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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcasts. Yesterday, the FCC

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Speaker 1: revoked net neutrality by a three to two vote as expected.

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Speaker 1: Joining me now is FCC Commissioner Brendan Carr, who was

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Speaker 1: nominated with the commission by President Trump. He voted to

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Speaker 1: repeal net neutrality. Thank you for being here, Thanks for

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Speaker 1: having me. I appreciate it. Well. The FCC is going

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Speaker 1: to be defending against many lawsuits. New York Attorney General

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Speaker 1: Eric Schneiderman announced to lead a multi state lawsuit against

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Speaker 1: the f SEC. Washington a G. Bob Ferguson will also

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Speaker 1: sue Schneiderman's investigation and a few research studies showed that

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Speaker 1: millions of public comments submitted were fake, and nineteen state

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Speaker 1: a G s and others quested a delay in the

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Speaker 1: vote to investigate it. Why didn't the commission grant that delay?

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Speaker 1: What was the rush to push this through? I think

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Speaker 1: a lot of what you're hearing is misinformation about what

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Speaker 1: the FCC ended up doing. Again, a lot of people

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Speaker 1: are claiming that we quote ended net neutrality or ended

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Speaker 1: the Internet as we know it simply not the case.

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Speaker 1: We went back to the regulatory framework that governed the

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Speaker 1: Internet that year and for twenty years before consumers were protected.

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Speaker 1: The Internet flourished under that framework. We simply went back

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Speaker 1: to that same regulatory framework. Yes, but the whole point

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Speaker 1: is there was a comment period which is required because

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Speaker 1: you revoked a rule and the the a g S

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Speaker 1: lawsuit is going to be based on a failure to

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Speaker 1: follow the Administrative Procedure Act, and so my question is,

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Speaker 1: what was the rush in doing that vote? Why not

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Speaker 1: wait and investigate? We followed the administrati Procedure Act absolutely.

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Speaker 1: In April is when we opened up this rulemaking proceeding,

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Speaker 1: we saw over four million vilenes get submitted in the

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Speaker 1: SEC's record. We released the document more than three weeks

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Speaker 1: before the FECs votes, So there's a tremendous amount of

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Speaker 1: transparency here and anybody and everyone that wanted to participate,

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Speaker 1: we're free to submit filings, and we reviewed the record

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Speaker 1: and based our decision on the public's feedback. The there

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Speaker 1: was enormous public feedback against this though. Yeah, and there's

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Speaker 1: a threshold legal question that we have to answer at

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Speaker 1: the FCC, which is a technical one, which is is

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Speaker 1: this a Title to telecom service or is it a

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Speaker 1: Title one information service? And that's a legal determination that

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Speaker 1: we have to make, and we looked at the record,

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Speaker 1: looked at the law and our precedent, and we made

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Speaker 1: that determination. As you point out, there's a separate policy

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Speaker 1: debate as well, and again, I think a lot of

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Speaker 1: what you're seeing is sort of this perception that by

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Speaker 1: repealing Title two that we are giving I s p

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Speaker 1: s free reign to dominate consumers online experience. That's not

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Speaker 1: what I want to see and that's not what our

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Speaker 1: vote did. We kept strong consumer protections in place. So

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Speaker 1: I think a lot of what you're seeing is fear

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Speaker 1: that I s p s are gonna have no legal

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Speaker 1: restraints on what they do, whether we're gonna somehow move

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Speaker 1: into some balkanized version of the Internet. Again, that's not

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Speaker 1: the case. We are putting strong protections in place to

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Speaker 1: make sure that we continue to have a free and

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Speaker 1: open Internet. Well, broadband providers say they'll not block or

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Speaker 1: throttle legal contact content, but they may engage in paid

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Speaker 1: prioritization or prioritize their own content or content from their partners.

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Speaker 1: For example, A T and T already has its direct

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Speaker 1: Now video streaming service to bypass mobile subscribers data limits,

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Speaker 1: so that may happen. No, not at all. So right now,

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Speaker 1: under Title too, all of that activity that you describe

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Speaker 1: blocking websites, paid priorization, throttling is lawful under the Title

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Speaker 1: to framework. The d C Circuit made that clear when

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Speaker 1: they reviewed the FECs rule. Now that we're appealing title to,

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Speaker 1: the Federal Trade Commission is empowered again. They lost their

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Speaker 1: authority over I s p s during this two year

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Speaker 1: experiment with Title two, and they're strong legal checks and

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Speaker 1: place Section one of the Sherman Acts Section two of

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Speaker 1: the Sherman Act. So if an I s P entered

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Speaker 1: into an anti competitive agreement to do those things that

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Speaker 1: you just talked about, those would be a violations of

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Speaker 1: federally any trust law. Again, it's a shift from the

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Speaker 1: FCC being the lead enforcer here to the FTC. It's

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Speaker 1: not a shift from having laws and restraints against I

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Speaker 1: s p s towards which there are no restraints, but

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Speaker 1: the FTC takes care of problems after the facts. The

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Speaker 1: enforcement happens after the fact, and its authorities under question

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Speaker 1: at the Ninth Circuit. So that's the first part of that.

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Speaker 1: That's the same framework we have at the FCC. We

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Speaker 1: had net neutrality rules and then people file complaints. In fact,

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Speaker 1: some alleged that we had fifty thou complaints, and then

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Speaker 1: the FEC takes enforcement action. Our rules are not self enforcing.

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Speaker 1: That's the same world we're going into with the Federal

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Speaker 1: Trade Commission. They have standards, whether it's Section one or

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Speaker 1: Section two, and then the question becomes enforcing those standards.

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Speaker 1: There's no shift in that respect, and that's the FTC

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Speaker 1: is jurisdiction. There was a panel decision at the Ninth

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Speaker 1: Circuit about a year ago that called their question and

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Speaker 1: do UH called their authority in a question? That pain

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Speaker 1: decision has now effectively been vacated by the full Ninth Circuits.

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Speaker 1: The law to Land today is the Federal Trade Commission

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Speaker 1: is fully empowered to take enforcement actions against I s P.

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Speaker 1: The only thing that was holding them back before was

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Speaker 1: the FEC Title two decisions. Well, there is going to

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Speaker 1: be an non bank hearing about that. So the Ninth

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Speaker 1: Circuit is still going to rule. But let's move on

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Speaker 1: the FCC order block states from making their own net

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Speaker 1: neutrality rules, and one California state center said he's going

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Speaker 1: to introduce a bill to impose net neutrality rules. There

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Speaker 1: the attorneys general can sue, saying the f CC doesn't

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Speaker 1: have authority to preempt state consumer protection rules and also

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Speaker 1: the Commission did not ask for questions on that issue.

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Speaker 1: Do you see problems there? You have about forty five seconds. No,

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Speaker 1: not at all. So there's actually two types of state laws.

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Speaker 1: What are generally applicable consumer protection laws that consumers benefit from.

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Speaker 1: Those are expressly not preempted by the FCC's decision to

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Speaker 1: center their state laws that would look to mimic federal

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Speaker 1: net neutrality laws simply by operation of law, our decision

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Speaker 1: p M. So those uh, those laws. But again there

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Speaker 1: will be state consumer protection laws that will continue to

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Speaker 1: apply after this decision. All right, well, you are in

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Speaker 1: for a lot of lawsuits and uh we will keep

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Speaker 1: following them. Thanks so much for being here on the show.

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Speaker 1: That's FCC Commissioner Brendan Carr Walt Disney's deal to buy

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Speaker 1: a chunk of twenty one Century Fox for roughly fifty

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Speaker 1: two point four billion dollars is a tie up that

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Speaker 1: concentrates Hollywood movie making and sports broadcasting. The acquisition would

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Speaker 1: make Disney the number one studio owner with more than

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Speaker 1: a third of the market, and give a control over

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Speaker 1: Fox's FX cable channel. It would also put Fox's regional

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Speaker 1: sports networks under the same roof as Disney's ESPN. It

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Speaker 1: will need approval from US ANTI Trust officials, who have

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Speaker 1: a March nineteenth court date to stop a T and

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Speaker 1: T s plan take over of Time Warner. In an

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Speaker 1: interview on Bloomberg TV, Disney Chief executive and chairman Bob

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Speaker 1: Iger said the d is very pro consumer. What does

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Speaker 1: combination will do? As I said a moment ago, was

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Speaker 1: going to give the consumer opportunities not only to consume

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Speaker 1: far greater amounts of high quality content, but to do

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Speaker 1: so under extremely innovative, modern, modern circumstances. And we think,

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Speaker 1: at least from a regulatory perspective, they focus just on

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Speaker 1: the consumer that that's actually quite a positive thing. Joining

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Speaker 1: me is Bloomberg Senior litigation analyst Bloomberg Intelligence Senior litigation

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Speaker 1: analyst Jennifer ree Jen we've been talking about horizontal versus

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Speaker 1: vertical mergers a lot. Does this deal look more like

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Speaker 1: the deals that the Justice Department typically tries to stop

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Speaker 1: as compared to the A T and T Time Warner deal. Well,

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Speaker 1: it looks more like the kind of deals that that

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Speaker 1: are more easily uh, that can more easily affect competition

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Speaker 1: in a bad way, you know, because a horizontal deal

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Speaker 1: is just a combination of two competitors, so automatically, on

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Speaker 1: its face, it's concentrating a market, right, it's taking out

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Speaker 1: a competitor in more competitors are better. Period. So the

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Speaker 1: question then becomes how much is it concentrating the market,

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Speaker 1: and is it concentrating the market so much so that

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Speaker 1: it could be harmful? So so it's a much more

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Speaker 1: straightforward theory of harm than when you're looking at a

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Speaker 1: vertical deal in the way that might harm a market.

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Speaker 1: So what might be the sticking points here? Well, you know,

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Speaker 1: first of all, I think, again, it's a horizontal deal.

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Speaker 1: So we have two companies that have movie studios that

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Speaker 1: make movies and distribute movies. So you have an overlap

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Speaker 1: right there, and and typically the way those overlaps are

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Speaker 1: looked at, I think some people have said, wow, that's

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Speaker 1: so much content, you know, block big blockbusters and award

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Speaker 1: winning movies that may be coming out of Fox. But

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Speaker 1: typically the way the regulators will look at that is say,

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Speaker 1: what is a market share? And they put those shares

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Speaker 1: together and they do kind of a preliminary measure of

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Speaker 1: market concentration by taking a some of the squares of

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Speaker 1: those market shares and looking at what those numbers are.

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Speaker 1: This is called the Herfandal Herschman Index, and it's something

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Speaker 1: I knew that you knew that. It's well called the

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Speaker 1: h H I here going forward because it's much easier.

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Speaker 1: But this is something that's been used for many, many years.

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Speaker 1: It's within their guidelines. It's helpful to them because it

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Speaker 1: just gives them a first glance, a first initial measure

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Speaker 1: of whether it's concentrated. And you know, when you look

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Speaker 1: at the most recent share figures for Fox and Disney

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Speaker 1: and putting them together, those numbers don't look that bad. Really. Yeah,

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Speaker 1: I know, it's surprising that it's surprising because when you

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Speaker 1: hear about what's involved, it sounds like it would would

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Speaker 1: cause some problems. Well does the d o J as

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Speaker 1: I said, is trying to block the A T and

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Speaker 1: T Time Warner merger. Does their position in that suit

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Speaker 1: tell us anything about what they might do here? Well,

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Speaker 1: they're very different, and of course east each merger is

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Speaker 1: meant to be taken for its own facts and the

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Speaker 1: circumstances that apply to those two merging companies. But I

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Speaker 1: think if the A T and T suit tells us anything,

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Speaker 1: what it tells us is that where there's a vertical

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Speaker 1: issue and a possibility that it could be harmful, the

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Speaker 1: behavioral conditions may not are unlikely to be accepted, because

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Speaker 1: that's really what's happened there. In A T and T

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Speaker 1: Time Warner. They always expected to have to have a remedy,

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Speaker 1: but they thought it would behavioral, be behavioral rather than

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Speaker 1: selling assets. So in this Disney Fox deal there is

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Speaker 1: a slight vertical aspect to it too, as well as

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Speaker 1: the horizontal where they may be licensing their content. Let's say,

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Speaker 1: to some of these what we call the over the

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Speaker 1: top providers like the Netflix of the world, or you know,

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Speaker 1: the competitors, the other competitors that may be still up

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Speaker 1: and coming, and and to that extent, what we do

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Speaker 1: know from A T and T is, if there's a

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Speaker 1: problem with that, they may have to be ready also

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Speaker 1: to offer a structural remedy rather than a behavioral remedy.

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Speaker 1: The antitrust breakup fee here is two point five billion dollars.

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Speaker 1: Does that mean that both parties view the antitrust risk

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Speaker 1: as high? You know, it's funny because I've seen people

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Speaker 1: interviewed and at one breath somebody will say, well, wow,

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Speaker 1: this is so high. This they must think, must think

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Speaker 1: this has massive risk, and somebody else saying, well, obviously

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Speaker 1: Disney thinks this has low risk because they're you know,

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Speaker 1: they're willing to pay to more. And that's exactly what

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Speaker 1: a high breakup fee tells you. It tells you nothing,

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Speaker 1: because it tells you that Fox is going to protect

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Speaker 1: himself itself just in case, which of course makes sense

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Speaker 1: in such an uncertain environment. But it also tells you

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Speaker 1: that Disney's lawyers have said, you should be confident that

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Speaker 1: you're going to be able to get this through because

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Speaker 1: you're putting this two point five billion dollars out there

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Speaker 1: and you're risking that. What did a lot of attention

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Speaker 1: yesterday was President Trump saying that the Disney Fox deal

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Speaker 1: would be good for jobs. Now, how does that factor

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Speaker 1: into the antitrust analysis and does it put pressure on

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Speaker 1: the regulators. Well, I'll tell you it's all very convoluted

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Speaker 1: because really horizontal deals don't end up usually in creating jobs. Now,

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Speaker 1: whether way down the road this could be job creating,

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Speaker 1: I don't know. But part of where you get those synergies,

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Speaker 1: and they're talking about two billion dollars worth of cost

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Speaker 1: synergies is because you have employment redundancies and people get

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Speaker 1: laid off, so they are they are job killers more

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Speaker 1: than they are job creators. And then the antitrust front, oddly,

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Speaker 1: that goes the pro column that's on the good column

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Speaker 1: in an antitrust analysis, because those pro competitive efficiencies that

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Speaker 1: gaining efficiencies internally by combining are are what is weighed

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Speaker 1: against the possible harm. Right, So sometimes those costs the

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Speaker 1: two billion and cost of finish efficiencies that are expected

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Speaker 1: which include layoffs, are looked at as a good thing,

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Speaker 1: usually by the regulators. So this is all very twisted.

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Speaker 1: In five seconds, how long before we know whether the

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Speaker 1: DJ is going to post this? Oh, it's going to

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Speaker 1: be a long time. I think we're looking at a

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Speaker 1: year at least. Really, Oh, yes, I think they'll scrutinize

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Speaker 1: this for a long time. Right well, thanks as always

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Speaker 1: for being here. Jen. That's Bloomberg Intelligence Senior Litigation analyst

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Speaker 1: Jennifer E. And for more of her analysis, you can

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Speaker 1: go to b I go on the Bloomberg Terminal. Thanks

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Speaker 1: for listening to the Bloomberg Law Podcast. You can subscribe

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Speaker 1: and listen to the show on Apple Podcasts, SoundCloud and

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Speaker 1: on Bloomberg dot com slash podcast. I'm June Rosso. This

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Speaker 1: is Bloomberg. He did the duck to the end in

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Speaker 1: Dundy