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

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

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

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

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Speaker 1: and on Bloomberg dot com slash podcasts. It took years

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Speaker 1: of on and off negotiations before T Mobile and Sprint

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Speaker 1: agreed to merge in a twenty six point five billion

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Speaker 1: dollar deal at the end of last month. Now they

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Speaker 1: have to wait for regulators to approve the deal, something

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Speaker 1: that many analysts say will never happen. John Ledger, CEO

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Speaker 1: of T Mobile, has been promoting the deal. He explained

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Speaker 1: why he thinks the deal will go through on Bloomberg.

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Speaker 1: It's not four to three, come on this, seven or

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Speaker 1: eight chem wireless players now, charters coming in anytime soon. Secondly,

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Speaker 1: more important, here's my headline. It's zero to one. There's

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Speaker 1: nobody doing five g We're going to be the first.

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Speaker 1: That's what the country should think about joining me. Is

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Speaker 1: Bloomberg Intelligent Senior Lytic Asian analyst Jennifer Rey so Jen

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Speaker 1: Mega deals worth ten billion or more are more than

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Speaker 1: twice as likely to fail as mid sized deals between

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Speaker 1: one billion and ten billion according to Bloomberg Laws M

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Speaker 1: and a market update, and this deal faces scrutiny from

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Speaker 1: several government agencies, which should be the hardest hurdle. I

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Speaker 1: think in this case it's probably the Department of Justice.

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Speaker 1: I think ordinarily when the deals in front of both

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Speaker 1: the Department of Justice and the Federal Communications Commission, you

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Speaker 1: would say the Federal Communications Commission. But in this case

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Speaker 1: you have a situation where their standard when they look

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Speaker 1: at this is a little bit looser, a little more

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Speaker 1: subjective than the Department of Justice is standard. And I

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Speaker 1: think that if they want to win this deal, T

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Speaker 1: Mobile and Sprint are going to have to do it

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Speaker 1: on this five G issue, this innovation issue, and the

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Speaker 1: FCC can look at that and say, is it in

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Speaker 1: the public interest, you know, in this five G world

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Speaker 1: and for innovation in the future, for these companies to

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Speaker 1: come together and say, yes, it is. The Department of

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Speaker 1: Justice has much more rigid standards by which they can

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Speaker 1: credit that kind of innovation sort of weigh it against

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Speaker 1: the possible anti competitive effects of reducing from four to three.

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Speaker 1: So the company seemed to be well aware of the

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Speaker 1: specific hurdles no matter what Ledger is preaching to the masses,

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Speaker 1: because they had built contingencies into the agreement and they

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Speaker 1: covered divestitures, national security conditions, and regulatory review. What stands

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Speaker 1: out to you there? You know what stands out to

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Speaker 1: me the most? I think there are two things. One

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Speaker 1: is the lack of an antitrust breakup fee. I found

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Speaker 1: that to be really unbelievable because for any big deal

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Speaker 1: that has a lot of uncertainty, and I think everybody

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Speaker 1: would agree, including the companies, that this does, there is

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Speaker 1: usually a breakup fee that's meant to protect the seller

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Speaker 1: after a year of investigation, their business can suffer, and

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Speaker 1: that fee can help make them whole. So that was

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Speaker 1: surprising to me, and also a little surprising was this recognition,

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Speaker 1: I mean not surprising, but interesting I think was the

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Speaker 1: recognition of the change in Sciphias because both of these companies,

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Speaker 1: remember Deutsche Telecom and soft Bank that owned the companies

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Speaker 1: already years ago, god Syphia's clearance to acquire American wireless companies. Siphius,

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Speaker 1: of course, being the commission that investigates deals having to

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Speaker 1: do with foreign countries and has been rather very busy lately,

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Speaker 1: shows Yes, so there is a lot of interesting deal

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Speaker 1: activity to keep you busy. Gin Disney's working through its

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Speaker 1: deal to buy some of Fox's stellar entertainment assets, and

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Speaker 1: now Comcast is getting into that picture. Again, explains right,

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Speaker 1: there are reports that Comcast might get into it, and

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Speaker 1: I think what happened here is that this is all

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Speaker 1: very contingent on what will happen and the judges ruling

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Speaker 1: on the on the Justice Department's lawsuit trying to block

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Speaker 1: a ten time Time Warners merger. We expect that decision

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Speaker 1: June twelve. And what happened there was that the Department

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Speaker 1: of Justice sued to block that deal. It is a

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Speaker 1: vertical deal, not a horizontal deal, not a deal between competitors,

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Speaker 1: because they were concerned about what owning that content would

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Speaker 1: allow A. T and T as a distributor to do

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Speaker 1: to other rival distributors. And that happened. Comcast originally was interested,

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Speaker 1: you know, about a year ago or sometime in the

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Speaker 1: last year. Comcast was interested in these Fox assets, but

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Speaker 1: they would have had the exact same issue that A.

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Speaker 1: T and T had an acquiring Time Warner, and so

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Speaker 1: I think Fox was concerned about that and they saw

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Speaker 1: Disney as the better buyer from an antitrust risk perspective.

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Speaker 1: But now there's a lot of speculation that a T

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Speaker 1: and T and Time Warner might actually win that trial.

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Speaker 1: And if they do, what has been reported is that

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Speaker 1: Comcast is going to jump back in because now their

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Speaker 1: antitrust risk is likely lowered. And explain that deal. What

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Speaker 1: that deal encompasses. The deal with the Fox and ABC. Well,

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Speaker 1: Fox is selling only some of its assets, so it's

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Speaker 1: selling regional sports networks but not its national sports net networks.

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Speaker 1: It's a movie studio, and then it's Steak in Hulu

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Speaker 1: and it does own of Sky, which is a UK company,

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Speaker 1: and that Steak will go to um other assets. It's

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Speaker 1: keeping itself other networks and tell of Asian stations. Uh

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Speaker 1: So the overlap for Disney, you know, it's a horizontal overlap.

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Speaker 1: It's two competitors. They both have movie studios. Disney of

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Speaker 1: course has ESPN and so there may be some overlap

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Speaker 1: there in the sports programming and the sports content. And

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Speaker 1: then Disney would up its Steak and Hulu because it

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Speaker 1: already has some Steak and Hulu. So and it would

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Speaker 1: be the same with Comcast. You would also have some

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Speaker 1: horizontal overlap. With Comcast, which also has programming. So these

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Speaker 1: will change the entertainment landscape. And as you mentioned, speculation

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Speaker 1: is high on the side that the judge will actually

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Speaker 1: allow that deal to go through. Is are people being

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Speaker 1: too confident about that? You know, I saw quite a

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Speaker 1: bit of the trial, and what a lot of what

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Speaker 1: I didn't see. I read the transcripts of those days

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Speaker 1: and you're a brave woman. It was really interesting. And

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Speaker 1: then the antitrust world, it's very exciting because we haven't

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Speaker 1: had a trial like this in a long time. Vertical

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Speaker 1: deals usually are able to get cleared or get cleared

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Speaker 1: with some conditions on conduct going forward. And I would

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Speaker 1: be very, very surprised if the judge ruled for the

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Speaker 1: Department of Justice in this case. You know, they have

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Speaker 1: a burden of showing that the deal has a likelihood

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Speaker 1: of substantial harm to competition post merger, and it just

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Speaker 1: I think they had a difficult time proving that they

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Speaker 1: didn't have a lot of strong evidence, and the economic

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Speaker 1: model wasn't strong and I think was very attenuated. Um,

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Speaker 1: And it's a lot to rest blocking a deal on

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Speaker 1: the kind of evidence that they provided a trial. So

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Speaker 1: I think most people who observed it are along. I

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Speaker 1: think that way too. So let's say that the judge

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Speaker 1: does allow the deal to go through. What kind of

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Speaker 1: effect will that have on the marketplace, on the landscape

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Speaker 1: of the entertainment industry, and also on the way the

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Speaker 1: Justice Department decides whether to oppose new mergers. Well, certainly

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Speaker 1: some of that depends on what the judge does and

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Speaker 1: what that what the opinion, how narrow or how broad

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Speaker 1: it is, what the judge says about vertical deals. But

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Speaker 1: certainly it move some of the risk for other vertical deals.

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Speaker 1: So if there are deals that we don't know about

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Speaker 1: in the making right now that had concerns because they

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Speaker 1: were vertical rather than horizontal deals and thought that that

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Speaker 1: might be a problem, they might feel free to move forward.

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Speaker 1: And certainly, as we see you've got Comcast already talking

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Speaker 1: about jumping back in, I think it will be a

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Speaker 1: little bit more deal activity, particularly in media, as a

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Speaker 1: lot of these companies try to compete with Netflix and

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Speaker 1: Amazon Prime and some of these other over the top

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Speaker 1: they're called options. And so the Justice Department in about

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Speaker 1: a minute, this is a big question. For a minute,

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Speaker 1: the Justice Department will just have to give in or

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Speaker 1: you think it still might oppose some of these deals

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Speaker 1: and try to work on it. Oh, they still can oppose,

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Speaker 1: you know, the deal. They look at it one by one.

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Speaker 1: Each one is unique for the facts that apply to

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Speaker 1: those companies. So I don't think that they'll give in.

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Speaker 1: And I actually also think in a teen t skates

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Speaker 1: if they lose, they'll appeal. That was going to be

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Speaker 1: my next question, but we have about half a half

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Speaker 1: a minute left. Thanks so much, Jen, Always a pleasure

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Speaker 1: to have you. And that's Bloomberg Intelligence Senior litigation analyst

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Speaker 1: Jennifer Ree. And you can read more of our analysis

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Speaker 1: by going to b I go on the Big Work Terminal.

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Speaker 1: RBS says it's paying four ft nine billion dollars to

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Speaker 1: resolve the Jostice Department's investigation into its sale of toxic

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Speaker 1: mortgage backed securities a decade ago. The number is good

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Speaker 1: news for banks like HSBC, UBS and Wells Fargo because

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Speaker 1: the RBS penalty will be about half what many analysts

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Speaker 1: had expected the bank to pay. Joining me as Robert Hocket,

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Speaker 1: professor at Cornell Law School, Bob, the NBS portfolio of

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Speaker 1: RBS was larger than that of most banks. Does this

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Speaker 1: settlement surprise you. It does in a way, June. In

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Speaker 1: another way I probably shouldn't. Uh. The sense in which

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Speaker 1: she does is and of course it's much much lower,

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Speaker 1: sort of on a per per unit basis, you might say,

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Speaker 1: than we're the fines that we're levied against most of

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Speaker 1: the big banks that were successfully prosecuted or investigated during

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Speaker 1: the Obama administration. And so in that sense, it looks

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Speaker 1: like those who are sort of process scuted later are

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Speaker 1: getting a bit of a windfall, right, Uh. And that

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Speaker 1: is in a sense of surprising. Right. The sensing which

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Speaker 1: it's not surprising is that there has been, of course

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Speaker 1: disturbing There have been disturbing development, you might say, over

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Speaker 1: the last year or so. Um. That basically indicate that

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Speaker 1: when Mr Trump was sort of running as a so

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Speaker 1: called populist who was uh, you know, kind of pro

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Speaker 1: main street or a pro industry, but maybe down on

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Speaker 1: Wall Street. Um, that those uh should I call them

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Speaker 1: where they promised us? I mean, if those assertions were surances,

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Speaker 1: we're basically you know, meaningless. So let's let's let's talk

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Speaker 1: about the and compare it to the Obama administration by

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Speaker 1: explaining what happened to Barkley's at the end of the

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Speaker 1: Obama administration and then at the beginning of the Trump administration. Yeah,

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Speaker 1: so of course there was an announcement, um, you know,

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Speaker 1: the towards the end of the Obama years, right, that

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Speaker 1: a particular settlement amount. I'm sure that in particular, uh, well,

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Speaker 1: that the administration might be seeking a rather large penalty, right,

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Speaker 1: Barkley announces defiantly, Barkley's, I should say, and now is

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Speaker 1: defiantly that it will not pay more than a certain

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Speaker 1: amount to billion. I believe it was, um. And so

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Speaker 1: the Obama administration goes ahead and prosecute anyway. Uh. And

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Speaker 1: then of course, here we are at the beginning of

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Speaker 1: the Trump administration, and when we reach the end of

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Speaker 1: the case, um Markley's ends up paying no more than

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Speaker 1: the two billion that they said that they would be

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Speaker 1: willing to pay. So now, as a policy shift, in

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Speaker 1: a speech on Wednesday, Deputy A. G. Rod Rosen sign

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Speaker 1: talked about companies over paying for their crimes because of

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Speaker 1: piling on by multiple government agencies. What was the new

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Speaker 1: policy he announced, Well, he's essentially announced that he wants

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Speaker 1: the various regulatory agencies to sort of work together to

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Speaker 1: arrive at sort of a common amount when it comes

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Speaker 1: to how much is going to be fined. But there's

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Speaker 1: sort of two different ways to read that. Right, on

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Speaker 1: the one hand, the you know, saying that referring to

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Speaker 1: this is sort of piling on, and also saying that,

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Speaker 1: you know, in consequence of the SoCal piling on, these

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Speaker 1: firms might be paying too much. That's one way of

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Speaker 1: reading things, and that's the read. If that's the property,

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Speaker 1: that an absurd. Right on the other hand, if the

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Speaker 1: idea is that well, there ought to be coordination between

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Speaker 1: distinct regulators who are regulating and assessing finds, then I

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Speaker 1: think nobody would contest that, right. I think everybody would

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Speaker 1: be flying with that. The reason that the first read

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Speaker 1: looks like the more likely one is precisely because he

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Speaker 1: seems to be using a lot of language, like the

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Speaker 1: piling on language and the paying too much language, to

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Speaker 1: suggest that that's what actually bothers him. And the thing

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Speaker 1: that's preposterous about that, of course, is, as anybody will

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Speaker 1: tell you, if you look at the amount of damage

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Speaker 1: or the amount of harm done, the sort of dollar

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Speaker 1: value of the harm done in the lead up to

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Speaker 1: the crash, the findes that have ultimately been levied. Even

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Speaker 1: the highest fines are in the Obama administrations have been

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Speaker 1: administration have been laughed at as having been paltry in

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Speaker 1: comparison to the gains that were that were made through

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Speaker 1: the wrongdoing. Right. So, in other words, even the so

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Speaker 1: called heavy or large OBOA findes are just looked at

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Speaker 1: as sort of business expenses by the banks in question.

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Speaker 1: And for that very reason, many people are saying, you

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Speaker 1: really have to go with individuals and jail. Then the

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Speaker 1: finding isn't working. So for reasons trying to come up

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Speaker 1: and say, well, the fines are too highs so much

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Speaker 1: filing on that's just crazy. So Bob, though, if these

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Speaker 1: fines aren't working, and that seems to be the indication

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Speaker 1: from the behavior we've seen, is there something to be

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Speaker 1: said for a less punitive approach to enforcement and spending

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Speaker 1: less money on it. I think that the answers that

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Speaker 1: fines aren't working, right, that's not a sign that we're

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Speaker 1: sort of doing too much or that finding just doesn't

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Speaker 1: work at all, or the prosecution doesn't work. It does

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Speaker 1: suggest that we're finding maybe some accept the wrong entities

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Speaker 1: or we're not finding enough entities. Um and most people

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Speaker 1: who have been watching this carefully or saying that, look,

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Speaker 1: we ought to go after the individuals themselves who make

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Speaker 1: actual decisions, and that would mean finding individuals, not firms,

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Speaker 1: or individuals in addition to firms, and it would mean

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Speaker 1: even possibly prohibiting people from the industry or uh even

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Speaker 1: jail time if people's crimes are severe enough. Bob, So

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Speaker 1: is it time for the banks to breathe a sigh

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Speaker 1: of relief? Well, uh, it's looking that way. I mean,

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Speaker 1: it is definitely looking as though that Trump has been

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Speaker 1: sustration is not going to be serious about law enforcement

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Speaker 1: against large financial institutions and the So the Wells Fargo

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Speaker 1: Fund was just um an isolated incident. Yeah, I think

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Speaker 1: in a way that was essentially a way for it's

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Speaker 1: philics just looking this way. To me, now, the best

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Speaker 1: interpretation I can put on it now is that this

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Speaker 1: was a way for Mr Mulvaaney to say, you see,

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Speaker 1: I'm not getting lacked in my sort of illegal occupation

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Speaker 1: of the CFPB. I'm actually quite severe. I'm very hard

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Speaker 1: on the banks. But it was just it was sort

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Speaker 1: of a one off deal. And of course this all

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Speaker 1: comes at the same time as announcement that the various

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Speaker 1: other enforcement actions are being dropped. They're not going to

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Speaker 1: pursue um exploitation or fraud by poor profit education institutions

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Speaker 1: like Trump University, that they're not going to bother going

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Speaker 1: out to pay the lenders. I mean, that's I think

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Speaker 1: what is more telling than a single isolated UH fine

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Speaker 1: that was imposed, that was already in the work before

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Speaker 1: he came along, uh and that now looks again just

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Speaker 1: like a kind of window dressing to give him at

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Speaker 1: least one on arrow in the quiver. And when he's

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Speaker 1: trying to defend himself, he gets claims that he's not

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Speaker 1: actually taking the role of the CFTP. Seriously. Thank you, Bob.

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Speaker 1: That's Robert Hockett. He's a professor at Cornell Law School.

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

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

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Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brosso.

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Speaker 1: This is Bloomberg