:50,920 --> 00:24:54,120 Speaker 5: ninety day public comment period because for one reason, sometimes 514 00:24:54,160 --> 00:24:56,960 Speaker 5: that public commentary period is extended. I think a very 515 00:24:57,040 --> 00:25:00,119 Speaker 5: stark example that's illustriof here is when the sec he 516 00:25:00,200 --> 00:25:05,560 Speaker 5: promulgated regulation BIGBI best interests okay about what brokers have 517 00:25:05,640 --> 00:25:07,919 Speaker 5: to disclose the clients to demonstrate that there's no conflict 518 00:25:07,920 --> 00:25:11,159 Speaker 5: of interest. That was met with the opposition, if not 519 00:25:11,440 --> 00:25:15,840 Speaker 5: outright derision by the broken dealer industry, by the security stenizens, 520 00:25:16,240 --> 00:25:18,160 Speaker 5: and they basically said, no, no, we don't want this rule. 521 00:25:18,200 --> 00:25:19,879 Speaker 5: We know what our rules are in terms of you know, 522 00:25:19,920 --> 00:25:22,560 Speaker 5: who's a fiduciary who's not where this pushion is too 523 00:25:22,560 --> 00:25:26,800 Speaker 5: close to being classified as fiduciaries. So they had almost 524 00:25:26,840 --> 00:25:31,800 Speaker 5: violently opposed it. The public commentary was absolutely massive. It 525 00:25:31,920 --> 00:25:34,439 Speaker 5: ran into his I recall hundreds of thousands of pages. 526 00:25:34,840 --> 00:25:37,199 Speaker 5: The commission took a long time because it needed to 527 00:25:37,240 --> 00:25:40,160 Speaker 5: be analyzed. Then the commission came out with i think, 528 00:25:40,200 --> 00:25:44,920 Speaker 5: initially a position that again the industry opposed. They modified 529 00:25:44,920 --> 00:25:46,560 Speaker 5: that a little bit to get something a little more 530 00:25:46,600 --> 00:25:49,919 Speaker 5: palatable to the broken dealer sector. And then they finally 531 00:25:49,920 --> 00:25:52,720 Speaker 5: came out with Regulation BI as you know as it 532 00:25:52,800 --> 00:25:55,480 Speaker 5: exists today. But the bottom line, it was not a 533 00:25:55,520 --> 00:25:58,720 Speaker 5: smooth path at all. Indeed was the antithesis of that. 534 00:25:58,760 --> 00:26:00,960 Speaker 5: It was a very rocky road indeed, okay, with a 535 00:26:00,960 --> 00:26:04,600 Speaker 5: lot of opposition. And again that to me, as much 536 00:26:04,640 --> 00:26:07,240 Speaker 5: as it creates a lot of work and creates difficulties, 537 00:26:07,600 --> 00:26:10,119 Speaker 5: the bottom line for the agency is that, look, the 538 00:26:10,280 --> 00:26:13,040 Speaker 5: road is hard enough. Okay, it's hard enough to promulgate 539 00:26:13,119 --> 00:26:15,879 Speaker 5: rules as it is. The sooner you start down the 540 00:26:15,880 --> 00:26:18,360 Speaker 5: path to promulgate the rules, the better off you are. 541 00:26:18,720 --> 00:26:21,600 Speaker 5: And also, and I think this is something that's been permeating, 542 00:26:21,880 --> 00:26:24,520 Speaker 5: know DC with the agencies and certainly in the federal 543 00:26:24,560 --> 00:26:28,320 Speaker 5: court systems more recently, is Americans and American businesses are 544 00:26:28,320 --> 00:26:33,880 Speaker 5: demanding more and more accountability from regulators and federal agencies because, 545 00:26:33,960 --> 00:26:37,160 Speaker 5: let's face it, nobody elected the five persons who sit 546 00:26:37,200 --> 00:26:40,280 Speaker 5: on the SEC or any of the other members of 547 00:26:40,280 --> 00:26:42,960 Speaker 5: the multi member commissions like the FTC, the FAA, etc. 548 00:26:43,520 --> 00:26:46,240 Speaker 5: But these are public servants who are supposed to be 549 00:26:46,240 --> 00:26:49,120 Speaker 5: accountable to us. And I think this is just one 550 00:26:49,160 --> 00:26:52,600 Speaker 5: iteration of that overall push to say, Look, government serves 551 00:26:52,600 --> 00:26:54,920 Speaker 5: the people, not the other way around. So we want 552 00:26:54,960 --> 00:26:58,639 Speaker 5: government to be more accountable to us. And again, rulemaking 553 00:26:59,000 --> 00:27:01,479 Speaker 5: to satisfy the needs of any particular industry is part 554 00:27:01,520 --> 00:27:02,160 Speaker 5: of that process. 555 00:27:02,400 --> 00:27:05,880 Speaker 2: According to the Bloomberg article, one court found the Occupational 556 00:27:05,920 --> 00:27:08,919 Speaker 2: Safety and Health administration six year delay in responding to 557 00:27:08,960 --> 00:27:12,400 Speaker 2: a petition was reasonable. Another court said the agency's three 558 00:27:12,480 --> 00:27:15,879 Speaker 2: year delay and another request was simply too long. In 559 00:27:15,920 --> 00:27:19,479 Speaker 2: this case, the third Circuit recently asked the SEC to 560 00:27:19,560 --> 00:27:23,159 Speaker 2: respond to some questions. What do you think that indicates? 561 00:27:23,400 --> 00:27:25,680 Speaker 5: First of all, it indicates what the wonderful things about 562 00:27:25,720 --> 00:27:29,720 Speaker 5: our justice system, which is, you have courts in different localities, 563 00:27:29,760 --> 00:27:32,680 Speaker 5: even though they were all federal courts, reaching different decisions. 564 00:27:32,720 --> 00:27:34,840 Speaker 5: But again, it also demonstrates that there is justice in 565 00:27:34,880 --> 00:27:38,040 Speaker 5: that because every case is too generous. I for one, 566 00:27:38,520 --> 00:27:41,600 Speaker 5: really can't comprehend how a six year delay by OSHA 567 00:27:41,920 --> 00:27:43,920 Speaker 5: could be deemed to be reasonable. But then again, I 568 00:27:43,960 --> 00:27:46,440 Speaker 5: didn't sit on that panel, okay, so maybe there were 569 00:27:46,480 --> 00:27:50,080 Speaker 5: remarkable circumstances there where that federal court said, okay, yeah, 570 00:27:50,320 --> 00:27:52,960 Speaker 5: it takes that long because it's extremely complex. On the 571 00:27:52,960 --> 00:27:54,520 Speaker 5: other hand, you have the other court saying look, three 572 00:27:54,600 --> 00:27:56,800 Speaker 5: years is too long to wait for this particular regulation, 573 00:27:57,160 --> 00:27:58,840 Speaker 5: and I'm sure they were right on that as well, 574 00:27:58,840 --> 00:28:01,720 Speaker 5: because in that instance they didn't find sufficient grounds to wait. 575 00:28:01,800 --> 00:28:04,000 Speaker 5: And it's not until the Supreme Court steps in and 576 00:28:04,119 --> 00:28:07,520 Speaker 5: basically provides guidance on these issues, a bright line rule, 577 00:28:07,560 --> 00:28:09,399 Speaker 5: if you will, that it's going to be resolved. But 578 00:28:09,480 --> 00:28:10,800 Speaker 5: you know what, I don't think that they will ever 579 00:28:10,880 --> 00:28:13,280 Speaker 5: come because it's all very suet generous. It's all very 580 00:28:13,359 --> 00:28:16,159 Speaker 5: much case by case basis, but upon the agency, the 581 00:28:16,160 --> 00:28:18,600 Speaker 5: subject matter. And again one has to look at what's 582 00:28:18,600 --> 00:28:21,720 Speaker 5: the question being asked Before one says okay, when is 583 00:28:21,760 --> 00:28:23,879 Speaker 5: the answer to It's not like taking a test on 584 00:28:23,960 --> 00:28:26,080 Speaker 5: a specific day okay. There are a lot of complicated 585 00:28:26,119 --> 00:28:28,720 Speaker 5: issues here, and that's why I think that the courts 586 00:28:28,720 --> 00:28:32,080 Speaker 5: have generally been reluctant to step in, although they're being 587 00:28:32,119 --> 00:28:34,560 Speaker 5: a little bit more proactive. And again part of that too, 588 00:28:34,840 --> 00:28:36,720 Speaker 5: and I can understand the courts here that have been 589 00:28:36,760 --> 00:28:39,680 Speaker 5: reluctant to push the agencies. You've got a very fundamental 590 00:28:39,760 --> 00:28:43,440 Speaker 5: constitutional issue here, June, and that's separation of powers. Once again, 591 00:28:43,600 --> 00:28:48,520 Speaker 5: the courts are there to resolve controversies between American citizens 592 00:28:48,560 --> 00:28:52,000 Speaker 5: and government agencies among other things. And the bottom line is, 593 00:28:52,200 --> 00:28:55,000 Speaker 5: if they start to push agencies, isn't that tantamount to 594 00:28:55,040 --> 00:28:58,640 Speaker 5: them making the rules. That's judicial legislation, and that is 595 00:28:58,800 --> 00:29:01,280 Speaker 5: not the American way at all, just the way. We 596 00:29:01,320 --> 00:29:04,680 Speaker 5: don't want the executive branch to push around Congress or 597 00:29:04,720 --> 00:29:07,680 Speaker 5: the judicial branch. We don't want to have the judicial 598 00:29:07,720 --> 00:29:11,520 Speaker 5: branch pushing around the administrative agencies because they are a 599 00:29:11,600 --> 00:29:14,840 Speaker 5: component of the executive branch. And the best avenue for 600 00:29:14,840 --> 00:29:18,280 Speaker 5: addressed by all Americans is, well, all these agencies, who's 601 00:29:18,320 --> 00:29:21,760 Speaker 5: their boss, the fellow who's at sixteen hundred Pennsylvania Avenue. 602 00:29:21,920 --> 00:29:24,920 Speaker 5: So you right to the presidents. And since the agencies 603 00:29:24,920 --> 00:29:27,280 Speaker 5: are accountable to the presidents and the president's accountable to 604 00:29:27,360 --> 00:29:29,920 Speaker 5: the people, that's how we the people keep these agencies 605 00:29:29,920 --> 00:29:31,800 Speaker 5: in line. So again, they serve us, not the other 606 00:29:31,840 --> 00:29:32,360 Speaker 5: way around. 607 00:29:32,600 --> 00:29:35,200 Speaker 2: Thanks so much for being on the show, Anthony. That's 608 00:29:35,240 --> 00:29:37,920 Speaker 2: Anthony Sabino, a professor in the law department at the 609 00:29:37,920 --> 00:29:41,840 Speaker 2: Peter Tobin College of Business at Saint John's University. In 610 00:29:41,880 --> 00:29:45,920 Speaker 2: other legal news today, crypto giant Binance and its chief 611 00:29:45,960 --> 00:29:50,720 Speaker 2: executive officer, Chen Peng Jao pleaded guilty to criminal charges 612 00:29:50,760 --> 00:29:55,440 Speaker 2: for anti money laundering and US sanctions violations, including allowing 613 00:29:55,480 --> 00:29:59,560 Speaker 2: transactions with Hamas and other terrorist groups. Under a sweeping 614 00:29:59,600 --> 00:30:03,360 Speaker 2: deal with the Justice Department designed to keep the company operating, 615 00:30:03,760 --> 00:30:07,280 Speaker 2: Binance agreed to plead guilty to criminal charges and pay 616 00:30:07,360 --> 00:30:11,240 Speaker 2: more than four billion dollars in penalties. Joo, who agreed 617 00:30:11,280 --> 00:30:14,080 Speaker 2: to step down and pay a fifty million dollar fine 618 00:30:14,120 --> 00:30:17,000 Speaker 2: as part of the settlement, appeared in court and Seattle 619 00:30:17,080 --> 00:30:21,800 Speaker 2: Tuesday to plead guilty. Federal prosecutors say Binance wilfully looked 620 00:30:21,800 --> 00:30:26,120 Speaker 2: away as terrorists, cyber criminals, and child abusers used the 621 00:30:26,160 --> 00:30:30,480 Speaker 2: company's crypto exchange, and at a press conference, Attorney General 622 00:30:30,520 --> 00:30:34,680 Speaker 2: Merrick Garland said Binance and its employees were well aware 623 00:30:34,760 --> 00:30:38,080 Speaker 2: that criminals were using the crypto exchange. 624 00:30:38,200 --> 00:30:42,720 Speaker 1: In a February twenty nineteen chet, one compliance employee wrote 625 00:30:42,880 --> 00:30:46,120 Speaker 1: that they needed a banner that said, quote is washing 626 00:30:46,240 --> 00:30:50,160 Speaker 1: drug money too hard? These days come to Binance, We 627 00:30:50,240 --> 00:30:51,160 Speaker 1: got cake for you. 628 00:30:52,200 --> 00:30:57,959 Speaker 2: Binance's violations included failure to prevent and report suspicious transactions 629 00:30:58,000 --> 00:31:03,479 Speaker 2: with terrorists including Hama US Palestidian Islamic Jihad, Al Qaeda, 630 00:31:03,560 --> 00:31:07,640 Speaker 2: and the Islamic State of Iraq, and Syria. Garland said 631 00:31:07,720 --> 00:31:12,280 Speaker 2: that Binance placed profits over US national security. 632 00:31:12,280 --> 00:31:15,640 Speaker 1: In part because of the crimes it committed. Finance became 633 00:31:15,720 --> 00:31:20,760 Speaker 1: the largest cryptocurrency exchange in the world. Now Finance is 634 00:31:20,800 --> 00:31:24,760 Speaker 1: paying one of the largest corporate penalties in US history. 635 00:31:25,400 --> 00:31:28,400 Speaker 2: After entering his plea, Joo was released and free to 636 00:31:28,440 --> 00:31:31,080 Speaker 2: return to his home in the United Arab Emirates while 637 00:31:31,120 --> 00:31:34,600 Speaker 2: awaiting sentencing. His agreement includes a waiver of his right 638 00:31:34,640 --> 00:31:39,000 Speaker 2: to appeal provided that his sentence doesn't exceed eighteen months. 639 00:31:39,240 --> 00:31:43,080 Speaker 2: He's also barred from any involvement in Binance until three 640 00:31:43,160 --> 00:31:47,000 Speaker 2: years after a monitor is appointed. Coming up next, AI 641 00:31:47,160 --> 00:31:50,840 Speaker 2: class action lawsuits. I'm Jim Gross when you're listening to Bloomberg. 642 00:31:51,160 --> 00:31:56,120 Speaker 2: As generative AI continues to explode in popularity, attorneys have 643 00:31:56,240 --> 00:31:59,440 Speaker 2: never been more mindful of the privacy and data security 644 00:31:59,560 --> 00:32:03,600 Speaker 2: challenge is presented by its rising use and rapid development. 645 00:32:04,080 --> 00:32:07,920 Speaker 2: Several class action lawsuits have already been filed against companies 646 00:32:07,960 --> 00:32:12,120 Speaker 2: that provide these smart tools, alleging serious federal and state 647 00:32:12,200 --> 00:32:16,720 Speaker 2: privacy violations. Recent survey data shows these challenges are putting 648 00:32:16,760 --> 00:32:20,520 Speaker 2: attorneys on alert. Joining me is Michael Benedetti, senior legal 649 00:32:20,520 --> 00:32:24,680 Speaker 2: analyst at Bloomberg Law, who's written about this. Everyone seems 650 00:32:24,720 --> 00:32:28,760 Speaker 2: to be worried about AI. Are attorneys any different? I 651 00:32:28,800 --> 00:32:31,640 Speaker 2: know you did Bloomberg Law survey. What did it tell you? 652 00:32:31,960 --> 00:32:32,080 Speaker 1: So? 653 00:32:32,240 --> 00:32:37,479 Speaker 6: Bloomberg Law recently conducted a survey among four hundred plus 654 00:32:37,560 --> 00:32:44,240 Speaker 6: legal practitioners and house some law from attorneys, and ninety 655 00:32:44,400 --> 00:32:49,000 Speaker 6: seven percent of those attorneys indicated some level of concern 656 00:32:49,400 --> 00:32:54,800 Speaker 6: with data privacy and generative AI. And actually seventy percent 657 00:32:54,920 --> 00:32:59,000 Speaker 6: of those respondents admitted that they were either moderately or 658 00:32:59,080 --> 00:33:04,040 Speaker 6: extremely concern So that's a fairly staggering number and attorneys 659 00:33:04,040 --> 00:33:05,160 Speaker 6: are definitely thinking about this. 660 00:33:05,600 --> 00:33:10,720 Speaker 2: Will you explain how AI depends on these huge data sets. 661 00:33:10,720 --> 00:33:13,120 Speaker 6: Jude, That's where the devil's really in the details, is 662 00:33:13,480 --> 00:33:17,160 Speaker 6: with the data. So I'm not an engineer. I'm an attorney, 663 00:33:17,760 --> 00:33:19,680 Speaker 6: so I like to have the engineers in the room 664 00:33:19,680 --> 00:33:22,200 Speaker 6: when I have this conversation. But the concern is around 665 00:33:22,520 --> 00:33:27,400 Speaker 6: the webscraping practice. And what web scraping is is the 666 00:33:27,720 --> 00:33:33,120 Speaker 6: mass collection of information off the open Internet, and once 667 00:33:33,160 --> 00:33:37,520 Speaker 6: that data is selected, it's been aggregated and fed into 668 00:33:37,800 --> 00:33:44,160 Speaker 6: AI training models that ultimately result in actual tools like 669 00:33:44,240 --> 00:33:46,760 Speaker 6: chat GPT or Bard tell. 670 00:33:46,640 --> 00:33:49,560 Speaker 2: Us about some of the laws that involve AI. 671 00:33:50,320 --> 00:33:54,920 Speaker 6: AI's data appetite potentially clashes with privacy laws in Europe 672 00:33:54,920 --> 00:33:59,640 Speaker 6: with GDPR and California CCPA, as well as Illinois biometric 673 00:33:59,680 --> 00:34:02,600 Speaker 6: privacy law, and this is putting companies at legal red 674 00:34:03,280 --> 00:34:07,640 Speaker 6: those laws, they're fairly dense, but some of the basic 675 00:34:07,720 --> 00:34:13,920 Speaker 6: concepts that they require are transparency, that adequate notice is 676 00:34:13,960 --> 00:34:17,880 Speaker 6: provided to individuals when their data is being collected or 677 00:34:18,040 --> 00:34:22,000 Speaker 6: used or shared. Consents, we're appropriate. Sometimes you have to 678 00:34:22,040 --> 00:34:26,480 Speaker 6: get written consent to use, share, or do anything with 679 00:34:26,520 --> 00:34:27,120 Speaker 6: this data. 680 00:34:27,680 --> 00:34:30,040 Speaker 2: Do you know how many class action lawsuits have been 681 00:34:30,120 --> 00:34:33,879 Speaker 2: filed over AI alleging privacy violations. 682 00:34:34,360 --> 00:34:37,359 Speaker 6: We don't have a total number. This is a very 683 00:34:37,400 --> 00:34:42,040 Speaker 6: new area. My article covers three very prominent ones against 684 00:34:42,440 --> 00:34:46,560 Speaker 6: very large companies. There's Alphabet, parent company of Google. There's 685 00:34:46,680 --> 00:34:52,399 Speaker 6: Open Ai, owner of the chat GPT service. And there's 686 00:34:52,480 --> 00:34:55,320 Speaker 6: more of these cropping up at a pretty quick pace. 687 00:34:55,640 --> 00:35:00,040 Speaker 6: Dinnerative AI like chat GPT and Google's barred hinge on 688 00:35:00,040 --> 00:35:03,759 Speaker 6: on vast data sets, including personal and biometric data. And 689 00:35:03,840 --> 00:35:05,760 Speaker 6: this is raising privacy red flags. 690 00:35:06,480 --> 00:35:11,120 Speaker 2: So give us some details about the JL versus Alphabet 691 00:35:11,239 --> 00:35:14,720 Speaker 2: case filed in the Northern District of California. 692 00:35:15,280 --> 00:35:19,400 Speaker 6: Yeah, this is a class action comprised of anonymous plaintists, 693 00:35:19,480 --> 00:35:22,760 Speaker 6: some of which are minors. And these plaintiffs are alleging 694 00:35:22,800 --> 00:35:28,480 Speaker 6: that Google's webscraping practices used to train the AI services 695 00:35:28,480 --> 00:35:33,680 Speaker 6: that Google offers, Barred and some others are violating users 696 00:35:33,719 --> 00:35:38,280 Speaker 6: privacy rights by not providing sufficient notice and obtaining consent. 697 00:35:39,120 --> 00:35:41,640 Speaker 2: The case against Prisma Labs is a little different. Tell 698 00:35:41,719 --> 00:35:42,279 Speaker 2: us about that. 699 00:35:42,920 --> 00:35:46,080 Speaker 6: There is a case against Prisma Labs, a mobile app 700 00:35:46,120 --> 00:35:52,960 Speaker 6: developer that publishes photo and video editing tools enhanced by AI, 701 00:35:53,920 --> 00:35:58,200 Speaker 6: and like the Open Ai case, that case is also 702 00:35:58,480 --> 00:36:03,600 Speaker 6: alleging biometric privacy violations. And thank us here for claiming 703 00:36:03,800 --> 00:36:10,640 Speaker 6: that billions of images found online containing people's faces, those 704 00:36:10,840 --> 00:36:16,120 Speaker 6: facial images were scanned and used to train the AI 705 00:36:16,200 --> 00:36:18,800 Speaker 6: algorithms that power the Prisma tools. 706 00:36:19,440 --> 00:36:21,719 Speaker 2: Just a few of the many cases that we'll be 707 00:36:21,800 --> 00:36:25,200 Speaker 2: coming up having to do with AI. Thanks Michael. That's 708 00:36:25,239 --> 00:36:29,120 Speaker 2: Michael Benedetti, Senior legal analyst at Bloomberg Law, and that's 709 00:36:29,160 --> 00:36:31,800 Speaker 2: it for this edition of the Bloomberg Law Show. Remember 710 00:36:31,840 --> 00:36:33,920 Speaker 2: you can always get the latest legal news on our 711 00:36:33,920 --> 00:36:38,080 Speaker 2: Bloomberg Law podcasts. You can find them on Apple Podcasts, Spotify, 712 00:36:38,280 --> 00:36:43,319 Speaker 2: and at www dot bloomberg dot com, slash podcast, Slash Law, 713 00:36:43,719 --> 00:36:46,320 Speaker 2: and remember to tune into The Bloomberg Law Show every 714 00:36:46,360 --> 00:36:50,280 Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso 715 00:36:50,400 --> 00:36:52,000 Speaker 2: and you're listening to Bloomberg