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

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Speaker 1: In just five weeks, the NFL's biggest financial threat in

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Speaker 1: years was erased in court, almost like magic Well Legal magic.

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Speaker 1: On June twenty seventh, the jury sided with football fans

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Speaker 1: and awarded four point seven billion dollars in damages to

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Speaker 1: residential and commercial subscribers after it rule the NFL had

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Speaker 1: violated anti trust laws in distributing out of market Sunday

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Speaker 1: afternoon games on a premium subscription service. Because damages can

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Speaker 1: be tripled under federal anti trust laws, the NFL could

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Speaker 1: have been liable for more than fourteen billion dollars. But

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Speaker 1: then a California judge tossed out the verdict after throwing

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Speaker 1: out the testimony of two expert witnesses and concluding the

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Speaker 1: jury improperly calculated damages. Joining me is Bloomberg Intelligence Senior

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Speaker 1: litigation analyst Jenniferree. The jury found that the arrangement was

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Speaker 1: anti competitive. Did the judge find anti competitive behavior?

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Speaker 2: So the judge didn't necessarily find anti competitive behavior. What

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Speaker 2: he said was that it wasn't unreasonable based on the

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Speaker 2: evidence presented at trial for the jury to reach that conclusion.

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Speaker 2: So essentially he supported the jury reaching the conclusion that

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Speaker 2: the agreements between the NFL teams and the NFL and

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Speaker 2: possibly I'm not clear on this, but possibly also with

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Speaker 2: direct TV were anti competitive restraints.

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Speaker 1: Yes, and the league had argued, let's there was the

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Speaker 1: jury made up methodology to calculate damages, and he went

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Speaker 1: off on that, right. Tell us why he went off

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Speaker 1: on that.

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Speaker 2: I have to tell you it was really kind of

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Speaker 2: a strange way for a jury to calculate damages. So

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Speaker 2: what happens in trial is there are experts, and the

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Speaker 2: experts are there to assist the jury to explain to

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Speaker 2: them how damages came and be calculated, what they think

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Speaker 2: the world would have looked like but for these restraints

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Speaker 2: that were deemed to be anti competitive, and what the

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Speaker 2: prices would have been. So what a jury is meant

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Speaker 2: to do is say, okay, in that butt for world

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Speaker 2: where we didn't have these restraints, what would people have paid?

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Speaker 2: But what did they actually pay? And what's the difference?

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Speaker 2: And the judge actually instructed them that way. You have

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Speaker 2: to say how much were people overcharged because of this

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Speaker 2: bad behavior? What they need to get back is what

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Speaker 2: they overpaid essentially, but instead the jury just kind of

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Speaker 2: projected all of that and they took the list price.

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Speaker 2: This is Sunday Ticket is what we're talking about, right,

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Speaker 2: It's something you can buy from the NFL to get

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Speaker 2: out of market games. And that's what the issue is here.

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Speaker 2: What did people and commercial entities pay for Sunday Ticket.

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Speaker 2: They took the list price for Sunday Ticket, and then

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Speaker 2: they took the testimony about what the actual average price

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Speaker 2: paid for Sunday Ticket was. Because you know, people get coupons,

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Speaker 2: they get discounts, they get specials, whatever, so there was,

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Speaker 2: you know, a little more than I think one hundred

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Speaker 2: dollars difference between the list price and the average price

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Speaker 2: actually paid. They took that difference, so in other words,

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Speaker 2: they took what was the discount and then they multiplied

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Speaker 2: that by the number of subscribers. So that really doesn't

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Speaker 2: bear any relation to what the experts testified as to

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Speaker 2: the overcharges. So the judge said, look, you can do

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Speaker 2: the math. You can see how they calculated this. It's

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Speaker 2: to the penny and it doesn't make sense. So that's

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Speaker 2: part of it.

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Speaker 1: The jury calculation was wrong, according to the judge. He

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Speaker 1: also struck two economic experts who had testified for the subscribers.

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Speaker 2: Right, so, you know, I just talked about the butt

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Speaker 2: four world. So one of those experts described what the

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Speaker 2: butt four world might have looked like if they hadn't

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Speaker 2: had the restraints, and the other one sort of talked

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Speaker 2: about then what people would have paid, how things would

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Speaker 2: have been, and what would have been paid to be

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Speaker 2: a subscriber to these out of market telecasts of NFL games.

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Speaker 2: And you know, an expert's conclusions and testimony really have

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Speaker 2: to be based on some sort of a methodology and

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Speaker 2: economic method methodology that makes sense. And here he basically

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Speaker 2: said it really wasn't. It wasn't reliable. Neither expert were

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Speaker 2: reliable one because really their testimony wasn't based both of

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Speaker 2: them on a methodology that made sense. In one case,

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Speaker 2: the first expert basically said, Hey, if you didn't have

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Speaker 2: these restraints, it would be just like college football. We

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Speaker 2: have a bunch of college football games all over the

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Speaker 2: place on some cable channels, on some over the air channels,

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Speaker 2: like you know, ABC on cable channels, and you see,

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Speaker 2: you know, loads of games every weekend, and this would

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Speaker 2: be just like that. But he didn't really explain how

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Speaker 2: it would. NFL has differences. It's different from college football.

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Speaker 2: It isn't the same. And CBS and Box have some

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Speaker 2: contracts with the NFL which aren't necessarily illegal, and those

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Speaker 2: probably would have stayed in place. And what he didn't

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Speaker 2: do is say how this would have happened. And when

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Speaker 2: asked how would this have all worked out, he said,

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Speaker 2: these are sophisticated entities. They would have made it work.

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Speaker 2: That isn't good enough. You know, it needs to be

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Speaker 2: based on some economic analysis that explaining exactly how everything

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Speaker 2: would have panned out, what would have been shown, how

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Speaker 2: it would have been shown, how much it would have

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Speaker 2: been had the restraints not been in place. And so

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Speaker 2: the judge said, this is really just speculation that things

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Speaker 2: would have been like college football, without explaining why or

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Speaker 2: how it would be like college football.

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Speaker 1: It's surprising to me that the plaintiffs, after all these

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Speaker 1: years of litigation, didn't get an expert who could do that.

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Speaker 1: It doesn't sound like it's something that's so impossible to

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Speaker 1: figure out.

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Speaker 2: I think they thought it would be sufficient because there

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Speaker 2: was some effort by the defendants earlier in the litigation.

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Speaker 2: It's called a dobear motion. To try to exclude the experts,

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Speaker 2: and they weren't able to do that. The judge said, no,

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Speaker 2: I'm going to go ahead and let them testify. And

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Speaker 2: I think the plaintiffs thought that this testimony might be

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Speaker 2: good enough. College football did face years ago a case

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Speaker 2: that was similar to this one, and as a result

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Speaker 2: of that litigation, we got what we got out of

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Speaker 2: the NCAA. We got a lot of college games on

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Speaker 2: a lot of different cable stations and over the air stations,

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Speaker 2: and I think they thought it would be good enough

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Speaker 2: to basically say, look, it's very similar and it would

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Speaker 2: be similar. But again from the perspective of what an

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Speaker 2: expert supposed to provide, the judge just deemed that to

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Speaker 2: be too speculative.

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Speaker 1: Was this a shocking decision to chass out the verdict.

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Speaker 2: I think not, because, first, all the way through trial,

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Speaker 2: the judge seemed a really skeptical of plaintiff's evidence. He

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Speaker 2: made comments like, I don't really think the evidence that

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Speaker 2: you're presenting here supports your theory or supports your case.

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Speaker 2: I don't really think you're making your case. So he

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Speaker 2: was skeptical the whole way. So that's one thing, and

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Speaker 2: the second thing is when you did look at the

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Speaker 2: damages that the jury awarded, they did look odd. They

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Speaker 2: weren't the damages that the experts predicted would be the

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Speaker 2: appropriate damages. And you saw that it was kind of

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Speaker 2: clear the way they calculated them in a way that

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Speaker 2: didn't make sense. Right, So I think that wasn't surprising.

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Speaker 2: And then June also, this has a long history, right,

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Speaker 2: This litigation has been going for ten years, and it

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Speaker 2: already went before the Supreme Court at one point. I

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Speaker 2: should say that the NFL tried to get Supreme Court

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Speaker 2: review sume Court didn't pick up the case because it

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Speaker 2: was just on emotion to dismiss and that's kind of

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Speaker 2: early on in the matter and sort of procedural. But

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Speaker 2: in saying we won't review the case, Justice Kavanaugh released

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Speaker 2: a statement and in the statement he basically said he

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Speaker 2: doesn't think that the plaintiff's case is good here that

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Speaker 2: he agrees with the NFL's position, and they didn't take

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Speaker 2: the case because it's just on emotion to dismiss.

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Speaker 3: It's early on.

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Speaker 2: But by the way, NFL, if you lose, practically invited

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Speaker 2: them to come back to the Supreme Court.

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Speaker 1: What surprised me here the jury didn't follow the judges

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Speaker 1: in struct rights. According to the judge, the jury calculated

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Speaker 1: the damages wrong. So then you order a new trial

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Speaker 1: and you give another jury a chance, especially after ten

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Speaker 1: years of litigation.

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Speaker 2: So I think a new trial could be where we

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Speaker 2: end up here. So the reason he did that is

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Speaker 2: because there were sort of three issues.

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Speaker 1: Right.

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Speaker 2: He didn't just say that the jury's damages made no sense.

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Speaker 2: That was one thing. But he also discounted and discluded

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Speaker 2: the evidence of two experts. And because he did that,

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Speaker 2: he granted judgment notwithstand need the verdict, because without those

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Speaker 2: two experts testimony, there was no evidence presented at all

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Speaker 2: to establish that there was injury or what the damages

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Speaker 2: would have been for that injury.

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Speaker 1: And because of that.

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Speaker 2: It was judgment notwithstanding the verdict. Now here's the thing,

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Speaker 2: what happens now? I would think that the plaintiffs will

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Speaker 2: probably appeal based on what we talked about right at

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Speaker 2: the beginning of this segment, that the judge didn't find

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Speaker 2: it unreasonable for the jury to decide that there'd been

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Speaker 2: anti competitive conduct. Right, So the judge agreed with that.

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Speaker 2: So on that basis, consumers and commercial entities, they're do

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Speaker 2: something right. There was anti competitive conduct according to this jury.

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Speaker 2: I would think the plaintiffs would appeal, and I would

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Speaker 2: believe that the upshot of that appeal, if they're successful,

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Speaker 2: would be to send it back for a new trial

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Speaker 2: on damages.

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Speaker 1: This has been going on so long that in twenty

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Speaker 1: seventeen a judge dismissed the lawsuit right at that point,

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Speaker 1: too right, right, and the Ninth Circuit two years later reversed.

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Speaker 2: That was really early on, so that was the motion

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Speaker 2: to dismiss. So it was first dismissed, went to the

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Speaker 2: Ninth Circuit. The Ninth Circuit resurrected it, and that's when

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Speaker 2: the NFL tried to get before the Supreme Court. It

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Speaker 2: was on that Ninth Circuit's decision to send it back

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Speaker 2: to the trial court on remand well it was a reversal, so,

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Speaker 2: you know, no motion to dismiss, keep litigating, and that's

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Speaker 2: when the Supreme Court refused to take the case. And

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Speaker 2: then we went through the litigation and the trial. So

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Speaker 2: that was really very different, a different situation. There was

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Speaker 2: no evidence presented at that time.

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Speaker 1: Looking at this big picture, it seems hard to believe

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Speaker 1: that there wasn't some anti competitive conduct here.

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Speaker 2: Well, you know, it's really complicated June, because there is

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Speaker 2: something called the Sports Broadcasting Act. It's from the nineteen sixties,

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Speaker 2: and what it does is it exempts professional football from

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Speaker 2: antitrust laws, the conspiracy laws for the purpose of being

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Speaker 2: organizing a league, right and for the purpose of having

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Speaker 2: all these teams that must come together to present professional football,

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Speaker 2: the games, the Super Bowl, et cetera. And what it

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Speaker 2: did at the time is it exempts it for the

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Speaker 2: purposes of pooling their licensing for free TV. But there

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Speaker 2: was nothing but free TV then. There was no cable.

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Speaker 3: It was just.

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Speaker 2: Ad supported television is what we got, right, and we

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Speaker 2: didn't pay for it. Things are different today. So one

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Speaker 2: of the arguments here by the NFL was that, well,

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Speaker 2: we're exempt from the antitrust laws because of the Sports

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Speaker 2: Broadcasting Act. We can do this. We can go ahead

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Speaker 2: and license pull the rights to the telecasts of all

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Speaker 2: the games and then sell them as a package to

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Speaker 2: Direct TV and let Direct TV charge subscribers whatever they

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Speaker 2: want to, right, Because this was the issue. So the

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Speaker 2: question is does the Sports Broadcasting Act apply or not?

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Speaker 2: And I think that if the NFL was planning ahead

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Speaker 2: and looking at their conduct. Their position would have been, well,

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Speaker 2: we're exempt, so we can do this.

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Speaker 1: I was surprised that we haven't heard from the plaintiffs

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Speaker 1: immediately saying we're going to appeal this, which they've done before.

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Speaker 1: So what do you think is next?

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Speaker 2: You know, I think it's such an interesting situation because

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Speaker 2: I would think the plaintiffs would want to appeal just

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Speaker 2: because they did get the jury verdict that there was

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Speaker 2: anti competitive conduct. But on the other hand, this litigation

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Speaker 2: has been going for ten years now. If they appeal,

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Speaker 2: we're tacking on years and years and years because the

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Speaker 2: Ninth Circuit is pretty backed up. They've got a lot

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Speaker 2: of cases. They're taking a long time to decide on

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Speaker 2: these appellate matters you're looking at. It could be another

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Speaker 2: two years before they get that decision. It's been ten years.

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Speaker 2: And if the decision is to send it back to

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Speaker 2: a new trial, I mean, I think at this point

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Speaker 2: they may just want to get paid. So what I

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Speaker 2: think this could lead to is some sort of a

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Speaker 2: settlement here.

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Speaker 1: Not much of a settlement though.

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Speaker 2: I don't think so. I mean, you know, that's the

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Speaker 2: thing their issues here on both sides. The NFL probably

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Speaker 2: feels like they have a strong case. But on the

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Speaker 2: other hand, everybody's probably tired of this litigation and it

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Speaker 2: may be worth their while just to pay these plaintiffs

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Speaker 2: and make it all go away, because the litigation itself

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Speaker 2: is costing them a lot of money and as I said,

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Speaker 2: could drag on for years. So we'll have to see

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Speaker 2: what happens. I suspect at least there will be an

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Speaker 2: appeal and it might get to the Ninth Circuit.

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Speaker 1: Turning to another antitrust issue, another deal that the ft

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Speaker 1: SEE is opposing the Krug or Albertson's merger. So Jen

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Speaker 1: there are going to be some important proceedings in the

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Speaker 1: case this month tells about that.

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Speaker 2: In Portland, Oregon. The trial or the hearing they call

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Speaker 2: it a hearing. I sort of call it a trial

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Speaker 2: because it really is a mini trial on the FTC's

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Speaker 2: motion for a preliminary junction that starts in Portland, Oregon

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Speaker 2: on the twenty sixth of.

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Speaker 1: August, and just tell us what the FTC's case is

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Speaker 1: about briefly.

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Speaker 2: So really, you know, this is a straightforward horizontal deal, right,

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Speaker 2: So the FTC's just looking at two competitors. They're both

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Speaker 2: grocery stores, they look at these in separate local regions. Obviously,

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Speaker 2: that makes sense because grocery stores compete with each other

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Speaker 2: in localities, they don't compete in a nationwide basis. So

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Speaker 2: I call this a map merger, right, because you dot

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Speaker 2: out where all these grocery stores are on a map,

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Speaker 2: and you make circles around the ones that are close

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Speaker 2: to each other, and then you look at who else

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Speaker 2: is in there competing, and it means any number of

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Speaker 2: locations could be problematic from an antitrust perspective, because it

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Speaker 2: could be a merger to monopoly. It could be a

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Speaker 2: merger three to two, four to three, leaving not enough

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Speaker 2: grocery options in those local regions. So what the FTC

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Speaker 2: has said is, look, that is the problem here. Now

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Speaker 2: they've led to some other allegations, but really the primary

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Speaker 2: issue here is horizontal competition and areas where it's overly concentrated,

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Speaker 2: and the concentration numbers give the FDC a presumption of

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Speaker 2: harm from this deal.

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Speaker 1: Did the companies try any remedies?

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Speaker 2: The companies did do what is typical. They offered to

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Speaker 2: divest some of these stores, actually quite a lot, I

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Speaker 2: think almost six hundred at this point. They keep upping

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Speaker 2: the number. So I don't know Jack will exactly know

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Speaker 2: where they landed now, but they keep adding to it,

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Speaker 2: and they've offered to divest quite a few stores to

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Speaker 2: a company called CNS Wholesale, which is a very big company,

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Speaker 2: but it's really mostly a wholesaler. It's not really a

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Speaker 2: retail grocer. It does have some retail grocery stores, it

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Speaker 2: does operate some, but it actually franchises more than it operates.

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Speaker 2: And the FTC rejected the settlement. They said it was

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Speaker 2: two piecemeal. There weren't enough sort of ancillary support assets

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Speaker 2: to help, like distribution centers, and they don't like the

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Speaker 2: buyer because the buyer doesn't really have a good history

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Speaker 2: of operating grocery stores. And unfortunately for Albertson's and Kroger,

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Speaker 2: there is a history of some failed divestiture remedies in

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Speaker 2: the grocery world. So the FTC said, no, settlements, not

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Speaker 2: good enough. We're still going to sue you. So I

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Speaker 2: think the issue will be one proving that the deal's

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Speaker 2: anti competitive, and then two, you know, the companies will

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Speaker 2: try to convince a judge that their remedy is good enough.

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Speaker 1: Thanks so much, Jen, As always that's Bloomberg Intelligence senior

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Speaker 1: litigation analyst Jenniferree. For more of Jen's analysis, you can

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Speaker 1: go to bigo on the Bloomberg terminal. There were some

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Speaker 1: dramatic moments in January when the Senate Judiciary Committee heard

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Speaker 1: from the CEOs of five major social media companies about

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Speaker 1: what could be done to protect kids online. Republican Senator

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Speaker 1: Josh Hawley asked Meta CEO Mark Zuckerber to apologize to

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Speaker 1: the family members of kids who've been directly affected by

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Speaker 1: online child exploitation.

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Speaker 3: Would you like now to apologize to the victims who

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Speaker 3: have been harmed by product showing them the pictures? Would

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Speaker 3: you like to apologize for what you've done to these

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Speaker 3: good people?

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Speaker 1: Zuckerberg pushed back on studies that suggested that social media

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Speaker 1: use was a deterrent to teen's mental health.

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Speaker 3: Mental health is a complex issue, and the existing body

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Speaker 3: of scientific work has not shown a cause a link

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Speaker 3: between using social media and young people having worse mental

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Speaker 3: health outcomes.

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Speaker 1: Congress has been under immense public pressure to address criticisms

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Speaker 1: that social media companies are harming kids and their mental

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Speaker 1: health with addictive algorithms and toxic content. So in a

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Speaker 1: rare display of bipartisanship. The Senate overwhelmingly passed legislation last

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Speaker 1: week that's designed to protect children from dangerous online content.

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Speaker 1: Only three Secs voted against the act. The Kids Online

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Speaker 1: Safety Act would require social media companies to make their

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Speaker 1: platform safer for kids, but critics of the bill say

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Speaker 1: it would violate the First Amendment and harm vulnerable kids

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Speaker 1: who wouldn't be able to access information on things like

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Speaker 1: LGBTQ issues or reproductive rights. The bill's fate in the

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Speaker 1: House is uncertain. Joining me is Eric Goleman, a professor

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Speaker 1: at the Santa Clara University School of Law and co

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Speaker 1: director of the High Tech Law Institute. Eric explained COOSA

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Speaker 1: and what it would do.

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Speaker 4: It's impossible to summarize COSA because there has so many

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Speaker 4: moving parts. The main centerpiece of the law is what's

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Speaker 4: called a duty of care that services governed by the

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Speaker 4: law are required to treat kids specially and stay like that.

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Speaker 4: We might think that's a pretty good idea, but the

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Speaker 4: devil is in the details. The law then has a

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Speaker 4: bunch of other provisions that has to build in certain

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Speaker 4: safeguards for children. It requires parental authorization before children can

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Speaker 4: get onto certain websites, and it requires this weird thing

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Speaker 4: called a filter bubble Transparency Report, which is basically, I think,

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Speaker 4: trying to make people understand the algorithms better and a

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Speaker 4: whole bunch more. It's kind of one of those things

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Speaker 4: where I was trying to think about how to describe it.

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Speaker 4: It's like kneeling jello to the wall. There's so much

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Speaker 4: going on there it's impossible to pinpoint exactly what this

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Speaker 4: law does.

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Speaker 1: Congress has been under intense public pressure to address the

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Speaker 1: criticisms that social media companies are hurting kids and their

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Speaker 1: mental health with these addictive algorithms and toxic content. Will

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Speaker 1: it help that?

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Speaker 4: So there's a fundamental, baseline factual question that this law

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Speaker 4: doesn't engage with, and that's whether not social media is

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Speaker 4: in that positive or negative for children. And the empirical evidence,

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Speaker 4: which is coming out fast and furious, suggests that there

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Speaker 4: are many ways in which social media is a net

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Speaker 4: benefit for children, and this law would actually work against that.

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Speaker 4: It would try to take those benefits away from children.

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Speaker 4: So if we assume that social media is only pernicious

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Speaker 4: towards children and only hurts them, this law might be

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Speaker 4: an approach I don't think it's a good one, but

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Speaker 4: it is an approach. But if we disagree on that

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Speaker 4: factual premise, this law is actually really dangerous. This law

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Speaker 4: will hurt many more kids than it's likely to help.

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Speaker 1: Some groups say that kids won't have access to information

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Speaker 1: about abortion and gender identity, transgender health care. Is that

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Speaker 1: what you're referring to?

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Speaker 4: Those are definitely on my mind, But I think it's

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Speaker 4: broader than that, And the data is showing across a

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Speaker 4: lot of different studies that children are looking for places

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Speaker 4: to connect with others, especially in the pandemic era, when

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Speaker 4: they were literally physically prevented from engaging with their peers

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Speaker 4: in person. The Internet became what's called the third place.

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Speaker 4: It's not school, and it's not home. It's a third

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Speaker 4: place that people can connect. And it's that social connection,

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Speaker 4: whether it's on a specific topic like LGBTQ identity, or

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Speaker 4: it's a more general issue about just wanting to make friends.

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Speaker 4: Social media and other Internet services have provided outlets for

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Speaker 4: that desire, that very basic human need, and if you

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Speaker 4: take that away, it's possible and in fact probable, that

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Speaker 4: it can't be repicated in the offline world, that it

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Speaker 4: just won't exist for those children more, the connections that

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Speaker 4: they had will no longer exist. They won't have an

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Speaker 4: outlet to find new connections, and that just makes them

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Speaker 4: lonelier and sadder.

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Speaker 1: How do you balance that, though, with the number of

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Speaker 1: deaths from social media.

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Speaker 4: I mean, that's a tough question because it again assumes

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Speaker 4: that social media caused the death. And I'm not there

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Speaker 4: close enough to the family to know, But we do

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Speaker 4: know that teens, especially are under extraordinary mental distress for

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Speaker 4: reasons have nothing to do with social media. They are

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Speaker 4: concerned about things like the pandemic and climate change and

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Speaker 4: the fact that we have efforts to impose an authoritarian

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Speaker 4: government that isn't listening to the needs of children, and

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Speaker 4: so like, there's so much going on in society that's

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Speaker 4: distressing kids, and to pull out one factor and assume

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Speaker 4: that that's the cause really is actually, I think not

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Speaker 4: properly respecting all the other problems we have that might

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Speaker 4: also be needing to be addressed. So my heart goes

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Speaker 4: out to the families who've lost children, either by death

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Speaker 4: or just through mental distress due to the internet. But

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Speaker 4: there are a lot of other things going on, and

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Speaker 4: we have to be very, very careful about making sure

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Speaker 4: that we're precisely identifying the root problems and then addressing those.

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Speaker 1: Do you think that there are First Amendment problems here?

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Speaker 4: They're enormous First Amendment problems. And what's so bad to

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Speaker 4: me is that Congress ninety one out of one hundred

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Speaker 4: centers voted for a law that seems like it goes

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Speaker 4: straight into the teeth of an opinion that just came

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Speaker 4: out a month ago saying that you cannot do many

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Speaker 4: of the things that are being required this law, and

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Speaker 4: the drafters didn't make any effort to accommodate the new

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Speaker 4: information that came out from the Supreme Court that said,

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Speaker 4: here are the limits on your ability to control how

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Speaker 4: people publish content and talk to each other online. And

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Speaker 4: so they're just doubling down on rules that were drafted

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Speaker 4: without the guidance the Supreme Court just gave them, And

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Speaker 4: to me, that's baffling.

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Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 1: this conversation with Professor Eric Goleman of Santa Clara University

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Speaker 1: Law School. We'll talk about how COOSO would be enforced. Also,

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Speaker 1: Google loses a huge antitrust case.

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Speaker 4: The iSER ninety one, the NASAR three and the motion

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Speaker 4: is agreed to.

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Speaker 1: The Senate resoundingly passed a package of internet safety bills

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Speaker 1: last Tuesday. The Kids Online Safety Yet would require social

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Speaker 1: media companies to make their platform safer for kids, but

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Speaker 1: critics of the bill say it would violate the First

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Speaker 1: Amendment and harm vulnerable kids who wouldn't be able to

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Speaker 1: access information on things like LGBTQ issues or reproductive rights.

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Speaker 1: President Joe Biden commended the Senate for taking what he

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Speaker 1: called a crucial bipartisan step forward, but it's not clear

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Speaker 1: if House Speaker Mike Johnson will bring up the package

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Speaker 1: for a vote. I've been talking to Professor Eric Goldman

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Speaker 1: of Santa Clara University Law School. The package also includes

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Speaker 1: the Children and Teens Online Privacy Protection Act.

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Speaker 4: Main thing that's at issue in both laws is how

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Speaker 4: does the service know that they're dealing with a child.

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Speaker 4: And in the old rules psy Congress back in the

439
00:22:49,560 --> 00:22:53,679
Speaker 4: nineteen nineties, the services would be obligated to treat a

440
00:22:53,800 --> 00:22:58,080
Speaker 4: user differently if they actually knew that the user was

441
00:22:58,119 --> 00:22:59,800
Speaker 4: a child, or they had built a website that was

442
00:23:00,080 --> 00:23:04,280
Speaker 4: during essentially only the children KOSA and the COPA two

443
00:23:04,320 --> 00:23:08,120
Speaker 4: point zero revisions try to loosen that standard to make

444
00:23:08,160 --> 00:23:10,320
Speaker 4: it so that there are times on which a service

445
00:23:10,359 --> 00:23:14,400
Speaker 4: will know for legal purposes that they're dealing with a minor,

446
00:23:14,760 --> 00:23:18,360
Speaker 4: even if they don't have quote actual knowledge from that

447
00:23:18,560 --> 00:23:21,400
Speaker 4: user that they are a minor. And it's that intermediate

448
00:23:21,480 --> 00:23:25,280
Speaker 4: gap that services will have to treat some users as

449
00:23:25,440 --> 00:23:30,200
Speaker 4: minors without having received quote actual knowledge that actually puts

450
00:23:30,240 --> 00:23:33,920
Speaker 4: services in an untenable position. They don't know when they're

451
00:23:33,920 --> 00:23:35,119
Speaker 4: going to be dealing with a minor or not, and

452
00:23:35,119 --> 00:23:37,880
Speaker 4: if they don't follow the rules for minors, then lots

453
00:23:37,920 --> 00:23:40,320
Speaker 4: of bad things could happen them from a legal standpoint.

454
00:23:40,560 --> 00:23:43,560
Speaker 4: And so this question of who is a minor and

455
00:23:43,640 --> 00:23:47,120
Speaker 4: how does the service know is the essential one Internet law.

456
00:23:47,240 --> 00:23:50,160
Speaker 4: It's as old as the Internet itself. This is the

457
00:23:50,200 --> 00:23:53,679
Speaker 4: first question that the lawmakers try to address back in

458
00:23:53,720 --> 00:23:57,520
Speaker 4: the nineteen nineties, and we still cannot resolve that fundamental

459
00:23:57,560 --> 00:24:00,679
Speaker 4: question today. We simply don't have a good way of

460
00:24:00,720 --> 00:24:03,119
Speaker 4: deciding when a user is a minor or not for

461
00:24:03,240 --> 00:24:06,960
Speaker 4: legal purposes, and if we get it wrong, then services

462
00:24:07,000 --> 00:24:09,040
Speaker 4: have to do things that we actually didn't intend them

463
00:24:09,040 --> 00:24:09,640
Speaker 4: to do.

464
00:24:09,680 --> 00:24:13,240
Speaker 1: The bill supporters say the measure would keep kids safe

465
00:24:13,280 --> 00:24:17,840
Speaker 1: by requiring companies to control the design, not the content,

466
00:24:18,119 --> 00:24:21,439
Speaker 1: of their platforms. I don't quite understand that, but do you.

467
00:24:22,000 --> 00:24:25,400
Speaker 4: I don't, and let me explain why. So there's been

468
00:24:25,440 --> 00:24:29,000
Speaker 4: a broad based regulatory effort to say that when we're

469
00:24:29,000 --> 00:24:32,800
Speaker 4: dealing with online publication of content, we can make a

470
00:24:32,840 --> 00:24:37,200
Speaker 4: distinction between the content that's being published and other publication

471
00:24:37,320 --> 00:24:41,159
Speaker 4: decisions like how to present the content, who to present

472
00:24:41,200 --> 00:24:43,800
Speaker 4: it to, and in my mind, they are all part

473
00:24:43,840 --> 00:24:47,760
Speaker 4: of the same publication process. Deciding the way in which

474
00:24:47,760 --> 00:24:50,880
Speaker 4: you present content is equally important to what the substance

475
00:24:50,920 --> 00:24:55,240
Speaker 4: of the content says. So drawing that distinction is nonsensical,

476
00:24:55,680 --> 00:24:58,240
Speaker 4: but it's something that lots of regulators are doing. It's

477
00:24:58,240 --> 00:25:01,280
Speaker 4: something that courts are prepared to do, and as a result,

478
00:25:01,359 --> 00:25:06,040
Speaker 4: it creates this weird artificial distinction between content and how

479
00:25:06,080 --> 00:25:08,800
Speaker 4: you talk about your content or how you present your content.

480
00:25:09,240 --> 00:25:11,160
Speaker 1: What other problems do you see with this bill?

481
00:25:12,119 --> 00:25:14,960
Speaker 4: I think the core problem with a bill is that

482
00:25:15,359 --> 00:25:19,000
Speaker 4: it creates a set of legal incentives that services simply

483
00:25:19,040 --> 00:25:22,640
Speaker 4: can't manage. If they are dealing with users that they

484
00:25:23,040 --> 00:25:26,639
Speaker 4: know are children, or the law deems them to have

485
00:25:26,720 --> 00:25:29,479
Speaker 4: known they were children, then they have burdens that they

486
00:25:29,480 --> 00:25:32,280
Speaker 4: simply can't comply with. I look at this law and

487
00:25:32,320 --> 00:25:34,320
Speaker 4: I say, I don't want to have children on my

488
00:25:34,440 --> 00:25:37,359
Speaker 4: site if I have to run through this gonglet. The

489
00:25:37,440 --> 00:25:40,840
Speaker 4: risks are too great, the obligations are too onerous. It

490
00:25:40,880 --> 00:25:43,440
Speaker 4: doesn't make sense for me. If I know that someone

491
00:25:43,520 --> 00:25:45,680
Speaker 4: is a minor or, I think they're a minor. They're

492
00:25:45,720 --> 00:25:48,359
Speaker 4: going to be kicked off our site. Now, that is

493
00:25:48,359 --> 00:25:50,679
Speaker 4: a solution. If we want to shrink the Internet for

494
00:25:50,760 --> 00:25:53,359
Speaker 4: children and make it so that they have less things

495
00:25:53,359 --> 00:25:56,000
Speaker 4: that they can do online, that is a form of

496
00:25:56,080 --> 00:25:59,720
Speaker 4: child protection. It is also a disadvantage for children because

497
00:25:59,720 --> 00:26:02,000
Speaker 4: it means that they can't do the self expression that

498
00:26:02,040 --> 00:26:05,919
Speaker 4: they need, the self identification, the exploration that we expect,

499
00:26:06,000 --> 00:26:08,800
Speaker 4: especially from teenagers. They simply won't be able to do

500
00:26:08,840 --> 00:26:11,000
Speaker 4: it in the way that we think they ought to

501
00:26:11,000 --> 00:26:13,960
Speaker 4: be able to. So if the doors start closing the

502
00:26:14,040 --> 00:26:17,040
Speaker 4: children online, I think in the end children get the

503
00:26:17,040 --> 00:26:19,520
Speaker 4: worst deal of that. That actually is not good for children,

504
00:26:19,560 --> 00:26:22,080
Speaker 4: it's not good for society. And this loss sets up

505
00:26:22,119 --> 00:26:25,359
Speaker 4: those incentives to close doors to children online and simply

506
00:26:25,400 --> 00:26:28,360
Speaker 4: say they're not welcome. And if that's really the case,

507
00:26:28,600 --> 00:26:31,359
Speaker 4: I do question, you know what now will be the

508
00:26:31,359 --> 00:26:33,959
Speaker 4: next set of problems our children face when the Internet

509
00:26:34,000 --> 00:26:35,080
Speaker 4: doesn't work as they'd like.

510
00:26:35,640 --> 00:26:38,800
Speaker 1: Is there anything that you like that you think is

511
00:26:38,880 --> 00:26:40,040
Speaker 1: positive about.

512
00:26:39,720 --> 00:26:42,399
Speaker 4: This bilm No, I really don't.

513
00:26:42,600 --> 00:26:42,760
Speaker 1: You know.

514
00:26:43,040 --> 00:26:45,920
Speaker 4: It's easy to be a cavecher and to just point

515
00:26:45,920 --> 00:26:50,400
Speaker 4: out problems, but the loss starts with two fundamental problems

516
00:26:50,480 --> 00:26:54,200
Speaker 4: that it cannot fix, and once it can't fix those problems,

517
00:26:54,520 --> 00:26:58,040
Speaker 4: nothing good results. The first problem is determine when a

518
00:26:58,160 --> 00:27:01,480
Speaker 4: user is a child or not. It's simply not possible

519
00:27:01,520 --> 00:27:06,000
Speaker 4: for services to do without engaging in some very privacy

520
00:27:06,040 --> 00:27:09,760
Speaker 4: and security and basive procedures. So any law that's predicated

521
00:27:09,800 --> 00:27:12,439
Speaker 4: on the idea of segregating children from the rest of

522
00:27:12,480 --> 00:27:16,520
Speaker 4: the population and then providing some kind of differential treatment

523
00:27:16,960 --> 00:27:19,719
Speaker 4: is always going to be problematic. And then the second

524
00:27:19,720 --> 00:27:25,280
Speaker 4: thing is that it fundamentally you served the editorial discretion

525
00:27:25,400 --> 00:27:29,200
Speaker 4: of services and says we don't like how you're making

526
00:27:29,200 --> 00:27:31,040
Speaker 4: your decisions how a publish content, We're going to tell

527
00:27:31,040 --> 00:27:34,840
Speaker 4: you how to do it. And that fundamental editorial discretion

528
00:27:35,320 --> 00:27:39,720
Speaker 4: is protected by the Constitution and essential to give services

529
00:27:39,760 --> 00:27:43,160
Speaker 4: the ability to cater to their users. So this law

530
00:27:43,359 --> 00:27:46,600
Speaker 4: starts with those two premises, that we can figure out

531
00:27:46,600 --> 00:27:48,520
Speaker 4: who the kids are and we can tell services how

532
00:27:48,560 --> 00:27:52,560
Speaker 4: to deal with them, and that simply does not work.

533
00:27:52,880 --> 00:27:55,119
Speaker 4: So there's no way to fix that law. Yet, to

534
00:27:55,160 --> 00:27:57,159
Speaker 4: start with the fundamental premise, i'll mention one other thing

535
00:27:57,160 --> 00:27:59,679
Speaker 4: I did mention before that it starts with the premise

536
00:27:59,760 --> 00:28:03,280
Speaker 4: that the regulated entities governed by the law are always

537
00:28:03,480 --> 00:28:06,600
Speaker 4: harming children and that they always need to be fixed.

538
00:28:06,720 --> 00:28:10,120
Speaker 4: And given how many different ways children are benefiting from

539
00:28:10,160 --> 00:28:13,240
Speaker 4: their Internet experiences, the law doesn't even account for that,

540
00:28:13,320 --> 00:28:16,560
Speaker 4: doesn't care about that. It's fine to sacrifice all the

541
00:28:16,600 --> 00:28:19,200
Speaker 4: benefits that children came from the Internet in the effort

542
00:28:19,200 --> 00:28:21,439
Speaker 4: to try and squeals some of the potential harms. And

543
00:28:21,480 --> 00:28:23,280
Speaker 4: so it's just it doesn't even do the right cost

544
00:28:23,359 --> 00:28:24,560
Speaker 4: benefit calculus.

545
00:28:24,760 --> 00:28:27,040
Speaker 1: And how would this be enforced?

546
00:28:27,280 --> 00:28:30,440
Speaker 4: So the law principally relies upon the Federal Trade Commission

547
00:28:30,440 --> 00:28:34,359
Speaker 4: to do enforcement. It also gives some limited authority to

548
00:28:34,480 --> 00:28:38,160
Speaker 4: the state attorneys general, but the law certainly contemplates that

549
00:28:38,200 --> 00:28:42,080
Speaker 4: the FTC will be the primary enforcement mechanism, and the

550
00:28:42,160 --> 00:28:46,000
Speaker 4: FTC is good at looking for things like false advertising

551
00:28:46,400 --> 00:28:50,320
Speaker 4: when consumers are being hoodwinked into partying with their money

552
00:28:50,360 --> 00:28:53,480
Speaker 4: to scammers. The FTC is not in the business so

553
00:28:53,560 --> 00:28:57,400
Speaker 4: being basically a content censorship board, which is what this

554
00:28:57,600 --> 00:29:01,240
Speaker 4: law would ask it to do. So it's deputiesing the

555
00:29:01,280 --> 00:29:03,880
Speaker 4: FTC to do think that that is really not that

556
00:29:03,960 --> 00:29:06,800
Speaker 4: good at and frankly, we don't really want them doing.

557
00:29:06,960 --> 00:29:10,640
Speaker 1: President Biden commanded the Senate for taking what he called

558
00:29:10,640 --> 00:29:16,040
Speaker 1: a crucial bypartisan step forward. Quote there is undeniable evidence

559
00:29:16,080 --> 00:29:19,760
Speaker 1: that social media and other online platforms contribute to our

560
00:29:19,800 --> 00:29:21,400
Speaker 1: youth mental health crisis.

561
00:29:22,000 --> 00:29:24,080
Speaker 4: And the President said he would sign it. The only

562
00:29:24,200 --> 00:29:26,800
Speaker 4: question is whether or not the Speaker of the House

563
00:29:26,840 --> 00:29:28,960
Speaker 4: will schedule ABOUTE. It's the Speaker of the House will

564
00:29:29,080 --> 00:29:31,280
Speaker 4: schedule ABOUTE. It almost only will pass. It will go

565
00:29:31,320 --> 00:29:33,840
Speaker 4: to Biden and he'll sign it. So like everything depends

566
00:29:33,880 --> 00:29:35,920
Speaker 4: on the Speaker of a house to decide if he

567
00:29:36,040 --> 00:29:39,120
Speaker 4: wants to put it on the agenda. And you know,

568
00:29:39,360 --> 00:29:41,960
Speaker 4: as an internet law expert who's been watching this space

569
00:29:42,040 --> 00:29:45,520
Speaker 4: for thirty years, I can see the pathologies in the

570
00:29:45,560 --> 00:29:53,080
Speaker 4: regulatory process that continually lead to terrible legislative outcomes. And

571
00:29:53,120 --> 00:29:56,440
Speaker 4: then our only chance of preserving the Internet in any

572
00:29:56,480 --> 00:29:59,400
Speaker 4: functional way is in the court. We have to take

573
00:29:59,440 --> 00:30:02,920
Speaker 4: it to the court, and that's not a situation for

574
00:30:03,120 --> 00:30:04,320
Speaker 4: long term success.

575
00:30:04,680 --> 00:30:07,160
Speaker 1: Well, if this bill does pass the House, it certainly

576
00:30:07,200 --> 00:30:10,240
Speaker 1: will end up in the courts, that's for sure. Thanks

577
00:30:10,240 --> 00:30:13,560
Speaker 1: so much, Eric. That's Professor Eric Goldman of Santa Clara

578
00:30:13,640 --> 00:30:17,560
Speaker 1: University Law School. In other legal news today, a huge

579
00:30:17,640 --> 00:30:21,320
Speaker 1: loss for Google. A federal judge rule that Google has

580
00:30:21,480 --> 00:30:25,960
Speaker 1: illegally monopolized the search market, handing the government and epic

581
00:30:26,040 --> 00:30:29,320
Speaker 1: win in its first major antitrust case against a tech

582
00:30:29,360 --> 00:30:33,680
Speaker 1: giant in more than two decades. DC Judge at Metas

583
00:30:33,720 --> 00:30:37,120
Speaker 1: said that Google's twenty six billion dollars in payments to

584
00:30:37,160 --> 00:30:41,120
Speaker 1: make its search engine the default option on smartphones and

585
00:30:41,200 --> 00:30:45,520
Speaker 1: web browsers effectively blocked any other competitor from succeeding in

586
00:30:45,560 --> 00:30:49,760
Speaker 1: the market end quote. The trial evidence firmly established that

587
00:30:49,880 --> 00:30:54,880
Speaker 1: Google's monopoly power, maintained by the exclusive distribution agreements, has

588
00:30:55,000 --> 00:30:59,480
Speaker 1: enabled Google to increase text ads prices without any meaningful

589
00:30:59,560 --> 00:31:03,800
Speaker 1: competitive constraint. Google said it plans to appeal the decision.

590
00:31:04,400 --> 00:31:07,080
Speaker 1: And that's it for this edition of the Bloomberg Law Podcast.

591
00:31:07,440 --> 00:31:09,800
Speaker 1: Remember you can always get the latest legal news by

592
00:31:09,840 --> 00:31:13,680
Speaker 1: subscribing and listening to the show on Apple Podcasts, Spotify,

593
00:31:13,960 --> 00:31:17,800
Speaker 1: and at Bloomberg dot com, slash podcast, slash Law. I'm

594
00:31:17,880 --> 00:31:20,320
Speaker 1: June Grosso and this is Bloomberg