WEBVTT - Sprint T-Mobile Deal Still Faces Regulatory Challenges

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. It took years

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<v Speaker 1>of on and off negotiations before T Mobile and Sprint

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<v Speaker 1>agreed to merge in a twenty six point five billion

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<v Speaker 1>dollar deal at the end of last month. Now they

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<v Speaker 1>have to wait for regulators to approve the deal, something

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<v Speaker 1>that many analysts say will never happen. John Ledger, CEO

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<v Speaker 1>of T Mobile, has been promoting the deal. He explained

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<v Speaker 1>why he thinks the deal will go through on Bloomberg.

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<v Speaker 1>It's not four to three, come on this, seven or

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<v Speaker 1>eight chem wireless players now, charters coming in anytime soon. Secondly,

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

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<v Speaker 1>nobody doing five g We're going to be the first.

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<v Speaker 1>That's what the country should think about joining me. Is

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<v Speaker 1>Bloomberg Intelligent Senior Lytic Asian analyst Jennifer Rey so Jen

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<v Speaker 1>Mega deals worth ten billion or more are more than

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<v Speaker 1>twice as likely to fail as mid sized deals between

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<v Speaker 1>one billion and ten billion according to Bloomberg Laws M

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<v Speaker 1>and a market update, and this deal faces scrutiny from

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<v Speaker 1>several government agencies, which should be the hardest hurdle. I

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<v Speaker 1>think in this case it's probably the Department of Justice.

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<v Speaker 1>I think ordinarily when the deals in front of both

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<v Speaker 1>the Department of Justice and the Federal Communications Commission, you

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<v Speaker 1>would say the Federal Communications Commission. But in this case

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<v Speaker 1>you have a situation where their standard when they look

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<v Speaker 1>at this is a little bit looser, a little more

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<v Speaker 1>subjective than the Department of Justice is standard. And I

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<v Speaker 1>think that if they want to win this deal, T

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<v Speaker 1>Mobile and Sprint are going to have to do it

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<v Speaker 1>on this five G issue, this innovation issue, and the

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<v Speaker 1>FCC can look at that and say, is it in

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<v Speaker 1>the public interest, you know, in this five G world

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<v Speaker 1>and for innovation in the future, for these companies to

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<v Speaker 1>come together and say, yes, it is. The Department of

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<v Speaker 1>Justice has much more rigid standards by which they can

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<v Speaker 1>credit that kind of innovation sort of weigh it against

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<v Speaker 1>the possible anti competitive effects of reducing from four to three.

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<v Speaker 1>So the company seemed to be well aware of the

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<v Speaker 1>specific hurdles no matter what Ledger is preaching to the masses,

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<v Speaker 1>because they had built contingencies into the agreement and they

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<v Speaker 1>covered divestitures, national security conditions, and regulatory review. What stands

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<v Speaker 1>out to you there? You know what stands out to

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<v Speaker 1>me the most? I think there are two things. One

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<v Speaker 1>is the lack of an antitrust breakup fee. I found

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<v Speaker 1>that to be really unbelievable because for any big deal

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<v Speaker 1>that has a lot of uncertainty, and I think everybody

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<v Speaker 1>would agree, including the companies, that this does, there is

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<v Speaker 1>usually a breakup fee that's meant to protect the seller

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<v Speaker 1>after a year of investigation, their business can suffer, and

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<v Speaker 1>that fee can help make them whole. So that was

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<v Speaker 1>surprising to me, and also a little surprising was this recognition,

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<v Speaker 1>I mean not surprising, but interesting I think was the

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<v Speaker 1>recognition of the change in Sciphias because both of these companies,

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<v Speaker 1>remember Deutsche Telecom and soft Bank that owned the companies

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

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<v Speaker 1>of course, being the commission that investigates deals having to

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<v Speaker 1>do with foreign countries and has been rather very busy lately,

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<v Speaker 1>shows Yes, so there is a lot of interesting deal

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<v Speaker 1>activity to keep you busy. Gin Disney's working through its

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<v Speaker 1>deal to buy some of Fox's stellar entertainment assets, and

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<v Speaker 1>now Comcast is getting into that picture. Again, explains right,

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<v Speaker 1>there are reports that Comcast might get into it, and

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<v Speaker 1>I think what happened here is that this is all

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<v Speaker 1>very contingent on what will happen and the judges ruling

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<v Speaker 1>on the on the Justice Department's lawsuit trying to block

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<v Speaker 1>a ten time Time Warners merger. We expect that decision

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<v Speaker 1>June twelve. And what happened there was that the Department

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<v Speaker 1>of Justice sued to block that deal. It is a

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<v Speaker 1>vertical deal, not a horizontal deal, not a deal between competitors,

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<v Speaker 1>because they were concerned about what owning that content would

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<v Speaker 1>allow A. T and T as a distributor to do

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<v Speaker 1>to other rival distributors. And that happened. Comcast originally was interested,

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<v Speaker 1>you know, about a year ago or sometime in the

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<v Speaker 1>last year. Comcast was interested in these Fox assets, but

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<v Speaker 1>they would have had the exact same issue that A.

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<v Speaker 1>T and T had an acquiring Time Warner, and so

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<v Speaker 1>I think Fox was concerned about that and they saw

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<v Speaker 1>Disney as the better buyer from an antitrust risk perspective.

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<v Speaker 1>But now there's a lot of speculation that a T

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<v Speaker 1>and T and Time Warner might actually win that trial.

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<v Speaker 1>And if they do, what has been reported is that

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<v Speaker 1>Comcast is going to jump back in because now their

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<v Speaker 1>antitrust risk is likely lowered. And explain that deal. What

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<v Speaker 1>that deal encompasses. The deal with the Fox and ABC. Well,

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<v Speaker 1>Fox is selling only some of its assets, so it's

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<v Speaker 1>selling regional sports networks but not its national sports net networks.

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<v Speaker 1>It's a movie studio, and then it's Steak in Hulu

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<v Speaker 1>and it does own of Sky, which is a UK company,

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<v Speaker 1>and that Steak will go to um other assets. It's

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<v Speaker 1>keeping itself other networks and tell of Asian stations. Uh

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

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<v Speaker 1>It's two competitors. They both have movie studios. Disney of

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<v Speaker 1>course has ESPN and so there may be some overlap

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<v Speaker 1>there in the sports programming and the sports content. And

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<v Speaker 1>then Disney would up its Steak and Hulu because it

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<v Speaker 1>already has some Steak and Hulu. So and it would

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<v Speaker 1>be the same with Comcast. You would also have some

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<v Speaker 1>horizontal overlap. With Comcast, which also has programming. So these

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<v Speaker 1>will change the entertainment landscape. And as you mentioned, speculation

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<v Speaker 1>is high on the side that the judge will actually

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<v Speaker 1>allow that deal to go through. Is are people being

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<v Speaker 1>too confident about that? You know, I saw quite a

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<v Speaker 1>bit of the trial, and what a lot of what

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<v Speaker 1>I didn't see. I read the transcripts of those days

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<v Speaker 1>and you're a brave woman. It was really interesting. And

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

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<v Speaker 1>had a trial like this in a long time. Vertical

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<v Speaker 1>deals usually are able to get cleared or get cleared

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<v Speaker 1>with some conditions on conduct going forward. And I would

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<v Speaker 1>be very, very surprised if the judge ruled for the

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<v Speaker 1>Department of Justice in this case. You know, they have

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<v Speaker 1>a burden of showing that the deal has a likelihood

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<v Speaker 1>of substantial harm to competition post merger, and it just

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<v Speaker 1>I think they had a difficult time proving that they

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<v Speaker 1>didn't have a lot of strong evidence, and the economic

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

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<v Speaker 1>And it's a lot to rest blocking a deal on

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<v Speaker 1>the kind of evidence that they provided a trial. So

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<v Speaker 1>I think most people who observed it are along. I

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<v Speaker 1>think that way too. So let's say that the judge

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<v Speaker 1>does allow the deal to go through. What kind of

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<v Speaker 1>effect will that have on the marketplace, on the landscape

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<v Speaker 1>of the entertainment industry, and also on the way the

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<v Speaker 1>Justice Department decides whether to oppose new mergers. Well, certainly

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<v Speaker 1>some of that depends on what the judge does and

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<v Speaker 1>what that what the opinion, how narrow or how broad

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<v Speaker 1>it is, what the judge says about vertical deals. But

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<v Speaker 1>certainly it move some of the risk for other vertical deals.

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<v Speaker 1>So if there are deals that we don't know about

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<v Speaker 1>in the making right now that had concerns because they

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<v Speaker 1>were vertical rather than horizontal deals and thought that that

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<v Speaker 1>might be a problem, they might feel free to move forward.

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<v Speaker 1>And certainly, as we see you've got Comcast already talking

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<v Speaker 1>about jumping back in, I think it will be a

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<v Speaker 1>little bit more deal activity, particularly in media, as a

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<v Speaker 1>lot of these companies try to compete with Netflix and

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<v Speaker 1>Amazon Prime and some of these other over the top

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<v Speaker 1>they're called options. And so the Justice Department in about

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<v Speaker 1>a minute, this is a big question. For a minute,

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<v Speaker 1>the Justice Department will just have to give in or

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<v Speaker 1>you think it still might oppose some of these deals

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<v Speaker 1>and try to work on it. Oh, they still can oppose,

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<v Speaker 1>you know, the deal. They look at it one by one.

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<v Speaker 1>Each one is unique for the facts that apply to

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

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<v Speaker 1>And I actually also think in a teen t skates

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<v Speaker 1>if they lose, they'll appeal. That was going to be

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<v Speaker 1>my next question, but we have about half a half

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<v Speaker 1>a minute left. Thanks so much, Jen, Always a pleasure

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<v Speaker 1>to have you. And that's Bloomberg Intelligence Senior litigation analyst

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<v Speaker 1>Jennifer Ree. And you can read more of our analysis

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<v Speaker 1>by going to b I go on the Big Work Terminal.

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<v Speaker 1>RBS says it's paying four ft nine billion dollars to

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<v Speaker 1>resolve the Jostice Department's investigation into its sale of toxic

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<v Speaker 1>mortgage backed securities a decade ago. The number is good

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<v Speaker 1>news for banks like HSBC, UBS and Wells Fargo because

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<v Speaker 1>the RBS penalty will be about half what many analysts

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<v Speaker 1>had expected the bank to pay. Joining me as Robert Hocket,

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<v Speaker 1>professor at Cornell Law School, Bob, the NBS portfolio of

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<v Speaker 1>RBS was larger than that of most banks. Does this

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<v Speaker 1>settlement surprise you. It does in a way, June. In

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<v Speaker 1>another way I probably shouldn't. Uh. The sense in which

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<v Speaker 1>she does is and of course it's much much lower,

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<v Speaker 1>sort of on a per per unit basis, you might say,

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<v Speaker 1>than we're the fines that we're levied against most of

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<v Speaker 1>the big banks that were successfully prosecuted or investigated during

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<v Speaker 1>the Obama administration. And so in that sense, it looks

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<v Speaker 1>like those who are sort of process scuted later are

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<v Speaker 1>getting a bit of a windfall, right, Uh. And that

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<v Speaker 1>is in a sense of surprising. Right. The sensing which

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<v Speaker 1>it's not surprising is that there has been, of course

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<v Speaker 1>disturbing There have been disturbing development, you might say, over

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<v Speaker 1>the last year or so. Um. That basically indicate that

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<v Speaker 1>when Mr Trump was sort of running as a so

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<v Speaker 1>called populist who was uh, you know, kind of pro

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<v Speaker 1>main street or a pro industry, but maybe down on

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<v Speaker 1>Wall Street. Um, that those uh should I call them

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<v Speaker 1>where they promised us? I mean, if those assertions were surances,

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<v Speaker 1>we're basically you know, meaningless. So let's let's let's talk

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<v Speaker 1>about the and compare it to the Obama administration by

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<v Speaker 1>explaining what happened to Barkley's at the end of the

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<v Speaker 1>Obama administration and then at the beginning of the Trump administration. Yeah,

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<v Speaker 1>so of course there was an announcement, um, you know,

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<v Speaker 1>the towards the end of the Obama years, right, that

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

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<v Speaker 1>that the administration might be seeking a rather large penalty, right,

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<v Speaker 1>Barkley announces defiantly, Barkley's, I should say, and now is

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<v Speaker 1>defiantly that it will not pay more than a certain

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<v Speaker 1>amount to billion. I believe it was, um. And so

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<v Speaker 1>the Obama administration goes ahead and prosecute anyway. Uh. And

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<v Speaker 1>then of course, here we are at the beginning of

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<v Speaker 1>the Trump administration, and when we reach the end of

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<v Speaker 1>the case, um Markley's ends up paying no more than

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<v Speaker 1>the two billion that they said that they would be

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<v Speaker 1>willing to pay. So now, as a policy shift, in

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<v Speaker 1>a speech on Wednesday, Deputy A. G. Rod Rosen sign

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<v Speaker 1>talked about companies over paying for their crimes because of

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<v Speaker 1>piling on by multiple government agencies. What was the new

0:10:32.559 --> 0:10:37.600
<v Speaker 1>policy he announced, Well, he's essentially announced that he wants

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<v Speaker 1>the various regulatory agencies to sort of work together to

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<v Speaker 1>arrive at sort of a common amount when it comes

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<v Speaker 1>to how much is going to be fined. But there's

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<v Speaker 1>sort of two different ways to read that. Right, on

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<v Speaker 1>the one hand, the you know, saying that referring to

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<v Speaker 1>this is sort of piling on, and also saying that,

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<v Speaker 1>you know, in consequence of the SoCal piling on, these

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<v Speaker 1>firms might be paying too much. That's one way of

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<v Speaker 1>reading things, and that's the read. If that's the property,

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<v Speaker 1>that an absurd. Right on the other hand, if the

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<v Speaker 1>idea is that well, there ought to be coordination between

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<v Speaker 1>distinct regulators who are regulating and assessing finds, then I

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<v Speaker 1>think nobody would contest that, right. I think everybody would

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<v Speaker 1>be flying with that. The reason that the first read

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<v Speaker 1>looks like the more likely one is precisely because he

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<v Speaker 1>seems to be using a lot of language, like the

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<v Speaker 1>piling on language and the paying too much language, to

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<v Speaker 1>suggest that that's what actually bothers him. And the thing

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<v Speaker 1>that's preposterous about that, of course, is, as anybody will

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<v Speaker 1>tell you, if you look at the amount of damage

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<v Speaker 1>or the amount of harm done, the sort of dollar

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<v Speaker 1>value of the harm done in the lead up to

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<v Speaker 1>the crash, the findes that have ultimately been levied. Even

0:11:35.720 --> 0:11:38.439
<v Speaker 1>the highest fines are in the Obama administrations have been

0:11:38.520 --> 0:11:41.400
<v Speaker 1>administration have been laughed at as having been paltry in

0:11:41.440 --> 0:11:44.480
<v Speaker 1>comparison to the gains that were that were made through

0:11:44.520 --> 0:11:47.320
<v Speaker 1>the wrongdoing. Right. So, in other words, even the so

0:11:47.400 --> 0:11:50.600
<v Speaker 1>called heavy or large OBOA findes are just looked at

0:11:50.600 --> 0:11:52.839
<v Speaker 1>as sort of business expenses by the banks in question.

0:11:52.880 --> 0:11:54.679
<v Speaker 1>And for that very reason, many people are saying, you

0:11:54.760 --> 0:11:56.720
<v Speaker 1>really have to go with individuals and jail. Then the

0:11:56.720 --> 0:11:59.120
<v Speaker 1>finding isn't working. So for reasons trying to come up

0:11:59.160 --> 0:12:00.920
<v Speaker 1>and say, well, the fines are too highs so much

0:12:00.920 --> 0:12:05.319
<v Speaker 1>filing on that's just crazy. So Bob, though, if these

0:12:05.320 --> 0:12:07.960
<v Speaker 1>fines aren't working, and that seems to be the indication

0:12:08.280 --> 0:12:11.000
<v Speaker 1>from the behavior we've seen, is there something to be

0:12:11.080 --> 0:12:14.480
<v Speaker 1>said for a less punitive approach to enforcement and spending

0:12:14.559 --> 0:12:17.480
<v Speaker 1>less money on it. I think that the answers that

0:12:17.640 --> 0:12:20.719
<v Speaker 1>fines aren't working, right, that's not a sign that we're

0:12:20.720 --> 0:12:23.720
<v Speaker 1>sort of doing too much or that finding just doesn't

0:12:23.760 --> 0:12:26.440
<v Speaker 1>work at all, or the prosecution doesn't work. It does

0:12:26.480 --> 0:12:29.240
<v Speaker 1>suggest that we're finding maybe some accept the wrong entities

0:12:29.320 --> 0:12:32.280
<v Speaker 1>or we're not finding enough entities. Um and most people

0:12:32.360 --> 0:12:34.319
<v Speaker 1>who have been watching this carefully or saying that, look,

0:12:34.360 --> 0:12:36.319
<v Speaker 1>we ought to go after the individuals themselves who make

0:12:36.360 --> 0:12:40.320
<v Speaker 1>actual decisions, and that would mean finding individuals, not firms,

0:12:40.440 --> 0:12:42.720
<v Speaker 1>or individuals in addition to firms, and it would mean

0:12:42.760 --> 0:12:46.560
<v Speaker 1>even possibly prohibiting people from the industry or uh even

0:12:46.640 --> 0:12:50.920
<v Speaker 1>jail time if people's crimes are severe enough. Bob, So

0:12:51.080 --> 0:12:53.280
<v Speaker 1>is it time for the banks to breathe a sigh

0:12:53.320 --> 0:12:57.559
<v Speaker 1>of relief? Well, uh, it's looking that way. I mean,

0:12:57.600 --> 0:12:59.920
<v Speaker 1>it is definitely looking as though that Trump has been

0:13:00.000 --> 0:13:02.800
<v Speaker 1>sustration is not going to be serious about law enforcement

0:13:03.320 --> 0:13:08.080
<v Speaker 1>against large financial institutions and the So the Wells Fargo

0:13:08.200 --> 0:13:13.400
<v Speaker 1>Fund was just um an isolated incident. Yeah, I think

0:13:13.400 --> 0:13:16.640
<v Speaker 1>in a way that was essentially a way for it's

0:13:16.640 --> 0:13:18.720
<v Speaker 1>philics just looking this way. To me, now, the best

0:13:18.720 --> 0:13:20.920
<v Speaker 1>interpretation I can put on it now is that this

0:13:21.000 --> 0:13:23.080
<v Speaker 1>was a way for Mr Mulvaaney to say, you see,

0:13:23.160 --> 0:13:26.120
<v Speaker 1>I'm not getting lacked in my sort of illegal occupation

0:13:26.440 --> 0:13:29.400
<v Speaker 1>of the CFPB. I'm actually quite severe. I'm very hard

0:13:29.400 --> 0:13:31.000
<v Speaker 1>on the banks. But it was just it was sort

0:13:31.000 --> 0:13:33.200
<v Speaker 1>of a one off deal. And of course this all

0:13:33.240 --> 0:13:35.920
<v Speaker 1>comes at the same time as announcement that the various

0:13:35.920 --> 0:13:38.559
<v Speaker 1>other enforcement actions are being dropped. They're not going to

0:13:38.559 --> 0:13:44.199
<v Speaker 1>pursue um exploitation or fraud by poor profit education institutions

0:13:44.240 --> 0:13:46.839
<v Speaker 1>like Trump University, that they're not going to bother going

0:13:46.840 --> 0:13:49.400
<v Speaker 1>out to pay the lenders. I mean, that's I think

0:13:49.440 --> 0:13:53.160
<v Speaker 1>what is more telling than a single isolated UH fine

0:13:53.360 --> 0:13:55.080
<v Speaker 1>that was imposed, that was already in the work before

0:13:55.120 --> 0:13:57.480
<v Speaker 1>he came along, uh and that now looks again just

0:13:57.559 --> 0:13:59.640
<v Speaker 1>like a kind of window dressing to give him at

0:13:59.679 --> 0:14:01.880
<v Speaker 1>least one on arrow in the quiver. And when he's

0:14:01.880 --> 0:14:03.760
<v Speaker 1>trying to defend himself, he gets claims that he's not

0:14:03.760 --> 0:14:07.680
<v Speaker 1>actually taking the role of the CFTP. Seriously. Thank you, Bob.

0:14:07.760 --> 0:14:10.360
<v Speaker 1>That's Robert Hockett. He's a professor at Cornell Law School.

0:14:10.559 --> 0:14:13.520
<v Speaker 1>Thanks for listening to the Bloomberg Law Podcast. You can

0:14:13.559 --> 0:14:17.280
<v Speaker 1>subscribe and listen to the show on Apple podcast, SoundCloud,

0:14:17.360 --> 0:14:21.280
<v Speaker 1>and on Bloomberg dot com slash podcast. I'm June Brosso.

0:14:21.760 --> 0:14:23.040
<v Speaker 1>This is Bloomberg