WEBVTT - Handbag Antitrust Trial & Justice Alito's Stock Portfolio

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<v Speaker 1>This is Bloomberg Law with June Brusso from Bloomberg Radio.

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<v Speaker 1>Google is back on trial just one month after losing

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<v Speaker 1>a landmark ruling finding that it illegally monopolizes Internet search.

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<v Speaker 1>Now the Justice Department is alleging that Google monopolizes the

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<v Speaker 1>six hundred and seventy seven billion dollar advertising market. Joining

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<v Speaker 1>me is Bloomberg Anti Trust reporter Leah Nylan, who's covering

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<v Speaker 1>the trial and joins us from the courthouse tell us

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<v Speaker 1>about the government's case against Google.

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<v Speaker 2>So, the Justice Department alleges that Google has illegally monopolized

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<v Speaker 2>the ad tech tool market. This is a market that

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<v Speaker 2>most consumers are probably not familiar with at all, because

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<v Speaker 2>it is sort of the plumbing behind online advertising, and

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<v Speaker 2>so it's the way that websites put, you know, ads

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<v Speaker 2>up for sale and advertiseers buy them.

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<v Speaker 3>So it's a.

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<v Speaker 2>Lot of technically complicated stuff, but it is the way

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<v Speaker 2>that Google makes billions of dollars each year. And so

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<v Speaker 2>the government alleges that they have monopolized this market by

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<v Speaker 2>buying up some rival competitors who are going to offer

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<v Speaker 2>different products, controlling the way that their customers are able

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<v Speaker 2>to interact with rivals. And changing sort.

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<v Speaker 3>Of the rules of the game.

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<v Speaker 2>Midstream, because a lot of these ads are actually sold auctions,

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<v Speaker 2>and Google controls that auction and therefore can change some

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<v Speaker 2>of the rules behind how those auctions work.

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<v Speaker 1>In the opening statement, the Justice Department's attorney said, what

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<v Speaker 1>we have is a trifecta of monopolies here. What did

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<v Speaker 1>she mean.

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<v Speaker 2>Yeah, they're actually alleging that there are three separate monopolies

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<v Speaker 2>that Google has. One of them is on what they

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<v Speaker 2>call the publisher side. That means some of the tools

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<v Speaker 2>that are used by websites to help put their adspace

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<v Speaker 2>up for sale. Those are called the ad server market.

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<v Speaker 3>They have alleged that there is a.

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<v Speaker 2>Market for the advertising exchanges. These are just like a

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<v Speaker 2>stock exchange, is where the advertisements are bought and sold.

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<v Speaker 2>And the third one is the advertiser side tools.

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<v Speaker 3>This is the tools that.

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<v Speaker 2>The advertisers use to put their ads out there for sale.

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<v Speaker 1>Google's attorney what did they stress in their openings?

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<v Speaker 3>Yeah.

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<v Speaker 2>Google stressed a couple different things in their opening statement.

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<v Speaker 2>The first one was that, you know, the market, in

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<v Speaker 2>their view, is very competitive. They compete against a lot

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<v Speaker 2>of different companies in a lot of different types of advertising,

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<v Speaker 2>and they say that the Justice Department has sort of

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<v Speaker 2>gerrymandered a market here to sort of bring their case. So,

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<v Speaker 2>the Justice Department alleges that Google has monopolized the open

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<v Speaker 2>web display advertising. This is the display ads, the sort

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<v Speaker 2>of the things that you see on like blogs or

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<v Speaker 2>news websites, sports websites, things like that.

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<v Speaker 3>They often appear at the top of the page.

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<v Speaker 2>Or like beside the content that you're reading. And Google

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<v Speaker 2>argues that there are lots of other types of advertising.

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<v Speaker 2>You know, you can advertise on social media, you can

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<v Speaker 2>advertise in video, you can advertise all sorts of places,

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<v Speaker 2>and it's weird, in their opinion for the Justice Department

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<v Speaker 2>to be focused in on this one. They have two

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<v Speaker 2>other arguments legally.

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<v Speaker 3>One of them is.

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<v Speaker 2>That they don't actually have an obligation under the antitrust

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<v Speaker 2>law to do business with anyone. So if they decide

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<v Speaker 2>that they don't want to make the tools that they

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<v Speaker 2>use for advertising work with.

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<v Speaker 3>Other people's tools, that that's completely fine.

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<v Speaker 2>And then their third argument is that we should really

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<v Speaker 2>think about this not as open web display advertising, but

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<v Speaker 2>as a transaction, almost like a credit card.

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<v Speaker 3>And under the law the.

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<v Speaker 2>Supreme Court had made of rulings about how to think

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<v Speaker 2>about markets in what they call two side transaction platforms,

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<v Speaker 2>and so Google is arguing that that sort of legal

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<v Speaker 2>overlay should apply here.

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<v Speaker 1>I like this line by the Google attorney. There's no

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<v Speaker 1>such thing as open web display advertising. She accused the

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<v Speaker 1>government of trying to open a time capsule that would

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<v Speaker 1>reveal a BlackBerry iPod and a Blockbuster video card.

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<v Speaker 3>Yes, it was a pretty good line.

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<v Speaker 2>Essentially, what they are saying is like, maybe at one

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<v Speaker 2>point in time, the in networked this way, but lots

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<v Speaker 2>of things have moved on, and the government is still

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<v Speaker 2>very focused on what, in Google's view is a vision

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<v Speaker 2>of the market that no longer exists anymore.

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<v Speaker 1>And so Google also this echoed the argument that we

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<v Speaker 1>heard in the other Google anti trust case that it's

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<v Speaker 1>end to end integration makes the technology more efficient and

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<v Speaker 1>secure and reliable. On that marketers and publishers choose it

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<v Speaker 1>because they're superior, not because they don't have any other options.

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<v Speaker 1>And in the other antitrust trial that they lost, they

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<v Speaker 1>said that, you know, Google's just better, that's why people

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<v Speaker 1>come to Google.

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<v Speaker 2>Yeah, they're making a similar argument here. You know, they

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<v Speaker 2>have pointed out that there are a lot of other options,

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<v Speaker 2>both for where you can buy advertising and.

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<v Speaker 3>For how you can buy advertising.

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<v Speaker 2>So you can do it through Google's tools, but there

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<v Speaker 2>are certainly other companies that offer similar tools that you

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<v Speaker 2>can buy these same ads through. And so their argument is,

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<v Speaker 2>you know, people are using these tools because they're well

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<v Speaker 2>known and sort of trusted. The government's response is actually

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<v Speaker 2>pretty similar to the previous case. They argue that, you know,

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<v Speaker 2>in these kinds of markets, scale is really important, So

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<v Speaker 2>like the publishers want to go to where the advertisers are,

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<v Speaker 2>and the advertisers want to go to where the publishers are.

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<v Speaker 2>And because Google owns the ad server part on.

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<v Speaker 3>The publisher side, and they also own the other.

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<v Speaker 2>Tools for publishers, you know, they sort of have an

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<v Speaker 2>advantage here that a lot of other players.

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<v Speaker 3>Do not have.

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<v Speaker 2>And while now Google has this what they call an

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<v Speaker 2>integrated stack, for a long time that wasn't true. Nobody

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<v Speaker 2>had an integrated stack. These were all sort of separate products,

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<v Speaker 2>and the government argues that maybe they should be separated

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<v Speaker 2>because they keep going back to this thing that you've

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<v Speaker 2>seen in a lot of Google's documents, which there have

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<v Speaker 2>been some emails in which people have suggested it's a

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<v Speaker 2>little bit like Google is operating both like Goldman Sachs

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<v Speaker 2>a trader and the New York Stock Exchange the place

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<v Speaker 2>where they're making trade. And in the financial world, that

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<v Speaker 2>would never be allowed, like you would not allow somebody

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<v Speaker 2>who is transacting on the platform to also own the platform.

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<v Speaker 2>But here Google does own.

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<v Speaker 3>All of the pieces, the buy side, the cell side.

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<v Speaker 2>And the platform itself, and that represents sort of a

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<v Speaker 2>conflict of interest that the Justice Department says is very problematic.

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<v Speaker 1>Who has the Justice Department put on the stand?

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<v Speaker 3>So far, we've actually been gone really fast.

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<v Speaker 2>I think we're on like Witness eight or nine.

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<v Speaker 3>A really yes.

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<v Speaker 2>So the various parts. We've heard from two website publishers,

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<v Speaker 2>Gannett and News Corps, and they've talked a little bit

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<v Speaker 2>about how that kine in online advertising has significantly impacted

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<v Speaker 2>their business. They've had to, you know, shut our publications

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<v Speaker 2>and fire journalists because they're just not getting as much

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<v Speaker 2>advertising through these online tools as they used to. We've

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<v Speaker 2>also heard from a couple rivals who offer other ad

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<v Speaker 2>tech tools that are similar to what Google offers. So

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<v Speaker 2>we heard from another company that is an exchange called

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<v Speaker 2>index Exchange, and we heard from another company that offers

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<v Speaker 2>an ad server. It's a little bit different from Google,

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<v Speaker 2>and their argument was that they tried to initially get

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<v Speaker 2>in the same market as Google and they couldn't because

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<v Speaker 2>it was sort of the gorilla in the room. And

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<v Speaker 2>we've also heard from two former Google employees so far

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<v Speaker 2>who worked on the display ad business and sort of

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<v Speaker 2>had a hand in how some of these tools were developed.

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<v Speaker 1>Does the government intend to also call people who are

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<v Speaker 1>still at Google.

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<v Speaker 2>Yes, they do plan to call some folks who are

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<v Speaker 2>still at Google. I think they're trying to get through

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<v Speaker 2>some of what we might call like the victim witnesses first,

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<v Speaker 2>so they were trying to establish some of the harm

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<v Speaker 2>from Google's conduct. But they do have a number of

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<v Speaker 2>Google witnesses that they plan to call. The most senior

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<v Speaker 2>one is Neil Mohan. He is actually now the CEO

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<v Speaker 2>of YouTube, but for a long time he was very

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<v Speaker 2>involved in Google's display advertising business. And then after him,

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<v Speaker 2>the most sort of senior person is somebody by the

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<v Speaker 2>name of Don Harrison. He's a pretty senior executive at Google.

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<v Speaker 3>He didn't testify in the search trial.

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<v Speaker 2>That he did testify in the Epics trial that was

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<v Speaker 2>over Android.

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<v Speaker 1>Well, those are going to be very interesting witnesses to see,

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<v Speaker 1>you know, hostile witnesses. And who does Google plan to call?

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<v Speaker 2>Yeah, most of the people Google plans to call are

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<v Speaker 2>again its own employees, because they are hoping to sort

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<v Speaker 2>of show that, you know, Google has really innovated in

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<v Speaker 2>the market. Their argument is that they've made a lot

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<v Speaker 2>of changes to make this ecosystem better. In particular, they've

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<v Speaker 2>spent a lot of resources trying to focus on rooting

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<v Speaker 2>out like.

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<v Speaker 3>BAM and ad fraud.

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<v Speaker 2>So they plan to call a number of witnesses who

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<v Speaker 2>will talk about Google's efforts there and why some of

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<v Speaker 2>the specific things that the government alleges their anti competitive were,

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<v Speaker 2>in their views, sort of done for legitimate business purposes.

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<v Speaker 1>Is the government call for a breakup of Google's ad

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<v Speaker 1>tech business here?

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<v Speaker 2>Yes, they are specifically calling for a breakup of the business.

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<v Speaker 3>Here.

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<v Speaker 2>They argue that Google should not essentially be allowed to

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<v Speaker 2>operate on all sides of the market, you know, the

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<v Speaker 2>by side, the sell side, and the exchange, and that.

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<v Speaker 3>They should have to at least sell off one side

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<v Speaker 3>of that.

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<v Speaker 2>Google you know, maintains that that would really break the

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<v Speaker 2>sort of feamless experience that they've really created for marketers

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<v Speaker 2>and website publishers.

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<v Speaker 1>Yeah, because in the other trial, there's a possibility they

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<v Speaker 1>could ask for their breakup, but they didn't say that,

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<v Speaker 1>like right at the start.

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<v Speaker 2>Yeah, in this one they did, like right at the

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<v Speaker 2>very beginning, say that they thought a breakup was needed.

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<v Speaker 2>Here in part they have identified a couple of transactions

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<v Speaker 2>that Google has engaged in over the years, including in

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<v Speaker 2>particular the two thousand and eight acquisition of double Click,

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<v Speaker 2>and in that one they bought what has now become.

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<v Speaker 3>The exchange of Google's exchange.

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<v Speaker 2>And so they argue that that was in the complaint.

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<v Speaker 2>They have a nice phrase that that was the beginning

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<v Speaker 2>of marched to monopoly. But that transaction and then a

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<v Speaker 2>couple others that they outlined really gave Google the tools

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<v Speaker 2>to build this sort of ad empire, and that maybe

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<v Speaker 2>we should just unwind some of those transactions.

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<v Speaker 1>Google has lost the last two antitrust trials. A lot

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<v Speaker 1>seems to be riding on this for Google, and a

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<v Speaker 1>judge is going to decide this, right, there's no jury here, Yes.

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<v Speaker 2>There was no jury. It was initially going to be

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<v Speaker 2>a jury trial, but Google did a very interesting thing

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<v Speaker 2>in which it just agreed to pay the government's damages,

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<v Speaker 2>which were two point three million, and that obviated the

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<v Speaker 2>need for a jury, so it is now just a

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<v Speaker 2>judge trial. She is expected to rule sometime after the trial,

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<v Speaker 2>maybe even by the end of the year.

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<v Speaker 1>And how long is a trial expected to last?

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<v Speaker 2>So initially they were suggesting it might be four to

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<v Speaker 2>six weeks. They have, however, this week gone much much

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<v Speaker 2>faster than they had anticipated, in part because the judge

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<v Speaker 2>is really focused on moving things along very expeditiously, So

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<v Speaker 2>the current estimate is maybe.

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<v Speaker 1>Three to four Thanks so much, Lea. We'll catch up

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<v Speaker 1>with you when the trial ends. That's Bloomberg Anti trust

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<v Speaker 1>reporter Leah Niln coming up next on the Bloomberg Law Show.

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<v Speaker 1>It's a trial where lots of handbags are on display.

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<v Speaker 1>The Federal Trade Commission is suing to block Tapestry and

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<v Speaker 1>Capri from merging in an eight point five billion dollar deal.

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<v Speaker 1>This is Bloomberg. It's not often that a rack of

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<v Speaker 1>handbags is rolled into court as evidence. They range from

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<v Speaker 1>a green and white Kate Spade tote priced at two

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<v Speaker 1>hundred and seventy nine dollars to a one thousand, ninety

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<v Speaker 1>five dollars brown leather Coach Rogue handbag. There's the merch

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<v Speaker 1>and there's the money. In the anti trust trial that

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<v Speaker 1>will spell the fate of the eight point five billion

0:11:48.200 --> 0:11:51.800
<v Speaker 1>dollar deal to marry the Coach and Kate Spade brands

0:11:52.080 --> 0:11:56.079
<v Speaker 1>with Versace and Michael Core's joining me is Bloomberg Intelligence

0:11:56.160 --> 0:12:00.520
<v Speaker 1>senior litigation analyst Jennifer Ree, who's covering the trial. Jen

0:12:00.640 --> 0:12:04.280
<v Speaker 1>it's the FTC so in to stop this deal. Tell

0:12:04.320 --> 0:12:06.560
<v Speaker 1>us about the opening statements by its lawyer.

0:12:07.160 --> 0:12:09.800
<v Speaker 4>They actually say they have two theories of harm by

0:12:09.800 --> 0:12:12.160
<v Speaker 4>which they could block this deal. And it's sort of

0:12:12.160 --> 0:12:15.000
<v Speaker 4>what we think of as a typical horizontal deal, meaning

0:12:15.000 --> 0:12:17.160
<v Speaker 4>there are two companies that want to merge that have

0:12:17.240 --> 0:12:20.720
<v Speaker 4>products that compete against each other, So pretty straightforward, the

0:12:20.720 --> 0:12:23.520
<v Speaker 4>traditional kind of merger that has been challenged by the

0:12:23.600 --> 0:12:25.840
<v Speaker 4>FTC or Department of Justice in the past. And in

0:12:25.880 --> 0:12:28.880
<v Speaker 4>this case, what they're really looking at is handbags and

0:12:28.920 --> 0:12:32.600
<v Speaker 4>a market for what they call accessible luxury handbags and

0:12:32.640 --> 0:12:34.920
<v Speaker 4>what that really means. They're sort of the handbags in

0:12:34.960 --> 0:12:37.800
<v Speaker 4>the middle market. They say, it's not the ultra premium,

0:12:37.920 --> 0:12:42.200
<v Speaker 4>ultra luxury usually European handbags made by companies like Louis

0:12:42.280 --> 0:12:45.280
<v Speaker 4>Vuitan and Prada and Gucci, and it's not really these

0:12:45.360 --> 0:12:49.000
<v Speaker 4>mass market bags that are often not leather and usually sold,

0:12:49.120 --> 0:12:51.440
<v Speaker 4>you know, for under one hundred dollars. But it's kind

0:12:51.480 --> 0:12:53.800
<v Speaker 4>of what's in between. And if you look at that

0:12:53.960 --> 0:12:57.960
<v Speaker 4>piece of the market, Tapestry has Coach and Kate's Bade brands,

0:12:58.160 --> 0:13:00.920
<v Speaker 4>and Capri has the Michael Core's brand, And what the

0:13:01.000 --> 0:13:04.760
<v Speaker 4>FTCT says is, look, these are each other's primary competitors.

0:13:05.040 --> 0:13:08.520
<v Speaker 4>Coach and Kate Spade primarily see themselves as competing in

0:13:08.559 --> 0:13:11.720
<v Speaker 4>the US at least against Michael Core's, and Michael Corres

0:13:11.760 --> 0:13:15.080
<v Speaker 4>primarily sees itself as competing against Coach and Kate Spade.

0:13:15.160 --> 0:13:17.160
<v Speaker 4>And if you look at the other bags that are

0:13:17.200 --> 0:13:20.720
<v Speaker 4>within what they call the successible luxury market, the market

0:13:20.720 --> 0:13:24.560
<v Speaker 4>shares combined would be, according to the FTC, fifty eight percent,

0:13:24.800 --> 0:13:27.640
<v Speaker 4>and this would be a market that is unduly concentrated

0:13:27.679 --> 0:13:31.560
<v Speaker 4>and would be presumed harmful. So that's kind of one argument,

0:13:31.600 --> 0:13:34.480
<v Speaker 4>which is a fairly typical argument. They define a market,

0:13:34.640 --> 0:13:36.600
<v Speaker 4>they look at what the market shairs are in the market.

0:13:36.640 --> 0:13:38.800
<v Speaker 4>They look at what the concentration in the market would

0:13:38.800 --> 0:13:41.960
<v Speaker 4>be before and after the deal. Their second theory is

0:13:42.000 --> 0:13:44.439
<v Speaker 4>a somewhat novel one, and it comes out of new

0:13:44.480 --> 0:13:47.400
<v Speaker 4>guidelines that the Federal Trade Commission and Department of Justice

0:13:47.480 --> 0:13:50.240
<v Speaker 4>issued at the end of last year. Now, they've had

0:13:50.320 --> 0:13:53.240
<v Speaker 4>guidelines for many, many years that lay out how they

0:13:53.280 --> 0:13:56.240
<v Speaker 4>assess the deal and whether the deal violates the antitrust

0:13:56.320 --> 0:13:58.920
<v Speaker 4>laws or not. They're not binding on judges, but most

0:13:58.960 --> 0:14:01.760
<v Speaker 4>judges find them to be persuasive and have followed them.

0:14:02.200 --> 0:14:06.880
<v Speaker 4>This FTC updated the guidelines that happens periodically, as I said,

0:14:06.880 --> 0:14:09.200
<v Speaker 4>at the end of twenty twenty three, and they added

0:14:09.240 --> 0:14:13.040
<v Speaker 4>a new provision. And what that provision says is they

0:14:13.080 --> 0:14:15.760
<v Speaker 4>don't really have to define a market or lay out

0:14:15.800 --> 0:14:18.439
<v Speaker 4>what the combined market shares would be if they can

0:14:18.520 --> 0:14:22.680
<v Speaker 4>prove that the merging parties are each other's primary head

0:14:22.680 --> 0:14:26.320
<v Speaker 4>to head competitors, they constrain each other's pricing essentially in

0:14:26.360 --> 0:14:29.280
<v Speaker 4>the market, and that if they come together, that constraint

0:14:29.320 --> 0:14:32.120
<v Speaker 4>on pricing will be eliminated and they'll have the incentive

0:14:32.160 --> 0:14:33.680
<v Speaker 4>in the ability to increase price.

0:14:33.920 --> 0:14:34.880
<v Speaker 3>So they're also.

0:14:34.720 --> 0:14:37.920
<v Speaker 4>Relying on this new guideline in case the judge doesn't

0:14:37.920 --> 0:14:41.760
<v Speaker 4>buy this concept of an accessible luxury handbag market.

0:14:42.040 --> 0:14:46.080
<v Speaker 1>The FTC lawyer said in the opening statement that the

0:14:46.200 --> 0:14:49.400
<v Speaker 1>case is about working and middle class women who will

0:14:49.440 --> 0:14:54.040
<v Speaker 1>suffer harm if the acquisition goes through, harm because they

0:14:54.120 --> 0:14:56.960
<v Speaker 1>can't buy a semi luxury.

0:14:56.840 --> 0:15:01.160
<v Speaker 4>Harm because what they claim is that that sector of

0:15:01.200 --> 0:15:04.640
<v Speaker 4>the population or the primary buyers of these handbags, and

0:15:04.720 --> 0:15:07.840
<v Speaker 4>that there will be three hundred and sixty five million

0:15:07.880 --> 0:15:11.680
<v Speaker 4>dollars annually in increased prices across the three brands. That

0:15:11.840 --> 0:15:15.400
<v Speaker 4>is what the FTC's economist has calculated out through his modeling,

0:15:15.480 --> 0:15:18.320
<v Speaker 4>and that the primary buyers are a certain segment of

0:15:18.320 --> 0:15:22.520
<v Speaker 4>the population that tend to make under eighty thousand dollars

0:15:22.640 --> 0:15:25.040
<v Speaker 4>or up to about eighty thousand dollars a year, and

0:15:25.080 --> 0:15:26.920
<v Speaker 4>that these are the people that will be harmed.

0:15:27.480 --> 0:15:29.840
<v Speaker 1>Okay, it always seems odd to me because you don't

0:15:29.880 --> 0:15:32.880
<v Speaker 1>have to buy right a cold handbag.

0:15:33.320 --> 0:15:36.080
<v Speaker 4>Yeah, that's the thing that's so odd about this case.

0:15:36.120 --> 0:15:39.000
<v Speaker 4>It's a highly discretionary purchase. And as some of the

0:15:39.040 --> 0:15:41.880
<v Speaker 4>witnesses for the companies have said, understand, look, you know,

0:15:41.920 --> 0:15:45.120
<v Speaker 4>we compete for share of dollars spend. A person goes

0:15:45.120 --> 0:15:47.120
<v Speaker 4>into a store to buy something, they may decide to

0:15:47.120 --> 0:15:49.080
<v Speaker 4>buy that handbag, or they might decide to buy those

0:15:49.080 --> 0:15:52.720
<v Speaker 4>boots instead. And it's a very discretionary purchase. If the

0:15:52.760 --> 0:15:55.240
<v Speaker 4>price is too high, the buyer can walk away. And

0:15:55.280 --> 0:15:58.120
<v Speaker 4>that is what makes this case quite unusual. It's not

0:15:58.280 --> 0:16:01.960
<v Speaker 4>like FDC versus Kroger and Albertson. People must buy food, right,

0:16:02.280 --> 0:16:04.560
<v Speaker 4>but they don't have to necessarily buy a coach or

0:16:04.600 --> 0:16:06.400
<v Speaker 4>a Kate's bad or Michael Core's handbag.

0:16:06.600 --> 0:16:09.800
<v Speaker 1>So now tell us about the opening by Tapestry's lawyer.

0:16:10.040 --> 0:16:12.600
<v Speaker 4>Well, Tapestries lawyers I think have done a very very

0:16:12.640 --> 0:16:15.400
<v Speaker 4>good job. I mean what they said is they've portrayed

0:16:15.440 --> 0:16:18.960
<v Speaker 4>the market is being much more competitive, far more dynamic,

0:16:19.240 --> 0:16:23.720
<v Speaker 4>fast moving, competitive and changing and fragmented than what the

0:16:23.800 --> 0:16:26.800
<v Speaker 4>FTC is portrayed. Now, first they've said, look, there isn't

0:16:26.800 --> 0:16:30.359
<v Speaker 4>this successible luxury market. There's just this span of prices

0:16:30.640 --> 0:16:32.760
<v Speaker 4>that go from what you think of as a less

0:16:32.760 --> 0:16:35.080
<v Speaker 4>expensive mass market bag all the way up to the

0:16:35.160 --> 0:16:38.280
<v Speaker 4>thousands of dollars for these luxury bags. And that many

0:16:38.280 --> 0:16:41.080
<v Speaker 4>of consumers they survey have a lot of different bags

0:16:41.120 --> 0:16:44.040
<v Speaker 4>that widely varied price points within their closet, and that

0:16:44.120 --> 0:16:47.400
<v Speaker 4>the market's changed radically, including in the last few years

0:16:47.720 --> 0:16:50.160
<v Speaker 4>kind of the birth of or the growth of the

0:16:50.200 --> 0:16:53.960
<v Speaker 4>purchase of previously used handbags, which has become a big

0:16:54.000 --> 0:16:57.320
<v Speaker 4>thing both online and in some department stores. And that

0:16:57.400 --> 0:16:59.960
<v Speaker 4>the FTC is sort of not looking at the commercial

0:17:00.120 --> 0:17:03.040
<v Speaker 4>realities of the market as it is today, and that

0:17:03.120 --> 0:17:05.480
<v Speaker 4>a lot of the data that the economists use to

0:17:05.520 --> 0:17:07.280
<v Speaker 4>look at the market and to come up with this

0:17:07.440 --> 0:17:11.000
<v Speaker 4>theoretical three hundred and sixty five million annual harm to

0:17:11.119 --> 0:17:14.399
<v Speaker 4>consumers is based on data from twenty twenty one in

0:17:14.520 --> 0:17:17.719
<v Speaker 4>twenty two, and it's just not relevant anymore. And they

0:17:17.720 --> 0:17:19.919
<v Speaker 4>did a pretty good job, I think, at making that argument.

0:17:20.160 --> 0:17:23.000
<v Speaker 1>He said that Lawrence Butterman, anyone who took the subway

0:17:23.040 --> 0:17:25.840
<v Speaker 1>to court today, or walked on Broadway or Fifth or

0:17:25.840 --> 0:17:29.600
<v Speaker 1>has access to an iPhone or Android phone can see

0:17:29.600 --> 0:17:33.879
<v Speaker 1>that the FDC's claims about market competition are completely divorced

0:17:33.920 --> 0:17:34.960
<v Speaker 1>from reality.

0:17:35.560 --> 0:17:38.520
<v Speaker 4>Yeah. And the funny thing is that the company's lawyers

0:17:38.640 --> 0:17:40.640
<v Speaker 4>rolled into court the very first day with a big

0:17:40.720 --> 0:17:42.680
<v Speaker 4>rack full of all sorts of different handbags.

0:17:42.880 --> 0:17:45.760
<v Speaker 1>I was going to ask you that, And on that

0:17:46.040 --> 0:17:51.280
<v Speaker 1>cart there was one thousand dollars coach handbag yeah, so,

0:17:51.400 --> 0:17:54.080
<v Speaker 1>I mean, how does that fit their market definition?

0:17:54.840 --> 0:17:56.879
<v Speaker 4>Let's see you And that's the difficulty I think in

0:17:56.920 --> 0:18:00.720
<v Speaker 4>this market definition they sort of tentatively said that there

0:18:00.720 --> 0:18:05.119
<v Speaker 4>aren't really precise boundaries or parameters, but generally these accessible

0:18:05.240 --> 0:18:09.800
<v Speaker 4>luxury handbags range between one hundred dollars and one thousand dollars.

0:18:10.000 --> 0:18:13.320
<v Speaker 4>And that's the real difficulty of their market because it's

0:18:13.400 --> 0:18:16.080
<v Speaker 4>very hard to argue that one hundred dollars bag doesn't

0:18:16.080 --> 0:18:18.520
<v Speaker 4>compete with a ninety dollars bag, or that a thousand

0:18:18.560 --> 0:18:21.000
<v Speaker 4>dollars bag doesn't compete with let's say, one thousand and

0:18:21.000 --> 0:18:24.199
<v Speaker 4>fifty dollars bag. You know, the difficulty of defining a

0:18:24.240 --> 0:18:28.080
<v Speaker 4>market and putting the boundaries around where competition lies when

0:18:28.119 --> 0:18:30.879
<v Speaker 4>you have such a wide range of pricing and a

0:18:30.920 --> 0:18:33.520
<v Speaker 4>wide range of different consumers that have a different idea

0:18:33.560 --> 0:18:35.679
<v Speaker 4>about what they want or what they're willing to spend,

0:18:36.200 --> 0:18:38.520
<v Speaker 4>makes it difficult to come up with these market shairs.

0:18:38.560 --> 0:18:41.160
<v Speaker 4>And that's why the Federal Trade Commission is also relying

0:18:41.240 --> 0:18:44.600
<v Speaker 4>on that second theory coming from their new guidelines, that

0:18:44.640 --> 0:18:46.959
<v Speaker 4>they don't really have to do that that if they

0:18:46.960 --> 0:18:49.440
<v Speaker 4>can just prove that these two companies view each other

0:18:49.440 --> 0:18:52.200
<v Speaker 4>as their primary competitor and compete head to head.

0:18:52.240 --> 0:18:52.760
<v Speaker 3>That to us.

0:18:53.160 --> 0:18:54.800
<v Speaker 4>And the thing is, there are a lot of documents

0:18:54.840 --> 0:18:58.679
<v Speaker 4>that actually support company documents that support this assertion by

0:18:58.720 --> 0:19:02.240
<v Speaker 4>the FTC. It's the difficulty here, It's going to kind

0:19:02.240 --> 0:19:05.320
<v Speaker 4>of be what do the documents look like versus how

0:19:05.359 --> 0:19:08.320
<v Speaker 4>credible is the testimony of the witnesses, Because there are

0:19:08.400 --> 0:19:11.400
<v Speaker 4>plenty of documents where these companies call each other their

0:19:11.440 --> 0:19:15.520
<v Speaker 4>primary competitor or where they tend to compare their pricing

0:19:15.840 --> 0:19:20.080
<v Speaker 4>to just a small group that generally consists of Michael Core's,

0:19:20.480 --> 0:19:23.920
<v Speaker 4>Kate Spade, Coach, Mark Jacobs, and Toribirch. There seem to

0:19:23.920 --> 0:19:25.800
<v Speaker 4>be a lot of documents like that, and that does

0:19:25.840 --> 0:19:29.400
<v Speaker 4>suggest a smaller sphere of competition than what the witnesses

0:19:29.440 --> 0:19:30.720
<v Speaker 4>from the companies are portraying.

0:19:31.440 --> 0:19:33.840
<v Speaker 1>Yeah, because I mean a coach bag is going to

0:19:33.840 --> 0:19:38.200
<v Speaker 1>be more expensive than a Michael Core's bag, yes, right, generally,

0:19:38.280 --> 0:19:40.760
<v Speaker 1>and as is a Kate Spade bag. And you're talking about,

0:19:40.840 --> 0:19:44.080
<v Speaker 1>you know, a pretty wide difference there, right.

0:19:44.160 --> 0:19:47.680
<v Speaker 4>So the economists for the FTC basically said from his modeling,

0:19:48.040 --> 0:19:50.879
<v Speaker 4>coach bags sell at an average of one hundred and

0:19:50.880 --> 0:19:53.920
<v Speaker 4>forty seven dollars more than a Cores bag. And what

0:19:54.080 --> 0:19:57.920
<v Speaker 4>he calculated out via his modeling, which is quite complicated,

0:19:58.240 --> 0:20:01.600
<v Speaker 4>is that once tapped Street owns Capri and has the

0:20:01.640 --> 0:20:05.480
<v Speaker 4>Cores bag, they have the ability incentive to raise prices

0:20:05.520 --> 0:20:08.320
<v Speaker 4>because to the extent that they raise the price of

0:20:08.359 --> 0:20:11.600
<v Speaker 4>a Corps bag and lose sales, they're gaining enough of

0:20:11.640 --> 0:20:15.360
<v Speaker 4>those sales the substitute buy by. That buyer is going

0:20:15.400 --> 0:20:17.240
<v Speaker 4>to be a Coach or at kate'spadebag, and so they're

0:20:17.280 --> 0:20:20.320
<v Speaker 4>gaining backs enough to make it profitable to raise prices.

0:20:20.480 --> 0:20:22.560
<v Speaker 1>Can tell us about the first witnesses.

0:20:23.040 --> 0:20:25.439
<v Speaker 4>So the first witnesses were called by the SEC, but

0:20:25.480 --> 0:20:28.760
<v Speaker 4>they are company representatives. We had, you know, the CEO

0:20:28.840 --> 0:20:31.920
<v Speaker 4>of Capri, the CEO of Tapestry, you had the president

0:20:31.960 --> 0:20:36.560
<v Speaker 4>of Coach, you had a senior vice president from Tapestry,

0:20:36.960 --> 0:20:39.600
<v Speaker 4>and you know, I think that all of them across

0:20:39.640 --> 0:20:43.280
<v Speaker 4>the board have done a good job of basically saying

0:20:43.359 --> 0:20:47.480
<v Speaker 4>that they don't view Michael Core's bags as their primary competitor,

0:20:47.760 --> 0:20:51.840
<v Speaker 4>that they view competition as broad and dynamic and ever changing,

0:20:52.160 --> 0:20:54.760
<v Speaker 4>and that part of the reason that these documents only

0:20:54.800 --> 0:20:57.840
<v Speaker 4>reference this smaller set of competitors is because a lot

0:20:57.880 --> 0:21:00.960
<v Speaker 4>of their competitors aren't publicly traded. It's hard to get

0:21:01.000 --> 0:21:03.480
<v Speaker 4>the data, and these are the companies where there's an

0:21:03.480 --> 0:21:05.840
<v Speaker 4>ease of data. So it's just they can get the data,

0:21:05.880 --> 0:21:08.919
<v Speaker 4>they can get financial information, and they can easily compare

0:21:08.960 --> 0:21:11.679
<v Speaker 4>themselves to them. And they also say that they compare

0:21:11.680 --> 0:21:14.760
<v Speaker 4>themselves Tapestry to Capri and Capri to Tapestry. They compare

0:21:14.800 --> 0:21:18.080
<v Speaker 4>themselves quite a lot in earnings calls with investors because

0:21:18.320 --> 0:21:21.199
<v Speaker 4>they are similar companies in the eyes of investors, in

0:21:21.200 --> 0:21:24.520
<v Speaker 4>that they are two publicly traded American fashion houses, and

0:21:24.560 --> 0:21:28.080
<v Speaker 4>that's why they come up a lot as competitors in

0:21:28.119 --> 0:21:31.280
<v Speaker 4>these investor calls. So they did a good job of

0:21:31.320 --> 0:21:34.639
<v Speaker 4>sort of explaining away what I would call bad documents.

0:21:34.800 --> 0:21:37.080
<v Speaker 4>And that's why I kind of see this as you know,

0:21:37.400 --> 0:21:39.320
<v Speaker 4>which way is the judge going to go. Is she

0:21:39.400 --> 0:21:42.560
<v Speaker 4>going to say, no, the documents really tell me the story,

0:21:43.040 --> 0:21:45.679
<v Speaker 4>or are the witnesses really telling me the story? You know,

0:21:45.760 --> 0:21:48.439
<v Speaker 4>which is more credible in her eyes in terms of

0:21:48.680 --> 0:21:50.080
<v Speaker 4>making some decision here.

0:21:50.200 --> 0:21:53.840
<v Speaker 1>Has Michael core said it needs an infusion of capital.

0:21:54.200 --> 0:21:55.760
<v Speaker 1>They're not doing as well as they used to.

0:21:56.280 --> 0:21:59.520
<v Speaker 4>Their sales have been declining and they've lost what all

0:21:59.520 --> 0:22:02.960
<v Speaker 4>of the witness is called brand heat. I've never heard that,

0:22:03.040 --> 0:22:03.760
<v Speaker 4>but now I know.

0:22:04.040 --> 0:22:04.760
<v Speaker 1>I can feel it.

0:22:05.320 --> 0:22:07.639
<v Speaker 4>You can feel it that when a bag is hot,

0:22:07.720 --> 0:22:11.080
<v Speaker 4>a bag is hot, maybe Taylor Swift warret on a

0:22:11.080 --> 0:22:13.560
<v Speaker 4>picture on Instagram and that bag is now going to

0:22:13.560 --> 0:22:16.000
<v Speaker 4>be hot. And so they said Michael Cores at one

0:22:16.000 --> 0:22:18.159
<v Speaker 4>time had brand heat and seems to have lost the

0:22:18.160 --> 0:22:20.439
<v Speaker 4>brand heat and not been able to regain it, and

0:22:20.520 --> 0:22:23.040
<v Speaker 4>as the result, has had declining sales and in order

0:22:23.080 --> 0:22:27.040
<v Speaker 4>to move bags, has had to discount heavily. Now Tapestry says,

0:22:27.119 --> 0:22:29.840
<v Speaker 4>we can take that brand and we just have better

0:22:29.880 --> 0:22:33.960
<v Speaker 4>resources to revitalize it bring back the brand heat. Michael Cores, though,

0:22:34.040 --> 0:22:37.080
<v Speaker 4>seems to also within their ordinary course documents, have a

0:22:37.119 --> 0:22:40.000
<v Speaker 4>plan that they're implementing and plan to implement in the

0:22:40.000 --> 0:22:43.160
<v Speaker 4>future to try to again gain traction and gain momentum

0:22:43.200 --> 0:22:46.480
<v Speaker 4>and bring back that brand heat. So even though you know,

0:22:46.520 --> 0:22:48.960
<v Speaker 4>the argument here is that Tapestry can help them, they

0:22:49.000 --> 0:22:52.280
<v Speaker 4>seem to also have their own internal plan to revitalize.

0:22:52.280 --> 0:22:54.719
<v Speaker 4>So it's not so much about whether they need an

0:22:54.720 --> 0:22:57.920
<v Speaker 4>infusion of capital. It's more about, you know, can they

0:22:57.920 --> 0:23:00.000
<v Speaker 4>bring that brand back so that it's popular again.

0:23:00.600 --> 0:23:05.440
<v Speaker 1>So Wall Street's merger arbitrageres are currently giving Tapestry and

0:23:05.520 --> 0:23:08.679
<v Speaker 1>Capri a better than even chance of closing the transaction.

0:23:09.040 --> 0:23:10.560
<v Speaker 1>What does Jennifer Ree give it?

0:23:11.240 --> 0:23:12.120
<v Speaker 2>Well, I tell you.

0:23:12.080 --> 0:23:14.919
<v Speaker 4>I think I agree. You know, coming into the trial,

0:23:15.080 --> 0:23:17.960
<v Speaker 4>I was really very fifty to fifty on it. And

0:23:18.000 --> 0:23:20.080
<v Speaker 4>part of the problem here, June is that an enormous

0:23:20.240 --> 0:23:22.520
<v Speaker 4>amount of the documents are sealed, so we don't know

0:23:22.520 --> 0:23:24.560
<v Speaker 4>what they say. So I don't know how bad those

0:23:24.600 --> 0:23:27.480
<v Speaker 4>documents are that the judge will see. But I think

0:23:27.520 --> 0:23:30.360
<v Speaker 4>the company witnesses have seemed very credible to me. They

0:23:30.400 --> 0:23:32.320
<v Speaker 4>seem to be earnest. It doesn't seem to be a

0:23:32.359 --> 0:23:35.879
<v Speaker 4>lawyer argument that they're making, and what they're saying seems

0:23:35.920 --> 0:23:38.159
<v Speaker 4>to be common sense. And the market that just I,

0:23:38.280 --> 0:23:41.399
<v Speaker 4>as a consumer observed seems to align with what they're saying,

0:23:41.440 --> 0:23:44.000
<v Speaker 4>that it is dynamic, it is rapidly changing, and there

0:23:44.000 --> 0:23:46.040
<v Speaker 4>are a lot of options. And then the second thing

0:23:46.119 --> 0:23:49.679
<v Speaker 4>is that the FTC's economic expert testified yesterday morning, and

0:23:49.760 --> 0:23:53.200
<v Speaker 4>I felt like his conclusions were backed by data that

0:23:53.359 --> 0:23:56.040
<v Speaker 4>was just a little bit weak. I think that data

0:23:56.240 --> 0:24:00.760
<v Speaker 4>is difficult and the judge may not credit his conclusions

0:24:00.840 --> 0:24:04.520
<v Speaker 4>because the inputs are sketchy. You know, it is older data.

0:24:04.600 --> 0:24:07.840
<v Speaker 4>It's data from twenty twenty one. In twenty twenty and

0:24:07.960 --> 0:24:10.000
<v Speaker 4>some of the sales data he used came from a

0:24:10.040 --> 0:24:15.080
<v Speaker 4>database called NPD that tracks sales by brand, by wholesalers

0:24:15.080 --> 0:24:19.240
<v Speaker 4>that means just department stores that's at Dillard's, Macy's, Nordstrom.

0:24:19.280 --> 0:24:22.720
<v Speaker 4>And he was able to calculate chares essentially using that data.

0:24:22.760 --> 0:24:25.760
<v Speaker 4>But that data doesn't track all sales and handbags, I

0:24:25.760 --> 0:24:29.720
<v Speaker 4>mean people buy them online. It excludes the previously owned bags,

0:24:29.720 --> 0:24:32.520
<v Speaker 4>that excludes the e commerce direct to consumer, So it's

0:24:32.560 --> 0:24:34.440
<v Speaker 4>a little bit hard to rely on the market share

0:24:34.520 --> 0:24:36.840
<v Speaker 4>coming out of that data. And the second thing he

0:24:36.880 --> 0:24:39.160
<v Speaker 4>did caused me to shake my head a little bit

0:24:39.640 --> 0:24:43.520
<v Speaker 4>was that this NPD data categorized bags in many different

0:24:43.560 --> 0:24:49.960
<v Speaker 4>categories names like better, Premium, Active, Leisure, Moderate, Bridge, contemporary,

0:24:50.280 --> 0:24:54.000
<v Speaker 4>and he took two of those categories only Bridge and contemporary.

0:24:54.400 --> 0:24:56.879
<v Speaker 4>And you ask yourself, well, what if bags in the

0:24:56.880 --> 0:25:00.240
<v Speaker 4>other categories also compete, You're leaving them out. And he

0:25:00.280 --> 0:25:03.159
<v Speaker 4>didn't talk to the company that collects this data to

0:25:03.280 --> 0:25:06.240
<v Speaker 4>understand why they put different bags in different categories and

0:25:06.320 --> 0:25:08.640
<v Speaker 4>whether that was sort of the right category for accessible

0:25:08.720 --> 0:25:12.080
<v Speaker 4>luxury market that they're claiming, you know, is the appropriate market.

0:25:12.320 --> 0:25:14.800
<v Speaker 4>And in his opening statement, what the lawyer for the

0:25:14.800 --> 0:25:17.199
<v Speaker 4>company said was that if you do include one of

0:25:17.240 --> 0:25:21.400
<v Speaker 4>these other categories like better or active leisure, that their

0:25:21.400 --> 0:25:23.639
<v Speaker 4>combined market share has come down to below thirty percent,

0:25:23.800 --> 0:25:27.119
<v Speaker 4>and that's below the problematic level rather than fifty eight percent.

0:25:27.320 --> 0:25:31.199
<v Speaker 4>So it's hard to rely on what the FTC's expert

0:25:31.200 --> 0:25:34.000
<v Speaker 4>has done here. I don't think listening to that that

0:25:34.160 --> 0:25:36.080
<v Speaker 4>if I were the judge, that I could and I

0:25:36.119 --> 0:25:38.800
<v Speaker 4>think in reaction to that and in reaction to the

0:25:38.840 --> 0:25:41.360
<v Speaker 4>witnesses this week, the merger arts are feeling more positive

0:25:41.359 --> 0:25:41.920
<v Speaker 4>about the deal.

0:25:42.359 --> 0:25:44.600
<v Speaker 1>Well, we have a ways to go yet. We'll check

0:25:44.680 --> 0:25:48.399
<v Speaker 1>back with you, Jen, Thanks so much. That's Bloomberg Intelligence

0:25:48.440 --> 0:25:54.200
<v Speaker 1>Senior litigation analyst Jenniferree coming up next. Why Justice Samuel

0:25:54.240 --> 0:26:02.480
<v Speaker 1>Alito's stock portfolio stands out you're listening to Bloomberg. Samuel

0:26:02.480 --> 0:26:05.800
<v Speaker 1>Alito is the only justice with a stake in more

0:26:05.840 --> 0:26:10.240
<v Speaker 1>than two dozen individual companies, a distinction that threatens to

0:26:10.359 --> 0:26:14.520
<v Speaker 1>sideline him from major business cases. Since twenty twenty one,

0:26:14.720 --> 0:26:19.800
<v Speaker 1>Alito has recused himself from sixty four cases involving corporations

0:26:19.840 --> 0:26:23.159
<v Speaker 1>he owned shares of. This as scrutiny of the Court's

0:26:23.240 --> 0:26:28.760
<v Speaker 1>judicial ethics has intensified after revelations that Justice Clarence Thomas

0:26:28.800 --> 0:26:33.520
<v Speaker 1>and Alito, to a lesser degree, accepted undisclosed gifts and

0:26:33.640 --> 0:26:38.520
<v Speaker 1>travel from billionaire benefactors. Joining me is Emily Burnbaum Bloomberg

0:26:38.600 --> 0:26:43.400
<v Speaker 1>Lobbying and legal affairs reporter Emily tell us how Alito's

0:26:43.400 --> 0:26:47.760
<v Speaker 1>stock portfolio distinguishes him from the other justices.

0:26:48.640 --> 0:26:52.000
<v Speaker 5>Alito's stock portfolio is very different from any of the

0:26:52.040 --> 0:26:55.960
<v Speaker 5>other sitting justices right now. So he owns stock in

0:26:56.600 --> 0:27:00.080
<v Speaker 5>more than two dozen individual companies, about twenty eight companies,

0:27:00.359 --> 0:27:04.439
<v Speaker 5>And that was a practice that was more commonplace in

0:27:04.560 --> 0:27:08.120
<v Speaker 5>years past, and now he's pretty much the last justice

0:27:08.160 --> 0:27:11.000
<v Speaker 5>left standing with stock and individual companies. So the most part,

0:27:11.040 --> 0:27:13.960
<v Speaker 5>the other justices are invested in index funds. You know,

0:27:14.080 --> 0:27:16.879
<v Speaker 5>they invest in ways that ensure that they are not

0:27:17.280 --> 0:27:19.800
<v Speaker 5>conflicted when it comes to individual companies.

0:27:20.200 --> 0:27:25.600
<v Speaker 1>There's nothing unethical about owning stock. What are the ethics

0:27:25.720 --> 0:27:26.800
<v Speaker 1>rules about stock?

0:27:27.560 --> 0:27:30.919
<v Speaker 5>The rule is if you have a financial stake in

0:27:30.960 --> 0:27:36.080
<v Speaker 5>a company, that you should refuse yourself from cases involving

0:27:36.119 --> 0:27:39.600
<v Speaker 5>that company. So that means in Alito's case, that he

0:27:40.160 --> 0:27:46.080
<v Speaker 5>has recused from dozens and dozens of cases involving companies

0:27:46.080 --> 0:27:48.480
<v Speaker 5>in which he owns stock. So he owns stock in

0:27:48.520 --> 0:27:53.440
<v Speaker 5>some of our biggest companies. So that's racy on Kinoko, Phillips,

0:27:53.480 --> 0:27:57.840
<v Speaker 5>big oil companies, big transportation companies, and companies that are

0:27:57.840 --> 0:27:59.520
<v Speaker 5>in high litigation areas.

0:27:59.600 --> 0:28:00.879
<v Speaker 2>So he has.

0:28:01.160 --> 0:28:05.800
<v Speaker 5>Recused himself from sixty four cases involving corporations he owned

0:28:05.800 --> 0:28:09.080
<v Speaker 5>shares of since twenty twenty one, and last term alone,

0:28:09.080 --> 0:28:12.080
<v Speaker 5>he recused from fifteen cases due to stock ownership. So

0:28:12.119 --> 0:28:16.880
<v Speaker 5>that's a lot more recusals in general than his fellow justices.

0:28:17.000 --> 0:28:20.439
<v Speaker 5>Often they'll recuse because they've seen the case four in

0:28:20.520 --> 0:28:24.159
<v Speaker 5>lower courts, or maybe one of their parents was involved

0:28:24.359 --> 0:28:28.280
<v Speaker 5>in the case in some way. But Alito is distinct

0:28:28.320 --> 0:28:31.320
<v Speaker 5>in that he has to keep refusing himself over and

0:28:31.359 --> 0:28:33.320
<v Speaker 5>over because of his stock portfolio.

0:28:33.840 --> 0:28:39.040
<v Speaker 1>Justices aren't required to say why they're recusing themselves. Recently,

0:28:39.160 --> 0:28:43.560
<v Speaker 1>the liberal justices have been giving reasons, but the conservative

0:28:43.760 --> 0:28:47.880
<v Speaker 1>justices have not explain how we know that he's recused

0:28:47.960 --> 0:28:49.800
<v Speaker 1>himself because of stock ownership.

0:28:50.600 --> 0:28:54.240
<v Speaker 5>Yeah, so he doesn't say himself. This is because this stock.

0:28:54.320 --> 0:28:57.160
<v Speaker 5>It's essentially just a matter of looking at the publicly

0:28:57.280 --> 0:28:58.560
<v Speaker 5>available information.

0:28:58.840 --> 0:28:59.520
<v Speaker 3>You know, he.

0:28:59.520 --> 0:29:04.000
<v Speaker 5>Refused is from cases where one of the companies from

0:29:04.000 --> 0:29:07.760
<v Speaker 5>which he owns stock is a party or has filed

0:29:07.800 --> 0:29:12.120
<v Speaker 5>a brief, so you know, Johnson and Johnson. He doesn't

0:29:12.120 --> 0:29:15.560
<v Speaker 5>participate in those cases, and actually neither does Brett Kavanaugh

0:29:15.680 --> 0:29:19.640
<v Speaker 5>because his father was a lobbyist for the talk industry,

0:29:20.040 --> 0:29:23.880
<v Speaker 5>and so you basically just look at you know, Okay,

0:29:23.880 --> 0:29:27.720
<v Speaker 5>this case involves Boeing. Alito owns stock and Boeing he's

0:29:27.760 --> 0:29:30.280
<v Speaker 5>refused himself from the case. So as I was talking

0:29:30.320 --> 0:29:35.040
<v Speaker 5>to experts about this article, they say Alito is very

0:29:35.120 --> 0:29:38.680
<v Speaker 5>good most of the time at anticipating when he needs

0:29:38.720 --> 0:29:41.320
<v Speaker 5>to recuse. There have been a couple instances where maybe

0:29:41.360 --> 0:29:44.440
<v Speaker 5>a company's subsidiary was involved it was a little more gray,

0:29:45.000 --> 0:29:47.120
<v Speaker 5>or there was a stock he wasn't aware of owned

0:29:47.200 --> 0:29:49.600
<v Speaker 5>by one of his sons. That was one case. But

0:29:49.640 --> 0:29:52.520
<v Speaker 5>for the most part, he looks ahead of time and refuses.

0:29:52.680 --> 0:29:55.800
<v Speaker 5>But yes, you're right. The latest code of ethics that

0:29:56.360 --> 0:29:59.760
<v Speaker 5>the Supreme Court put out does say that you can

0:30:00.080 --> 0:30:04.160
<v Speaker 5>disclose why you're accusing, and that's something that Justice Kagan

0:30:04.160 --> 0:30:07.080
<v Speaker 5>has done, but Alito still has not chosen to do that.

0:30:07.320 --> 0:30:10.160
<v Speaker 1>And so often he'll sell off the stock so that

0:30:10.240 --> 0:30:11.600
<v Speaker 1>he can sit on the case.

0:30:12.240 --> 0:30:14.880
<v Speaker 5>Yes, there have been instances of that. So there is

0:30:14.960 --> 0:30:19.640
<v Speaker 5>an instance related to Exxon. In twenty sixteen, he sold

0:30:19.800 --> 0:30:23.320
<v Speaker 5>his stake after years of accusals related to the company.

0:30:23.640 --> 0:30:25.960
<v Speaker 5>He sold his stock in Oracle ahead of a really

0:30:26.040 --> 0:30:30.760
<v Speaker 5>important copyright case that was Oracle versus Google. So yeah,

0:30:30.840 --> 0:30:34.400
<v Speaker 5>throughout his time on the Court, he's chosen to sell

0:30:34.480 --> 0:30:38.960
<v Speaker 5>stock strategically. He actually late last year sold his Johnson

0:30:39.000 --> 0:30:42.560
<v Speaker 5>and Johnson's stock. He traded it in for a subsidiary

0:30:42.680 --> 0:30:45.760
<v Speaker 5>of Johnson and Johnson. So it's so far a little

0:30:45.840 --> 0:30:49.920
<v Speaker 5>unclear if that will impact whether he can weigh in

0:30:49.960 --> 0:30:53.640
<v Speaker 5>on Johnson Johnson related cases or not. We still yet

0:30:53.680 --> 0:30:54.120
<v Speaker 5>to see.

0:30:54.640 --> 0:30:59.240
<v Speaker 1>You mentioned the Supreme Court's Voluntary Code of Ethics, which

0:30:59.280 --> 0:31:05.960
<v Speaker 1>it adopted in November. Explain how that code encourages justices

0:31:06.560 --> 0:31:08.200
<v Speaker 1>to try to not refuse.

0:31:08.920 --> 0:31:12.920
<v Speaker 5>So the code has a really long section about refusal.

0:31:13.240 --> 0:31:16.719
<v Speaker 5>It says Supreme Court justices should try to avoid refusal

0:31:17.040 --> 0:31:20.040
<v Speaker 5>whenever they can. Because they're only nine members, and this

0:31:20.120 --> 0:31:22.800
<v Speaker 5>is a direct quote. It says much can be lost

0:31:22.840 --> 0:31:26.360
<v Speaker 5>when even one justice does not participate in a particular case.

0:31:26.560 --> 0:31:29.680
<v Speaker 5>They say it's particularly important when it comes to the

0:31:29.760 --> 0:31:33.000
<v Speaker 5>court deciding which cases to take, because it just makes

0:31:33.000 --> 0:31:36.600
<v Speaker 5>it that much harder for parties to have their cases

0:31:36.640 --> 0:31:39.680
<v Speaker 5>accepted when a bunch of the justices aren't even allowed

0:31:39.720 --> 0:31:42.520
<v Speaker 5>to participate in the decision making. So the Code of

0:31:42.520 --> 0:31:45.160
<v Speaker 5>Ethics says that that can have a distorting effect. So

0:31:45.560 --> 0:31:48.640
<v Speaker 5>while it's not an ethics issue for Aldo to own

0:31:48.760 --> 0:31:51.960
<v Speaker 5>stock in that you know, he's fully allowed to, there

0:31:52.000 --> 0:31:56.600
<v Speaker 5>are concerns about how well the court functions when one

0:31:56.600 --> 0:31:59.600
<v Speaker 5>of the justices is conflicted out from dozes of cases.

0:32:00.600 --> 0:32:04.680
<v Speaker 1>You spoke to Northwestern professor Stephen Lubad who said it's

0:32:05.040 --> 0:32:08.800
<v Speaker 1>a question not of ethics, but of judgment. Not everything

0:32:08.800 --> 0:32:10.520
<v Speaker 1>that's legal is a good idea.

0:32:11.200 --> 0:32:14.960
<v Speaker 5>Yeah, So he's pointing out, you know, there's no allegation

0:32:15.160 --> 0:32:20.600
<v Speaker 5>that Alito is violating rules. There's not a clause that

0:32:20.760 --> 0:32:24.400
<v Speaker 5>says don't own stock in individual companies. It's more that this

0:32:24.480 --> 0:32:28.000
<v Speaker 5>has really folid out of fashion, especially as scrutiny has

0:32:28.080 --> 0:32:33.160
<v Speaker 5>increased on the Supreme Court. Amid all of the ethics concerns,

0:32:33.560 --> 0:32:36.600
<v Speaker 5>a lot of justice has chosen no longer to invest

0:32:36.640 --> 0:32:42.120
<v Speaker 5>in individual companies. There's obviously more ethical scrutiny of the

0:32:42.160 --> 0:32:45.720
<v Speaker 5>Supreme Court and of our federal judiciary than ever. So

0:32:45.840 --> 0:32:47.920
<v Speaker 5>then it becomes a question of why does he still

0:32:47.920 --> 0:32:52.200
<v Speaker 5>own these stocks? You know, there's not that much evidence.

0:32:52.280 --> 0:32:56.280
<v Speaker 5>You know, it's much better for your accumulation of wealth

0:32:56.320 --> 0:32:58.920
<v Speaker 5>to own stock in individual companies, probably just as good

0:32:58.960 --> 0:33:01.560
<v Speaker 5>to own index funds. So then it becomes a question

0:33:01.600 --> 0:33:05.240
<v Speaker 5>of why, you know, when this hampers the Court's functioning,

0:33:05.560 --> 0:33:09.040
<v Speaker 5>When this means Alito will sit out of pretty important cases,

0:33:09.680 --> 0:33:11.520
<v Speaker 5>I think it just comes down to the question of

0:33:12.040 --> 0:33:12.680
<v Speaker 5>what's the point.

0:33:12.880 --> 0:33:14.920
<v Speaker 1>I can't figure it out, and I'm sure he will

0:33:14.960 --> 0:33:18.360
<v Speaker 1>not tell us. And also, as you're right, he is

0:33:18.600 --> 0:33:22.080
<v Speaker 1>a very reliable pro business vote. Can you agree with

0:33:22.160 --> 0:33:25.160
<v Speaker 1>the Chamber of Commerce in seventy three percent of cases

0:33:25.480 --> 0:33:26.400
<v Speaker 1>last term.

0:33:26.680 --> 0:33:30.680
<v Speaker 5>Yes, So he's been a long time critic of federal

0:33:30.800 --> 0:33:36.640
<v Speaker 5>environmental regulations. He often sides with business. One really important

0:33:36.840 --> 0:33:40.040
<v Speaker 5>case that is pending before the Court right now is

0:33:40.480 --> 0:33:45.560
<v Speaker 5>essentially whether states and cities can sue oil companies for

0:33:45.680 --> 0:33:49.880
<v Speaker 5>damages over how oil companies have contributed to climate change.

0:33:49.920 --> 0:33:52.600
<v Speaker 5>But this is a really big issue there's tons of

0:33:52.640 --> 0:33:57.600
<v Speaker 5>similar lawsuits climbing up across the country, and Alito is

0:33:57.720 --> 0:33:59.720
<v Speaker 5>not going to be able to weigh in. He's already

0:33:59.720 --> 0:34:02.320
<v Speaker 5>re use himself from the petition pending before the court

0:34:02.360 --> 0:34:06.640
<v Speaker 5>in this case because he owns stock in several oil companies.

0:34:06.680 --> 0:34:09.120
<v Speaker 5>So if I were an oil company, that would be

0:34:09.239 --> 0:34:13.920
<v Speaker 5>pretty disappointing. Because he's reliably pro business, so it's going

0:34:13.960 --> 0:34:16.600
<v Speaker 5>to have an impact on lots of similar big business cases.

0:34:17.000 --> 0:34:20.799
<v Speaker 1>So he might still sell his stock before the briefings

0:34:20.800 --> 0:34:22.000
<v Speaker 1>in oral arguments.

0:34:22.239 --> 0:34:25.480
<v Speaker 5>He could do that in this case, he's already refused

0:34:25.520 --> 0:34:28.879
<v Speaker 5>himself from considering whether the court should take it up.

0:34:29.280 --> 0:34:32.920
<v Speaker 5>If he sold all of his oil company stocks tomorrow,

0:34:33.000 --> 0:34:34.959
<v Speaker 5>then he potentially could take part.

0:34:35.200 --> 0:34:36.680
<v Speaker 2>But his annual.

0:34:36.360 --> 0:34:39.440
<v Speaker 5>Financial disclosure just came out the other day. He hasn't

0:34:39.680 --> 0:34:43.040
<v Speaker 5>sold any new stocks, so he could, but right now

0:34:43.080 --> 0:34:46.200
<v Speaker 5>it doesn't seem like he's planning to, and we don't.

0:34:46.040 --> 0:34:48.920
<v Speaker 1>Really know the exact stock value. It's a range.

0:34:49.360 --> 0:34:53.040
<v Speaker 5>Yeah, They're all reported in ranges. So he has stocks

0:34:53.080 --> 0:34:57.200
<v Speaker 5>that are between one and fifteen thousand. He has a

0:34:57.200 --> 0:35:00.040
<v Speaker 5>bunch of stocks that are between fifteen and fifty. I

0:35:00.040 --> 0:35:01.600
<v Speaker 5>don't think right now he has any stocks that are

0:35:01.600 --> 0:35:04.800
<v Speaker 5>worth more than that, so it's hard to say exactly

0:35:04.840 --> 0:35:07.680
<v Speaker 5>how much all of them are worth altogether. One disclaimer,

0:35:07.840 --> 0:35:12.640
<v Speaker 5>financial disclosures don't differentiate between the stocks owned by Alito

0:35:13.200 --> 0:35:16.800
<v Speaker 5>or owned by his wife, So some of these stocks

0:35:17.239 --> 0:35:21.440
<v Speaker 5>could belong to his wife, but just the court considers

0:35:21.480 --> 0:35:23.920
<v Speaker 5>them to be the same because they are married.

0:35:24.440 --> 0:35:28.040
<v Speaker 1>And we should mention that most of these recusals are

0:35:28.160 --> 0:35:32.440
<v Speaker 1>coming while the court is considering cases, not after the

0:35:32.440 --> 0:35:33.680
<v Speaker 1>court has taken the case.

0:35:34.680 --> 0:35:35.640
<v Speaker 5>Yeah, for the most part.

0:35:35.719 --> 0:35:40.840
<v Speaker 1>Yes, there have been a few reported instances where Alito

0:35:40.960 --> 0:35:44.480
<v Speaker 1>failed to accuse himself in cases where he should have

0:35:44.640 --> 0:35:46.239
<v Speaker 1>because of stock ownership.

0:35:46.520 --> 0:35:50.320
<v Speaker 5>So in twenty seventeen, there was a case involving Merk,

0:35:50.680 --> 0:35:55.040
<v Speaker 5>so he initially failed to recuse despite owning stock in

0:35:55.080 --> 0:35:58.440
<v Speaker 5>the company. He ultimately sold his shares and participated in

0:35:58.480 --> 0:36:02.319
<v Speaker 5>that case. And then in there was another instance in

0:36:02.360 --> 0:36:05.240
<v Speaker 5>which he says there was an unintentional conflict of interests,

0:36:05.640 --> 0:36:08.439
<v Speaker 5>so he blamed it on staff oversight. He took part

0:36:08.480 --> 0:36:11.800
<v Speaker 5>in a two thousand and nine ruling that involved ABC

0:36:11.920 --> 0:36:16.040
<v Speaker 5>News even though his children held stock in Disney, so

0:36:16.080 --> 0:36:19.520
<v Speaker 5>he in that case voted against ABC. He joined a

0:36:19.640 --> 0:36:23.360
<v Speaker 5>five to four majority, So you know, his vote was

0:36:23.360 --> 0:36:25.880
<v Speaker 5>pretty consequential in that case. He owed a lot of

0:36:25.880 --> 0:36:27.640
<v Speaker 5>stock and so he said it kind of flipped under

0:36:27.640 --> 0:36:27.959
<v Speaker 5>the radar.

0:36:28.360 --> 0:36:30.879
<v Speaker 1>That's some slip. There would have been a tie if

0:36:30.880 --> 0:36:33.920
<v Speaker 1>he hadn't participated, and then the decision of the lower

0:36:33.960 --> 0:36:37.640
<v Speaker 1>court would have stood. Instead, the Supreme Court reversed the

0:36:37.719 --> 0:36:40.719
<v Speaker 1>decision that was favorable to the networks in that five

0:36:40.760 --> 0:36:43.399
<v Speaker 1>to four vote that he took part in. Now I'm

0:36:43.400 --> 0:36:47.880
<v Speaker 1>not sure there's anything unethical about this, but one of

0:36:47.880 --> 0:36:50.239
<v Speaker 1>his trades appeared to be political.

0:36:51.080 --> 0:36:54.840
<v Speaker 5>Yeah, so he still hasn't said anything about this publicly,

0:36:55.080 --> 0:36:58.480
<v Speaker 5>but you might remember last year there was a big

0:36:58.520 --> 0:37:03.719
<v Speaker 5>conservative boycott of Anheuser Busch that's the maker of bud Light.

0:37:03.960 --> 0:37:07.160
<v Speaker 5>Basically they got a lot of hot water with conservatives

0:37:07.200 --> 0:37:12.440
<v Speaker 5>because they partnered with a transgender influencer to promote some beer.

0:37:12.760 --> 0:37:15.719
<v Speaker 5>So around the time of that boycott, Alito sold his

0:37:15.800 --> 0:37:19.880
<v Speaker 5>shares of Anheuser Busch and he bought shares of Arrival

0:37:20.000 --> 0:37:22.920
<v Speaker 5>beer maker, which is molten Core's. So a lot of

0:37:22.960 --> 0:37:27.360
<v Speaker 5>people noticed that speculated about whether he was participating in

0:37:27.360 --> 0:37:31.040
<v Speaker 5>the conservative boycott, and he hasn't said anything, but the

0:37:31.120 --> 0:37:33.320
<v Speaker 5>timing did align with the boycott.

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<v Speaker 1>Sort of reminds me about the flag flying incident. Thanks

0:37:37.440 --> 0:37:41.600
<v Speaker 1>so much, Emily, it's a really revealing story. That's Emily Burnbaum,

0:37:41.640 --> 0:37:46.040
<v Speaker 1>Bloomberg Lobbying and legal affairs reporter. And that's it for

0:37:46.080 --> 0:37:49.120
<v Speaker 1>this edition of the Bloomberg Law Podcast. Remember you can

0:37:49.160 --> 0:37:52.080
<v Speaker 1>always get the latest legal news by subscribing and listening

0:37:52.120 --> 0:37:55.840
<v Speaker 1>to the show on Apple Podcasts, Spotify, and at Bloomberg

0:37:55.880 --> 0:37:59.920
<v Speaker 1>dot com, slash podcast, slash Law. I'm June Grosso and

0:38:00.120 --> 0:38:01.319
<v Speaker 1>this is Bloomberg