WEBVTT - Writer's Block from DOJ Antitrust Suit 0:00:03.200 --> 0:00:07.960 This is Bloomberg Law with June Brussel from Bloomberg Radio. 0:00:09.360 --> 0:00:11.920 There are five major publishers in the country and the 0:00:11.960 --> 0:00:15.160 federal government wants it to stay that way. So it's 0:00:15.200 --> 0:00:18.720 suing to stop the number one publisher, Penguin Random House 0:00:19.079 --> 0:00:22.720 from buying the number four publisher, Simon and Schuster in 0:00:22.760 --> 0:00:25.480 a more than two billion dollar deal. Joining me is 0:00:25.560 --> 0:00:30.240 Jennifer Bloomberg Intelligence Senior litigation analyst. Well, first of all, 0:00:30.320 --> 0:00:34.320 what is the goal of this merger? Well, the goal 0:00:34.400 --> 0:00:37.400 of the merger, according to what the companies are saying now, 0:00:37.600 --> 0:00:40.440 is to become more efficient. I mean, essentially if it's 0:00:40.479 --> 0:00:43.640 what most big merging parties would say, but in order 0:00:43.680 --> 0:00:47.240 to provide better cloud or better leverage as against Amazon, 0:00:47.600 --> 0:00:50.040 you know, which is a big seller of books out there, 0:00:50.400 --> 0:00:53.320 and also just to become more efficient as some of 0:00:53.320 --> 0:00:56.600 the advances that go to the really big top selling 0:00:56.600 --> 0:01:00.880 authors have gone up. The Justice Department is suing and 0:01:01.000 --> 0:01:03.960 it says if the merger went ahead, the deal would 0:01:04.000 --> 0:01:07.280 give Penguin Random House nearly half the market for publishing 0:01:07.360 --> 0:01:11.280 rights to blockbuster books, while it's nearest competitors will be 0:01:11.360 --> 0:01:15.039 less than half its size. Tell us about why the 0:01:15.120 --> 0:01:19.440 Justice Department is suing here. Well, it's an interesting theory 0:01:19.560 --> 0:01:22.840 because usually when two companies come together, what the Justice 0:01:22.840 --> 0:01:25.840 Department is looking at is whether they are too competing 0:01:25.840 --> 0:01:28.319 sellers of products, and as a result of the merger, 0:01:28.400 --> 0:01:30.959 the price of those products they sell will go up 0:01:31.040 --> 0:01:33.039 because they'll have more market power and they'll have the 0:01:33.080 --> 0:01:35.720 ability to increase the price. This is what's called them 0:01:35.720 --> 0:01:39.960 ansony case. They are buyers of products, so essentially they 0:01:40.000 --> 0:01:43.280 are paying authors for the rights to publish those authors 0:01:43.280 --> 0:01:46.600 works their books. And the concern here is that if 0:01:46.640 --> 0:01:49.160 they come together and they have that much leverage, they're 0:01:49.160 --> 0:01:51.840 that much bigger than all the other publishing houses that 0:01:51.920 --> 0:01:55.240 could be bidding for these top selling books, that authors 0:01:55.240 --> 0:01:58.080 will start getting paid less. And as authors start to 0:01:58.080 --> 0:02:00.800 get paid less, fewer can afford to write, and the 0:02:00.880 --> 0:02:04.320 upshot would be fewer books for consumers to buy, less innovation, 0:02:04.640 --> 0:02:08.000 less variety. So the concern here is the fees that 0:02:08.080 --> 0:02:11.280 get paid to authors to write books, and they're mostly 0:02:11.320 --> 0:02:15.360 focusing on big, top selling authors. They're arguing that a 0:02:15.440 --> 0:02:19.080 top selling author, the competition will be less because it 0:02:19.120 --> 0:02:25.520 will be down to four large publishers instead of five. Argument. Yes, 0:02:25.600 --> 0:02:28.040 so it's four rather than five, which a five to 0:02:28.080 --> 0:02:30.440 four merger. You know, it depends on the industry, it 0:02:30.480 --> 0:02:33.720 depends on market shares. Sometimes these kinds of cases have 0:02:33.760 --> 0:02:36.120 been successful for the d o J and sometimes not. 0:02:36.520 --> 0:02:40.080 Five to four is sort of borderline, But in this 0:02:40.120 --> 0:02:43.240 case it looks like the market would be very weighed 0:02:43.320 --> 0:02:45.840 toward the merged entity. What the d o J is 0:02:45.880 --> 0:02:48.440 saying here, they don't give exact market shares, but what 0:02:48.520 --> 0:02:51.840 they're saying is that together they be far larger than 0:02:51.880 --> 0:02:55.680 the other three that are left, So even unilaterally, they'd 0:02:55.680 --> 0:03:00.000 have this ability to depress the wages being paid to authors. 0:03:00.080 --> 0:03:02.600 And they do, actually, June have a lot of examples 0:03:02.600 --> 0:03:06.040 in the complaint of bidding that occurred that drove these 0:03:06.040 --> 0:03:08.959 advances way up. That was just bidding between these two 0:03:08.960 --> 0:03:12.400 companies Penguin Random House and Simon and Schuster that ultimately 0:03:12.480 --> 0:03:14.840 up some of these advances by sometimes even in the 0:03:14.919 --> 0:03:17.799 millions of dollars. So they do have examples of where 0:03:17.800 --> 0:03:20.360 the two of them go head to head and compete 0:03:20.360 --> 0:03:23.480 to increase those prices. So theoretically, as a result of 0:03:23.480 --> 0:03:26.399 this merger, that might not happen anymore because the other 0:03:26.480 --> 0:03:28.639 three that are left just may simply not be able 0:03:28.680 --> 0:03:32.160 to play in the same ballpark. Does any part of 0:03:32.240 --> 0:03:36.720 the Justice Department's intent to hear concern the fact that 0:03:36.840 --> 0:03:41.480 one of these companies is German. Oh no, I don't 0:03:41.480 --> 0:03:43.520 think so at all. You know, if there was any 0:03:43.600 --> 0:03:46.200 kind of concern about a German buyer, it would actually 0:03:46.240 --> 0:03:48.480 be dealt with the Committee on Foreign Investment in the 0:03:48.600 --> 0:03:51.600 US over the Department of Justice, that they'll look at 0:03:51.640 --> 0:03:55.320 foreign buyers and ask whether there's a US national security 0:03:55.360 --> 0:03:58.440 issue in this case. I don't think that is of 0:03:58.520 --> 0:04:02.080 concern or even being contemplated by the d J. I 0:04:02.120 --> 0:04:05.480 think the main issue here is a new interest, particularly 0:04:05.520 --> 0:04:10.160 pushed by Merritt Garland and promoted by Spiden's July executive order, 0:04:10.480 --> 0:04:13.120 to look at the impact of mergers on labor and 0:04:13.160 --> 0:04:16.279 on prices that are paid. It's always been a theory 0:04:16.320 --> 0:04:20.080 of harmon anti trust, but not used often and rarely 0:04:20.160 --> 0:04:23.000 is there a lawsuit brought based on this theory. So 0:04:23.279 --> 0:04:25.960 it's kind of novel. I just say kind of because 0:04:26.000 --> 0:04:29.240 it is a valid antitrust theory. There have been mergers 0:04:29.240 --> 0:04:31.080 that have settled in the past and not gone to 0:04:31.160 --> 0:04:34.200 litigation on the basis of this kind of depressing the 0:04:34.240 --> 0:04:38.000 wages or monopsony type theory, particularly in agriculture. But what 0:04:38.080 --> 0:04:40.120 we haven't seen as a lawsuit on this basis, so 0:04:40.160 --> 0:04:42.440 it's going to be very interesting to see what happens 0:04:42.480 --> 0:04:45.720 in court here. The Author's Guild, which supports the d 0:04:46.000 --> 0:04:50.560 j's complaints, said, the DJ statements recognized the burden book 0:04:50.600 --> 0:04:53.600 authors currently face, and we hope that today's decision is 0:04:53.640 --> 0:04:56.800 a signal that the do J may be finally expanding 0:04:56.839 --> 0:05:01.040 the definition of antitrust to consider the impact don creators. 0:05:01.720 --> 0:05:04.080 Do you think that's what's going on here? Well, I 0:05:04.120 --> 0:05:07.520 think it's meant to describe what I just talked about. 0:05:07.960 --> 0:05:10.360 I have seen a lot of references to the concept 0:05:10.400 --> 0:05:13.760 that they're expanding ideas an anti trust and expanding the harms. 0:05:14.120 --> 0:05:17.039 I don't so much see it as an expansion because 0:05:17.520 --> 0:05:21.080 impact on creators, or not just creators, but impact on 0:05:21.160 --> 0:05:23.760 any kind of a wage earner, let's say, has been 0:05:23.760 --> 0:05:25.960 an issue in anti trust in the past. It just 0:05:26.040 --> 0:05:28.880 doesn't come up a lot, and we haven't seen a lawsuit, 0:05:28.960 --> 0:05:31.920 so I think to some observers this seems very novel. 0:05:32.120 --> 0:05:34.760 But in the agriculture markets, for example, the Department of 0:05:34.800 --> 0:05:37.120 Justice will always look at the prices paid to the 0:05:37.160 --> 0:05:40.240 small farmers by lets say, meat processors that are trying 0:05:40.240 --> 0:05:42.600 to merge. And in fact, there have been the antitrust 0:05:42.680 --> 0:05:46.560 price fixing lawsuits in the past related to the fixing 0:05:46.600 --> 0:05:49.440 of wages paid to creators in Silicon Valley. So it's 0:05:49.480 --> 0:05:52.040 not the first time that this has been considered an 0:05:52.040 --> 0:05:54.840 anti trust harm. It's just the first time we're going 0:05:54.880 --> 0:05:57.440 to see a merger that is challenged in court on 0:05:57.480 --> 0:05:59.960 the basis of that theory. So J and the published 0:06:00.040 --> 0:06:03.320 just say they'll fight this lawsuit. What are their arguments 0:06:03.360 --> 0:06:05.880 against it? Right, Well, I think they have a lot 0:06:05.920 --> 0:06:08.760 of different responses here. There's some very interesting issues. I 0:06:08.760 --> 0:06:11.120 think first they say, look, this is going to create 0:06:11.120 --> 0:06:14.359 efficiencies and allow us to deal or have better cloud 0:06:14.400 --> 0:06:17.680 against Amazon and deal with this, you know, entity that 0:06:17.800 --> 0:06:21.440 drives the price for books down. They also say that 0:06:21.640 --> 0:06:25.600 the relevant market is defined by the DJ is not correct. 0:06:25.839 --> 0:06:29.240 So the DJ is considering here only publishing by the 0:06:29.240 --> 0:06:31.640 Big five. As you noted, they're calling it a five 0:06:31.680 --> 0:06:34.320 to four. But there are other publishing houses, there are 0:06:34.320 --> 0:06:38.120 smaller publishers, there are independent publishers, and there's also self publishing. 0:06:38.440 --> 0:06:40.320 And I think if you include all of those in 0:06:40.360 --> 0:06:42.839 the market, what it means is that the market shairs 0:06:42.880 --> 0:06:45.520 of these two merging parties would be lower. And I 0:06:45.560 --> 0:06:47.640 think they can argue that they're not looking at the 0:06:47.720 --> 0:06:50.640 right market and they also face competition from some of 0:06:50.680 --> 0:06:53.800 these smaller publishers, and therefore it's not really a five 0:06:53.880 --> 0:06:56.320 to four, you know. They can argue that as well. 0:06:57.520 --> 0:07:00.919 How much does Amazon play in year as a factor. 0:07:02.120 --> 0:07:05.520 The Amazon issue is interesting because the Amazon defense I 0:07:05.560 --> 0:07:09.920 think is used fairly often nowadays in mergers because it's 0:07:09.920 --> 0:07:13.280 become so big and such a conglomerate and involved in 0:07:13.280 --> 0:07:17.120 in so many different areas in industries, UH, particularly in 0:07:17.160 --> 0:07:20.360 the types of items that itself and so the need 0:07:20.400 --> 0:07:23.120 to come together to fight against Amazon, I think is 0:07:23.120 --> 0:07:26.800 a common defense. What I'll say about it in the case, 0:07:26.880 --> 0:07:29.400 it's interesting because the d o J does fight to 0:07:29.480 --> 0:07:32.520 one document where one of the executives from one of 0:07:32.560 --> 0:07:35.679 the company says, well, I don't really buy into that defense. 0:07:36.160 --> 0:07:38.360 I get that that's what our defense is now, but 0:07:38.480 --> 0:07:40.960 I don't really buy into it. And and they've also 0:07:41.040 --> 0:07:44.800 cited two documents that show that the intention post merger 0:07:44.840 --> 0:07:48.120 would be to align more with Amazon, and not necessarily 0:07:48.120 --> 0:07:50.640 to have better leverage against Amazon. So I think the 0:07:50.720 --> 0:07:52.960 evidence is going to have to show how the Amazon 0:07:53.000 --> 0:07:55.760 factor really weighs in here. But the only other thing 0:07:55.760 --> 0:07:57.840 I'll say is that an argument that we need to 0:07:57.840 --> 0:08:00.640 come together to fight against some of a really big 0:08:00.680 --> 0:08:02.880 b m off in in the M and A world 0:08:03.000 --> 0:08:06.160 is never really a great argument. Um, It's made a lot, 0:08:06.360 --> 0:08:10.840 it doesn't usually work. So Um, what will be the 0:08:10.880 --> 0:08:14.000 main question here? Is it mainly what the market is? 0:08:15.000 --> 0:08:17.360 What the market is is a big question, and what 0:08:17.440 --> 0:08:19.600 the shares are and whether this is truly a five 0:08:19.640 --> 0:08:22.480 to four. I think where the efficiencies are and what 0:08:22.560 --> 0:08:24.840 they are will be a big question, and that's obviously 0:08:24.920 --> 0:08:27.520 going to depend on the documents and the facts. These 0:08:27.520 --> 0:08:31.320 companies obviously studied the efficiencies that they expect to be generated, 0:08:31.320 --> 0:08:33.800 and it will be important to see what they're saying 0:08:33.840 --> 0:08:36.880 about it and why they really need to merge. If 0:08:36.920 --> 0:08:39.720 they have documents that just simply say, look, we'll take 0:08:39.760 --> 0:08:42.760 over the market will be this enormous number one by 0:08:42.840 --> 0:08:45.920 virtue of this deal, obviously that's going to be unhelpful 0:08:45.960 --> 0:08:49.120 to them. Are they still unaware of what emails and 0:08:49.200 --> 0:08:53.440 documents like that due to a case. You know, emails 0:08:53.440 --> 0:08:56.520 and documents like that always exist, and and the issue 0:08:56.559 --> 0:08:59.040 is really what is the bulk of the evidence show? 0:08:59.160 --> 0:09:01.720 What is the bulk of the evidence say? It's easy 0:09:01.800 --> 0:09:05.560 to take emails and documents and sort of cherry pick 0:09:06.000 --> 0:09:08.839 and make a company look bad. And certainly what the 0:09:08.920 --> 0:09:11.120 DJ sites in his complaint is going to be some 0:09:11.240 --> 0:09:13.760 of the better documents that support its case. But it 0:09:13.880 --> 0:09:15.920 depends what else is out there, and it may be 0:09:16.080 --> 0:09:18.400 that there are an overwhelming number of documents to talk 0:09:18.440 --> 0:09:22.120 about the efficiencies to be derived, pro competitive efficiencies to 0:09:22.160 --> 0:09:24.480 be derived from the deal, or the need to come 0:09:24.520 --> 0:09:28.359 together to be able to better distribute books by publishers, 0:09:28.640 --> 0:09:31.160 you know, provide better backing for the book so that 0:09:31.200 --> 0:09:34.000 they sell better, which would be a benefit to authors. 0:09:34.040 --> 0:09:37.080 So you know, as much as they understand what those 0:09:37.120 --> 0:09:39.640 documents say. In these big companies, you can have a 0:09:39.679 --> 0:09:42.440 compliance program, but you can't control what all of those 0:09:42.480 --> 0:09:45.080 documents say. But if you have a handful of bad 0:09:45.160 --> 0:09:48.200 documents out of a very large mass, I don't think 0:09:48.240 --> 0:09:51.800 that's necessarily going to sway a judge. Is this lawsuit 0:09:51.880 --> 0:09:57.360 a sign of more aggressive antitrust enforcement in the Biden administration. 0:09:58.200 --> 0:10:00.480 I do think it is June. Yes. I mean they're 0:10:00.480 --> 0:10:03.400 going to court with what is a new theory to 0:10:03.480 --> 0:10:06.920 be tested in court. That's always a little bit risky. Um, 0:10:06.960 --> 0:10:09.160 they're going to court and what they're calling a five 0:10:09.200 --> 0:10:12.240 to four merger, which again isn't you know, it's one 0:10:12.240 --> 0:10:15.120 of these borderline situations. You know, six to five is 0:10:15.360 --> 0:10:18.360 rarely ever going to be challenged, A four to three 0:10:18.440 --> 0:10:20.720 is probably often going to be challenged. That five to 0:10:20.760 --> 0:10:23.320 four is right in between. It's sort of as sometimes 0:10:23.320 --> 0:10:26.120 will be challenged. And it was your very first impression 0:10:26.120 --> 0:10:27.839 when you said, look, it's the five to four. Do 0:10:27.960 --> 0:10:30.240 they really think that there will be harm in the market. 0:10:30.280 --> 0:10:32.240 I think a judge will be asking the same thing. 0:10:32.600 --> 0:10:35.280 So it's not the easiest case for them. It's not 0:10:35.320 --> 0:10:38.720 necessarily a slam dunk. And and because of that, and 0:10:38.720 --> 0:10:41.240 and it has focuses on labor, which which again is 0:10:41.400 --> 0:10:44.280 somewhat new. So because of all that, I would say, yes, 0:10:44.320 --> 0:10:46.840 it is showing that they intend to be more aggressive. 0:10:47.440 --> 0:10:49.520 So in the past, we've talked about, you know, the 0:10:49.600 --> 0:10:55.439 push for more aggressive antitrust enforcement, particularly with the tech companies. 0:10:56.080 --> 0:11:00.960 Do you see any focus of the Biden administration. I 0:11:01.000 --> 0:11:04.120 think the Biden administration is focusing across the board on 0:11:04.240 --> 0:11:07.280 industries that they believe in the past twenty years of 0:11:07.400 --> 0:11:10.960 consolidated quite a bit and have probably hit what they 0:11:11.120 --> 0:11:14.640 view as what should be the peak of their consolidation. Now, 0:11:14.800 --> 0:11:17.600 they haven't really talked about publishing. They generally tend to 0:11:17.600 --> 0:11:22.240 talk about agriculture, airlines, some of the big tech areas, 0:11:22.320 --> 0:11:24.960 you know, social media platforms of course, with Facebook having 0:11:24.960 --> 0:11:28.400 bought Instagram and WhatsApp, even beer markets. They talk about 0:11:28.400 --> 0:11:32.160 pharmaceutical certainly. So I haven't really heard them talk about publishing. 0:11:32.240 --> 0:11:34.439 But it is a market that has seen quite a 0:11:34.480 --> 0:11:37.840 bit of consolidation, and it is down to five. There 0:11:37.920 --> 0:11:41.240 used to be quite a few bigger entities you saw. 0:11:41.679 --> 0:11:43.520 Let me just pull it up. I have a list here. 0:11:43.920 --> 0:11:46.240 And by the way, there also is a past history 0:11:46.280 --> 0:11:49.080 of collusion amongst the Big five. In two thousand twelve, 0:11:49.120 --> 0:11:51.880 there was a lawsuit in which a district court determined 0:11:51.920 --> 0:11:54.839 that they'd engaged in a price fixing conspiracy. So the 0:11:54.960 --> 0:11:57.800 end of these companies are not necessarily completely in the 0:11:57.840 --> 0:12:01.640 clear on this stuff. But you've seen Random House and 0:12:01.760 --> 0:12:05.640 Schuster haven't done. I think a lot of acquiring but 0:12:05.720 --> 0:12:11.320 HarperCollins Publishers recently acquired Houghton Mifflin Hardcourt and had Chet 0:12:11.600 --> 0:12:15.640 recently acquired Workman Publishing. So and I think before those 0:12:15.679 --> 0:12:18.600 two deals that were also a few smaller deals. And 0:12:18.640 --> 0:12:21.839 I think generally what the d o J and FTC 0:12:22.240 --> 0:12:25.640 want to do at this point is just stem the 0:12:25.720 --> 0:12:30.920 tide of further consolidation in industries that are fairly consolidated. 0:12:31.000 --> 0:12:33.679 And I say fairly consolidated, because again we're talking about 0:12:33.720 --> 0:12:36.360 five here and maybe more depending on how you define 0:12:36.400 --> 0:12:40.559 the market. But there has been so much criticism from 0:12:40.600 --> 0:12:44.880 the antitrust bar, from academics, from economists in the last 0:12:44.920 --> 0:12:47.520 ten years, and so many studies done showing that across 0:12:47.559 --> 0:12:51.719 the board that lacks antitrust enforcement has allowed for too 0:12:51.760 --> 0:12:55.360 much consolidation just in general, not a specific industry, but 0:12:55.440 --> 0:12:58.560 just in general. So I think now the focus for 0:12:58.600 --> 0:13:01.600 the d o J and FTC just generally we're just 0:13:01.679 --> 0:13:04.480 going to stem the tide. So every time we get 0:13:04.480 --> 0:13:07.040 a merger in front of us that is in an 0:13:07.080 --> 0:13:09.680 industry where we've seen quite a bit of consolidation in 0:13:09.679 --> 0:13:11.720 the last ten or twenty years, we're going to look 0:13:11.760 --> 0:13:15.040 more closely at that industry and possibly challenge that deal. 0:13:15.920 --> 0:13:21.839 I just wonder how many books really have competitive publishing. 0:13:21.880 --> 0:13:24.480 You know, you have a couple of big titles a year, 0:13:24.600 --> 0:13:27.959 you have former President Obama, you have, but how many 0:13:28.080 --> 0:13:32.040 of these books really have this kind of competitive auctioning 0:13:32.160 --> 0:13:35.920 and stuff. It seems like it's just a handful. Really. Yeah, 0:13:35.960 --> 0:13:37.880 you know, they don't really get into volume, and to 0:13:37.920 --> 0:13:41.720 be perfectly honest, for antitrust purposes, volume doesn't really matter. 0:13:41.960 --> 0:13:44.320 You know, two big companies can come together and even 0:13:44.320 --> 0:13:47.920 if it's just a tiny segment of their businesses representing 0:13:47.960 --> 0:13:51.000 a very small percentage of their own revenues um that 0:13:51.120 --> 0:13:54.200 could create harm in the market, the DOJ or the 0:13:54.240 --> 0:13:57.440 FTC will still go ahead and challenge that because it's 0:13:57.440 --> 0:14:00.600 not like, well, if there's only harms a handful of consumers, 0:14:00.600 --> 0:14:03.079 are small group of consumers, well then you know, we'll 0:14:03.160 --> 0:14:05.560 let it go. If it could harm you know, any 0:14:05.600 --> 0:14:08.840 small group of consumers, they will go ahead and challenge 0:14:08.920 --> 0:14:11.440 the deal. And I think that at least what they 0:14:11.520 --> 0:14:15.200 talk about in this case is that the advances, even 0:14:15.240 --> 0:14:18.120 if it is a fairly small group of authors in 0:14:18.120 --> 0:14:21.120 the scheme of all publishing, that the advances that have 0:14:21.200 --> 0:14:24.080 been extended by the Big Vibe are are huge in 0:14:24.120 --> 0:14:26.520 the last couple of years, you know, in the billions, 0:14:27.080 --> 0:14:31.280 and that supports the writing. So Penguin, Random House and 0:14:31.320 --> 0:14:34.720 Simon and Schuster said that they fight this lawsuit vigorously, 0:14:35.120 --> 0:14:37.600 noting that the government had not alleged that the deal 0:14:37.600 --> 0:14:43.040 would harm competition in book sales. Where does that factor in. Yeah, 0:14:43.080 --> 0:14:45.240 they're pointing to the fact that this is a monopsony 0:14:45.320 --> 0:14:47.720 case and not a monopoly case. They're saying, Look, they're 0:14:47.760 --> 0:14:51.800 not saying that book prices for consumers like you and 0:14:51.840 --> 0:14:53.560 me will go up, that when you go to buy 0:14:53.600 --> 0:14:55.600 a book, the prices are going to be higher. That 0:14:55.720 --> 0:14:58.520 what they're doing isn't going to impact those prices, and 0:14:58.600 --> 0:15:01.520 that's the more traditional anti trust harm. So but I 0:15:01.560 --> 0:15:05.320 think that's really just smoking mirrors because you know, again, 0:15:05.360 --> 0:15:07.680 this is a monopsony case and what they're alleging is 0:15:07.720 --> 0:15:09.840 harm to what's paid to the authors, and we can't 0:15:09.880 --> 0:15:12.520 just ignore that. I mean, that is an antitrust harm, 0:15:12.560 --> 0:15:14.800 even if we're not talking about harm to the people 0:15:14.800 --> 0:15:17.040 who buy the book. As always, it's great to have 0:15:17.120 --> 0:15:20.640 you on the show. Agin that's Bloomberg Intelligence senior litigation 0:15:20.680 --> 0:15:25.560 analyst Jennifer Ree. A case over a center at a 0:15:25.640 --> 0:15:28.640 Texas community college found its way to the highest court 0:15:28.680 --> 0:15:31.280 in the land this week. David Wilson had a rocky 0:15:31.360 --> 0:15:34.800 relationship with other trustees during his tenure on the Houston 0:15:34.840 --> 0:15:38.480 Community College System board. So when the board centered Wilson 0:15:38.560 --> 0:15:41.520 for his constant criticism and took steps to limit his 0:15:41.640 --> 0:15:46.000 legislative privileges, Wilson sued, alleging of violation of his First 0:15:46.040 --> 0:15:50.480 Amendment rights. Jonesice is on both sides of the ideological spectrum, 0:15:50.760 --> 0:15:53.520 seemed ready to side with the college. Here at jonestice 0:15:53.640 --> 0:15:56.920 is Samuel Alito and Sonya. So to Mayor, this is 0:15:56.960 --> 0:16:01.160 a very easy case. One person says something derogatory about 0:16:01.200 --> 0:16:04.760 another person, and then the other person responds by saying 0:16:04.800 --> 0:16:09.560 something derogatory about the first person. That's that's not a violation. 0:16:09.560 --> 0:16:14.320 Nobody's free speech rights are violated. There, You've got an 0:16:14.360 --> 0:16:18.840 easy case on censure. Historically joining me his First Amendment 0:16:18.920 --> 0:16:21.640 law expert Eugene Valla, a professor at u c l 0:16:21.680 --> 0:16:25.240 A Law School, Eugene tell us about Wilson's relationship with 0:16:25.280 --> 0:16:28.400 the board. So David Wilson was an elected member of 0:16:28.440 --> 0:16:32.520 the community College Board and was a critic of other 0:16:32.600 --> 0:16:36.160 board members. He voiced concerns that the trustees were violating 0:16:36.280 --> 0:16:39.840 the boards by laws. He arranged robo calls regarding the 0:16:39.880 --> 0:16:43.880 board's action. He filed the lawsuit against the individual board 0:16:43.880 --> 0:16:47.720 trustees and against the community college system, and he hired 0:16:47.720 --> 0:16:50.720 a private investigator to determine whether one of the trustees 0:16:50.800 --> 0:16:53.200 resided in the district in which he was elected. He 0:16:53.280 --> 0:16:56.600 had a website where he was criticizing fellow trustees and 0:16:56.640 --> 0:16:59.480 the Houston Community College System, so they thought he wasn't 0:16:59.520 --> 0:17:03.520 playing with others, and they censured him. They publicly chastised him, 0:17:03.520 --> 0:17:06.320 and they also suspended a few of his privileges having 0:17:06.320 --> 0:17:09.000 to do the reimbursement for various expenses and such. But 0:17:09.040 --> 0:17:12.240 the key question facing the U. S. Supreme Court is 0:17:12.359 --> 0:17:17.840 whether this censure, this public censure for Wilson's speech, is 0:17:18.119 --> 0:17:21.800 a violation of Wilson's First Amendment right. Explain why the 0:17:21.800 --> 0:17:25.120 Fifth Circuit allowed the case to proceed. So the Fifth 0:17:25.160 --> 0:17:30.720 Circuit concluded that censure is essentially a form of official action, 0:17:31.160 --> 0:17:35.040 that it's a retaliation for constitutionally protected speech, and that 0:17:35.280 --> 0:17:39.240 therefore it is presumptively unconstitutional because it's a violation of 0:17:39.280 --> 0:17:41.840 the First Amendment to retaliate for peach. And if you 0:17:41.880 --> 0:17:45.400 think about it, in other contexts, censers are seen as 0:17:45.440 --> 0:17:48.200 more than just government criticism. They're seen as a kind 0:17:48.200 --> 0:17:52.480 of formal disciplinary action. For example, generally speaking, before a 0:17:52.600 --> 0:17:55.640 lawyer can be formally censured by the bar, not even 0:17:55.720 --> 0:17:59.280 suspended or debarred, but just formally censured. They're generally speaking, 0:17:59.400 --> 0:18:01.960 have to be here rings if he is being censured 0:18:02.040 --> 0:18:04.560 for his constitutionally protected speech, there might well be a 0:18:04.640 --> 0:18:09.240 First Amendment violation. So the circuit concluded that likewise, this 0:18:09.280 --> 0:18:13.080 sort of censure is more than just government speech criticizing 0:18:13.200 --> 0:18:16.240 a member, but rather it is essentially a form of 0:18:16.280 --> 0:18:19.399 discipline reaction of subject of First Amendment constraint. The question 0:18:19.440 --> 0:18:22.280 before the US Supreme Court is whether that's indeed so, 0:18:22.800 --> 0:18:26.600 or whether that it's either just government speech the government 0:18:26.640 --> 0:18:32.160 can engage in under any circumstances, or perhaps whether more specifically, 0:18:32.240 --> 0:18:36.120 there's just a tradition of government bodies being able to 0:18:36.160 --> 0:18:40.160 censure their own members indeed as a discipline reaction, and 0:18:40.359 --> 0:18:43.959 that that makes it quite different from situations where there 0:18:43.960 --> 0:18:46.760 are employees. Let's say, are students or members of the 0:18:46.800 --> 0:18:50.680 bar or doctors being censured by administrative board. What were 0:18:50.720 --> 0:18:53.879 the main concerns that Justice has had, Well, there were 0:18:53.880 --> 0:18:57.560 a couple. One was that they were skeptical that just 0:18:57.680 --> 0:19:02.119 a label censure is really that significant. Here they pointed 0:19:02.160 --> 0:19:04.720 out that, of course the government can speak out in 0:19:04.760 --> 0:19:08.639 all sorts of ways, including about particular people, especially in 0:19:08.680 --> 0:19:12.560 the context of political fights among elected officials. So they 0:19:12.600 --> 0:19:16.280 were skeptical that there is really a sharp divide between 0:19:16.359 --> 0:19:19.280 censure and ordinary government speech again, at least when it 0:19:19.359 --> 0:19:22.000 comes to speech about government officials. And the other concerns 0:19:22.000 --> 0:19:23.960 that they had is just there's a pretty long standing 0:19:24.000 --> 0:19:27.360 tradition of government bodies being able to center their own members. 0:19:27.560 --> 0:19:30.399 Houses of Congress are entitled to and often do, censure 0:19:30.440 --> 0:19:32.840 their own members, and sometimes they do so for the 0:19:32.920 --> 0:19:36.439 members speech, and the justices care a lot about tradition. 0:19:36.520 --> 0:19:41.280 Occasionally they do invalidate longstanding traditions, but they're quite hesitant 0:19:41.320 --> 0:19:44.200 to do so. Did some of the justices express concerns 0:19:44.240 --> 0:19:50.480 about ruling on clashes between politicians and getting into that area, right, 0:19:51.000 --> 0:19:54.520 But I think specifically what they were concerned about was 0:19:55.760 --> 0:20:01.680 interfering with what they understand to be a very specific 0:20:01.800 --> 0:20:04.000 kind of class, which is a class which is a 0:20:04.040 --> 0:20:08.640 war of words. Somebody says something sharply criticizing his colleagues, 0:20:08.680 --> 0:20:12.400 then they say something sharply criticizing him. I think there 0:20:12.400 --> 0:20:15.480 are many of them. Took the view that that's really 0:20:15.600 --> 0:20:18.880 something that's kind of normal in politics. Now. Not all 0:20:19.000 --> 0:20:24.080 clashes among politicians are immune from constitutional scrutiny. So the 0:20:24.080 --> 0:20:27.480 Supreme Court, as for example, held that UM Congress is 0:20:27.600 --> 0:20:31.920 limited in its ability to just exclude members from Congress. 0:20:31.960 --> 0:20:34.800 That's a tangible action, and that needs to be consistent 0:20:35.119 --> 0:20:40.200 with the specific rules for expulsion that the Constitution sets forth. Likewise, 0:20:40.240 --> 0:20:42.480 accord in another case that that you can't just a 0:20:42.800 --> 0:20:47.359 state legislature can just exclude an elected member based on 0:20:47.520 --> 0:20:50.560 his speech. But when it comes to these kinds of 0:20:51.080 --> 0:20:55.720 essentially mutual public criticisms, I think the justices I think 0:20:55.800 --> 0:20:58.359 that that's something that ought to be left to the 0:20:58.359 --> 0:21:04.120 political process. So both liberal Justice Sonia Sotomayoran conservative Justice 0:21:04.119 --> 0:21:07.760 Samuel Alito said this was an easy case on censure. 0:21:08.359 --> 0:21:11.240 Does that tell you where the Court is going? Yeah. 0:21:11.359 --> 0:21:14.480 It founded from the argument that the justices would reverse 0:21:14.520 --> 0:21:17.480 the Fifth Circuit and say that this kind of political 0:21:17.520 --> 0:21:21.719 censure is basically immune from first amoment's scrutiny. The interesting 0:21:21.800 --> 0:21:24.439 question is how broad the opinion will be. So, for example, 0:21:24.480 --> 0:21:26.920 you can imagine an opinion that says, well, any kind 0:21:26.960 --> 0:21:29.320 of center is just government speech, and the government is 0:21:29.440 --> 0:21:31.840 entitled to say what I want. That would suggest that 0:21:32.080 --> 0:21:35.399 the bar could censure a lawyer simply because it doesn't 0:21:35.480 --> 0:21:39.080 like his politics, or that the government as employer, let's say, 0:21:39.200 --> 0:21:43.000 university could formally censure a faculty member for the faculty 0:21:43.000 --> 0:21:45.520 member's research. Let's say that would be quite a broad 0:21:45.600 --> 0:21:48.399 ruling in might unduly interfere with First Amendment rights in 0:21:48.440 --> 0:21:52.160 some situations, because in any context, the law does recognize 0:21:52.240 --> 0:21:56.960 that censure formal reprimand is a form of discipline reaction, 0:21:57.080 --> 0:21:59.880 kind of a form of employment action. That's not quite 0:21:59.880 --> 0:22:02.560 the same, of course as firing or demotion, but that's 0:22:02.600 --> 0:22:04.879 in that same category. Or it could decide in a 0:22:05.000 --> 0:22:07.240 narrowor theory, which is simply that this is a form 0:22:07.320 --> 0:22:11.600