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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 2: This is such an odd case for our usual jurisprudence.

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Speaker 2: It seems like your law is covering just about every

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Speaker 2: social media platform on the Internet. And we have a

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Speaker 2: meek guy who are not traditional social media platforms like

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Speaker 2: smartphones and others who have submitted a meeky brief telling

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Speaker 2: them that readings of this law could cover them.

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Speaker 3: And during the next almost four hours of oral arguments today,

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Speaker 3: the Supreme Court justice is continue to grapple with the

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Speaker 3: new Republican backed laws in Texas and Florida that would

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Speaker 3: sharply restrict the ability of social media companies to regulate

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Speaker 3: the content posted by their users. Several justices echoed the

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Speaker 3: concerns of Justice Sonya So to Mayor about how the

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Speaker 3: overly broad laws might affect other tech services, including e

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Speaker 3: commerce sites like Uber and Etsy, and email and messaging services.

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Speaker 3: Here's Justice Amy Coney Barrett.

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Speaker 4: So Florida's law. So far as I can understand, it

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Speaker 4: is very broad, and we're talking about the classic social

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Speaker 4: media platforms. But it looks to me like it could

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Speaker 4: cover Uber. It looks to me like it could cover

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Speaker 4: just Google Search engines, Amazon Web Service and all of

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Speaker 4: those things would look very different. And you know, Justice

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Speaker 4: Sotomayor brought up Etsy. It seems to me that there

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Speaker 4: are now Etsy has a feed recommended for you, right,

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Speaker 4: but it also just has shops for handmade goods that

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Speaker 4: you can get.

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Speaker 5: It looks a.

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Speaker 4: Lot more like a brick and mortar marketplace or flea market,

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Speaker 4: you know, than you know a place for hosting speech.

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Speaker 3: Joining me is Eric Goleman, co director of the High

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Speaker 3: Tech Law Institute at Santa Clara University Law School four hours.

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Speaker 3: What was the major question or questions that the justices

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Speaker 3: were grappling with.

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Speaker 1: The primary question the judges were wrestling with is whether

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Speaker 1: the cases that presented itself to them was ready for

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Speaker 1: their determination. The case has been styled as a facial challenge,

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Speaker 1: which means that the plaintiffs are trying to overturn the

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Speaker 1: laws entirely, and the Court wasn't sure if that was

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Speaker 1: appropriate procedural challenge or if a better procedure would have

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Speaker 1: been preferred.

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Speaker 3: Justice Sonya sot Mayor started out by saying that this

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Speaker 3: is such an odd case for us. The Florida law

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Speaker 3: is so broad, it's covering almost everything. She talked about

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Speaker 3: whether it would apply to Etsy, and later on Justice

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Speaker 3: Amy Cony Barrett echoed that question in staid it looked

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Speaker 3: like it could cover Uber, Google search Engine, Amazon web services,

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Speaker 3: So tell us about those concerns.

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Speaker 1: Essentially, what Florida and techs did is that they passed

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Speaker 1: laws that were packed with over a dozen different ideas

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Speaker 1: in each and because of that complexity, it makes it

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Speaker 1: very hard to determine who's actually covered by the law

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Speaker 1: and what they're expected to do. And based on the

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Speaker 1: way that the cases got to the Supreme Court, some

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Speaker 1: of that wasn't fully clarified at the lower levels, and

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Speaker 1: so the justices were just wrestling with the indeterminacy of

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Speaker 1: the law that they couldn't figure out who's covered, what

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Speaker 1: it would actually require them to do, and therefore they

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Speaker 1: didn't even know how to evaluate the constitutionality of those provisions.

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Speaker 3: Also, Justice Samuel Alito asked Paul Clement, who was arguing

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Speaker 3: for the tech industry, basically, could the Florida law prevent

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Speaker 3: Gmail from deleting or sending to spam emails sent by

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Speaker 3: political commentators such as Tucker Carlson or Rachel Maadow and

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Speaker 3: Clement said, the Florida law would seem to cover Gmail.

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Speaker 1: Yes, And so here's the problem. Because of the way

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Speaker 1: the law is drafted, it's not entirely clear what's inside

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Speaker 1: and outside of the scope of the law. So Gmail,

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Speaker 1: when you think about it, is just purely moving email

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Speaker 1: from point to point might very well not be covered

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Speaker 1: by the law. But Gmail, as an inbox, does a

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Speaker 1: number of things that actually helps the email users navigate

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Speaker 1: their email. For example, they put the emails into different

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Speaker 1: folders that are more or less prominent, And so it's

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Speaker 1: not totally clear what to make of that, because the

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Speaker 1: concept of email is not just about moving messages from

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Speaker 1: point to point. There's more to it.

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Speaker 3: There were also a lot of questions about whether social

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Speaker 3: media platforms should be treated like common carriers such as

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Speaker 3: telephone companies. So are tech companies more like publishers or

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Speaker 3: public utilities.

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Speaker 1: I think that the real struggle was in how to

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Speaker 1: inter play a speech restriction, of which the laws contained

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Speaker 1: several with other legal principles like public accommodations, the idea

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Speaker 1: that companies should not discriminate against their customers based on

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Speaker 1: certain protected attributes. So other concepts like common carriage or

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Speaker 1: public utility doctrines. Those kinds of doctrines could be in play.

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Speaker 1: But the real struggle is that the Court doesn't really

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Speaker 1: know how to think about how social media services differ

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Speaker 1: from say, a restaurant. Until they get to that basic

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Speaker 1: understanding of the different functions of social media services, they

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Speaker 1: don't even know how to categorize them.

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Speaker 3: And early in the arguments, about half an hour in,

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Speaker 3: Justice Cavanaugh emphasized to Florida Solicitor General that the First

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Speaker 3: Amendment only prevents governments from restricting speech, not private businesses.

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Speaker 5: In your opening remarks, you said, the design of the

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Speaker 5: First Amendment is to prevent suppression of speech each end quote,

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Speaker 5: and you left out what I understand to be three

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Speaker 5: key words in the First Amendment or to describe the

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Speaker 5: First Amendment by the government. Do you agree by the

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Speaker 5: government is what the First Amendment is targeting.

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Speaker 3: That seemed to be such a strong point, but then

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Speaker 3: it just disappeared from the arguments.

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Speaker 1: Justice Kavanaugh really hammered that the First Amendment restricts how

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Speaker 1: governments act, not how private actors act. And when the

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Speaker 1: government tries to tell publishers how to act, that's a facial, unambiguous.

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Speaker 1: First Amendment violation, no questions about it, and for some reason,

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Speaker 1: he was pretty much the only voice making that point,

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Speaker 1: even though it seems so screamingly obvious. All the other

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Speaker 1: justices were struggling to get back to that basic point.

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Speaker 1: And so that makes me nervous because Justice Kavanaugh was

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Speaker 1: one hundred percent correct in that observation, and he was

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Speaker 1: almost like a loan Well, that's.

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Speaker 3: What I mean. I thought coming into these arguments that

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Speaker 3: there was no way they would uphold either of these laws.

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Speaker 3: Now I'm not so sure.

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Speaker 1: Well, it's not a binary question. It's not do the

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Speaker 1: law survive or the laws fail. It could be the

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Speaker 1: parts of law survive and parts of the law fail.

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Speaker 1: Like in the Eleventh Circuit, some of the laws did

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Speaker 1: survive and other parts did not. So the Supreme Court

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Speaker 1: is quite likely to try to make some distinctions about

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Speaker 1: the different provisions and will be careful to try and

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Speaker 1: make sure that whatever they say on any of those

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Speaker 1: visions wouldn't affect some future legislature's freedom on different topic.

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Speaker 1: So the net effect is that it's possible that some

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Speaker 1: parts of the law will survive. And that's scary to

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Speaker 1: me because there was really no salagy in the law

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Speaker 1: at all either law. Both of them were so misguided

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Speaker 1: at their core that the idea that any peace of

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Speaker 1: the law might be okay is really just tor to me.

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Speaker 3: Well, if parts of the laws are allowed to go

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Speaker 3: into effect, that means we could have a landscape across

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Speaker 3: the country where different states have different rules about social media.

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Speaker 1: That's inevitable. That's already happening today. And that's a different

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Speaker 1: question for the Court that they acknowledged occasionally but weren't

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Speaker 1: prepared to deal with. It wasn't within the scope of

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Speaker 1: their review. But the entire idea of individual states coming

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Speaker 1: up with their own version of a social media service

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Speaker 1: and how they regulated just completely cutradicts how we think

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Speaker 1: about the Internet and really how internet law can function

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Speaker 1: in a meaningful way. So, just to be clear, there

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Speaker 1: are provisions of both the Florid and Texas laws that

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Speaker 1: were not challenged, that are in effect today that the

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Speaker 1: states have chosen not yet to enforce. So we are

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Speaker 1: already living in a world where parts of these laws

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Speaker 1: are in effect, and whenever they're enforced, if ever, we

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Speaker 1: could see a radically different internet, the states are not

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Speaker 1: likely to deploy those laws to advance the interests of

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Speaker 1: the Internet at large. They will do so to advance

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Speaker 1: the voters they're trying to impress.

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Speaker 3: Yeah, at one point there was a discussion about whether

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Speaker 3: Texas could be GEO fenced out.

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Speaker 1: Yeah, it's the weirdest message. The Texas lawyer basically said,

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Speaker 1: to get the f out of Texas if you don't

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Speaker 1: want to follow their rules. And if I'm a Texas

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Speaker 1: social media user, I'm going to be quite concerned about

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Speaker 1: that position. They're basically begging the social media service to

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Speaker 1: change the Internet for Texas, and I'm pretty sure that's

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Speaker 1: not actually what Texas voters want.

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Speaker 3: As Clement made clear, this is here on a preliminary injunction,

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Speaker 3: So could the justices just send this back for trial

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Speaker 3: and for more findings of fact.

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Speaker 1: That's the best case in for the social media services

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Speaker 1: is that the Supreme Court keeps the function in place,

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Speaker 1: or in the Texas case, restores the injunction that was

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Speaker 1: initially issued and then sends it back to the child

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Speaker 1: courts to determine whether or not a permanent injunction is appropriate.

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Speaker 1: That's the best case scenario. That step would have to happen,

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Speaker 1: no matter what, if the law is going to be

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Speaker 1: struck down. But if the courts decide to affirm some

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Speaker 1: or all of the existing laws, they could simply say injunction.

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Speaker 1: Dissolved laws go into effect, and either the social media

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Speaker 1: services can never challenge it because they'll have no merit,

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Speaker 1: or at best, the social media services will have to

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Speaker 1: challenge only after they've been sued under the law. And

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Speaker 1: social media services don't like that answer because of the

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Speaker 1: fact that they would then have to build a compliance

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Speaker 1: function and hope that they got it right or risk

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Speaker 1: really quite devastating remedies. So the best scenario is that

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Speaker 1: we have further proceeds in this case at the lower

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Speaker 1: court to determine the permanent injunction, and the worst case

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Speaker 1: scenario is that the laws go into effect as they're

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Speaker 1: currently written, with the possibility of limited further challenges.

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Speaker 3: Did you see certain justices on one side and certain

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Speaker 3: justices on the other, or did you have any idea

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Speaker 3: where the justices stood.

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Speaker 1: It wouldn't surprise me if three justices would vote to

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Speaker 1: support the Texas and Florida laws. That could be done substantly,

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Speaker 1: or more likely on a procedural basis, simply saying that

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Speaker 1: they reject the facial challenge. That was Justice Thomas, Justice Toledo,

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Speaker 1: and Justice or such. After that, the other six justices

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Speaker 1: were kind of all over the map. I heard some

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Speaker 1: reservations about the laws and the likelihood that some aspects

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Speaker 1: were unconstitutional, but I couldn't tell then if that would

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Speaker 1: support a procedural ruling on the legitimacy of the facial challenge,

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Speaker 1: or if there were substance of agreement about which of

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Speaker 1: the pieces were going to be unconstitutional. So I come

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Speaker 1: away from the oral argument really uncertain about the future

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Speaker 1: of the cases, and also frankly uncertain about the future

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Speaker 1: of the Internet.

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Speaker 3: And by the way, those three justices you mentioned were

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Speaker 3: the ones in dissent when the Supreme Court blocked the

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Speaker 3: Texas law in twenty twenty two, So I guess they

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Speaker 3: haven't changed their minds. But I mean, is there any

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Speaker 3: way you think the Court would come out and say

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Speaker 3: that social media companies don't have First Amendment rights.

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Speaker 1: I don't think we're likely to see that broadest statement

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Speaker 1: that social media services have no First Amendment rights, But

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Speaker 1: it's unclear if the Court would do something like say

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Speaker 1: that the regulations affected the social media services conduct as

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Speaker 1: opposed to their speech, in which case it would be

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Speaker 1: subject to a much less stringent review. I don't think

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Speaker 1: that's the right answer to this question. I'm not sure

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Speaker 1: there would be a majority of justices voting for that,

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Speaker 1: but that would be a way for them to say

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Speaker 1: that the social media services have First Amendment protection and

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Speaker 1: still conclude that the laws could go into effect.

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Speaker 3: Coming up next on the Bloomberg Lawn Show, I'll continue

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Speaker 3: this conversation with Professor Eric Goleman of Santa Clara University

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Speaker 3: Law School, and we'll talk about where this decision might

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Speaker 3: stand in First Amendment jurisprudence. I'm Juan Grosso. When you're

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Speaker 3: listening to Bloomberg, the US Supreme Court justice is struggled

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Speaker 3: today to find a middle ground on the application of

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Speaker 3: free speech principles to the Internet. They were reviewing republican

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Speaker 3: back laws in Florida and Texas that would sharply restrict

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Speaker 3: the editorial discretion of the largest social media companies. In

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Speaker 3: almost four hours of oral arguments, justices across the court's

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Speaker 3: ideological spectrum suggested reluctance to completely strike down new laws

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Speaker 3: in Texas and Florida, as trade groups representing Facebook and

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Speaker 3: Google are seeking, but a majority of justices also expressed

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Speaker 3: concern about how the law's core provisions would apply to

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Speaker 3: decisions to take down hate speech and misinformation and block

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Speaker 3: users who don't comply with the platform's terms of service.

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Speaker 3: I've been talking to Eric Goldman, a professor at Santa

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Speaker 3: Clara University School of Law and co director of the

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Speaker 3: school's High Tech Law Institute, explain what's at stake in

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Speaker 3: these cases.

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Speaker 1: Eric, there are two that matter here. First, as the

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Speaker 1: Texas and Floria laws themselves have really devastating consequences for

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Speaker 1: how the Internet runs today. They would either require social

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Speaker 1: media services to publish content that we might call lawful

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Speaker 1: but awful, content that most of the audience does not

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Speaker 1: want to see, but the social media service as would

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Speaker 1: lose the ability to remove. And more generally, the stakes

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Speaker 1: are that if the Supreme Court suggests that there are

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Speaker 1: ways to regulate social media services, the states will continue

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Speaker 1: to pour extraordinary resources into that potential to try to

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Speaker 1: bend the services to their will. So the stakes aren't

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Speaker 1: just about the Texas and Florida laws. Those the stakes,

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Speaker 1: and those are extraordinarily high. But the real states are

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Speaker 1: what else can other states do? And they are chomping

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Speaker 1: at the bit to basically dictate how the Internet should function,

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Speaker 1: and they're not chomping at the bit to make it

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Speaker 1: better for users.

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Speaker 3: And this started as a political battle over perceived censorship

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Speaker 3: of conservative speech. Has it moved beyond that or is

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Speaker 3: it still a left right issue?

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Speaker 1: Well, so, the Florida and Texas laws trace back to

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Speaker 1: the concerns that canerservatives have that they are somehow being

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Speaker 1: discriminated against and their voices are being marginalized. Those concerns

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Speaker 1: are a factual. They cannot be validated in any empirically

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Speaker 1: rigorous way, but it doesn't matter. So long as the

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Speaker 1: conservatives believe that, and they control legislatures and governors, like

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Speaker 1: in Florida and Texas, then that can become the basis

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Speaker 1: for regulation that may not make any sense, but makes

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Speaker 1: the conservatives feel like they're speaking up for themselves. However,

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Speaker 1: with respect to the desires of states to regulate the Internet,

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Speaker 1: that's not a left right divide. That is a pro

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Speaker 1: censorship anti censorship divide, and there are very few people

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Speaker 1: still left on the anti censorship side. Both Democrats and

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Speaker 1: Republicans have absolutely unrestrained plans to tell the Internet how

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Speaker 1: they should function, and so it's not a partisan divide,

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Speaker 1: it's really like a worldview divide.

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Speaker 3: And where does Section two thirty fit into this? I

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Speaker 3: think it was Justice Barrett who called it a landmine.

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Speaker 1: So Section two thirty came up multiple times throughout the

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Speaker 1: oral arguments, but it wasn't part of the scope of

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Speaker 1: review that the Supreme Court justices authorized. They authorized a

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Speaker 1: review about the First Amendment, and Section two thirty is

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Speaker 1: a statute, it's not part of the Constitution, and so

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Speaker 1: it wasn't actually really relevant to the discussion today. Nevertheless,

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Speaker 1: a few of the justices tried to keep coming back

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Speaker 1: to Section two thirty, trying to find some way to

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Speaker 1: establish it either section two thirty was wrong or that

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Speaker 1: it put the services in an untenable position where they

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Speaker 1: were backing both Section two thirty and the First Amendment simultaneously.

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Speaker 1: Much of that discussion was frankly disingenuous. Any of the

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Speaker 1: justices trying to undermine Section two thirty were both talking

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Speaker 1: out of scope and also were almost always wrong about

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Speaker 1: the facts.

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Speaker 3: So will this, no matter which way it goes, be

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Speaker 3: the Court's most important state on the scope of the

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Speaker 3: First Amendment in the Internet error.

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Speaker 1: Well, it's not the first time the Supreme Court has

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Speaker 1: subbined about the First Amendment of the Internet. The first

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Speaker 1: case on that topic was back in nineteen ninety seven,

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Speaker 1: and there have been numerous cases since then. So a

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Speaker 1: lot depends on exactly what the Court says in this case.

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Speaker 1: If the Court creates a zone of regulation that authorizes

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Speaker 1: states to dictate behavior of social media services, then that

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Speaker 1: will become the most important Supreme Court case on the

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Speaker 1: First Amendment of the Internet, because it will be the

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Speaker 1: end of the First Amendment on the Internet. But just

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Speaker 1: to be clear, there are numerous additional cases that are

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Speaker 1: either currently punting before the Supreme Court or that on

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Speaker 1: their way to Supreme Court, where even if the Supreme

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Speaker 1: Court gave a full throated, unambiguous endorsement of a robust

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Speaker 1: First Amendment protection for the Internet, the future cases might

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Speaker 1: undo that. So, in a sense, for the Internet to

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Speaker 1: stay the way it is today, all of these cases

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Speaker 1: have to go in the Internet's favor, and that's a

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Speaker 1: really daunting prospect only because the law of math is

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Speaker 1: working against the Internet. At that point. There are too

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Speaker 1: many cases with too much risk for the Court to

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Speaker 1: get it right. One hundred percent every single time.

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Speaker 3: And will you explain in a little more depth just

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Speaker 3: what a facial challenge means, because that was a huge

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Speaker 3: part of the arguments.

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Speaker 1: Yeah, there are two ways to challenge the constitutionality of

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Speaker 1: a law. You can challenge it on its face, saying

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Speaker 1: that no matter how this law is applied, it would

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Speaker 1: always be unconstitutional. Or you can challenge it as applied.

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Speaker 1: After a particular lawsuit has been filed, the defendant can

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Speaker 1: say this lawsuit will require the state to engage in

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Speaker 1: an unconstitutional action. The as applied challenges are more common

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Speaker 1: in constitutional challenges because of the fact that then at

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Speaker 1: that point you can see all the facts that are

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Speaker 1: in play, whereas when you're dealing with a facial che lenge,

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Speaker 1: the facts are uncertain. There's an unlimited range of hypothetical

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Speaker 1: scenarios that might be in play. But when it comes

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Speaker 1: to speech restrictions, facial challenges are somewhat common because of

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Speaker 1: the fact that we shouldn't have to wait for speech

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Speaker 1: to be chilled in order for us to determine whether

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Speaker 1: or not the law is chilling speech. So it's really

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Speaker 1: appropriate to look at the law on its face and say,

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Speaker 1: will this chill speech impermissively. Otherwise the laws is causing harment.

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Speaker 1: It may never lead to it as applied challenge, because

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Speaker 1: people have already chilled their speech. And just as Soda,

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Speaker 1: my yours said something very interesting at the end. I

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Speaker 1: don't know if you remember this statement, but at the end,

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Speaker 1: just as Soda, Mayors said something the effect of, I

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Speaker 1: have a problem with laws so broad that they stifle

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Speaker 1: speech on its face. Basically, she looked at this law

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Speaker 1: and said, of course this is a speech restriction. Of course,

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Speaker 1: this is a First Amendment problem. Now how do we

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Speaker 1: get there? And the fact that some of the justices

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Speaker 1: weren't on that program from day one is a sign

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Speaker 1: of how dangerous these cases are, because those justices could

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Speaker 1: rule in a way that absolutely blows the minds of

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Speaker 1: the American people.

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Speaker 3: And representing the tech companies, here was a well known

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Speaker 3: Supreme Court advocate and former Solicitor General, Paul Clement.

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Speaker 1: I thought it. Paul clemented a good job today. I

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Speaker 1: will single out I thought the Solicitor General did a

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Speaker 1: fabulous job today. She really rocked it. And I was

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Speaker 1: proud to be paying taxes to support her work because

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Speaker 1: she really said what needed to be said, and in

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Speaker 1: such a clear, coherent way. I was just blown away

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Speaker 1: by her. She was one of the best oral advocates

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Speaker 1: I've heard in a very long time. She was just

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Speaker 1: almost perfect. Really, I mean, it was shocking how good

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Speaker 1: she was.

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Speaker 3: You're the perfect person to talk about this, Eric, Thanks

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Speaker 3: so much. I really appreciate your time. That's Eric Goleman,

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Speaker 3: a professor at Santa Clara University Law School and co

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Speaker 3: director of the school's High Tech Law Institute. The Federal

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Speaker 3: Trade Commission is suing to stop the biggest grocery deal

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Speaker 3: in US history, which would combine the two largest supermarket chains.

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Speaker 3: The FTC, eight states, and DC are suing to block

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Speaker 3: Kroger's twenty four point six billion dollar acquisition of Albertson's,

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Speaker 3: arguing the tie up would lead to lower wages for

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Speaker 3: workers and higher prices for groceries. The merger would mean

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Speaker 3: that Kroger Albertson's would have nearly five thousand stores across

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Speaker 3: the country. Joining me is Bloomberg Intelligence Senior litigation analyst

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Speaker 3: Jennifer ree Jen explain the FTC's reasons here.

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Speaker 6: They believe the deal's anti competitive, and you know, at

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Speaker 6: the end of the day. It is because of the

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Speaker 6: way grocery store deals are assessed under the antitrust laws.

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Speaker 6: I mean, the way the FTC would look at this

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Speaker 6: in general is to look at all the locations on

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Speaker 6: a map of the United States where both of these

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Speaker 6: companies have stores, and they're going to draw circles. And

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Speaker 6: the size of those circles depends kind of on whether

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Speaker 6: it's a rural area or an urban area, but they're

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Speaker 6: going to range anywhere from half a square mile up

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Speaker 6: to ten square miles. Look to see if both companies exist,

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Speaker 6: and then look to see what other competition exists. And

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Speaker 6: there's no doubt June that in numerous locations in the country,

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Speaker 6: probably the merger leads to a concentrated market. It's possible

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Speaker 6: that there are some regions where they're the only two

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Speaker 6: and it would be mergered of monopoly, or maybe there's three,

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Speaker 6: so it would be a merger todopoly. So that right

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Speaker 6: there kind of sets a threshold that the deal does

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Speaker 6: have some anti competitive issues, that it does potentially violate

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Speaker 6: the antitrust law in certain regions. Now the companies know this, right,

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Speaker 6: so what they proposed, which has happened in numerous other

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Speaker 6: grocery store deals in the past is to divest those stores,

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Speaker 6: and they look at the map, they pick out all

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Speaker 6: those regions where the concentration is too high if they merge,

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Speaker 6: and they sell those stores to a third party competitor.

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Speaker 6: In this case, it's a company called CNS Wholesalers, and

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Speaker 6: they fix the problem essentially. And what they've said is, look,

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Speaker 6: what we have suggested here is to sell up to

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Speaker 6: six hundred and fifty stores, and we think that resolves

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Speaker 6: the problem. We think in the other regions where we're

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Speaker 6: not divesting, the concentration levels are low enough that it's

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Speaker 6: not a competitive problem. We think that this company CNS

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Speaker 6: will buy these stores, they'll be a viable competitor, and

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Speaker 6: the level of competition will remain the same. So essentially,

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Speaker 6: what this comes down to is the FTC saying no,

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Speaker 6: not good enough. We don't think that the remedy Youth

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Speaker 6: offered up is good enough to fix the competition that's

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Speaker 6: been lost by virtue of this merger. So we're not

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Speaker 6: going to accept it, and we're going to go ahead

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Speaker 6: and sue. And so that's where we are, and that's

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Speaker 6: why they've sued.

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Speaker 3: And the FTC said that that remedy of divestiture wouldn't

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Speaker 3: solve the problem given a history of failed divestitures in

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Speaker 3: the supermarket industry.

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Speaker 6: Yes, you know, it's really unbelievable how closed this is

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Speaker 6: to a past, really spectacular failure in divestitures in supermarket industries.

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Speaker 6: And that is when Albertson's tried to buy Safeway. And

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Speaker 6: when they tried to buy Safeway, the FTC agreed to

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Speaker 6: allow the deal with a certain number of divestitures that

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Speaker 6: I think was in the hunt. It's nothing close to

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Speaker 6: six hundred and fifty stores. And they sold these stores

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Speaker 6: to a company called Hagen Well June. It was a

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Speaker 6: matter of something like six months or less than a

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Speaker 6: year that Hagen just failed. They couldn't handle these grocery stores.

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Speaker 6: They went bankrupt and eventually it was opered since that

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Speaker 6: bought them back many of them back. So it's like

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Speaker 6: a picture book failure of divestitures in supermarket industry, and

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Speaker 6: this one looks a lot like that. I think the

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Speaker 6: problem was Hagen was small and they simply just weren't

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Speaker 6: able operationally to pick up as many stores as they

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Speaker 6: picked up that were divested and operate them successfully. And

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Speaker 6: you have CNS, which is a big company, but it's

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Speaker 6: a wholesaler and it only operates about twenty three grocery stores.

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00:25:43,880 --> 00:25:46,160
Speaker 6: So you're going to go from a company that operates

439
00:25:46,200 --> 00:25:48,960
Speaker 6: twenty three grocery stores to six hundred and fifty. It's

440
00:25:49,000 --> 00:25:51,680
Speaker 6: a big leap, and I think it is a tough

441
00:25:51,800 --> 00:25:54,639
Speaker 6: argument to say that that company can do that and

442
00:25:54,680 --> 00:25:56,840
Speaker 6: can take on those stores and they can be as

443
00:25:56,880 --> 00:26:00,560
Speaker 6: competitive fairly quickly as Kroger or Alert. Since we're with

444
00:26:00,600 --> 00:26:02,080
Speaker 6: those stores here, the.

445
00:26:02,040 --> 00:26:06,879
Speaker 3: FTC is worried about consumers and workers.

446
00:26:07,040 --> 00:26:09,000
Speaker 6: Right, So that's the whole other piece, you know. I

447
00:26:09,160 --> 00:26:11,119
Speaker 6: talked in the beginning about drawing the circles in the

448
00:26:11,160 --> 00:26:13,560
Speaker 6: map and looking at where the stores competed, and that's

449
00:26:13,680 --> 00:26:15,840
Speaker 6: kind of one big piece of it. But a second

450
00:26:15,880 --> 00:26:18,760
Speaker 6: big piece is labor and employment, and this has been

451
00:26:18,800 --> 00:26:21,280
Speaker 6: something that the FTC's focused on in the last couple

452
00:26:21,320 --> 00:26:23,560
Speaker 6: of years, much more so than in the past. And

453
00:26:23,680 --> 00:26:26,920
Speaker 6: in fact, there are unions, several unions that are against

454
00:26:26,920 --> 00:26:29,000
Speaker 6: this deal because they do think it's going to hurt

455
00:26:29,040 --> 00:26:31,800
Speaker 6: workers and employees. And the issue here is that the

456
00:26:31,880 --> 00:26:34,040
Speaker 6: unions can kind of play the stores off each other

457
00:26:34,080 --> 00:26:36,919
Speaker 6: when they're negotiating the contracts and they can use that

458
00:26:37,040 --> 00:26:39,720
Speaker 6: leverage to help them get a better contract, and that's

459
00:26:39,760 --> 00:26:42,520
Speaker 6: not going to exist anymore if these companies merge. And

460
00:26:42,560 --> 00:26:45,199
Speaker 6: then I think the other issue is some concern about

461
00:26:45,200 --> 00:26:49,240
Speaker 6: CNS and whether CNS would maintain union contracts and how

462
00:26:49,280 --> 00:26:52,000
Speaker 6: they would treat the workers or employees, or whether they'd

463
00:26:52,040 --> 00:26:54,040
Speaker 6: actually close them of these stores and there would be

464
00:26:54,040 --> 00:26:54,919
Speaker 6: a loss of jobs.

465
00:26:55,480 --> 00:26:59,760
Speaker 3: And the FTC has been negotiating with the supermarkets for months. Yes,

466
00:27:00,040 --> 00:27:04,320
Speaker 3: and the grocers also said they would invest five hundred

467
00:27:04,400 --> 00:27:08,560
Speaker 3: million to cut prices and a billion to raise wages,

468
00:27:09,119 --> 00:27:12,640
Speaker 3: plus a one point three billion to improve Albertson's stores.

469
00:27:12,720 --> 00:27:16,560
Speaker 3: So does the FTC just not believe that would work

470
00:27:16,680 --> 00:27:18,080
Speaker 3: or not trust them.

471
00:27:18,680 --> 00:27:21,600
Speaker 6: I think it's a combination of both, you know, not

472
00:27:21,760 --> 00:27:24,639
Speaker 6: trusting them, not believing that it would work, and also

473
00:27:24,840 --> 00:27:28,439
Speaker 6: still having concerns about those stores that are divested and

474
00:27:28,480 --> 00:27:31,720
Speaker 6: sold to CNS. I mean, all these investments are something

475
00:27:31,760 --> 00:27:33,800
Speaker 6: that Kroger and Albertsons would do in the stores that

476
00:27:33,840 --> 00:27:37,040
Speaker 6: they jointly own, but it doesn't really do anything for

477
00:27:37,119 --> 00:27:40,160
Speaker 6: those stores that CNS would be taking over that need

478
00:27:40,240 --> 00:27:42,720
Speaker 6: to continue to operate and operate competitively.

479
00:27:43,400 --> 00:27:46,760
Speaker 3: The supermarket chains say they need the deal to compete

480
00:27:46,840 --> 00:27:50,840
Speaker 3: better with bigger rivals. So an Albertson spokesman said that

481
00:27:50,960 --> 00:27:54,600
Speaker 3: the company is disappointed that the FTC continues to use

482
00:27:54,640 --> 00:27:59,320
Speaker 3: the same outdated view of the US grocery industry. It said,

483
00:27:59,520 --> 00:28:02,359
Speaker 3: if the the FTC is successful in blocking this merger,

484
00:28:02,560 --> 00:28:07,359
Speaker 3: be hurting customers and helping strengthen larger multi channel retailers

485
00:28:07,359 --> 00:28:11,240
Speaker 3: such as Amazon, Walmart, and Costco, the very companies the

486
00:28:11,400 --> 00:28:15,119
Speaker 3: FTC claims to be raining in. Is that true to

487
00:28:15,160 --> 00:28:15,879
Speaker 3: a certain extent.

488
00:28:16,400 --> 00:28:19,480
Speaker 6: So I think the issue here comes down to what's

489
00:28:19,560 --> 00:28:22,920
Speaker 6: called defining the relevant market. So when the FTC assesses

490
00:28:22,960 --> 00:28:25,840
Speaker 6: a deal and does this investigation, they're asking what is

491
00:28:25,880 --> 00:28:28,560
Speaker 6: the sphere of competition? Who do you compete with companies

492
00:28:28,560 --> 00:28:32,240
Speaker 6: that are merging? And they have traditionally, when they've looked

493
00:28:32,240 --> 00:28:36,400
Speaker 6: at grocery deals, basically decided that these companies do compete

494
00:28:36,400 --> 00:28:39,360
Speaker 6: with other standard grocery stores and do compete to some

495
00:28:39,480 --> 00:28:42,800
Speaker 6: extent with a Walmart supercenter that sells groceries, But they

496
00:28:42,880 --> 00:28:46,720
Speaker 6: haven't viewed competition to include the club stores like Sam's

497
00:28:46,720 --> 00:28:50,720
Speaker 6: Club or Costco. And they also have really excluded sales

498
00:28:50,720 --> 00:28:54,320
Speaker 6: of groceries online, the e commerce sales of groceries. So

499
00:28:55,040 --> 00:28:57,440
Speaker 6: that's what Croger and Albertson's mean when they say they're

500
00:28:57,440 --> 00:28:59,760
Speaker 6: taking an outdated view. They're saying, Look, the industry is

501
00:28:59,800 --> 00:29:03,880
Speaker 6: really changed, and it's not just about traditional supermarkets anymore.

502
00:29:03,960 --> 00:29:06,920
Speaker 6: We face competition from dollar stores, which I think the

503
00:29:07,000 --> 00:29:10,440
Speaker 6: FDC doesn't include. We face competition from Costco and from

504
00:29:10,480 --> 00:29:13,520
Speaker 6: Sam's Club, and the FDC doesn't include those entities. If

505
00:29:13,560 --> 00:29:16,960
Speaker 6: the FTC did, the market concentration numbers would be lower

506
00:29:17,240 --> 00:29:20,200
Speaker 6: and this deal wouldn't look as problematic as it does now.

507
00:29:20,240 --> 00:29:23,680
Speaker 6: The thing here is that oftentimes merging companies try to

508
00:29:23,800 --> 00:29:26,720
Speaker 6: argue that we need to come together better to face

509
00:29:26,880 --> 00:29:30,760
Speaker 6: these bigger competitive threats or these emerging competitive threats, and

510
00:29:30,880 --> 00:29:34,760
Speaker 6: unfortunately those arguments just don't tend to resonate with the regulators.

511
00:29:35,000 --> 00:29:37,880
Speaker 6: They really tend to sort of stick with what they've

512
00:29:37,880 --> 00:29:41,440
Speaker 6: done historically. And that's why they threw the lawsuit, because

513
00:29:41,480 --> 00:29:44,640
Speaker 6: that's how the FTC sees it. Now they have another shot, right,

514
00:29:44,680 --> 00:29:46,680
Speaker 6: they're going to go before a judge, and they can

515
00:29:46,720 --> 00:29:48,800
Speaker 6: make those same arguments to a judge, and they can

516
00:29:48,840 --> 00:29:51,640
Speaker 6: try to present evidence to the judge as to how

517
00:29:51,920 --> 00:29:56,560
Speaker 6: their own prices and activity is constrained let's say by

518
00:29:56,600 --> 00:29:59,240
Speaker 6: an Amazon or by Costco, right, and they can try

519
00:29:59,240 --> 00:30:01,400
Speaker 6: to convince the judge that the market's a little broader,

520
00:30:01,440 --> 00:30:02,880
Speaker 6: and a judge might see it that way.

521
00:30:03,240 --> 00:30:06,320
Speaker 3: I take it you think that the FTC has the

522
00:30:06,360 --> 00:30:07,760
Speaker 3: better argument in.

523
00:30:07,760 --> 00:30:11,000
Speaker 6: Court right well, right now, I tend to lean towards

524
00:30:11,080 --> 00:30:14,160
Speaker 6: that because I've always had my doubts about the divestiture

525
00:30:14,160 --> 00:30:17,880
Speaker 6: package being sufficient. This is a very big merger of

526
00:30:18,000 --> 00:30:21,120
Speaker 6: two grocery stores that have a lot of different brand names.

527
00:30:21,480 --> 00:30:23,640
Speaker 6: I think people might not realize how very big they

528
00:30:23,640 --> 00:30:25,440
Speaker 6: are when you think of all the different banners and

529
00:30:25,480 --> 00:30:27,800
Speaker 6: brand names that they own each of them. And I

530
00:30:27,840 --> 00:30:30,440
Speaker 6: do think you have this kind of very well known

531
00:30:30,480 --> 00:30:34,520
Speaker 6: failure of a divestiture in the supermarket industry. So I

532
00:30:34,560 --> 00:30:36,640
Speaker 6: think it's going to depend on what kind of evidence

533
00:30:36,680 --> 00:30:39,480
Speaker 6: they can present to show that CNS can do this,

534
00:30:39,920 --> 00:30:42,960
Speaker 6: that CNS has the incentive to compete, and the incentive

535
00:30:43,000 --> 00:30:45,560
Speaker 6: to keep these stores open that they're buying, and the

536
00:30:45,600 --> 00:30:50,120
Speaker 6: incentive to maintain union labor contracts. It just depends on

537
00:30:50,160 --> 00:30:52,600
Speaker 6: what they can show in court. In that respect, They're

538
00:30:52,600 --> 00:30:55,280
Speaker 6: really going to have to show how this remedy is

539
00:30:55,360 --> 00:30:58,520
Speaker 6: going to replace the competition that's been lost by virtue

540
00:30:58,560 --> 00:30:59,560
Speaker 6: of the two coming together.

541
00:31:00,120 --> 00:31:02,160
Speaker 3: So, now where does it fit in that about a

542
00:31:02,160 --> 00:31:07,120
Speaker 3: week ago Colorado sued in a Denver court and Washington

543
00:31:07,240 --> 00:31:10,680
Speaker 3: State a month ago sued in its state court. Do

544
00:31:10,760 --> 00:31:13,320
Speaker 3: those fit in with this at all? Or separate tracks?

545
00:31:13,560 --> 00:31:16,280
Speaker 6: You know, they're separate tracks. And it is really unusual.

546
00:31:16,360 --> 00:31:19,160
Speaker 6: I mean, you probably saw that nine state attorneys general

547
00:31:19,240 --> 00:31:22,760
Speaker 6: actually joined the FTC suit, which is usually what happens

548
00:31:22,760 --> 00:31:24,880
Speaker 6: when states want to get involved. They join in the

549
00:31:24,960 --> 00:31:28,400
Speaker 6: FTC suit, They work with the FTC. It's all one litigation.

550
00:31:28,840 --> 00:31:31,720
Speaker 6: This was a little bit of an unusual circumstance, not

551
00:31:31,800 --> 00:31:34,440
Speaker 6: only that these two states filed separately, but also that

552
00:31:34,480 --> 00:31:37,240
Speaker 6: they filed in state court. So I think to some

553
00:31:37,400 --> 00:31:39,800
Speaker 6: extent for those states where there are a lot of

554
00:31:39,840 --> 00:31:43,000
Speaker 6: overlapping Krueger and Albertson stores. By the way, it's a

555
00:31:43,000 --> 00:31:46,280
Speaker 6: bit of an insurance policy for them if the FTC

556
00:31:46,480 --> 00:31:49,080
Speaker 6: does lose in court, they still have their own lawsuits,

557
00:31:49,320 --> 00:31:51,400
Speaker 6: and it gives them well the ability to try to

558
00:31:51,440 --> 00:31:54,360
Speaker 6: block the suit, you know, second shot at blocking the deal,

559
00:31:54,600 --> 00:31:57,120
Speaker 6: but it also gives them some leverage to negotiate some

560
00:31:57,240 --> 00:32:00,840
Speaker 6: additional concessions if they need to directly pointed at their

561
00:32:00,880 --> 00:32:04,040
Speaker 6: own states and workers and facilities in their own states.

562
00:32:04,400 --> 00:32:06,840
Speaker 6: And I think also there might be some feeling that

563
00:32:06,880 --> 00:32:10,040
Speaker 6: they have a better shot under their own state laws

564
00:32:10,080 --> 00:32:12,280
Speaker 6: perhaps than under federal antitrust laws.

565
00:32:12,520 --> 00:32:14,640
Speaker 3: Now we have talked a lot, but I'm still going

566
00:32:14,680 --> 00:32:17,200
Speaker 3: to ask you this question, so people who have not

567
00:32:17,320 --> 00:32:22,320
Speaker 3: heard about our many antitrust discussions can understand the Biden

568
00:32:22,360 --> 00:32:28,520
Speaker 3: administration's laser focus on preventing deals it sees as anti competitive.

569
00:32:29,040 --> 00:32:32,960
Speaker 6: YEA, you know, there really is a significant effort by

570
00:32:32,960 --> 00:32:37,480
Speaker 6: the Biden administration enforcers to bolster anti trust enforcement. There

571
00:32:37,560 --> 00:32:40,680
Speaker 6: is a viewpoint that it's just been two lacks for

572
00:32:40,880 --> 00:32:43,560
Speaker 6: many years, and the result is that we have a

573
00:32:43,600 --> 00:32:46,480
Speaker 6: lot of industries in this country that are too concentrated.

574
00:32:46,760 --> 00:32:50,680
Speaker 6: And when industries are too concentrated, it impacts consumers because

575
00:32:50,720 --> 00:32:54,040
Speaker 6: it can mean prices, our higher quality is lower, there's

576
00:32:54,160 --> 00:32:57,440
Speaker 6: less choice, there might be less innovation, and that's essentially

577
00:32:57,480 --> 00:33:00,720
Speaker 6: the result of just having too few competitors. So they

578
00:33:00,840 --> 00:33:03,760
Speaker 6: really were on a mission from day one to slow

579
00:33:03,840 --> 00:33:06,560
Speaker 6: that process down and to do what they can to

580
00:33:06,640 --> 00:33:09,720
Speaker 6: try to stem the tide of consolidation and in particular

581
00:33:09,720 --> 00:33:13,720
Speaker 6: industries like grocery as a matter of fact, So they

582
00:33:13,840 --> 00:33:17,760
Speaker 6: have followed through by being a lot tougher when it

583
00:33:17,800 --> 00:33:20,640
Speaker 6: comes to remedies that have been proposed by the companies,

584
00:33:20,640 --> 00:33:23,960
Speaker 6: and that's what you see here, or really just essentially

585
00:33:24,160 --> 00:33:26,520
Speaker 6: not being willing to accept a remedy to clear a

586
00:33:26,600 --> 00:33:30,440
Speaker 6: deal and instead saying, hey, if your deal's anti competitive

587
00:33:30,480 --> 00:33:32,160
Speaker 6: in our view, we're just going to go to court

588
00:33:32,200 --> 00:33:34,480
Speaker 6: and try to block it, rather than trying to settle

589
00:33:34,520 --> 00:33:37,040
Speaker 6: with you with some sort of a proposal or concessions

590
00:33:37,080 --> 00:33:39,760
Speaker 6: that you think will fix our concerns. And that's what

591
00:33:39,760 --> 00:33:40,600
Speaker 6: we're seeing.

592
00:33:40,960 --> 00:33:44,760
Speaker 3: And more ahead. Thanks so much, Jen. That's Bloomberg Intelligence

593
00:33:44,760 --> 00:33:50,240
Speaker 3: senior litigation analyst Jenniferree. In other legal news today, prosecutors

594
00:33:50,240 --> 00:33:53,120
Speaker 3: and Donald Trump's New York hush money criminal case are

595
00:33:53,160 --> 00:33:55,720
Speaker 3: asking a judge to impose a gag order on the

596
00:33:55,760 --> 00:33:59,600
Speaker 3: former president ahead of next month's trial, citing a long

597
00:33:59,720 --> 00:34:03,920
Speaker 3: hiss of making public and inflammatory remarks about people involved

598
00:34:03,960 --> 00:34:07,520
Speaker 3: in his legal cases. The Manhattan District Attorney's office asked

599
00:34:07,520 --> 00:34:10,799
Speaker 3: for what it called a narrowly tailored gag order that

600
00:34:10,880 --> 00:34:13,799
Speaker 3: would bar Trump from making or directing others to make

601
00:34:13,880 --> 00:34:18,279
Speaker 3: public statements about potential witnesses and jurors, as well as

602
00:34:18,320 --> 00:34:21,920
Speaker 3: statements meant to interfere with or harass the court's staff,

603
00:34:22,239 --> 00:34:26,760
Speaker 3: prosecution team, or their families. Prosecutors wrote that Trump quote

604
00:34:27,000 --> 00:34:31,160
Speaker 3: has a longstanding and perhaps singular history of using social media,

605
00:34:31,520 --> 00:34:35,799
Speaker 3: campaign speeches and other public statements to attack individuals that

606
00:34:35,880 --> 00:34:39,520
Speaker 3: he considers to be adversaries. Jury selection in the case

607
00:34:39,600 --> 00:34:42,800
Speaker 3: is scheduled to begin March twenty fifth, barring a last

608
00:34:42,880 --> 00:34:45,759
Speaker 3: minute delay. It will be the first of Trump's four

609
00:34:45,840 --> 00:34:48,799
Speaker 3: criminal cases to go to trial. And that's it for

610
00:34:48,840 --> 00:34:51,839
Speaker 3: this edition of the Bloomberg Law podcast. Remember you can

611
00:34:51,920 --> 00:34:54,880
Speaker 3: always get the latest legal news by subscribing and listening

612
00:34:54,880 --> 00:34:58,560
Speaker 3: to the show on Apple Podcasts, Spotify, and at Bloomberg

613
00:34:58,640 --> 00:35:02,719
Speaker 3: dot com, slash podcast, slash Law. I'm June Grosso and

614
00:35:02,800 --> 00:35:05,480
Speaker 3: this is Bloomberg