WEBVTT - Apple, Bayer, Moderna and Other Catalysts 0:00:13.400 --> 0:00:17.200 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:17.239 --> 0:00:21.279 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:21.320 --> 0:00:26.960 investment research platform of Bloomberg LP. This podcast series examines 0:00:27.000 --> 0:00:31.040 the intersection of business policy and law, and today we'll 0:00:31.040 --> 0:00:34.680 be looking at the litigation and policy catalysts that we're 0:00:34.720 --> 0:00:38.240 watching in February twenty twenty four and that we think 0:00:38.240 --> 0:00:42.080 will impact companies across a number of different sectors. My 0:00:42.200 --> 0:00:45.519 name is Elliot Stein. I'm a senior litigation analyst covering 0:00:45.560 --> 0:00:48.919 litigation and the financial sector, and I will be your 0:00:48.960 --> 0:00:54.200 host for today, February one, twenty twenty four. As always, 0:00:54.240 --> 0:00:56.600 if you have any questions about any of the matters 0:00:56.640 --> 0:01:00.800 that we'll be discussing on this episode, please don't hesitate 0:01:00.840 --> 0:01:03.840 to reach out to us at your convenience with your questions. 0:01:05.120 --> 0:01:09.080 All right, So we'll be discussing a handful of sectors today. First, 0:01:09.160 --> 0:01:14.039 our healthcare policy analyst Dwayne Wright will discuss why Scenting 0:01:14.280 --> 0:01:18.800 and United Health are the likely beneficiaries of an Affordable 0:01:18.880 --> 0:01:23.840 Care Act sign up surge, and separately, why retail companies 0:01:23.880 --> 0:01:28.560 like Best Buy and healthcare providers like a Medicist will 0:01:28.560 --> 0:01:30.919 benefit from Medicare's Hospital. 0:01:30.480 --> 0:01:31.360 At home waiver. 0:01:32.600 --> 0:01:37.160 After that, Tish Walker, our healthcare patent litigation analyst, will 0:01:37.240 --> 0:01:42.039 preview an upcoming claim construction hearing on February ace in 0:01:42.080 --> 0:01:47.600 litigation between Our Buddhists and Maderna over the latter's COVID vaccine. 0:01:48.600 --> 0:01:52.320 Sticking with Patents, Tamlin Basin will tell us about Apple's 0:01:52.400 --> 0:01:56.040 choices now that a US import ban on some of 0:01:56.080 --> 0:02:01.640 its watches has taken effect. Sticking with tech. Matt Settenhelm, 0:02:01.760 --> 0:02:07.080 our TMT litigation and policy analyst, will discuss February twenty 0:02:07.120 --> 0:02:11.000 sixth oral arguments in the Supreme Court concerning whether the 0:02:11.000 --> 0:02:15.280 First Amendment allows states to force Internet platforms like Google 0:02:15.400 --> 0:02:20.080 and Meta to carry content against their will. After that, 0:02:20.200 --> 0:02:24.120 I'll discuss in upcoming hearing on February fifth in a 0:02:24.240 --> 0:02:27.880 lawsuit by private equity firms and hedge fund hedge funds 0:02:28.280 --> 0:02:32.680 challenging a recent SEC rule that would increase regulation of 0:02:32.840 --> 0:02:39.800 private fund advisors. Nathan Dean, our financials policy analyst in Washington, DC, 0:02:40.000 --> 0:02:42.320 will then give us an update on the Basel three 0:02:42.560 --> 0:02:47.119 endgame concerning capital requirements for banks, and he'll also talk 0:02:47.160 --> 0:02:51.440 about in anticipated final rule by the CFPB on credit 0:02:51.440 --> 0:02:56.400 card late fees. After that, Justin Taresi, who covers consumer 0:02:56.480 --> 0:03:00.440 and industrial litigation and policy, will discuss additional trial that 0:03:00.760 --> 0:03:05.920 the company buyer faces in cancer related roundup litigation in 0:03:06.000 --> 0:03:09.520 state courts across the US. And last, but not least, 0:03:09.600 --> 0:03:14.280 our antitrust analyst Jenrie will discuss a lawsuit likely to 0:03:14.360 --> 0:03:19.560 be filed by the FTC against the Kroger Albertson's MNA deal. 0:03:21.120 --> 0:03:23.360 As always, all of this research is available on the 0:03:23.360 --> 0:03:27.600 Bloomberg terminal under big and just a quick word about 0:03:27.639 --> 0:03:30.760 Bloomberg Intelligence for those who don't know. We are the 0:03:30.800 --> 0:03:34.840 investment research platform on the Bloomberg terminal, providing in depth 0:03:34.880 --> 0:03:38.560 research on industries, companies, and markets and delivering key data 0:03:38.600 --> 0:03:43.160 from bi analysts in their given industries. All right, So 0:03:43.280 --> 0:03:45.280 with all that out of the way, let's get started 0:03:45.320 --> 0:03:48.680 with the content. Dwayne, let's bring you in to start 0:03:48.720 --> 0:03:53.160 with some DC policy talk, specifically in the healthcare sector. 0:03:53.880 --> 0:03:56.160 You've written that there has been a record number of 0:03:56.240 --> 0:03:59.680 Affordable Care Act sign ups for twenty twenty four and 0:03:59.720 --> 0:04:03.760 that's and United Health are among the health insurers most 0:04:03.800 --> 0:04:06.280 likely to benefit from that. And you also had a 0:04:06.320 --> 0:04:09.760 really interesting note on hospital at home care and why 0:04:09.840 --> 0:04:12.880 companies like best Buy and a medicis are likely to 0:04:12.920 --> 0:04:16.120 benefit from a Medicare waiver for such care. Do you 0:04:16.200 --> 0:04:18.280 want to come in and tell us more about these issues? 0:04:19.160 --> 0:04:22.520 Yeah? Sure, thanks Elliott. So there was some good news 0:04:22.520 --> 0:04:26.320 for health insurance in January, the obvious bad news being 0:04:26.600 --> 0:04:32.400 unfavorable Medicare advantage cost trends. Leaving that aside, there was 0:04:32.440 --> 0:04:37.160 good news for their commercial segments, especially for United Health 0:04:37.240 --> 0:04:42.400 senteen and elevants. Affordable Care Act sign ups during the 0:04:42.400 --> 0:04:46.040 open enrollment period top twenty one point three million people. 0:04:46.800 --> 0:04:49.320 Why is that good news? It's five million more than 0:04:49.480 --> 0:04:53.919 sign ups from twenty twenty three. It offsets some of 0:04:53.920 --> 0:04:56.680 the roughly fifteen million people that are expected to lose 0:04:56.720 --> 0:05:00.000 Medicaid coverage during the renewal process that began in April, 0:05:00.800 --> 0:05:04.360 and it suggests that of the fifteen million, some are 0:05:04.400 --> 0:05:09.039 being captured into a different business segment, allowing companies to 0:05:09.080 --> 0:05:15.120 retain premium revenues. CMS estimates that of the twenty one 0:05:15.160 --> 0:05:19.560 point three million or the five million new enrollees two 0:05:19.640 --> 0:05:24.360 point four or previously on Medicaid. So why is this happening? 0:05:25.240 --> 0:05:29.480 One the timing the Medicaid renwal process and a multi 0:05:29.480 --> 0:05:35.040 stakeholder push on coverage is free advertising for the Affordable 0:05:35.040 --> 0:05:38.719 Care Act as a health coverage option, and the number 0:05:38.720 --> 0:05:43.200 two enhanced subsidies, the I rays and HAND subsidies lowers 0:05:43.279 --> 0:05:47.840 premiums for individuals below a certain income or if their 0:05:47.880 --> 0:05:51.960 premiums are a certain percentage of their annual income. So 0:05:52.279 --> 0:05:56.400 both of these trends have been favorable for the health insurance. 0:05:56.560 --> 0:06:00.360 Now what's the outlook, Well, it wouldn't be surprised if 0:06:01.400 --> 0:06:06.120 enrollment eventually tops twenty two million this year, largely because 0:06:06.240 --> 0:06:11.160 the Medicaid manual process will continue through the first half 0:06:11.200 --> 0:06:14.839 of this year, and as more enrollies lose coverage, the 0:06:14.880 --> 0:06:20.320 ACA could be a coverage option. Number two, the growth 0:06:20.839 --> 0:06:26.239 trajectory helps cement the ACA into the healthcare fabric, making 0:06:26.279 --> 0:06:31.120 it more and more difficult to repeal, which presidential candidate 0:06:31.200 --> 0:06:36.400 Trump has promised to do if elected. And then for 0:06:36.560 --> 0:06:39.720 United Health and centeen, they're probably the biggest winners because 0:06:39.800 --> 0:06:43.400 they have the largest footprints in terms of the number 0:06:43.440 --> 0:06:47.000 of states they're in, roughly twenty eight or twenty nine 0:06:47.040 --> 0:06:53.120 states for those companies, followed by Elevants and some others 0:06:53.160 --> 0:06:57.320 so they're likely to see the biggest gains from this 0:06:57.400 --> 0:07:00.279 and will continue to see the biggest gains as the 0:07:00.480 --> 0:07:04.960 Medicaid process unfolds through this year. Now, on the other topic, 0:07:05.080 --> 0:07:08.280 the hospital at home trend, it's something they keep an 0:07:08.279 --> 0:07:11.760 eye on. It's starting out very small, but this could 0:07:12.480 --> 0:07:15.320 grow over time. And so what am I talking about 0:07:15.320 --> 0:07:19.560 with hospital at home? It's a pandemic era waiver that 0:07:19.640 --> 0:07:24.160 allows hospitals to provide in patient hospital care for patients 0:07:24.160 --> 0:07:28.240 in Medicare's fee for service program. These hospitals get the 0:07:28.280 --> 0:07:31.360 same in patient payments amount they would have received if 0:07:31.720 --> 0:07:34.400 they had received care provided care in a brick and 0:07:34.440 --> 0:07:37.400 mortar setting, but the waiver allows them to get the 0:07:37.440 --> 0:07:41.560 payment when the care is provided at home. The waivers 0:07:41.600 --> 0:07:43.520 expires at the end of the year, and we think 0:07:43.560 --> 0:07:48.520 it will get extended. The key here is how healthcare 0:07:48.600 --> 0:07:51.680 players and some non healthcare players are using this as 0:07:51.720 --> 0:07:56.400 an opportunity to expand their growth opportunities to capture some 0:07:56.480 --> 0:07:59.200 of those healthcare dollars. So when you think about a 0:07:59.200 --> 0:08:05.040 company like By you wouldn't think healthcare, but they've expanded 0:08:05.080 --> 0:08:09.720 their remote monitoring and telehealth capabilities through acquisition and are 0:08:09.840 --> 0:08:13.920 partnering with hospital systems to provide the IT infrastructure to 0:08:13.960 --> 0:08:20.040 safely do these hospital at home programs. Companies like Medicists 0:08:20.080 --> 0:08:25.200 have expanded their home health capabilities through acquisition, but they 0:08:25.240 --> 0:08:28.960 too are being in the process of being acquired by 0:08:29.600 --> 0:08:32.160 United Health, seemingly as a way for the company to 0:08:33.080 --> 0:08:37.600 improve margins on their Medicare population by creating a pathway 0:08:37.760 --> 0:08:42.040 for treatment in a cheaper setting without lowering quality. So 0:08:42.840 --> 0:08:46.080 is this a big revenue driver for companies now? No, 0:08:47.160 --> 0:08:51.400 But with increasing pressure on health plans through lower payment rates, 0:08:52.040 --> 0:08:56.680 a shift to value based healthcare, growing medicare population, the 0:08:56.840 --> 0:08:59.920 hospital home trend is something that we're keeping an eye 0:09:00.960 --> 0:09:03.320 and to see how it evolves over the coming years. 0:09:04.240 --> 0:09:06.240 So if that I'll turn back to Elliott. 0:09:07.400 --> 0:09:10.480 Great, thanks a Lotwayne, really interesting stuff. All right, We're 0:09:10.480 --> 0:09:14.280 going to stick with healthcare and bring in Tish Walker. Tish, 0:09:14.520 --> 0:09:18.240 you've been following the our Buddhists versus Maderna patent litigation 0:09:18.360 --> 0:09:22.559 over Moderna's COVID nineteen vaccine, and it sounds like there 0:09:22.640 --> 0:09:25.840 is a key hearing coming up on February ACE that 0:09:25.880 --> 0:09:27.400 you're going to be watching. Can you tell us more 0:09:27.400 --> 0:09:29.640 about that hearing? And why it's so important. 0:09:30.240 --> 0:09:34.440 Hi, Elliott, Sure, so, yeah, I've been following this case, gosh, 0:09:34.559 --> 0:09:37.480 since twenty twenty two. This was actually the first case 0:09:37.559 --> 0:09:41.840 that was filed on the COVID vaccines litigations, where our 0:09:41.880 --> 0:09:47.439 Bautists sued Maderna alleging that Maderni's spike facts infringes several 0:09:47.520 --> 0:09:52.360 of their patents that cover lipid nanoparticle technology. The patents 0:09:52.360 --> 0:09:56.680 that they asserted expire. One expired last year in July 0:09:56.760 --> 0:10:00.600 of twenty twenty three, and the others expire in twenty 0:10:00.679 --> 0:10:05.559 twenty nine. So the hearing that's coming up as a 0:10:05.600 --> 0:10:08.040 claim construction hearing, it's going to provide the court and 0:10:08.120 --> 0:10:11.640 opportunity to construe the claims. And we think this key 0:10:11.800 --> 0:10:13.480 is really going to be this hearing is going to 0:10:13.480 --> 0:10:18.480 be key to Maderna because you know, based on the filings, 0:10:18.600 --> 0:10:22.080 Maderna looks like they are setting up to argue that 0:10:22.160 --> 0:10:26.960 their COVID vaccine doesn't infringe these patents, and I think 0:10:27.000 --> 0:10:29.400 the key to their argument is likely going to be 0:10:29.600 --> 0:10:33.839 that their vaccine contains a different amount of lipids than 0:10:33.880 --> 0:10:38.480 what's actually claimed in our beautuses claims, particularly in the 0:10:38.520 --> 0:10:42.240 twenty twenty nine patents. So the twenty twenty nine patents, 0:10:42.480 --> 0:10:46.840 most of them claim these lipid nanoparticle formulations that contain 0:10:46.920 --> 0:10:51.560 a certain amount of lipids, and of interest here is 0:10:51.920 --> 0:10:57.319 the cationic lipid, which typically their claims say fifty to 0:10:57.360 --> 0:11:00.960 sixty five percent. Now, looking at some of the filings, 0:11:01.040 --> 0:11:06.640 it looks like Maderna has some level potentially lower than 0:11:06.640 --> 0:11:09.160 fifty percent, though it's not clear. We're not able to 0:11:09.200 --> 0:11:13.240 deduce from their filings what amount they actually have. So 0:11:14.320 --> 0:11:17.200 what's going to be key at this hearing is how 0:11:17.280 --> 0:11:20.440 those claims are construed around fifty to sixty percent and 0:11:20.520 --> 0:11:24.760 what amount, if any below that fifty percent is our 0:11:24.840 --> 0:11:28.920 beutises claims going to be set to cover. Now, one 0:11:28.920 --> 0:11:32.600 of those patents in the twenty twenty nine patents has 0:11:32.640 --> 0:11:36.319 been drafted where they don't actually recite a specific amount 0:11:36.360 --> 0:11:39.640 of caonic lipid. But what Maderna is arguing in the 0:11:39.640 --> 0:11:43.480 claim construction as well. During prosecution of all these patents, 0:11:43.520 --> 0:11:46.240 the key feature that you our Bautist relied on for 0:11:46.320 --> 0:11:49.880 patentability was to say that it was fifty to sixty 0:11:49.920 --> 0:11:53.600 five percent caic lipid. So they're looking to have the 0:11:53.640 --> 0:11:57.480 court read that into the claims the patent that doesn't 0:11:57.520 --> 0:12:03.160 specify the percentage of cabianic lipid. That's the three seven 0:12:03.200 --> 0:12:05.960 eight patent that expires in twenty twenty nine. So I 0:12:06.000 --> 0:12:07.880 think this is going to be sort of the first 0:12:07.880 --> 0:12:10.720 battle between these two to really get a sense of 0:12:10.760 --> 0:12:15.560 what our beautuses patents cover and how successful potentially Maderna's 0:12:15.720 --> 0:12:20.640 arguments could be for non infringement. This is a brand 0:12:20.679 --> 0:12:24.360 on brand type of patent litigation, So really what we're 0:12:24.400 --> 0:12:26.440 looking at is whether Maderna is going to be on 0:12:26.480 --> 0:12:31.560 the hook for reasonable royalty. So you know, we think 0:12:31.600 --> 0:12:35.320 the risk to Maderna is about one hundred and seven 0:12:35.440 --> 0:12:40.920 to fifty six or five sixty eight million in total 0:12:40.960 --> 0:12:44.719 patent royalties through twenty twenty nine. But again we think 0:12:44.760 --> 0:12:46.800 this is really going to be key to whether they 0:12:46.800 --> 0:12:52.360 can limit or potentially reduce that liability. And with that, 0:12:52.400 --> 0:12:53.760 I'll turn it back to you, Elliott. 0:12:55.000 --> 0:12:58.280 Good stuff, Thanks Tish. All right, let's stick with patents, 0:12:58.400 --> 0:13:01.319 but move over to the tech sector and bringing Tamlin 0:13:01.440 --> 0:13:04.560 basin our Tamlin. I think when we last had you 0:13:04.640 --> 0:13:08.040 on here, you were previewing for us the likelihood of 0:13:08.080 --> 0:13:12.200 an important ban against certain Apple watches and I guess 0:13:12.320 --> 0:13:15.920 now that import ban has taken effect, and you've written 0:13:15.960 --> 0:13:19.319 about what Apple's options are going forward to deal with it, 0:13:19.840 --> 0:13:20.839 you want to tell us more about that? 0:13:21.440 --> 0:13:24.680 Yeah, sure, hi Elia. Yeah, so you're right, Apple is 0:13:24.760 --> 0:13:28.160 no longer selling watches in the US market they can 0:13:28.200 --> 0:13:31.760 measure a user's blood oxygen level, and the reason for 0:13:31.840 --> 0:13:36.000 that is a long running intellectual property dispute with medical 0:13:36.000 --> 0:13:39.800 device maker Masimo, And in particular, it's this import man 0:13:39.840 --> 0:13:43.240 you messed mentioned that was issued by the International Trade 0:13:43.240 --> 0:13:47.240 Commission after finding that Apple's watches and friend two of 0:13:47.320 --> 0:13:52.079 Masimo's patents. Now, the last time we talked, that ban 0:13:52.240 --> 0:13:55.240 had been temporarily paused by the US Court of Appeals 0:13:55.240 --> 0:13:57.960 for the Federal Circuit, but the court then said that 0:13:58.000 --> 0:14:01.559 the band could go back into effect during the tendency 0:14:01.640 --> 0:14:05.320 of Apples appeals appeal of that underlying decision. So the 0:14:05.360 --> 0:14:08.960 band did take hold January eighteenth. So right now, and 0:14:09.000 --> 0:14:11.920 what we're waiting for is any indication that Apple is 0:14:11.960 --> 0:14:15.800 willing to finally settle this lawsuit now so far it 0:14:15.840 --> 0:14:19.800 has refused, and its attempt to design around the infringing 0:14:19.920 --> 0:14:23.600 patents was successful only because what it essentially did was 0:14:24.000 --> 0:14:27.360 issue a software update that blocked this feature from working, 0:14:28.560 --> 0:14:33.840 And in fact, because these patents protect hardware specifically, it 0:14:33.880 --> 0:14:36.680 sort of protects the placing of the sensors on the 0:14:36.680 --> 0:14:39.280 back of the watch to measure these blood oxygen levels. 0:14:39.720 --> 0:14:41.800 But because of that, we don't think it's likely that 0:14:41.880 --> 0:14:43.280 Apple is going to be able to come up with 0:14:43.840 --> 0:14:47.040 any easy way to bring a watch to market that 0:14:47.200 --> 0:14:52.480 includes these features absent a broad and significant redesign. Now 0:14:52.480 --> 0:14:56.280 the litigation has shifted somewhat to the focus of litigation 0:14:56.440 --> 0:14:59.320 to a case in Delaware where Apple is actually the plaintiff. 0:15:00.040 --> 0:15:02.880 It's trying to stop Masimo from bringing its own watch 0:15:02.920 --> 0:15:06.359 to the market. Now, in that case, Masimo has challenged 0:15:06.400 --> 0:15:09.040 apples asserted patents at the patent trial and pel board, 0:15:09.640 --> 0:15:11.960 and it has asked the Delaware court to pause that 0:15:12.040 --> 0:15:16.080 proceeding while those challenges play out. Apple a few weeks 0:15:16.080 --> 0:15:20.760 ago opposes that stay, and our use of the district 0:15:20.480 --> 0:15:24.720 court case is Apple's best chance to stop masscrow from 0:15:24.760 --> 0:15:29.040 really coming in here and taking massive scale share in 0:15:29.120 --> 0:15:35.040 this market for smart watches that monitor these functionalities. Now, 0:15:35.040 --> 0:15:38.960 we think the court will deny Apple's request and the 0:15:39.040 --> 0:15:43.560 case will be stayed while these challenges play out, But 0:15:43.640 --> 0:15:47.480 the fun fundamental question remains is will Apple settle now 0:15:47.480 --> 0:15:50.800 most companies would have done so already rather than letting 0:15:50.920 --> 0:15:54.680 a highly touted, touted feature be removed from a signature 0:15:54.960 --> 0:15:58.800 signature product. Apple's resistance to a deal is likely at 0:15:58.880 --> 0:16:03.520 least partially driven by a reluctant to setup precedent of 0:16:03.600 --> 0:16:07.080 paying off patent owners. Now. Like most large tech companies, 0:16:07.120 --> 0:16:10.360 Apple does face dozens of patent infringement lawsuits each year, 0:16:10.840 --> 0:16:13.000 and if it were to settle all of those cases, 0:16:13.040 --> 0:16:17.880 it really would have a material impact on Apple's margins. However, 0:16:18.000 --> 0:16:19.320 we're just gonna have to wait and see if it 0:16:19.360 --> 0:16:22.800 reaches a threshold in this dispute with Masimo where the 0:16:22.880 --> 0:16:26.680 damages of that sales ban outweigh the potential risks of 0:16:26.720 --> 0:16:29.480 setting such a precedent. So I will leave it there. 0:16:30.120 --> 0:16:32.360 Back to you, Elliott, Thanks Jaremn. 0:16:32.760 --> 0:16:38.760 That's super interesting, multifaceted litigation. All right, let's stick with tech. 0:16:39.360 --> 0:16:41.880 We'll move over to the Internet side of the sector, 0:16:41.960 --> 0:16:47.480 bringing Matt sett in Helm Matt pretty high profile case 0:16:47.560 --> 0:16:49.680 you're following in the Supreme Court that's going to be 0:16:49.800 --> 0:16:53.440 argued later in February over whether states like Florida and 0:16:53.600 --> 0:16:57.480 Texas can compel companies like Google and Meta to carry 0:16:57.520 --> 0:17:02.160 content against their will. Interesting First Amendment issue, I guess, 0:17:02.200 --> 0:17:05.160 with big implications for these companies in particular. You want 0:17:05.200 --> 0:17:06.560 to come in and tell us more about it. 0:17:06.760 --> 0:17:10.480 Yeah, yeah, thanks elliott. A. Big tech regulation remains a 0:17:10.600 --> 0:17:13.520 hot topic here in Washington, d c. And just this 0:17:13.600 --> 0:17:17.800 week we had, you know, a very high profile hearing 0:17:17.840 --> 0:17:21.439 in the Senate about how to regulate these companies for 0:17:21.680 --> 0:17:26.080 harms to that they may be causing for children. This 0:17:26.200 --> 0:17:31.600 Supreme Court case really gets to how can can regulators 0:17:31.640 --> 0:17:34.360 go after these companies and how does the First Amendment 0:17:34.600 --> 0:17:38.600 limit their ability to regulate an issue specifically, Here are 0:17:38.760 --> 0:17:42.119 two state laws, one from Florida one from Texas that 0:17:42.160 --> 0:17:45.040 were motivated by concerns that the big tech companies were 0:17:45.040 --> 0:17:50.120 biased against conservatives. But fundamentally these laws raise a basic 0:17:50.200 --> 0:17:56.520 question about control from the companies. Can regulators force the 0:17:56.560 --> 0:18:00.960 companies to operate as open platforms for the speech of others. 0:18:01.000 --> 0:18:03.920 The companies say no. They say they have a First 0:18:03.920 --> 0:18:07.280 Amendment right to decide what appears on their platforms, what 0:18:07.359 --> 0:18:10.440 to emphasize on their platforms. Just as the New York 0:18:10.480 --> 0:18:13.879 Times gets to decide what stories to run and which 0:18:13.960 --> 0:18:18.400 to emphasize or prioritize, just as a museum curator gets 0:18:18.440 --> 0:18:22.880 to decide what to display. The government can't dictate how 0:18:22.920 --> 0:18:27.000 they make those speech decisions, and so that's what's tied 0:18:27.080 --> 0:18:29.119 up here in terms of impact. I think there are 0:18:29.160 --> 0:18:31.960 two important things to watch here. One, if the States 0:18:32.119 --> 0:18:36.680 win big here and social media companies can't control their platforms, 0:18:36.880 --> 0:18:40.480 they can be treated as common carriers. It risks denting 0:18:40.640 --> 0:18:43.720 their digital ad business that brings in billions of dollars 0:18:43.760 --> 0:18:48.119 a year for Alphabet and Meta. The platforms would be 0:18:48.160 --> 0:18:51.720 at risk of being overwhelmed by content that the companies 0:18:51.840 --> 0:18:57.480 now look work very hard to remove. Advertisers could look elsewhere, 0:18:58.480 --> 0:19:01.560 and that could have a on the business. If the 0:19:01.680 --> 0:19:06.199 companies win and the First Amendment shields them from this 0:19:06.280 --> 0:19:08.760 sort of regulation, the question is how big of a 0:19:08.880 --> 0:19:12.360 victory did they win. How much does the First Amendment 0:19:12.480 --> 0:19:16.920 shield other types of regulation, such as data privacy regulation, 0:19:17.280 --> 0:19:20.760 such as regulation aimed at protecting kids. There's the potential 0:19:20.920 --> 0:19:24.440 for a very big win for the companies here as well. 0:19:24.840 --> 0:19:26.760 So how does it likely play out. It's not a 0:19:26.800 --> 0:19:29.119 sure thing, and I expect the Supreme Court to be 0:19:29.200 --> 0:19:32.240 divided on this, but I give the companies a seventy 0:19:32.280 --> 0:19:36.240 percent chance to win this case. I think Justice is Alito, 0:19:36.359 --> 0:19:39.240 Gorsicch and Thomas are good bets to rule against the 0:19:39.280 --> 0:19:42.280 companies and to rule for the States, But in my view, 0:19:42.359 --> 0:19:45.480 it's difficult to see the States getting two more votes 0:19:46.080 --> 0:19:50.440 to win this case. Justices Barrett, Kavanaugh and Roberts will 0:19:50.480 --> 0:19:53.119 be the most important to watch at the February twenty 0:19:53.160 --> 0:19:56.560 sixth hearing, and so keep an eye on them. I 0:19:56.640 --> 0:19:59.480 expect the Court to decide this case in the second quarter, 0:20:00.000 --> 0:20:03.120 probably in May or June. With that, let me toss 0:20:03.160 --> 0:20:04.080 it back to you Elliott. 0:20:05.800 --> 0:20:07.119 Great, thanks Matt. 0:20:07.640 --> 0:20:08.720 That'll be a really. 0:20:08.480 --> 0:20:10.960 Interesting one to watch. I'm sure it'll garner a lot 0:20:10.960 --> 0:20:14.840 of headlines. All right, I'll jump in here to talk 0:20:14.880 --> 0:20:18.920 about a lawsuit by trade groups on behalf of hedge 0:20:18.920 --> 0:20:22.880 funds and private equity firms challenging an SEC rule from 0:20:23.000 --> 0:20:29.000 August that increases regulations for private fund advisors. Specifically, that 0:20:29.119 --> 0:20:33.840 rule requires private fund advisors to give investors quarterly statements 0:20:33.880 --> 0:20:38.639 detailing performance, fees and expenses. The rules also call for 0:20:38.880 --> 0:20:43.000 these advisors to obtain annual audits for each private fund. 0:20:43.520 --> 0:20:48.080 The rules also prohibit providing preferential treatment to investors, and 0:20:48.200 --> 0:20:51.879 the rules impose restrictions on expenses and fees that are 0:20:51.880 --> 0:20:57.040 related to government investigations. So all told, these rules are 0:20:57.160 --> 0:21:00.719 estimated to cost private funds about five billion dollars per 0:21:00.800 --> 0:21:04.320 year to comply with, and they're expected to result in 0:21:04.440 --> 0:21:08.080 loss of investor capital and higher fees for investors as well. 0:21:09.359 --> 0:21:13.359 Oral argument is going to be held February fifth before 0:21:13.359 --> 0:21:16.560 a three judge panel of the Fifth Circuit Court of Appeals, 0:21:16.600 --> 0:21:19.600 which generally is, I think most people are now aware, 0:21:19.640 --> 0:21:22.480 has been a very business friendly court and also a 0:21:22.560 --> 0:21:27.639 court very skeptical of administrative overreach, and that's one of 0:21:27.640 --> 0:21:30.920 the reasons we think the challengers that are suing here 0:21:30.960 --> 0:21:33.520 have a seventy percent chance of striking down the rule, 0:21:34.040 --> 0:21:37.359 as we think their primary arguments will resonate with these 0:21:37.440 --> 0:21:40.600 judges on the Fifth Circuit and then also the Supreme 0:21:40.640 --> 0:21:44.480 Court if it gets that far. Just to be a 0:21:44.520 --> 0:21:47.720 little more specific, I think the trade groups have a 0:21:47.760 --> 0:21:52.119 strong argument that the SEC is exceeding its authority because 0:21:52.160 --> 0:21:57.200 the agency is relying on a general anti fraud provision 0:21:57.400 --> 0:22:00.439 of the Investment Advisors Act as well as action of 0:22:00.520 --> 0:22:04.199 Dodd Frank that doesn't really even mention private funds but 0:22:04.280 --> 0:22:07.840 instead is focused on retail investors, which really aren't at 0:22:07.920 --> 0:22:11.440 issue here. So I think the court will find that 0:22:11.480 --> 0:22:15.840 the rule violates the Major Questions doctrine because Congress didn't 0:22:15.880 --> 0:22:20.360 explicitly give the SEC the authority to regulate private funds 0:22:20.400 --> 0:22:25.200 in this manner, like I said or argument on February fifth, 0:22:25.680 --> 0:22:28.439 and I expect a decision by this three judge panel 0:22:28.520 --> 0:22:33.360 by the end of the second quarter. If the SEC loses, 0:22:33.440 --> 0:22:37.520 as we expect they will, the agency can then pursue 0:22:37.600 --> 0:22:41.120 further review by the full Fifth Circuit Court of Appeals 0:22:41.280 --> 0:22:44.720 or the Supreme Court, but I don't expect the agency 0:22:44.760 --> 0:22:49.560 to do any better with those appeals either. So for now, 0:22:49.640 --> 0:22:53.760 stay tuned for updates following the February fifth hearing, and 0:22:54.840 --> 0:22:58.200 we will move on to Nathan Dean to talk some 0:22:58.280 --> 0:23:04.040 financials policy. Nason, a lot of talk about the Bosle 0:23:04.080 --> 0:23:07.440 three endgame recently and whether it will be finalized this 0:23:07.560 --> 0:23:11.480 year or not. Plus, I feel like we've been waiting 0:23:11.520 --> 0:23:14.199 for the cspb's final rule on credit card late fees 0:23:14.800 --> 0:23:16.679 for quite a while. Now, you want to come in 0:23:16.720 --> 0:23:18.639 and tell us the latest on both of those issues. 0:23:18.840 --> 0:23:21.439 Yeah, so let's start with the Bosle three endgame. You know, 0:23:21.480 --> 0:23:23.520 I think a lot of people know what this is, 0:23:23.600 --> 0:23:26.560 but just for those of you who don't know, it is, 0:23:26.880 --> 0:23:30.000 it's the last remaining piece of the Bosle three accords, 0:23:30.000 --> 0:23:33.480 hence the name endgame, and it's recalibration of risk weighting 0:23:33.520 --> 0:23:38.200 of assets, which when taken with all the changes as proposed, 0:23:38.200 --> 0:23:42.159 you're looking around a nineteen percent increase in capital requirements 0:23:42.200 --> 0:23:44.320 for the largest banks, so the JP Morgan is the 0:23:44.320 --> 0:23:47.480 Bank Americas. For the regional banks, you're looking around five 0:23:47.520 --> 0:23:51.800 to six percent. Now, this rule is universally hated by 0:23:51.800 --> 0:23:53.600 the industry. In fact, for those of us in the 0:23:53.640 --> 0:23:57.200 DC area, we actually had commercials during the Ravens Chiefs 0:23:57.240 --> 0:24:02.040 game talking about Bosle three endgame. So what the industry 0:24:02.080 --> 0:24:04.480 is doing is at this moment is they are putting 0:24:04.520 --> 0:24:08.439 pressure on the FED, the OCC and the FDIC to 0:24:08.520 --> 0:24:11.920 either scale back drastically their rule, or their hope better 0:24:11.960 --> 0:24:15.439 hopes is to delay this until after the twenty twenty 0:24:15.480 --> 0:24:18.280 four election, and then if you get a Republican victor 0:24:18.320 --> 0:24:20.160 in the White House, then you know this rule could 0:24:20.200 --> 0:24:23.000 be indefinitely delayed. So what do we think is going 0:24:23.080 --> 0:24:25.359 to happen? Well, the comment deadline was January sixteenth, to 0:24:25.480 --> 0:24:27.440 the FED and the other regulators are going to go 0:24:27.560 --> 0:24:30.040 quiet for the next few months. They're going to analyze 0:24:30.040 --> 0:24:32.439 all the comments, there are lots of them, and then 0:24:32.440 --> 0:24:34.479 they're going to try and give us signals on what 0:24:34.520 --> 0:24:37.280 they think will happen. Now, as of right now, we 0:24:37.320 --> 0:24:40.560 are still saying sixty percent chance of finalization this year. 0:24:41.160 --> 0:24:43.080 But I want to throw a huge caveat on this 0:24:43.200 --> 0:24:46.919 because the FED is hanging by a thread because the 0:24:47.000 --> 0:24:49.240 amount of changes that they are going to make, which 0:24:49.280 --> 0:24:51.119 I think they will make, and we actually saw a 0:24:51.160 --> 0:24:54.800 note from one of the bank, one of the big 0:24:54.840 --> 0:24:56.760 banks this week saying that they think there are going 0:24:56.840 --> 0:25:01.159 to be substantial changes to the basle three endgame is 0:25:01.240 --> 0:25:04.119 because if you look at the risk weighting of assets 0:25:04.160 --> 0:25:09.240 within this rule, specifically geared towards consumer products like mortgages, loans. 0:25:09.680 --> 0:25:13.560 We've even seen criticism from moderate Democrats over the environmental 0:25:14.040 --> 0:25:19.000 aspect of this, for the risk waiting of climate financial 0:25:19.040 --> 0:25:22.040 instruments that's going to change. There are three pillars to 0:25:22.080 --> 0:25:25.000 this rule. It's operational risk, capital risk, and market risk, 0:25:25.440 --> 0:25:29.000 and it's the operational risk and the capital risk that 0:25:29.080 --> 0:25:31.879 I think are going to be dramatically changed. Now will 0:25:32.000 --> 0:25:34.240 we don't have a prediction on will it be a 0:25:34.320 --> 0:25:37.240 nineteen percent increase in capital. It'll probably be much smaller 0:25:37.280 --> 0:25:39.880 than that. But that's the thing that we're going with 0:25:39.920 --> 0:25:42.439 at this moment. But like I said, there is a 0:25:42.480 --> 0:25:45.200 decent chance that this could also be delayed because there's 0:25:45.240 --> 0:25:49.040