Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
Speaker 2: We're going to work with President Trump to push back
Speaker 2: on governments around the world. They're going after American companies
Speaker 2: and pushing to censor more.
Speaker 1: Meta CEO Mark Zuckerberg has been courting President Donald Trump
Speaker 1: since his election, scrapping content moderation policies criticized by conservatives,
Speaker 1: donating a million dollars to Trump's inauguration, promoting Republicans to
Speaker 1: top roles in Meta, and visiting the White House several times.
Speaker 1: Despite all that lobbying, the historic antitrust case against Meta
Speaker 1: that was started in the first Trump administration went to
Speaker 1: trial this week in DC. The Federal Trade Commission is
Speaker 1: trying to force METTA to divest Instagram and WhatsApp, calling
Speaker 1: Zuckerberg as its first witness. Joining me is anti trust
Speaker 1: expert Harry First, a professor at NYU Law School. Harry,
Speaker 1: what's the main issue the FGC has to prove? Here?
Speaker 2: There are a few main issues. The first issue is
Speaker 2: the definition of the market. So the question is who
Speaker 2: are Facebook's competitors? That sort of in some ways a
Speaker 2: simple question. Who will consumers turn to? What sellers? If
Speaker 2: the sellers they're looking at offers a bad deal. Usually
Speaker 2: it's raises price, they switch to something else. We do
Speaker 2: this all the time. So the question is who are
Speaker 2: the rivals of Facebook and who do consumers switch to
Speaker 2: if they wanted to switch. Market definition always critical issue
Speaker 2: in any trust cases, and the first issue to resolve.
Speaker 2: The second issue is are they a monopolists in this market?
Speaker 2: You know, do they have a large enough share of
Speaker 2: the market. Is it hard to enter the market so
Speaker 2: they can sort of have power to do what they want?
Speaker 2: Do we see them doing the bad things that monopolists do,
Speaker 2: which often means, you know, selling something at a high price.
Speaker 2: Of course, Facebook says, hey, we give our thing away
Speaker 2: for free. So what's their problem? And then the third
Speaker 2: thing is, okay, if they are monopoly with monopoly power,
Speaker 2: have they engaged in anti competitive conduct that excludes competitors
Speaker 2: unreasonably from the market. And so that's the third thing,
Speaker 2: and that's where the acquisitions of Instagram and WhatsApp come in.
Speaker 1: Let's start with the market definition, which was one of
Speaker 1: the key points Zuckerberg was questioned about. So tell us
Speaker 1: how the FTC and Meta are viewing the market.
Speaker 2: Facebook contends that the market, you know, whatever it was
Speaker 2: maybe in twenty eleven. Now there are lots of competitors
Speaker 2: and Facebook is doing things similar to particularly TikTok. So
Speaker 2: the Pedroal Trade Commission has called the market we always
Speaker 2: love these names and anti trust, the Personal Social Networking
Speaker 2: Services market, and then they use an acronym, so you
Speaker 2: think it's something special, the PSN market, And basically that's
Speaker 2: friends and family. You know where Facebook started out putting
Speaker 2: people together and creating the social network, as the name
Speaker 2: of that movie was way back at the start. So
Speaker 2: the Federal Trade Commission says, that's really the core of
Speaker 2: their services, and it's not something that actually other platforms
Speaker 2: except for Instagram offer, They don't really offer that sort
Speaker 2: of friends and family network. You know, TikTok and follow people,
Speaker 2: but you know, not for keeping up on what your
Speaker 2: high school buddies are doing. So the first question is
Speaker 2: how broad is that market? So Facebook says, hey, you know,
Speaker 2: lots of choices for consumers. They don't want to watch
Speaker 2: reels on Facebook, they go to TikTok and vice versa,
Speaker 2: so we have to include them in the market, says Meta,
Speaker 2: And you know that's what a lot of the argument's
Speaker 2: going to be with data and consumer surveys and so forth.
Speaker 2: And the analogy that the Commission has used and I
Speaker 2: think we'll continue to use, is supermarkets. So there was
Speaker 2: a famous case involving Whole Foods and an acquisition that
Speaker 2: Whole Foods did, and the Federal Trade Commission called the
Speaker 2: markets the PNOS market got it premium natural organic supermarkets.
Speaker 2: And when Whole Foods made this acquisition of another market
Speaker 2: like that, they said, ah, that's the market. Other supermarkets
Speaker 2: are not in this market, you know, like stopping shopper
Speaker 2: and so forth. And the court in which this case
Speaker 2: is being tried, the PC Circuit, accepted that definition. And
Speaker 2: the point is sort of a simple one. Yeah, they've
Speaker 2: got lots of things in the supermarket, but you go
Speaker 2: to certain supermarkets sort of a core of users for
Speaker 2: a core of things. So you go to Whole Foods
Speaker 2: because you like to pay high prices. Oh wait a minute,
Speaker 2: that's wrong. You go to Whole Foods because you want
Speaker 2: the organic, natural, premium stuff that they specialize in. And
Speaker 2: then you buy milk, so you know, you go to
Speaker 2: Facebook do you want to communicate with your friends and family?
Speaker 2: And then you know, maybe you'll look at some reels
Speaker 2: or maybe do some other things or what whatever other
Speaker 2: fees they've got. But the core is still the friends
Speaker 2: and family. So that's going to be the legal and
Speaker 2: sort of factual contention that the parties are going to
Speaker 2: litigate over during the course of this trial, and to.
Speaker 1: The point of bad conduct or anti competitive conduct. The
Speaker 1: FTC showed Zuckerberg some smoking gun emails, including one from
Speaker 1: twenty twelve where he described the Instagram deal as a
Speaker 1: way to neutralize a competitor.
Speaker 2: Yeah, that's a good one. Yeah. I could see the
Speaker 2: lawyers looking at that going, oh my god, did you
Speaker 2: write that. There's a good reason why that would be
Speaker 2: called a smoking gun. You know, not every acquisition that
Speaker 2: a major platform or a monopoly, let's say, makes is illegal.
Speaker 2: It's not illegal for that reason. Firms make acquisitions all
Speaker 2: the time. The ones that are illegal in this context
Speaker 2: are those that are done to u out a threat
Speaker 2: to the monopolists. As they said, a buyer bury strategy.
Speaker 2: They would just buy up the competitions they were worried about.
Speaker 2: So on its face it could be neutral. Well, they
Speaker 2: made an acquisition, what the heck? And maybe they have
Speaker 2: some alleged good reasons, but then you read the email
Speaker 2: in Zuckerberg says, hey, we're worried about this company, we
Speaker 2: better buy it. And their effort at incorporating photographs into
Speaker 2: Facebook and making it the kind of thing that Instagram
Speaker 2: was doing was not going well. So they were really
Speaker 2: being challenged by Instagram, and you know, they responded to
Speaker 2: that challenge not by making a better product, but by
Speaker 2: buying their competitor. Classic move, but not a competitive move.
Speaker 2: It's an anti competitive move, so the government says, and
Speaker 2: so Mark Zuckerberg apparently said.
Speaker 1: At one point, Zuckerberg said that Facebook's feed has turned
Speaker 1: away from family and friends and toward quote more of
Speaker 1: a broad discovery entertainment space.
Speaker 2: Right, Yeah, sure, we compete with television, Yeah, and tennis
Speaker 2: and the national football. They're not going to go that far,
Speaker 2: but you know the game if you want to call
Speaker 2: it that. But the idea is you broaden that consumers
Speaker 2: do have lots of choices, do do different things. You know,
Speaker 2: they don't only look at Facebook, and Facebook over time
Speaker 2: has tried to bring more things within his ecosystem, within
Speaker 2: the platform. So they're gone into virtual reality. That's why
Speaker 2: Zuckerberg renamed the company meta because he wants the metaverse.
Speaker 2: So true that, but that doesn't take away from the
Speaker 2: fact that they still sell groceries. You know, they may
Speaker 2: want to have espressos, you know, in the grocery store,
Speaker 2: but they're not an espresso store. So you know, they
Speaker 2: still sell their core function and that's why people put
Speaker 2: up with all the junk pardon my French that they
Speaker 2: see with these ads constantly.
Speaker 1: Can we read anything into the fact that Judge Bosberg
Speaker 1: has sounded skeptical about the FTC's case. He dismissed the
Speaker 1: initial case in twenty twenty one, and in November he
Speaker 1: said the agency faces hard questions about whether it's claims
Speaker 1: can hold up in the crucible of trial.
Speaker 2: Right, well, he's running the crucible like an Arthur Miller play.
Speaker 2: So Judge Bosburg, just from reading his opinions, is sharp,
Speaker 2: he's critical. He is not a pushover for the government,
Speaker 2: but he's not a pushover for the defendants either. So
Speaker 2: you know, I read this as saying he'll come out
Speaker 2: with an opinion that will prove challenging for the losing
Speaker 2: party on appeal, wherever that is. And I don't predict
Speaker 2: that he's necessarily going to come out in favor of Facebook, frankly,
Speaker 2: because he's been willing to accept, at least as a
Speaker 2: legal matter, important arguments from the government and dismissed some
Speaker 2: of Facebook's defenses. And you're not going to fool a.
Speaker 1: Judge if the judge does find against Meta. How likely
Speaker 1: is in order to divest Instagram and WhatsApp, I mean,
Speaker 1: a breakup of that size hasn't happened since AT and
Speaker 1: T forty years ago.
Speaker 2: Well, we haven't taken on companies of this size. We
Speaker 2: did take on Microsoft, I didn't order structural relief. The
Speaker 2: AT and T breakup was by agreement, so it's not
Speaker 2: a decree entered by a court after losing a case.
Speaker 2: So we don't do divestitures that often, you know, not never,
Speaker 2: it does get done, but this is certainly of an
Speaker 2: important magnitude, and you know, puts the court in a
Speaker 2: difficult role of trying to separate companies that Facebook frankly
Speaker 2: has done its best to smush together, to use the
Speaker 2: technical term. So that's sort of an obvious remedy but
Speaker 2: not necessarily going to be the one the court will accept.
Speaker 2: But there are lots of steps before we would see
Speaker 2: an order to separate those companies.
Speaker 1: Mark Zuckerberg has been closing up to Trump for a
Speaker 1: while now. Could Trump bail Meta out if it does
Speaker 1: lose the case.
Speaker 2: I guess the answer is sure. At least at this point,
Speaker 2: he has pretty much seized control. I don't know what
Speaker 2: you want to call it. A hostile takeover of the
Speaker 2: Federal Trade Commission. He fired the two Democratic members of
Speaker 2: the commission, supposed to be balanced bipartisan commission. He's fired
Speaker 2: the two for no reason other than the Democrats. The
Speaker 2: chair is slavish in his praise of the President. I
Speaker 2: think that's a fair work. So yes, I think Trump
Speaker 2: could very well order whatever he wanted to order, and
Speaker 2: if the chairman or the other commissioners didn't want to
Speaker 2: go along, you can just fire them. At least that's
Speaker 2: how he sees the law. It may turn out that
Speaker 2: that's not going to be the law. Maybe the Supreme
Speaker 2: Court is going to not take that final step in
Speaker 2: terms of ending the independence of regulatory agencies, but we'll
Speaker 2: have to see. That's in litigation. But if he has control,
Speaker 2: then he can do that. Even before he did try
Speaker 2: to pressure in his first administration, pressure the chair of
Speaker 2: the Federal Trade Commission who resisted things. But now the
Speaker 2: ability and willingness of the chairman who resists whatever the
Speaker 2: president wants is zero. That's said, I'm not quite sure
Speaker 2: I know or understand, and maybe the President doesn't either
Speaker 2: what he might want and what he would pressure the
Speaker 2: Federal Trade Commission to do. Obviously he's not pulled the
Speaker 2: plug on this litigation, which he could have, so we'll
Speaker 2: just have to see how it goes.
Speaker 1: Always a pleasure, Harry, Thank you. That's Professor Harry First
Speaker 1: of NYU Law School. Coming up next. How the Blue
Speaker 1: states could fight back when they're targeted. I'm June Grosso.
Speaker 1: When you're listening to Bloomberg. In the past, President Trump
Speaker 1: has even blamed the criminal case against him on blue
Speaker 1: states being out to get him.
Speaker 3: Can we fly over a Democrat state?
Speaker 4: I get it, grand jury subpoena?
Speaker 3: So what happened?
Speaker 2: What do you do?
Speaker 4: Sir?
Speaker 1: They're investigated you.
Speaker 3: You flew over the state.
Speaker 1: They think something's up. So now is he targeting those
Speaker 1: states for retribution? On April first, the Trump administration announced
Speaker 1: the closing of five of ten regional offices of the
Speaker 1: Department of Health and Human Services, all in blue states.
Speaker 1: On April eighth, an executive order was aimed at the
Speaker 1: blue states of New York, Vermont, in California for state
Speaker 1: overreach with respect to climate change policies. And six of
Speaker 1: the seven universities that have lost funding on the grounds
Speaker 1: that they didn't adequately address anti semitism on campus are
Speaker 1: in blue states. The seventh is in a purple state.
Speaker 1: But even if Trump is in fact targeting Blue states,
Speaker 1: what can they do about it? Joining me is retired
Speaker 1: federal judge Nancy Goer, a senior lecturer at Harvard Law School.
Speaker 1: She's the co author of an article on Bloomberg Law
Speaker 1: entitled Trump's Blue state bias could rip the US apart.
Speaker 1: Judge tell us how President Trump has been discriminating against
Speaker 1: the Blue states.
Speaker 3: Well, the most recent one was when he closed five
Speaker 3: of the ten AHHS offices, and significantly the five were
Speaker 3: all in blue states. In addition, he has suspended the
Speaker 3: funding for various kinds of programs to hospitals. But really
Speaker 3: he's listening, we believe, only to the red states that
Speaker 3: are begging for these two return. So you know, Katie
Speaker 3: Britt from Alabama calls him to rein state and we
Speaker 3: believe that he will do that. So he's basically doling
Speaker 3: out federal funds who had vanished the red states over
Speaker 3: the blue. And we think that that's going to be
Speaker 3: a pattern going forward. You know, the pattern has not
Speaker 3: been completed. We haven't seen all aspects of it, but
Speaker 3: clearly this is what we have seen so far, particularly
Speaker 3: the thing that happens with respect to AHHS. I mean,
Speaker 3: why do you shut down the regional offices that do
Speaker 3: the most business, the most business, namely you know, New York, Boston, Chicago,
Speaker 3: San Francisco, Seattle. It's really pretty transparent what's going on.
Speaker 1: And has the Supreme Court been clear that the Constitution
Speaker 1: requires the federal government to treat all states the same.
Speaker 3: Well, in a decision that I mostly disagreed with, which
Speaker 3: is the Shelby County decision, that was dealing with preclearance
Speaker 3: requirement of the Voting Rights Act. Preclearance was a requirement
Speaker 3: that really reflected the discrimination against black people that had
Speaker 3: occurred in certain states in the South, that was documented,
Speaker 3: that was well known. The Supreme Court eliminated preclearance, which
Speaker 3: basically was a situation in which the government would review
Speaker 3: any changes in voting rights procedures in those states to
Speaker 3: make certain that it didn't continue to disadvantage black people
Speaker 3: or didn't re disadvantage black people. And what happened was
Speaker 3: the court eliminated that preclearance on the theory that there
Speaker 3: was a requirement of equal treatment of all states. And
Speaker 3: so if that is a principle reaffirms now only a
Speaker 3: few years ago, then Trump simply does not have the
Speaker 3: right to discriminate against blue states in favor of red.
Speaker 3: He can't use the federal spending power to disadvantage blue
Speaker 3: states at the expense of red.
Speaker 1: In the article, you talk about tax dollars, and a
Speaker 1: recent report from the Rockefeller Institute of Government shows that
Speaker 1: only thirteen states send more money to the federal government
Speaker 1: than they receive, and ten of those are Blue states.
Speaker 3: Every state is an employer and is oftentimes the major
Speaker 3: employer in any given state, and as with any employer,
Speaker 3: the state has to withhold money for federal taxes. And
Speaker 3: in the case of the blue states that we mention,
Speaker 3: it is a substantial amount of money. In fact, as
Speaker 3: we note in the article, the blue states are net donors.
Speaker 3: In other words, they give more money to the federal
Speaker 3: government and they get in the form of services. Now,
Speaker 3: it would be illegal, and I have to say that
Speaker 3: quite candidly, for the Blue states to withhold federal dollars.
Speaker 3: In other words, the withholding that you do on your taxes,
Speaker 3: you withhold for the purpose of turning it over to
Speaker 3: the federal government at the appropriate time. This would be
Speaker 3: illegal to withhold it, frankly, until the government makes the
Speaker 3: allocations among the states equal. It would certainly be illegal.
Speaker 3: But it is leverage, what we say, and the piece
Speaker 3: is that the government, if they continue to favor Red
Speaker 3: states over blue, will be acting illegally and unconstitutionally. And
Speaker 3: so we speculate that this is something the Blue states
Speaker 3: could do, although it is illegal.
Speaker 1: And California has a ballot issue where voters are already
Speaker 1: considering this.
Speaker 3: So California Balid initiative goes even further. The Baalid initiative
Speaker 3: is to secede from the Union, which is extraordinary. It's
Speaker 3: asking the voters to endorse the idea of secession. It's
Speaker 3: not clear what legal authority that would have, but that's
Speaker 3: certainly what California voters are indulging in. Again, you know,
Speaker 3: both withholding federal tax dollars and obviously, seceding from the
Speaker 3: Union are patently illegal. But the notion here is the
Speaker 3: government is behaving illegally. Were they to punish Massachusetts and California,
Speaker 3: for example, in favor of the Red States. The government
Speaker 3: is behaving blatantly illegally. There's no question. When the government
Speaker 3: behaves illegally, citizens have to decide what to do. Citizens
Speaker 3: have to decide what the appropriate response is. And make
Speaker 3: no mistake, this government is behaving illegally on numbers of fronts,
Speaker 3: as numbers of federal courts have found.
Speaker 1: Have we reached a constitutional crisis yet?
Speaker 3: I don't think there's any doubt that we are in
Speaker 3: a constitutional crisis, whatever the name you put on it,
Speaker 3: I don't think that there's any doubt. So far. There
Speaker 3: isn't a situation, you know, with a Southern politician now
Speaker 3: barring federal truths from coming into Mississippi or Georgia or
Speaker 3: Alabama or anything like that. That's not what we have
Speaker 3: seen yet. What we have seen, as with for example,
Speaker 3: the most recent case of mister Abrago Garcia, this is
Speaker 3: an individual who is wrongly deported to El Salvador. What
Speaker 3: we have seen is the government effectively ignoring a Supreme
Speaker 3: Court decision. We've seen the government effectively ignoring decisions of
Speaker 3: the lower courts. We've seen sophistry men outright lying. The
Speaker 3: sophistry is describing the Supreme Court's decision in a way
Speaker 3: which is patently false, patently false. You know, they saying
Speaker 3: things like the Supreme Court in dealing with the Abrago
Speaker 3: Garcia case didn't really demand that the government do anything,
Speaker 3: but only they can passively make certain that if El
Speaker 3: Salvador releases a man he could come into the countries.
Speaker 3: I mean, that's absolutely not the Supreme Court said. It's
Speaker 3: not at all what the Supreme Court said. So that's
Speaker 3: sort of really sophistry in dealing with Supreme Court decisions.
Speaker 3: And then there's been outright ignoring and disobedience of them.
Speaker 3: You know, in the cases involving the funding freezes on
Speaker 3: government funds across the country, a court will require that
Speaker 3: the funding be restored, and the government is just ignoring it,
Speaker 3: just ignoring it, requiring you know, courts to essentially get
Speaker 3: to the point to the moment of contempt. So I
Speaker 3: don't think there's any question we're in a constitutional crisis
Speaker 3: when the government can lie as they did in the
Speaker 3: Oval office, in the meeting with El Salvador's who Cale
Speaker 3: about again, this gentleman Albrego Garcia, when the government can
Speaker 3: lie flat out that he had been found to be
Speaker 3: an MS thirteen member, not true anywhere that the government
Speaker 3: can lie about its arrangements with with Cale. I don't
Speaker 3: think there's any doubt that we're in a constitutional crisis.
Speaker 1: And not only did the Attorney General misinterpret the Supreme
Speaker 1: Court's decision, but Trump advisor Stephen Miller actually said that
Speaker 1: the Supreme Court had ruled unanimously for the Trump administration.
Speaker 4: Right.
Speaker 3: Again, this is not even close to truth. When the
Speaker 3: Supreme Court says the government has to facilitate its return,
Speaker 3: and clearly in the context of a decision that is
Speaker 3: about how there was no right to deport him. When
Speaker 3: they say it has to facilitate his return, that doesn't
Speaker 3: mean well, El Salvador, if you wish to send him,
Speaker 3: we will allow him in. It's clear that it meant
Speaker 3: more than that. It meant affirmative steps to right or wrong.
Speaker 3: The government was responsible for a wrong and they had
Speaker 3: to take affirmative steps to write it. I mean also
Speaker 3: the notion that this is a foreign policy issue is
Speaker 3: pure poppycock. This is a commercial issue. This is not
Speaker 3: like returning Brittany Griner from Russia, which was a matter
Speaker 3: of delicate diplomatic negation. This is about a commercial contract
Speaker 3: between a two big dictator and the United States dealing
Speaker 3: with a contract for six million dollars to receive deportees
Speaker 3: from the United States. And clearly the United States has
Speaker 3: rights under the contract and the United States has power.
Speaker 3: If in the meeting, before the public meeting, Trump had
Speaker 3: said to Bouquele, return this guy, it would have been over.
Speaker 3: It would have been over. And the fact that they
Speaker 3: don't even think that this is a wrong that needs
Speaker 3: to be righted is stunning.
Speaker 1: The Fourth Circuit agrees with you. It denied an emergency
Speaker 1: motion by the Trump administration to halt a federal judge's
Speaker 1: effort to facilitate Garcia's return, saying the Justice Department's conduct
Speaker 1: were shocking to American sense of liberty. Is this the
Speaker 1: most serious constitutional crisis we've faced since the Civil War?
Speaker 3: I think that that's true. It's one thing to have,
Speaker 3: you know, the pictures of the Southern States defying a
Speaker 3: constitutional directive to desegregate, requiring troops to be sent to
Speaker 3: southern states to enforce the prohibition against segregation. That was
Speaker 3: a confrontation as between a unified federal government and particular states.
Speaker 3: This is a confrontation between the federal government as a
Speaker 3: whole individuals, and a confrontation between the federal government as
Speaker 3: a whole and the states. It's about to involve almost
Speaker 3: every aspect of our lives. The federal government is asserting
Speaker 3: control over universities. The federal government is seeking to control
Speaker 3: who is in the country and who is not, seeking
Speaker 3: to control who is a citizen, and flouting the Constitution
Speaker 3: in numbers of ways. So in both the scope of
Speaker 3: the disobedience the scope of the violations by the federal
Speaker 3: government on every front. So yes, I would call it
Speaker 3: the most serious constitutional crisis in the Civil War.
Speaker 1: And capitulation by some of the country's largest law firms.
Speaker 3: Well, I think we're beginning to see something different. And
Speaker 3: let me make a more general points. So, the strength
Speaker 3: of the United States is not just in representative government,
Speaker 3: not just having Congress and the president elected by the people,
Speaker 3: not just having local governments. The strength of the United
Speaker 3: States is also having civil society, namely organizations like universities,
Speaker 3: and law firms that are independent of the government. They
Speaker 3: stand for principles that the government can't control. So what
Speaker 3: Trump has done is he's taken over the government we
Speaker 3: elected him. That was the product of the voters, namely
Speaker 3: that he has a House of Representatives, the Senate, and
Speaker 3: the Lighthouse. But the judges are supposed to be independent,
Speaker 3: and the judges have been holding the judges have reflected
Speaker 3: that independence. What he is doing is trying to dismantle
Speaker 3: civil society. And the way you dismantle civil society is
Speaker 3: you dismantle the universities, and you'd sort of tried to
Speaker 3: co opt the law firms. I think we're seeing a
Speaker 3: change now. I think there was a certain kind of
Speaker 3: shock at the beginning of this administration. People didn't quite
Speaker 3: understand how far he was prepared to go. I think
Speaker 3: that the firms that have sued the government for its
Speaker 3: illegal actions, I think are going to be the wave
Speaker 3: of the future. And Harvard's standing up to Trump, I
Speaker 3: think will forecast other universities doing exactly the same. I
Speaker 3: think there was a certain amount of shock. Surely he
Speaker 3: didn't mean to go as far as he went, was
Speaker 3: the sense, And the answer is yes, he has an
Speaker 3: indeed further.
Speaker 1: Thanks for joining me. That's retired federal judge Nancy Gertner
Speaker 1: coming up. Can you keep your data private? I'm June
Speaker 1: Grosso and you're listening to Bloomberg Holden.
Speaker 4: Almost missed it.
Speaker 1: That's for your wife. Yeah, I thought your wife liked roses.
Speaker 4: Excuse me?
Speaker 3: Do I know you?
Speaker 1: No?
Speaker 3: But I know you Bill little relationship advice.
Speaker 1: If you're going to step out on your wife, you
Speaker 1: need to think it through. Do work here, because if
Speaker 1: you do, you're fired.
Speaker 3: I'm more like an independent contract.
Speaker 1: In the TV series Person of Interest, a computer program
Speaker 1: known as the Machine monitors all electronic communications and surveillance
Speaker 1: video feeds in order to find people planning to commit crimes.
Speaker 1: The Machine knows all about you. The series is science fiction,
Speaker 1: but is it that far from reality? Our online activities
Speaker 1: and data are increasingly being tracked, collected, and analyzed, so
Speaker 1: our digital data, including photos, documents, emails, finances, and even
Speaker 1: health information, isn't really private anymore. For example, according to
Speaker 1: a class action lawsuit, weight Watchers websites allegedly shared users'
Speaker 1: personal information, including health related data, with third party tracking
Speaker 1: services like Google, Facebook, and Amplitude. Joining me is an
Speaker 1: expert in cybersecurity and data privacy. Colin Walkee a partner
Speaker 1: at holestal So Colin what kind of information did WeightWatchers
Speaker 1: allegedly give out and how.
Speaker 4: So WeightWatchers was able to give out this information utilizing
Speaker 4: pixels that were on their website from companies like Facebook, Splash, Meta,
Speaker 4: Google for analytics purposes. And their allegations are that essentially
Speaker 4: every question that you answered on their website up to
Speaker 4: and including you know, are you living with Type two diatabetes?
Speaker 4: Have you used any weight loss medication? You know, do
Speaker 4: you have a history of cancer? Blood pressure? All of
Speaker 4: these sorts of sensitive information, low testosterone, All of these
Speaker 4: were questions that you were supposed to answer when you
Speaker 4: went to the website that had these pixels on them
Speaker 4: and share that information then with third parties.
Speaker 1: The sharing with third party was deliberate or was it
Speaker 1: a mistake?
Speaker 4: Well, it appears that it was deliberate. I mean, according
Speaker 4: to the allegation, certainly WeightWatchers knew about utilizing pixels in
Speaker 4: relation to healthcare information because the Federal Trade Commission has
Speaker 4: issued warnings to that, and in fact, Weight Watchers was
Speaker 4: sued once before regarding these types of issues, and so
Speaker 4: weight watchers knew that pixels were being utilized and continue
Speaker 4: to do so in spite of warnings from the Federal
Speaker 4: Trade Commission. So, for example, like fitbit, it collects healthcare information,
Speaker 4: but it's not a hipoprotected entity, and so they can
Speaker 4: do whatever they want with that information. So consequently, the
Speaker 4: FDC came out and said, no, you need to start
Speaker 4: treating healthcare information wildly different than any other type of
Speaker 4: information and protect it better, ie, don't use pixels on website.
Speaker 1: They had a privacy policy, right, and they pledged that
Speaker 1: they wouldn't share the information without written consent.
Speaker 4: That's correct, but you have to read between the lines
Speaker 4: on their privacy policy because they do know that they
Speaker 4: share this information with third parties. And that's part of
Speaker 4: the problem with privacy policies. One, if you actually took
Speaker 4: the time to read all of them, you know, you
Speaker 4: would never actually utilize a website. You'd just be reading
Speaker 4: all of these vague details. And then two, because there
Speaker 4: aren't requirements on what privacy policies have to contain with
Speaker 4: certain nominal exceptions, they can get away with making broad
Speaker 4: statements like we don't sell or share your data to
Speaker 4: third parties, and at the same time, they can still
Speaker 4: do it because they'll share that information for marketing purposes
Speaker 4: or other sorts of quote unquote internal business purposes. And
Speaker 4: so if you're utilizing the information for internal business purposes
Speaker 4: i e. Analytics, then you can get away with sharing
Speaker 4: this type of information with third parties. So it's really
Speaker 4: all about wordsmithing.
Speaker 1: Weight Watchers is reportedly facing bankruptcy. If it does go
Speaker 1: into bankruptcy, what happens with the data?
Speaker 4: So that's all part of the questions, right. So first
Speaker 4: and foremost, this class action law to filed against weight
Speaker 4: Watchers was filed on April nine, so they're still at
Speaker 4: the beginning stages. And in fact, I do not believe
Speaker 4: that weight Watchers has answered yet. If it the case
Speaker 4: that WeightWatchers isn't fact going to file for bankruptcy, the
Speaker 4: question becomes is it going to be like a twenty
Speaker 4: three and me situation in which they're looking for buyers,
Speaker 4: ie a Chapter seven or something along those lines, or
Speaker 4: is it going to be something more like a Chapter
Speaker 4: eleven where it's a true restructuring, in which case WeightWatchers
Speaker 4: wouldn't necessarily sell or give away this information to any
Speaker 4: third parties, but we retain it for their future use,
Speaker 4: you know, after they've addressed all of their debt issues.
Speaker 4: But all of that said, it goes right back to
Speaker 4: what we saw with twenty three and meters filing bankruptcy,
Speaker 4: which is, if it's the case that they go ahead
Speaker 4: and liquidates company, these are assets, which is part of
Speaker 4: the reason why the PLANEFF sued for unjust En Richmond.
Speaker 4: And this is the private type of information that's going
Speaker 4: to be sold in a bankruptcy proceeding.
Speaker 1: So you can go on these sites and they give
Speaker 1: you options about whether you want to share your information
Speaker 1: or not. Does any of that matter in reality?
Speaker 4: Well, so you've got to remember there's a slight difference
Speaker 4: between for example, accepting cookies, right or rejecting cookies, which
Speaker 4: is one way that they can obtain your information.
Speaker 2: But anytime you.
Speaker 4: Fill out a form, the form and that information is
Speaker 4: going to be stored with that company. So even if
Speaker 4: you opt out of all cookies, you might still be
Speaker 4: consenting to them utilizing this information. Because remember all state
Speaker 4: laws at this stage are opt out. What's the exception
Speaker 4: of Colorado, which is a minor exception for sensitive information,
Speaker 4: But otherwise, these are all opt out statuses. And what
Speaker 4: that means is is while you may decline cookies, once
Speaker 4: you've submitted your information to that company, they can basically
Speaker 4: do anything that they want with that information, up to
Speaker 4: and including selling it to third party.
Speaker 1: So then as you respond to the questions or fill
Speaker 1: out forms, you should just consider that information is gone,
Speaker 1: whatever information I'm giving them.
Speaker 4: I don't think that most consumers realize how unprotected their
Speaker 4: data is. Once you go on the Internet and you
Speaker 4: interact with the third party for all intents and purposes,
Speaker 4: that information is then going to be retained by them
Speaker 4: and they can pretty much do whatever they want with it.
Speaker 4: And so the concept of privacy no longer exists because
Speaker 4: we have divided human beings from their data. What the
Speaker 4: reality is is human beings are data. What we do
Speaker 4: on a daily basis is being collected, and so consequently
Speaker 4: we need to make sure or we need to try
Speaker 4: and obtain right to our data, not just privacy laws
Speaker 4: and those sorts of things, but actual rights, because then if,
Speaker 4: for example, weightwatcher says we don't sell your information or
Speaker 4: give it away to third parties, and meta gets hacked
Speaker 4: and all of a sudden you find out that they've
Speaker 4: got WeightWatchers information in their website. You now have a claim,
Speaker 4: plain and simple because they stole your property and used
Speaker 4: it without your consent. But right now, there are no
Speaker 4: laws on the books they even except for a few
Speaker 4: minor exceptions, that say your data is yours. Otherwise your
Speaker 4: data is whoever you.
Speaker 1: Give it to, So then it would take a law
Speaker 1: to change this.
Speaker 4: That's correct. So for example, in Oklahoma, and this is
Speaker 4: the only law that I'm aware of on the books,
Speaker 4: but I would love to see it in other states.
Speaker 4: In Oklahoma, there's a law that says if you upload
Speaker 4: health care information to Oklahoma's Health Information Exchange, which is
Speaker 4: a database that most states have where if you get
Speaker 4: injured in one part of the state, a doctor in
Speaker 4: another part of the state can look up that information
Speaker 4: and the Health Information Exchange. And the law says that
Speaker 4: all of the information and data that you upload to
Speaker 4: the Health Information Exchange, you quote retain a property right
Speaker 4: in that healthcare data, but then give them a license
Speaker 4: to use it. So there is a statutory instantiation of
Speaker 4: your property rights in your healthcare data. Now how far
Speaker 4: does that extend, Probably not much further. Than your healthcare data.
Speaker 4: But you can see how we would be able to
Speaker 4: pass the law that would cover any type of data
Speaker 4: that you'd give over to third parties.
Speaker 1: So a few months ago I got to notice that
Speaker 1: a company had been hacked, and it was a company
Speaker 1: that was somehow involved in processing claims for one of
Speaker 1: my doctors. So you're giving information to your doctor and
Speaker 1: somehow that information is getting hacked.
Speaker 4: So that's another great example. So within HIPPA, there are
Speaker 4: rules that permit third parties to utilize this data on
Speaker 4: behalf of the covertant. So for example, your doctor, he
Speaker 4: gives this over to a third party so that they
Speaker 4: can essentially manage it, but not utilize it without his permission.
Speaker 4: Here's the problem is that I would be shocked in
Speaker 4: astounded whether many, if any health care entities actually then
Speaker 4: go to their business associates and bet their cybersecurity protocol instead.
Speaker 4: The business associated agreements typically say that you know you're
Speaker 4: going to comply with HIPPA, and you're going to comply
Speaker 4: with my instructions, but there's no verification, there's no auditing
Speaker 4: that in fact, that's what they're doing with that data.
Speaker 4: And in healthcare space, it is all over the place
Speaker 4: because you're sharing information with testing facilities, with third parties,
Speaker 4: billing companies, so your data gets spread all over the
Speaker 4: place and you're hoping and praying that somebody's actually can
Speaker 4: imply with that business associate agreement.
Speaker 1: And their solution is usually to give you something like
Speaker 1: a year of free credit monitoring. But what can you do?
Speaker 1: You really don't have a choice but giving information in
Speaker 1: some of these situations.
Speaker 4: That's a very good point. And not only that, but
Speaker 4: what are you going to do about the data breaches themselves?
Speaker 4: I mean, in HIPPA, if somebody has breached in less
Speaker 4: than five hundred healthcare records or access, the reporting entity
Speaker 4: does not have to report that hack until February one
Speaker 4: of the following year. So you, as a consumer, how
Speaker 4: are you going to protect yourself when you find out
Speaker 4: about this hack a year later? You're not. And in fact,
Speaker 4: I've been an advocate that we need to rethink our
Speaker 4: breach notification laws altogether, because just like you said, what
Speaker 4: do you do when you get that piece of paper?
Speaker 4: You throw it away or you call a credit agency
Speaker 4: to monitor your credit. That's about all that you can
Speaker 4: do at the moment. There needs to be more meat
Speaker 4: on the bones when it comes to data breach notification requirements.
Speaker 1: And what about all the information that the government has
Speaker 1: about us?
Speaker 4: And it's not just information that you've supplied through for example,
Speaker 4: social security information in those works, but it's all that
Speaker 4: information plus whatever else that the government can aggregate from
Speaker 4: data brokers, which they have full rain and free access to,
Speaker 4: just by asking the data brokers to give them copies
Speaker 4: of that information. And just think about it this way.
Speaker 4: Every time that you go to the airport, you have
Speaker 4: that bioinformation screenpace check when you go to check in.
Speaker 4: That information is then stored and utilized so that, for example,
Speaker 4: if you're in New York City and there's a street
Speaker 4: camera that can pick you up, they can then reidentify
Speaker 4: you fairly quickly. And not just that, but your gate.
Speaker 4: All sorts of unique aspects about you are stored not
Speaker 4: just by third parties but by the government as well.
Speaker 4: The thing is is that I do not think that
Speaker 4: people appreciate the surveillance state that we live in at
Speaker 4: the particular moment. If we want to identify any particular
Speaker 4: person in the United States right now, at this moment
Speaker 4: where they're at, if they have a cell phone. We
Speaker 4: can do that fairly.
Speaker 1: So it's like the TV shows where they can track
Speaker 1: people no matter where they are.
Speaker 4: It is, it is Unfortunately, it's a very scary situation
Speaker 4: in which we're living in. So I mean, for example,
Speaker 4: you know, one of the questions on wait Watchers was
Speaker 4: have you made yourself vomit within the past week? What
Speaker 4: you could imagine then that information being sold to some
Speaker 4: diet pill company who then sends a targeted ad towards you,
Speaker 4: And now you're getting, you know, fluff medication from some
Speaker 4: third party that probably doesn't work as opposed to from
Speaker 4: your actual healthcare provider. And so it's really concerning how
Speaker 4: we're giving away this information, how can be utilized.
Speaker 1: So what do you do when a website ask for
Speaker 1: your information?
Speaker 4: So again it's all about risk and so certain websites
Speaker 4: I have to use, But I will tell you I
Speaker 4: don't use apps on my phone at all. I have
Speaker 4: like five apps that didn't come pre stored, and it's
Speaker 4: because I'm more concerned about them tracking me on my
Speaker 4: phone and where I'm at, more so than necessarily what
Speaker 4: I'm uploading the website. Because the reality is is we
Speaker 4: live in the world in which we have to upload
Speaker 4: information to websites every day, so it's a matter of
Speaker 4: managing your risk.
Speaker 1: So then when you check, don't follow me. Uh huh,
Speaker 1: that doesn't work.
Speaker 4: Well, it can, I mean it can to some degree,
Speaker 4: but you just never know. I mean there's a lot
Speaker 4: of backdoor and so I just prefer not to even
Speaker 4: risk it.
Speaker 1: So I guess the only solution is to go back
Speaker 1: to an analog world.
Speaker 4: I think that's the way people are going to realize
Speaker 4: they need to be safe.
Speaker 1: Yes, whenever I talk to you, Colin, I resolve to
Speaker 1: be more careful about my personal information. Thanks for the warnings.
Speaker 1: That's Colin Walkee of hall Estell and that's it for
Speaker 1: this edition of The Bloomberg Law Show. Remember you can
Speaker 1: always get the latest legal news on our Bloomberg Law Podcast.
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