Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. It took years
Speaker 1: of on and off negotiations before T Mobile and Sprint
Speaker 1: agreed to merge in a twenty six point five billion
Speaker 1: dollar deal at the end of last month. Now they
Speaker 1: have to wait for regulators to approve the deal, something
Speaker 1: that many analysts say will never happen. John Ledger, CEO
Speaker 1: of T Mobile, has been promoting the deal. He explained
Speaker 1: why he thinks the deal will go through on Bloomberg.
Speaker 1: It's not four to three, come on this, seven or
Speaker 1: eight chem wireless players now, charters coming in anytime soon. Secondly,
Speaker 1: more important, here's my headline. It's zero to one. There's
Speaker 1: nobody doing five g We're going to be the first.
Speaker 1: That's what the country should think about joining me. Is
Speaker 1: Bloomberg Intelligent Senior Lytic Asian analyst Jennifer Rey so Jen
Speaker 1: Mega deals worth ten billion or more are more than
Speaker 1: twice as likely to fail as mid sized deals between
Speaker 1: one billion and ten billion according to Bloomberg Laws M
Speaker 1: and a market update, and this deal faces scrutiny from
Speaker 1: several government agencies, which should be the hardest hurdle. I
Speaker 1: think in this case it's probably the Department of Justice.
Speaker 1: I think ordinarily when the deals in front of both
Speaker 1: the Department of Justice and the Federal Communications Commission, you
Speaker 1: would say the Federal Communications Commission. But in this case
Speaker 1: you have a situation where their standard when they look
Speaker 1: at this is a little bit looser, a little more
Speaker 1: subjective than the Department of Justice is standard. And I
Speaker 1: think that if they want to win this deal, T
Speaker 1: Mobile and Sprint are going to have to do it
Speaker 1: on this five G issue, this innovation issue, and the
Speaker 1: FCC can look at that and say, is it in
Speaker 1: the public interest, you know, in this five G world
Speaker 1: and for innovation in the future, for these companies to
Speaker 1: come together and say, yes, it is. The Department of
Speaker 1: Justice has much more rigid standards by which they can
Speaker 1: credit that kind of innovation sort of weigh it against
Speaker 1: the possible anti competitive effects of reducing from four to three.
Speaker 1: So the company seemed to be well aware of the
Speaker 1: specific hurdles no matter what Ledger is preaching to the masses,
Speaker 1: because they had built contingencies into the agreement and they
Speaker 1: covered divestitures, national security conditions, and regulatory review. What stands
Speaker 1: out to you there? You know what stands out to
Speaker 1: me the most? I think there are two things. One
Speaker 1: is the lack of an antitrust breakup fee. I found
Speaker 1: that to be really unbelievable because for any big deal
Speaker 1: that has a lot of uncertainty, and I think everybody
Speaker 1: would agree, including the companies, that this does, there is
Speaker 1: usually a breakup fee that's meant to protect the seller
Speaker 1: after a year of investigation, their business can suffer, and
Speaker 1: that fee can help make them whole. So that was
Speaker 1: surprising to me, and also a little surprising was this recognition,
Speaker 1: I mean not surprising, but interesting I think was the
Speaker 1: recognition of the change in Sciphias because both of these companies,
Speaker 1: remember Deutsche Telecom and soft Bank that owned the companies
Speaker 1: already years ago, god Syphia's clearance to acquire American wireless companies. Siphius,
Speaker 1: of course, being the commission that investigates deals having to
Speaker 1: do with foreign countries and has been rather very busy lately,
Speaker 1: shows Yes, so there is a lot of interesting deal
Speaker 1: activity to keep you busy. Gin Disney's working through its
Speaker 1: deal to buy some of Fox's stellar entertainment assets, and
Speaker 1: now Comcast is getting into that picture. Again, explains right,
Speaker 1: there are reports that Comcast might get into it, and
Speaker 1: I think what happened here is that this is all
Speaker 1: very contingent on what will happen and the judges ruling
Speaker 1: on the on the Justice Department's lawsuit trying to block
Speaker 1: a ten time Time Warners merger. We expect that decision
Speaker 1: June twelve. And what happened there was that the Department
Speaker 1: of Justice sued to block that deal. It is a
Speaker 1: vertical deal, not a horizontal deal, not a deal between competitors,
Speaker 1: because they were concerned about what owning that content would
Speaker 1: allow A. T and T as a distributor to do
Speaker 1: to other rival distributors. And that happened. Comcast originally was interested,
Speaker 1: you know, about a year ago or sometime in the
Speaker 1: last year. Comcast was interested in these Fox assets, but
Speaker 1: they would have had the exact same issue that A.
Speaker 1: T and T had an acquiring Time Warner, and so
Speaker 1: I think Fox was concerned about that and they saw
Speaker 1: Disney as the better buyer from an antitrust risk perspective.
Speaker 1: But now there's a lot of speculation that a T
Speaker 1: and T and Time Warner might actually win that trial.
Speaker 1: And if they do, what has been reported is that
Speaker 1: Comcast is going to jump back in because now their
Speaker 1: antitrust risk is likely lowered. And explain that deal. What
Speaker 1: that deal encompasses. The deal with the Fox and ABC. Well,
Speaker 1: Fox is selling only some of its assets, so it's
Speaker 1: selling regional sports networks but not its national sports net networks.
Speaker 1: It's a movie studio, and then it's Steak in Hulu
Speaker 1: and it does own of Sky, which is a UK company,
Speaker 1: and that Steak will go to um other assets. It's
Speaker 1: keeping itself other networks and tell of Asian stations. Uh
Speaker 1: So the overlap for Disney, you know, it's a horizontal overlap.
Speaker 1: It's two competitors. They both have movie studios. Disney of
Speaker 1: course has ESPN and so there may be some overlap
Speaker 1: there in the sports programming and the sports content. And
Speaker 1: then Disney would up its Steak and Hulu because it
Speaker 1: already has some Steak and Hulu. So and it would
Speaker 1: be the same with Comcast. You would also have some
Speaker 1: horizontal overlap. With Comcast, which also has programming. So these
Speaker 1: will change the entertainment landscape. And as you mentioned, speculation
Speaker 1: is high on the side that the judge will actually
Speaker 1: allow that deal to go through. Is are people being
Speaker 1: too confident about that? You know, I saw quite a
Speaker 1: bit of the trial, and what a lot of what
Speaker 1: I didn't see. I read the transcripts of those days
Speaker 1: and you're a brave woman. It was really interesting. And
Speaker 1: then the antitrust world, it's very exciting because we haven't
Speaker 1: had a trial like this in a long time. Vertical
Speaker 1: deals usually are able to get cleared or get cleared
Speaker 1: with some conditions on conduct going forward. And I would
Speaker 1: be very, very surprised if the judge ruled for the
Speaker 1: Department of Justice in this case. You know, they have
Speaker 1: a burden of showing that the deal has a likelihood
Speaker 1: of substantial harm to competition post merger, and it just
Speaker 1: I think they had a difficult time proving that they
Speaker 1: didn't have a lot of strong evidence, and the economic
Speaker 1: model wasn't strong and I think was very attenuated. Um,
Speaker 1: And it's a lot to rest blocking a deal on
Speaker 1: the kind of evidence that they provided a trial. So
Speaker 1: I think most people who observed it are along. I
Speaker 1: think that way too. So let's say that the judge
Speaker 1: does allow the deal to go through. What kind of
Speaker 1: effect will that have on the marketplace, on the landscape
Speaker 1: of the entertainment industry, and also on the way the
Speaker 1: Justice Department decides whether to oppose new mergers. Well, certainly
Speaker 1: some of that depends on what the judge does and
Speaker 1: what that what the opinion, how narrow or how broad
Speaker 1: it is, what the judge says about vertical deals. But
Speaker 1: certainly it move some of the risk for other vertical deals.
Speaker 1: So if there are deals that we don't know about
Speaker 1: in the making right now that had concerns because they
Speaker 1: were vertical rather than horizontal deals and thought that that
Speaker 1: might be a problem, they might feel free to move forward.
Speaker 1: And certainly, as we see you've got Comcast already talking
Speaker 1: about jumping back in, I think it will be a
Speaker 1: little bit more deal activity, particularly in media, as a
Speaker 1: lot of these companies try to compete with Netflix and
Speaker 1: Amazon Prime and some of these other over the top
Speaker 1: they're called options. And so the Justice Department in about
Speaker 1: a minute, this is a big question. For a minute,
Speaker 1: the Justice Department will just have to give in or
Speaker 1: you think it still might oppose some of these deals
Speaker 1: and try to work on it. Oh, they still can oppose,
Speaker 1: you know, the deal. They look at it one by one.
Speaker 1: Each one is unique for the facts that apply to
Speaker 1: those companies. So I don't think that they'll give in.
Speaker 1: And I actually also think in a teen t skates
Speaker 1: if they lose, they'll appeal. That was going to be
Speaker 1: my next question, but we have about half a half
Speaker 1: a minute left. Thanks so much, Jen, Always a pleasure
Speaker 1: to have you. And that's Bloomberg Intelligence Senior litigation analyst
Speaker 1: Jennifer Ree. And you can read more of our analysis
Speaker 1: by going to b I go on the Big Work Terminal.
Speaker 1: RBS says it's paying four ft nine billion dollars to
Speaker 1: resolve the Jostice Department's investigation into its sale of toxic
Speaker 1: mortgage backed securities a decade ago. The number is good
Speaker 1: news for banks like HSBC, UBS and Wells Fargo because
Speaker 1: the RBS penalty will be about half what many analysts
Speaker 1: had expected the bank to pay. Joining me as Robert Hocket,
Speaker 1: professor at Cornell Law School, Bob, the NBS portfolio of
Speaker 1: RBS was larger than that of most banks. Does this
Speaker 1: settlement surprise you. It does in a way, June. In
Speaker 1: another way I probably shouldn't. Uh. The sense in which
Speaker 1: she does is and of course it's much much lower,
Speaker 1: sort of on a per per unit basis, you might say,
Speaker 1: than we're the fines that we're levied against most of
Speaker 1: the big banks that were successfully prosecuted or investigated during
Speaker 1: the Obama administration. And so in that sense, it looks
Speaker 1: like those who are sort of process scuted later are
Speaker 1: getting a bit of a windfall, right, Uh. And that
Speaker 1: is in a sense of surprising. Right. The sensing which
Speaker 1: it's not surprising is that there has been, of course
Speaker 1: disturbing There have been disturbing development, you might say, over
Speaker 1: the last year or so. Um. That basically indicate that
Speaker 1: when Mr Trump was sort of running as a so
Speaker 1: called populist who was uh, you know, kind of pro
Speaker 1: main street or a pro industry, but maybe down on
Speaker 1: Wall Street. Um, that those uh should I call them
Speaker 1: where they promised us? I mean, if those assertions were surances,
Speaker 1: we're basically you know, meaningless. So let's let's let's talk
Speaker 1: about the and compare it to the Obama administration by
Speaker 1: explaining what happened to Barkley's at the end of the
Speaker 1: Obama administration and then at the beginning of the Trump administration. Yeah,
Speaker 1: so of course there was an announcement, um, you know,
Speaker 1: the towards the end of the Obama years, right, that
Speaker 1: a particular settlement amount. I'm sure that in particular, uh, well,
Speaker 1: that the administration might be seeking a rather large penalty, right,
Speaker 1: Barkley announces defiantly, Barkley's, I should say, and now is
Speaker 1: defiantly that it will not pay more than a certain
Speaker 1: amount to billion. I believe it was, um. And so
Speaker 1: the Obama administration goes ahead and prosecute anyway. Uh. And
Speaker 1: then of course, here we are at the beginning of
Speaker 1: the Trump administration, and when we reach the end of
Speaker 1: the case, um Markley's ends up paying no more than
Speaker 1: the two billion that they said that they would be
Speaker 1: willing to pay. So now, as a policy shift, in
Speaker 1: a speech on Wednesday, Deputy A. G. Rod Rosen sign
Speaker 1: talked about companies over paying for their crimes because of
Speaker 1: piling on by multiple government agencies. What was the new
Speaker 1: policy he announced, Well, he's essentially announced that he wants
Speaker 1: the various regulatory agencies to sort of work together to
Speaker 1: arrive at sort of a common amount when it comes
Speaker 1: to how much is going to be fined. But there's
Speaker 1: sort of two different ways to read that. Right, on
Speaker 1: the one hand, the you know, saying that referring to
Speaker 1: this is sort of piling on, and also saying that,
Speaker 1: you know, in consequence of the SoCal piling on, these
Speaker 1: firms might be paying too much. That's one way of
Speaker 1: reading things, and that's the read. If that's the property,
Speaker 1: that an absurd. Right on the other hand, if the
Speaker 1: idea is that well, there ought to be coordination between
Speaker 1: distinct regulators who are regulating and assessing finds, then I
Speaker 1: think nobody would contest that, right. I think everybody would
Speaker 1: be flying with that. The reason that the first read
Speaker 1: looks like the more likely one is precisely because he
Speaker 1: seems to be using a lot of language, like the
Speaker 1: piling on language and the paying too much language, to
Speaker 1: suggest that that's what actually bothers him. And the thing
Speaker 1: that's preposterous about that, of course, is, as anybody will
Speaker 1: tell you, if you look at the amount of damage
Speaker 1: or the amount of harm done, the sort of dollar
Speaker 1: value of the harm done in the lead up to
Speaker 1: the crash, the findes that have ultimately been levied. Even
Speaker 1: the highest fines are in the Obama administrations have been
Speaker 1: administration have been laughed at as having been paltry in
Speaker 1: comparison to the gains that were that were made through
Speaker 1: the wrongdoing. Right. So, in other words, even the so
Speaker 1: called heavy or large OBOA findes are just looked at
Speaker 1: as sort of business expenses by the banks in question.
Speaker 1: And for that very reason, many people are saying, you
Speaker 1: really have to go with individuals and jail. Then the
Speaker 1: finding isn't working. So for reasons trying to come up
Speaker 1: and say, well, the fines are too highs so much
Speaker 1: filing on that's just crazy. So Bob, though, if these
Speaker 1: fines aren't working, and that seems to be the indication
Speaker 1: from the behavior we've seen, is there something to be
Speaker 1: said for a less punitive approach to enforcement and spending
Speaker 1: less money on it. I think that the answers that
Speaker 1: fines aren't working, right, that's not a sign that we're
Speaker 1: sort of doing too much or that finding just doesn't
Speaker 1: work at all, or the prosecution doesn't work. It does
Speaker 1: suggest that we're finding maybe some accept the wrong entities
Speaker 1: or we're not finding enough entities. Um and most people
Speaker 1: who have been watching this carefully or saying that, look,
Speaker 1: we ought to go after the individuals themselves who make
Speaker 1: actual decisions, and that would mean finding individuals, not firms,
Speaker 1: or individuals in addition to firms, and it would mean
Speaker 1: even possibly prohibiting people from the industry or uh even
Speaker 1: jail time if people's crimes are severe enough. Bob, So
Speaker 1: is it time for the banks to breathe a sigh
Speaker 1: of relief? Well, uh, it's looking that way. I mean,
Speaker 1: it is definitely looking as though that Trump has been
Speaker 1: sustration is not going to be serious about law enforcement
Speaker 1: against large financial institutions and the So the Wells Fargo
Speaker 1: Fund was just um an isolated incident. Yeah, I think
Speaker 1: in a way that was essentially a way for it's
Speaker 1: philics just looking this way. To me, now, the best
Speaker 1: interpretation I can put on it now is that this
Speaker 1: was a way for Mr Mulvaaney to say, you see,
Speaker 1: I'm not getting lacked in my sort of illegal occupation
Speaker 1: of the CFPB. I'm actually quite severe. I'm very hard
Speaker 1: on the banks. But it was just it was sort
Speaker 1: of a one off deal. And of course this all
Speaker 1: comes at the same time as announcement that the various
Speaker 1: other enforcement actions are being dropped. They're not going to
Speaker 1: pursue um exploitation or fraud by poor profit education institutions
Speaker 1: like Trump University, that they're not going to bother going
Speaker 1: out to pay the lenders. I mean, that's I think
Speaker 1: what is more telling than a single isolated UH fine
Speaker 1: that was imposed, that was already in the work before
Speaker 1: he came along, uh and that now looks again just
Speaker 1: like a kind of window dressing to give him at
Speaker 1: least one on arrow in the quiver. And when he's
Speaker 1: trying to defend himself, he gets claims that he's not
Speaker 1: actually taking the role of the CFTP. Seriously. Thank you, Bob.
Speaker 1: That's Robert Hockett. He's a professor at Cornell Law School.
Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can
Speaker 1: subscribe and listen to the show on Apple podcast, SoundCloud,
Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brosso.
Speaker 1: This is Bloomberg