Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to our Bloomberg TV and radio audiences around the world.
Speaker 2: A recurring theme of recent tech m and a has
Speaker 2: been deals to bring in talent in so called aquahiers.
Speaker 2: The Federal Trade Commission is taking notice. One member of
Speaker 2: the FTC worn Thursday that these quote creative deal structures
Speaker 2: could raise antitrust concerns. Let's discuss and delighted to welcome
Speaker 2: Andrew Ferguson, Chairman of the FTC, to the program. We
Speaker 2: cover the topic of aquahiers on Bloomberg Tech regularly. It
Speaker 2: was a mainstay story in twenty twenty five. When does
Speaker 2: a talent deal stop being a talent deal and become
Speaker 2: more than that, become a merger? What are the rules
Speaker 2: based approach that the FTC would take chairmen to look
Speaker 2: at that.
Speaker 1: Yeah, so we are examining.
Speaker 3: Looks have been around, especially in the sort of startup
Speaker 3: founder space, for a long time, and they've gotten bigger
Speaker 3: basically in the last ADMIN and a lot of people
Speaker 3: were of the view that these things were sort of
Speaker 3: being constructed in these big deals to try to escape
Speaker 3: you know, Hart Scott Rodino Review, which is pre merger
Speaker 3: anti trust review in the United States because the Biden
Speaker 3: administration was trying to block all deals, and I think
Speaker 3: generally they were that isn't you know, necessary anymore.
Speaker 1: We don't need.
Speaker 3: Clever workarounds for around anti trust review anymore because at
Speaker 3: the FTC under the Trump administration, you get a fair shake.
Speaker 1: I'm not saying your deal will go through.
Speaker 3: I've sued to block several deals this year, and I've
Speaker 3: won those cases. But if your deal's not illegal, we
Speaker 3: get out of the way and sort of let the
Speaker 3: market take care of things. So we are beginning to
Speaker 3: examine that the HSR Act has a provision that says
Speaker 3: you're not allowed to structure deals in order to escape
Speaker 3: pre merger review, and so we are beginning to examine
Speaker 3: the exactly to make sure that they aren't an attempt to.
Speaker 1: Get around HSR review.
Speaker 3: But the message I want to send sort of Silicon
Speaker 3: Valley and to the M and A infrastructure generally is
Speaker 3: you don't need to structure deals as a clever, you know,
Speaker 3: attempt to get around pre merger review. You'll get a
Speaker 3: fair shake at the FTC. Deal may not go through,
Speaker 3: but if your deal is legal, I will get out
Speaker 3: of your way very quickly, and if it's not, I'll
Speaker 3: take you to court and I'll fight to win there.
Speaker 3: We're not going to let the process be the punishment anymore.
Speaker 1: But Jem, you know it is important to us to
Speaker 1: us to.
Speaker 3: Make sure that people aren't going to use clever deal
Speaker 3: structures to get around pre merger review.
Speaker 2: The language of clever or creative deal structures that I
Speaker 2: cited at the beginning of our conversation was from your
Speaker 2: colleague and fellow Commissioner Mark made Or Right, who is
Speaker 2: speaking at a conference in California yesterday. I think what
Speaker 2: the industry hopes to understand from you is what the
Speaker 2: threshold is, or what the set of rules.
Speaker 1: Would be where a hiring.
Speaker 2: Proposal situation should be reported to antitrust authorities. It should
Speaker 2: be Yeah, as simple as that. It should be by
Speaker 2: right reported.
Speaker 1: Yeah.
Speaker 3: And you know, we are beginning to examine how these
Speaker 3: deals work. Aqu higher deal structures vary from deal to deal,
Speaker 3: and so there wouldn't necessarily be sort of a one
Speaker 3: size fits all rule. But we are beginning to examine
Speaker 3: these big aqui higher deals that raise a lot of
Speaker 3: attention so that we can understand when an aqui higher
Speaker 3: is in fact an acquisition that might be covered by
Speaker 3: the pre merger review laws and when it's not, and
Speaker 3: we need to understand them before we're sort of out
Speaker 3: there telling people what the rules are. But this is
Speaker 3: you're right, this has become a big enough deal that
Speaker 3: we are beginning to look very closely at how these
Speaker 3: things work, including you know, determining whether we need to
Speaker 3: promulgate additional guidance here in the coming months about how
Speaker 3: we understand these acquires.
Speaker 2: Is there a fact that that matters is more to you,
Speaker 2: you know, the number of employees hired, or putting a
Speaker 2: value on the intellectual capital or the competitive advantage that
Speaker 2: such a transaction would give the aquira.
Speaker 3: So the value that matters for HSR is set by
Speaker 3: the statute.
Speaker 1: That's not really here or there.
Speaker 3: But the HSR Act applies to deals where assets or
Speaker 3: stock are being purchased, and that's what triggers HSR review.
Speaker 3: And so what we need to understand, which is why
Speaker 3: we're beginning to examine this question now, is when does
Speaker 3: an acqui hier you know, involve the sale of the
Speaker 3: acquisition of assets or stock in a way that would
Speaker 3: trigger the statute. Look at the end of the day,
Speaker 3: I'm a lawyer and a law enforcer, and I enforced statutes,
Speaker 3: and those statutes have texts, and so it's my job
Speaker 3: to understand whether things happening in the marketplace trigger the
Speaker 3: text that Congress has actually passed for us.
Speaker 1: But that's what we're looking at.
Speaker 3: We're not trying to set sort of we wouldn't be
Speaker 3: setting like aqui hier rules. Generally, we would be looking
Speaker 3: at deals and trying to understand, you know, does this
Speaker 3: in fact involve the acquisition or sale of assets or
Speaker 3: stock and are is anything being structured as an attempt
Speaker 3: to circumvent review. But you know, I'm not here to
Speaker 3: say this is what the rules are. There will be
Speaker 3: you know, hard and fast, clear rules. There aren't even
Speaker 3: for the ordinary deals. We've got the you know, the
Speaker 3: HSR Act and the HSR rules. But deal structure is
Speaker 3: even an ordinary in then a very widely, and so
Speaker 3: we have to apply the text that Congress actually wrote
Speaker 3: to specific deals. But aqui hiers have become frequent enough
Speaker 3: and large enough that we are beginning to look at
Speaker 3: the appropriate way to apply the law that Congress actually
Speaker 3: adopted to aqui hires.
Speaker 1: I don't It's not my job.
Speaker 3: As an enforcer to sort of fit square pegs into
Speaker 3: round holes. But it is my job to make sure
Speaker 3: that the will of Congress, which is the will of
Speaker 3: the people at the end of the day, is being followed.
Speaker 3: And that's what we're here to try to do. We're
Speaker 3: trying to figure out how that applies in the case
Speaker 3: of acquay hires.
Speaker 2: CHAM and how common is this in the field of
Speaker 2: oftficial intelligence or how often is this particular scenario arising
Speaker 2: and crossing your desk from the AI industry.
Speaker 1: We've seen a couple in the last twelve months.
Speaker 3: My understanding is that the act we hire sort of structure,
Speaker 3: if you want to call it that, where you know,
Speaker 3: a firm acquires a lot of the talent and another
Speaker 3: firm is pretty old. Has been going on for a
Speaker 3: long time, but it often involves very small firms, and
Speaker 3: I think the reason that a lot of people are
Speaker 3: starting to notice it is because now it involves much
Speaker 3: larger firms and the sort of price being attached to
Speaker 3: obtaining the talent into licensing IP is in the billions.
Speaker 3: So I've definitely seen a couple in the AI space
Speaker 3: this year, which is why has attracted a lot of
Speaker 3: the attention, and it's why we're beginning to try to
Speaker 3: examine how are these working and how does the law
Speaker 3: that Congress passed governing pre merger review actually apply here
Speaker 3: as well as the provision in the pre merger review
Speaker 3: law that says you can't structure a deal in order
Speaker 3: to try to escape HSR review. So that is what
Speaker 3: we are trying to understand now. But certainly, I mean
Speaker 3: you are reported on them. You can read them about
Speaker 3: them on the Wall Street Journal. It's definitely true that
Speaker 3: there have been a couple of these big ones in
Speaker 3: the AI area.
Speaker 2: You're alive with us on Bloomberg Television, Bloomberg Radar around
Speaker 2: the world. Were speaking to Andrew Ferguson, Chairman of the FTC.
Speaker 2: I think the biggest case study of late which just
Speaker 2: to give an example of the structure, is Nvidio and
Speaker 2: GROC Because you know what in Vidia CEO Jen Mung
Speaker 2: told me a couple of weeks ago is they hired
Speaker 2: about four hundred engineers, but it also included the licensing
Speaker 2: of the core technology at a twenty billion dollar value.
Speaker 2: But over a set time horizon, Grock exists as a
Speaker 2: company still but with a focus on one of its
Speaker 2: business lines, that hiring and licensing technology fullmats. Is there
Speaker 2: anything specific that Shaman?
Speaker 3: Yeah, so I can't talk about specific deals or specific
Speaker 3: potential investigations. As a law enforcer, you know, I have
Speaker 3: to maintain a lot of confidentiality about the work of
Speaker 3: the commission. But I mean, you know that particular structure
Speaker 3: of the aquahier was different from example, from the one
Speaker 3: that Meta conducted earlier in the year. These things vary
Speaker 3: pretty wildly. The terms of the aile I'm sorry of
Speaker 3: the software and IP licensing can vary, the number of
Speaker 3: employees obtained in the transaction can vary. So we're trying
Speaker 3: to understand these things, first of all, because the last
Speaker 3: thing I want to do is sort of blindly charge
Speaker 3: ahead with a bunch of you know, sort of pre
Speaker 3: determined assumptions and start trying to apply the law to
Speaker 3: something we don't understand. But it is very important to me,
Speaker 3: because it's very important to Congress that people not try
Speaker 3: to come up with ways to attempt to get around
Speaker 3: pre merger review.
Speaker 1: And that's what we're looking at. And again, it's just
Speaker 1: not necessary.
Speaker 3: I get why people wanted to do this in the
Speaker 3: previous administration, where the anti trust enforcers tended to use
Speaker 3: the process as a way to block deals rather than
Speaker 3: you know, sort of being a lot more honest about
Speaker 3: it than taking people to court. But under the Trump administration,
Speaker 3: we are either going to get out of your way
Speaker 3: very quickly or we are going to take you to court.
Speaker 3: We're not letting the process be the punishment, and so
Speaker 3: people don't need to try to come up with ways
Speaker 3: to get around HSR.
Speaker 1: You will get a fair shake at the FTC.
Speaker 2: Chevan, there's a lot of interest in the FTC and
Speaker 2: consumer protection and what the FTC's remit is in the
Speaker 2: domain of AI.
Speaker 1: It's an example.
Speaker 2: I know you won't comment on specific cases, but x
Speaker 2: and Elon musk s XAI and Grock have been in
Speaker 2: the news because of the use of the tool to
Speaker 2: generate non consen sensual sexualized images. Does the FTC have
Speaker 2: a role in regulating from a consumer protection standpoint that domain?
Speaker 1: Yeah, I mean the president.
Speaker 3: Congress passed and the President signed in spring of last
Speaker 3: year that Take It Down Act, which is seminal groundbreaking
Speaker 3: legislation to protect people from artificially generated non consensual intimate images.
Speaker 3: The criminal component of that law that the Department of
Speaker 3: Justice enforces is already in effect. The part that we enforce,
Speaker 3: where we have to compel platforms to take down these
Speaker 3: images and then bring enforcement actions that they fail, will
Speaker 3: take effect in the spring.
Speaker 1: We are getting ready for that.
Speaker 3: I have been meeting with the elite child protection prosecutors
Speaker 3: and investigators at the Department of Homeland Security to make
Speaker 3: sure that we're synced up on that mission. This is
Speaker 3: relatively new to the FTC, and I want to make
Speaker 3: sure we hit the ground running when the authority takes effect.
Speaker 1: Right now, we are hiring.
Speaker 3: Specialists, prosecutors, lawyers, investigators, and IT experts to enable us
Speaker 3: the second that this thing takes effect to start bringing
Speaker 3: enforcement actions wherever these things are happening. And I don't
Speaker 3: care what kind of company you are, if you are
Speaker 3: a platform, whether you're a legacy social media company a
Speaker 3: burgeoning AI company, I don't care. If you are violating
Speaker 3: to take a down Act, you are going to hear
Speaker 3: from us, and we are going to be ready to
Speaker 3: do it. This is incredibly important legislation. I'm really excited
Speaker 3: that the FTC has a role in this. I lobby
Speaker 3: Congress very heavily to make sure that we had enough
Speaker 3: money to get this program off the ground when it
Speaker 3: takes effect in the middle of this year.
Speaker 1: You're getting that money and we will be ready, Chairman.
Speaker 2: President Trump has nominated David McNeil to the Commission. Our
Speaker 2: audience have asked me to ask you your thoughts on
Speaker 2: that someone perhaps without antitrust experience, legal experience, the Commission experience,
Speaker 2: and somebody, you know, frankly with high net wealth.
Speaker 1: Your thoughts, please look.
Speaker 3: I am generally of the view that Washington has too
Speaker 3: many lawyers. I think it is great that the President
Speaker 3: has decided to nominate someone who isn't a lawyer, who
Speaker 3: doesn't sort of think in the pathways that lawyers always think.
Speaker 3: I think it's great that the President has nominated. You know,
Speaker 3: I've never met mister McNeil. I've talked to him a
Speaker 3: little since the nomination. The man is a true American patriot.
Speaker 3: He's created thousands of jobs in this country. He has
Speaker 3: been one of the most outspoken proponents of manufacturing here
Speaker 3: in America. That has been one of the President's principal
Speaker 3: economic priorities is to make sure we make and build
Speaker 3: things in America.
Speaker 1: David McNeil has done that.
Speaker 3: He has been successful in doing that, and I think
Speaker 3: it's great that there is going to be sort of
Speaker 3: someone with that perspective who isn't coming at this like
Speaker 3: I am from fancy law schools with a long sort
Speaker 3: of litigation.
Speaker 1: And law enforcement background.
Speaker 3: He's coming at it as a job creator, as a
Speaker 3: wealth creator, and as one of the most outspoken proponents
Speaker 3: of manufacturing in America that there is in this country.
Speaker 3: You know, is it an unconventional pick, Yeah, of course
Speaker 3: it is. But part of what has made President Trump
Speaker 3: so successful is that he doesn't always think in the
Speaker 3: conventions that governed DC. And I think that this is
Speaker 3: a really really good idea to bring someone with mister
Speaker 3: McNeil's perspective here to the Commission chairman.
Speaker 2: The major concern to the consumer right now is affordability.
Speaker 2: What is the TC able to do on pricing pressure,
Speaker 2: bringing prices down? Addressing that consumer concern?
Speaker 3: Yeah, I mean it's one of my main concerns too.
Speaker 3: We're doing a lot on this front. On the merger
Speaker 3: review front, my first two merger enforcement actions were in
Speaker 3: the healthcare space. We just won one of those healthcare
Speaker 3: enforcement actions last week and several months before, the judge
Speaker 3: denied our injunction, but only because after I sued them,
Speaker 3: they offered to divest the assets that were.
Speaker 1: The problem, so that was a win for the Commission
Speaker 1: as well.
Speaker 3: Another merger enforcement action I brought is about industrial adhesives
Speaker 3: that are used to build homes. We have a real
Speaker 3: home building crisis in this country. Although under President Trump,
Speaker 3: home sales went up last year for the first time
Speaker 3: in a while, we still have a home affordability crisis
Speaker 3: in this country. And I have focused intently on the
Speaker 3: competition side, on making sure that we are active in
Speaker 3: markets grocery, healthcare, homes to try to bring prices down
Speaker 3: to consumers and to make sure that all Americans get
Speaker 3: the advantages that come with vigorous competition. On the other side,
Speaker 3: I sued ticket Master and a groundbreaking lawsuit charging them
Speaker 3: with having basically inflated all the prices of tickets in
Speaker 3: violation of multiple federal laws. Americans have been complaining justly
Speaker 3: for a long time that it has become almost impossible
Speaker 3: to take your family to a ballgame or to a
Speaker 3: concert without having a fork over the value of a
Speaker 3: mortgage payment to do it. We have been very active
Speaker 3: in the ticketing space to make sure that those prices
Speaker 3: are going to come down. We have been bringing actions
Speaker 3: on the consumer protection side in the healthcare space. We've
Speaker 3: also been bringing a lot of consumer protection cases and
Speaker 3: competition cases to protect the value of wages again non
Speaker 3: competes against job scams.
Speaker 1: The FTC is a little agency.
Speaker 3: Our budget is even half a billion dollars, but we
Speaker 3: have returned literally billions of dollars of wrongfully taken money
Speaker 3: just in the last year back in the pockets of
Speaker 3: the American consumers. We are doing everything we can within
Speaker 3: our little remit to try to bring down prices and
Speaker 3: to make this country a more affordable place to live,
Speaker 3: which is exactly what President Trump has been telling us
Speaker 3: to do.
Speaker 1: Chairman.
Speaker 2: Very quickly, Bloomberg's reported that the White House is considering
Speaker 2: you for a DOJ fraud role. What would that entail
Speaker 2: and legally would it be possible for you to take
Speaker 2: on that role while remaining chair of the FTC.
Speaker 3: I can tell you definitively, I'm not leaving the Federal
Speaker 3: Trade Commission and I'm not going to the Department of Justice.
Speaker 3: This is an important full time job that the President
Speaker 3: entrusted me with to try to help the American people
Speaker 3: that just voted in their tens of millions to make
Speaker 3: Donald Trump president. That's what we have done. We've sent
Speaker 3: billions of dollars wrongfully taken money back to Americans, and
Speaker 3: I'm focused on fighting fraud and protecting competition right here
Speaker 3: at the FTC.
Speaker 2: Andrew Ferguson, the FTC Chairman, thank you for your time
Speaker 2: here on Bloomberg Tech. Okay, coming up, Jermaina Alaman of
Speaker 2: Prometeer joins us to discuss the future of banking within AI.
Speaker 1: That's next.
Speaker 2: This is Bloomberg Tech.