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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 2: Is time ticking away for TikTok? Or is it just

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Speaker 2: another step in a year's long tech drama. The wildly

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Speaker 2: popular short video app used by one hundred seventy million

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Speaker 2: Americans is facing its most serious challenge to date, a

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Speaker 2: bill that would require its parent company, Chinese tech giant

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Speaker 2: Fyte Edance, to divest itself of the popular video service

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Speaker 2: in the US or remove the app from the country altogether.

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Speaker 2: That bill passed by a vote of three hundred fifty

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Speaker 2: two to sixty five on Wednesday in the House and

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Speaker 2: now goes to the Senate. Lawmakers cite privacy risks and

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Speaker 2: national security fears over the Chinese Communist Party's perceived ability

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Speaker 2: to use personal information for political gains or manipulation. Here's

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Speaker 2: North Carolina Republican Senator Tom tillis, we.

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Speaker 3: Have to recognize that information on any of these platforms

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Speaker 3: are at risk of going to the Chinese Communist Party.

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Speaker 3: So this is one step in one. I thinks a

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Speaker 3: long journey to hold China accountable.

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Speaker 2: But others like Republican Congressman Tom McClintock of California are

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Speaker 2: concerned that the US is going down a dangerous path.

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Speaker 1: The answer to CCPA style propaganda is not CCPA style oppression.

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Speaker 1: Let us slow down before we blunder down this very

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Speaker 1: steep and slippery slope.

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Speaker 2: And TikTok Ceo showed you promised a fight that includes

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Speaker 2: the courts.

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Speaker 4: We will continue to do all we can, including exercising

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Speaker 4: all legal rights.

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Speaker 2: That's something the company did last time in twenty twenty,

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Speaker 2: when then President Donald Trump ordered by Dance to sell TikTok.

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Speaker 2: My guest is Eric Goleman, a professor at Santa Clara

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Speaker 2: University Law School and co director of its High Tech

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Speaker 2: Law Institute. Eric explained why so many lawmakers are concerned

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Speaker 2: about TikTok and it's Chinese parent.

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Speaker 4: A lot of the legislatures object to TikTok principally because

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Speaker 4: of the fact that it's related to China, and there's

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Speaker 4: such senophobia among our country that it becomes a very

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Speaker 4: politically popular move to tweak China. So it's not so

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Speaker 4: much that the representatives care about the privacy issues. They

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Speaker 4: care about China, and they're signaling that to their voters.

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Speaker 2: They point to Chinese national security law that forces companies

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Speaker 2: to turn over information when compelled to do so. TikTok

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Speaker 2: CEO show Chu said that TikTok has never shared or

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Speaker 2: received request to share US user data with the Chinese government,

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Speaker 2: and he said that information on TikTok's American users had

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Speaker 2: been moved to US servers run by Texas based company Oracle,

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Speaker 2: and that under the new structure there's no way for

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Speaker 2: the Chinese government to access it or compel access to it.

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Speaker 2: So is that just a false premise or is there

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Speaker 2: something to be concerned about in general?

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Speaker 4: I think we should be concerned about government access to

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Speaker 4: our private information online, but I don't restrict my concern

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Speaker 4: to China. I feel that way about all governments across

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Speaker 4: the globe, including here in the United States, where government

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Speaker 4: agencies have a variety of ways about taining private online

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Speaker 4: communications that in fact we would prefer that they don't

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Speaker 4: have access to. Indeed, Europe cut off data flows with

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Speaker 4: the United States because of the concern in Europe that

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Speaker 4: the US government had access to European private information online.

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Speaker 4: So if that's the concern, then trying to target China

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Speaker 4: and doing it in this way is really an indirect solution.

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Speaker 4: We really ought to have a broad society wide conversation

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Speaker 4: about when government to have access to private citizen data

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Speaker 4: and what we're going to do to protect the interest

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Speaker 4: of private citizens.

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Speaker 2: So tell us about this bill what it would do.

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Speaker 4: The bill is styled as a divestiture law. The idea

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Speaker 4: is to get the ownership of TikTok out of the

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Speaker 4: hands of people related to China. In practice, it's almost

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Speaker 4: certainly going to turn into a TikTok ban. It would

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Speaker 4: ban TikTok in the United States and require app stores

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Speaker 4: not to allow the installation of TikTok. So it's trying

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Speaker 4: to just kick TikTok out of the US market.

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Speaker 2: So what the lawmakers are saying is that by dance,

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Speaker 2: the Chinese parent would have six months to divest TikTok.

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Speaker 4: Yeah, just to be clear, nobody expects that to really

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Speaker 4: be the outcome. There's a limited number of people who

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Speaker 4: might be interested in buying TikTok, and the forced sale

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Speaker 4: would almost certainly depress the prices. But I want to

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Speaker 4: analogize this to what happened after the Ukrainian War, where

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Speaker 4: Russia put the squeeze on US owned enterprises and force

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Speaker 4: them to sell to Russian owners, and in so doing,

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Speaker 4: they transferred billions of dollars of wealth from the US

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Speaker 4: owners to new Russian owners who bought it pennies on

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Speaker 4: the dollar. And so essentially the Congress is doing what

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Speaker 4: Russia did to our companies, and that really seems like

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Speaker 4: the wrong inspiration for US to be.

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Speaker 2: Drawn from China. Beijing has warned that a ban would

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Speaker 2: ultimately backfire on the United States itself. So what could

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Speaker 2: they do there?

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Speaker 4: You know, we're locked in a long term strategic battle

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Speaker 4: of words and actions against China and some other global powers,

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Speaker 4: So there's an infinite number of ways in which China

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Speaker 4: could work to degrade the interest of US companies. Now,

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Speaker 4: of course, China has a long history of doing that.

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Speaker 4: They have literally kicked US companies out of the China market.

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Speaker 4: They could continue to tamp down on US interests in

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Speaker 4: China to the economic detriment of US interests, And these

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Speaker 4: kinds of trade wars or attempts to kick foreign companies

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Speaker 4: out of the markets ultimately erect barriers that make everyone poorer.

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Speaker 4: So let's hope that we don't go there. But no

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Speaker 4: doubt that the US would be sending a strong signal

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Speaker 4: to China. We're erecting another trade barrier. You know, we

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Speaker 4: expected retaliation.

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Speaker 2: China's Foreign ministry also said that there was a failure

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Speaker 2: to provide evidence that TikTok is a threat to the

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Speaker 2: US national security. I've heard a lot of blanket statements

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Speaker 2: that it's a threat, but is there actual proof.

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Speaker 4: So one of the big questions is exactly how is

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Speaker 4: TikTok a threat to national security? And there's been some

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Speaker 4: seculation about this, but the best evidence of this has

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Speaker 4: not been revealed to the public. It's only been disclosed privately,

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Speaker 4: with the justification that because it's in national security interests,

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Speaker 4: we couldn't tell the public we would jeopardize national security.

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Speaker 4: But that kind of rationale makes it impossible for us

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Speaker 4: to actually scrutinize credibly the evidence, and as a result,

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Speaker 4: it's possible that that evidence is not credible. And in fact,

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Speaker 4: the efforts to ban TikTok were initiated in the Trump

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Speaker 4: administration and some of the judges got to see that

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Speaker 4: evidence and they did not find a persuasive Now, maybe

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Speaker 4: there's new evidence that we haven't seen yet, but the

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Speaker 4: most likely scenario is that national security is being invoked

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Speaker 4: as a concept, not actually as pieces of specific credible

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Speaker 4: evidence to try and justify the ban.

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Speaker 2: The company TikTok has warned about the potential economic impact

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Speaker 2: on small business owners who depend on the app. It's

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Speaker 2: urged it's one hundred and seventy million US users to

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Speaker 2: speak out against it, and they have been influencers. Took

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Speaker 2: to Capital Hill on Wednesday. Members of Congress were flooded

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Speaker 2: with calls from angry constituents and small business as are

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Speaker 2: saying a ban would crush their business. Do you think

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Speaker 2: it would have a severe economic impact on certain people?

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Speaker 4: It's not just the economic impact, although I think that's

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Speaker 4: a helpful way of establishing a measuring stick, but so

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Speaker 4: many communities rely upon TikTok to communicate with each other,

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Speaker 4: and that can create new stars, celebrities, influencers who wouldn't

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Speaker 4: have had a voice any other way that are actually

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Speaker 4: quite helpful to the communities that they're speaking to. It

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Speaker 4: also has created a variety of different small business opportunities

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Speaker 4: where new entrants to a market can use social media,

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Speaker 4: including TikTok, in order to gain traction against incumbents who

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Speaker 4: otherwise would rather not give them any opportunity to grow.

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Speaker 4: So When Congress says that we want to ban TikTok,

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Speaker 4: what they're really saying is we don't want people talking

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Speaker 4: to each other in that way, and we don't care

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Speaker 4: that sometimes that's the very best way for those people

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Speaker 4: to help self actualize or the very best way for

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Speaker 4: those entre to help build their business. So Congress is

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Speaker 4: just saying, we'll care about any of that, all of

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Speaker 4: that we're willing to forego in this nebulous chasing of

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Speaker 4: the quote national security interest.

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Speaker 2: Eric, I am not on TikTok. I confess, is it

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Speaker 2: really this unique platform? Because hearing people talk about it,

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Speaker 2: they say, this is the only way I can accomplish

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Speaker 2: this goal, whether it's business or reaching out to people.

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Speaker 2: Is it really that unique?

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Speaker 4: It doesn't really matter if TikTok is unique compared to

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Speaker 4: other social media. What matters is that there's certain types

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Speaker 4: of communities that have developed on TikTok that don't exist

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Speaker 4: in the other social media, and so by eliminating those communities,

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Speaker 4: even if you could publish the exact same content on

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Speaker 4: social media, you can't reach the same audience in the

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Speaker 4: same way. Now I don't personally use TikTok, it doesn't

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Speaker 4: speak to me, But for those who it speaks to,

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Speaker 4: it is perhaps the best way to reach them, the

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Speaker 4: best way to engage them. And so it isn't something

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Speaker 4: where we could simply tell the content publisher and the

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Speaker 4: audience just move your conversation another social media that literally

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Speaker 4: wouldn't happen, That relationship would bust up instead.

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Speaker 2: Does it seem as if the Senate is not as

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Speaker 2: enthrall with this bill as the House was.

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Speaker 4: We don't know what's going to happen to the bill

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Speaker 4: in the Senate. The Senate leaders have created equivocation about

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Speaker 4: the bill, but the political calculus that got the bill

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Speaker 4: through the House is the same for the Senate. In

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Speaker 4: all cases, there's political gold for beating up on China

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Speaker 4: legitimately or not. So I don't think that the bill

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Speaker 4: will die in the Senate easily. It will be given

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Speaker 4: a fair amount of push I think forward. But there

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Speaker 4: are a number of senators I think we understand both

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Speaker 4: the ridiculousness of the justifications of the bill as well

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Speaker 4: as the fact that in the end, the bill is

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Speaker 4: a censorship bill, and I think there are some senators

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Speaker 4: who just can't support that.

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Speaker 2: And some lawmakers did say that the United States shouldn't

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Speaker 2: be following China in selectively blocking social media platforms citing

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Speaker 2: free speech concerns.

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Speaker 4: I mean, it sounds so weird to say we should

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Speaker 4: not be ripping the playbook off of from authoritarian countries

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Speaker 4: and then justifying our actions by because they're doing it

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Speaker 4: like that, Just to me is so obvious, such a

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Speaker 4: baseline foundational assumption in how I proceed, and yet it

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Speaker 4: is not obvious in the house.

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Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 2: this conversation with Professor Eric Goleman of Santa Clara University

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Speaker 2: Law School. TikTok says it will fight the bill in

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Speaker 2: the courts. What are some of the legal grounds it

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Speaker 2: could use? And later in the show, the accident investigation

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Speaker 2: into that Alaska Airlines mid air emergency in January is

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Speaker 2: being slowed down by Boeing's failure to cooperate. Remember, you

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Speaker 2: can always get the latest legal news by listening to

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Speaker 2: our Bloomberg Law podcasts. You can get them wherever you

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Speaker 2: get your favorite podcasts, and you're listening to Bloomberg. TikTok

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Speaker 2: is used by one hundred and seventy million Americans, so

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Speaker 2: it's no wonder that after TikTok urged them on, angry

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Speaker 2: users flooded members of Congress with calls over a bill

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Speaker 2: that would lead to a nationwide ban of the popular

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Speaker 2: video app if it's China based owner doesn't sell at stake.

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Speaker 2: Here's the bill's author, Wisconsin Republican Mike Gallagher.

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Speaker 1: It's also based on a lie. They're saying we're pushing

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Speaker 1: an outright ban of TikTok, which is not true. It's

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Speaker 1: not actually what the bill does. It forces a divestiture.

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Speaker 2: But users, influencers, social media content creators, and small business

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Speaker 2: owners weren't buying it. Brandon Hurst, who sells plants on TikTok,

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Speaker 2: lobbied lawmakers not to pass the bill.

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Speaker 4: My whole business would be devastated. Yeah, I would lose

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Speaker 4: the opportunity to connect with millions of people on a

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Speaker 4: regular basis, and the community that I've worked really hard

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Speaker 4: to build would be would be gone.

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Speaker 2: But the bill passed the House with overwhelming bipartisan support

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Speaker 2: and now goes on to the Senate. I've been talking

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Speaker 2: to Professor Eric Goleman of Santa Clara University School of Law. Eric,

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Speaker 2: let's say that some version of the bill is enacted,

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Speaker 2: TikTok says it plans to exhaust all legal challenges before

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Speaker 2: it considers divestiture. What kind of legal challenges could TikTok bring.

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Speaker 4: Yeah, no doubt that if the bill is enacted, it

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Speaker 4: will be challenged in court, and it will be challenged

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Speaker 4: by TikTok. It's also probable that it will be challenged

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Speaker 4: by users of TikTok expressing their own free speech concerns

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Speaker 4: independent of the concerns that TikTok has, and the bill

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Speaker 4: will also impact the app stores, and it's possible that

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Speaker 4: they will point out that the bill impacts their free

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Speaker 4: speech as well. So there are at least three different

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Speaker 4: communities that have concerns about how the bill would restrict

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Speaker 4: their speech, and we actually have some indication of how

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Speaker 4: those legal challenges might look. This is not the first

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Speaker 4: time that efforts to ban social media apps have been

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Speaker 4: attempted and have been challenged in court. Both in the

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Speaker 4: Trump administration, there was a ban on TikTok and we chat,

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Speaker 4: and then states have been enacting bands, including an illegal

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Speaker 4: challenge was filed against one in Montana, and all of

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Speaker 4: those efforts to ban in the past have failed, including

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Speaker 4: on First Amendment grounds, those bands were unconstitutional, and so

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Speaker 4: it seems to me that TikTok and its users and

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Speaker 4: maybe the answers have pretty good reasons to think that

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Speaker 4: they might win a First Amendment challenge.

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Speaker 2: Tell us more about the possible First Amendment challenges from

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Speaker 2: those three communities you mentioned.

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Speaker 4: So let's talk about TikTok's interest under the First Amendment.

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Speaker 4: TikTok operates a service that other people's used to talk

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Speaker 4: to each other, and sometimes there's been discussion that TikTok

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Speaker 4: doesn't have its own First Amendment interest. It's just a

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Speaker 4: vessel for other communications. But TikTok publishes content in the

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Speaker 4: form of the software that offers to its users, and

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Speaker 4: it curates users speech in a way that communicates its

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Speaker 4: editorial Priorities and courts have recognized that TikTok has a

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Speaker 4: speech interest in the publication of the software and in

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Speaker 4: the way in which it curates its content for its users.

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Speaker 4: So there's some serious First Amendment issues that I think

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Speaker 4: are raised when you tell a service that the government's

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Speaker 4: going to come in and override its its curatorial discretion.

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Speaker 4: I want to talk about the TikTok users interest for

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Speaker 4: the First Amendment. The TikTok users are talking to each other,

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Speaker 4: and they are creating conversations that don't exist in the

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Speaker 4: same way to the same audience anywhere else in the

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Speaker 4: information ecosystem, and so taking away TikTok takes away their

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Speaker 4: ability to engage with each other. If you're content publisher

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Speaker 4: in TikTok, it takes away your ability to create your

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Speaker 4: own audience and speak with them in the way you choose,

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Speaker 4: And so that impacts their First Amendment interests. And looking

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Speaker 4: back to the app stores, the app stores have not

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Speaker 4: previously taken the leadership on challenging the constitutionality of TikTok

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Speaker 4: bands or bands of social media, but they're actually harmed

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Speaker 4: by the TikTok band bill as well. And let me

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Speaker 4: give an analogy of how we might think about their interests.

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Speaker 4: The ban is kind of like telling a bookstore that

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Speaker 4: they can't carry a particular book. They can still run

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Speaker 4: a bookstore, but they just can't carry a book. And

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Speaker 4: so for the app store, they're being told you have

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Speaker 4: to pull an app off of your shelves. And by

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Speaker 4: forcing the bookstore or in this case, the app store

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Speaker 4: to change what it wants to offer to its users

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Speaker 4: that encroaches on the app store speech interests as well.

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Speaker 4: So there are three different each interests to play here, TikTok's,

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Speaker 4: TikTok users, and the app stores. And I think each

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Speaker 4: of them has very good reason to point to the

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Speaker 4: Constitution and say that the ban hurts their ability to

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Speaker 4: speak the way they choose.

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Speaker 2: TikTok is banned on federal devices, and Biden administration officials

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Speaker 2: help with the bill's technical language. But by re election

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Speaker 2: campaign joined TikTok last month, I mean talk about irony.

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Speaker 4: Biden's presence on TikTok is a reminder that even if

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Speaker 4: Biden could reach audiences through other channels, there's value to

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Speaker 4: reach them through TikTok. And it is that exact political

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Speaker 4: speech benefit that shows how corrupt it is to try

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Speaker 4: and ban TikTok. It literally would suppress valuable political speech

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Speaker 4: coming from the president who would potentially sign to build

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Speaker 4: a bandit.

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Speaker 2: Former President Donald Trump, surprise surprise, has flip flopped on TikTok. Recently,

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Speaker 2: he's expressed his opposition to the ban. Do you think

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Speaker 2: that this could be an issue in the presidential election.

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Speaker 4: Trump's flip flopping on TikTok is really quite shocking. He

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Speaker 4: made a concerted effort to try to force the exact

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Speaker 4: same moves that the House enacted while he was in office,

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Speaker 4: but he didn't sway a lot of his loyal fans.

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Speaker 4: Only fifteen Republicans voted against the TikTok band despite Trump

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Speaker 4: asking him to do so, so the vast majority of

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Speaker 4: Republicans didn't heed his requests. Though I don't really know

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Speaker 4: how serious anyone's taking him on this topic.

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Speaker 2: You know, I thought that in all the discussion about TikTok,

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Speaker 2: there might be some discussion about how it's harmful to

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Speaker 2: young adults. You know, we had those lawsuits by parents.

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Speaker 4: Yeah. So the effort to ban TikTok is a very

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Speaker 4: small corner of the broader tech lash, the effort among

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Speaker 4: regulators to try to suppress and control social media generally.

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Speaker 4: And there's a wide list of gripes against social media

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Speaker 4: that regulators have lobbed, of which privacy is a non

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Speaker 4: trivial one. But there are other concerns as well, including

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Speaker 4: the concerns about the impact of social media on teenage

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Speaker 4: and younger users. But in this sense, the TikTok ban

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Speaker 4: is not really about protecting the users. Although nominally it's

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Speaker 4: about protecting their privacy, it always comes back to the

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Speaker 4: idea it's China that's doing these nefarious things, and if

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Speaker 4: it had been a British company owning TikTok who did

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Speaker 4: the exact same things that China was doing, we wouldn't

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Speaker 4: even be hearing a peep about this. And it's just

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Speaker 4: a reminder that all the efforts that are taking place

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Speaker 4: to ban TikTok are not about protecting users. They really

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Speaker 4: are just political gamesmanship.

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Speaker 2: Have any of those lawsuits by parents reached a motion

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Speaker 2: to dismiss stage or have been settled or any important

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Speaker 2: rulings yet.

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Speaker 4: Yeah, a number of the lawsuits against TikTok for harming

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Speaker 4: their users, including underage users, have been dismissed outright. Some

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Speaker 4: of those are on appeal, but there's a very large

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Speaker 4: pair of cases in California courts that have not reached

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Speaker 4: a final judgment on the question, and so those are

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Speaker 4: really going to dictate whether or not there's going to

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Speaker 4: be legal traction to the claims against TikTok.

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Speaker 2: While we're on the topic, across the pond, as they say,

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Speaker 2: there's a battle over one of Britain's most famous newspapers,

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Speaker 2: and the government has outlined plans to stop foreign states

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Speaker 2: from owning newspapers.

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Speaker 4: And the target there was some US buyers were planned

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Speaker 4: to buy up one of the leading newspapers in the

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Speaker 4: UK that caters to the conservative audience, and the members

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Speaker 4: of the legislature there didn't want to see the newspaper

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Speaker 4: fall into the hands of US interests, and it was

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Speaker 4: a reminder that here in the United States, we would

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Speaker 4: not tolerate an effort to ban or control the identity

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Speaker 4: of owners of a newspaper. That would be clearly a

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Speaker 4: First Amendment objection because it would be dictating who gets

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Speaker 4: the right to speak in our country. And believe it

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Speaker 4: or not, foreign speakers have protected constitutional rights to speak

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Speaker 4: here in the United States, So there would not be

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Speaker 4: the possibility of establishing controls over who owned a newspaper

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Speaker 4: here in the US, unlike other countries like Britain, where

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Speaker 4: literally they're proposed to that, but they don't have the

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Speaker 4: First Amendment, they can pass laws like that with the

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Speaker 4: intent and objective of controlling who gets to speak in

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Speaker 4: their country. We wouldn't tolerate that here.

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Speaker 2: What about the regulation of broadcast ownership in the US.

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Speaker 4: Back to this ish about foreign ownership over media in

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Speaker 4: the United States, Now, there is one area where there

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Speaker 4: is the right of the government to control who owns

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Speaker 4: the media that reaches the public, and that's in the

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Speaker 4: area of broadcasting. We limit the ability of foreign owners

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Speaker 4: to own broadcasting stations in the United States, and I

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Speaker 4: believe that that's constitutional. Now, even though we allow the

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Speaker 4: regulation of broadcast ownership, that doesn't extend to the ownership

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Speaker 4: of online services, even if they're broadcasting video, just like

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Speaker 4: the broadcasters do who are regulated by the SEC. And

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Speaker 4: that's because of nineteen ninety seven court opinion that said

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Speaker 4: that the rules that apply to broadcasting are not the

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Speaker 4: same as the rules that apply to the Internet, that

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Speaker 4: the reasons why we control the access to broadcasting don't

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Speaker 4: extend to why we might permit people to speak on

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Speaker 4: the Internet. So there are rules about foreign ownership of

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Speaker 4: media here in the US that might very well be constitutional,

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Speaker 4: and yet they don't extend to a ban on TikTok

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Speaker 4: because the Internet is not like broadcasting.

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Speaker 2: Thank you so much, Eric, This has been a tour

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Speaker 2: de force. We covered so many different topics. That's Professor

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Speaker 2: Eric Goldman of Santa Clara University Law School and co

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Speaker 2: director of the High Tech Law Institute. In other legal news, today,

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Speaker 2: Donald Trump's first criminal trial may not begin on March

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Speaker 2: twenty fifth, as planned, after lawyers for the Manhattan District

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Speaker 2: Attorney and the former president told a judge they'd received

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Speaker 2: thousands of new pages of evidence from Federal prosecutors Office

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Speaker 2: said today that some thirty one thousand pages of records

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Speaker 2: tied to former Trump lawyer Michael Cohen's federal campaign finance

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Speaker 2: convictions were turned over to their office on Wednesday, adding

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Speaker 2: that they would not object to a thirty day delay

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Speaker 2: in the start of Trump's hush money trial. Bragg blamed

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Speaker 2: Trump for the delay of the production of documents, saying

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Speaker 2: the defense waited until January eighteenth to issue a subpoena

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Speaker 2: for more materials. The potential delay is the latest good

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Speaker 2: news in court for Trump, who had faced the prospect

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Speaker 2: of up to four criminal trials before the November presidential election.

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Speaker 2: Three of those cases now might slip into next year.

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Speaker 2: Coming up next on the Bloomberg Law Show, we'll look

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Speaker 2: at the accident investigation into the Alaska Airlines mid air emergency.

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Speaker 2: In January, officials say that investigation is being slowed down

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Speaker 2: and complicated by Boeing's failure to cooperate. I'm June Grosso,

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Speaker 2: and you're listening to Bloomberg. It's been two months since

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Speaker 2: that Alaska Airlines jet had a mid air emergency when

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Speaker 2: a door plug blew off, and officials with the National

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Speaker 2: Transportation Safety Board say they're still in the dark about

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Speaker 2: who performed the work on the panel of the Boeing

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Speaker 2: seven thirty seven MAX that failed. At a Senate Commerce

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Speaker 2: Committee hearing last week, NTSB chair Jennifer Homandy said they've

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Speaker 2: repeatedly asked Boeing for the information, and they can't even

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Speaker 2: get a list of the people who are on the

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Speaker 2: team that handles doors and door plugs.

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Speaker 5: We don't have the records. We don't have the names

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Speaker 5: of the twenty five people that is in charge of

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Speaker 5: doing that work in that facility. It's absurd that two

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Speaker 5: months later we don't have that.

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Speaker 2: Joining me is Alan Levin, Bloomberg Aviation Safety reporter. So

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Speaker 2: I want you to start with a description of what

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Speaker 2: happened to Alaska Airlines Flight twelve eighty two, and you

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Speaker 2: know what we know about it.

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Speaker 6: This plane took off from Portland in the evening of

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Speaker 6: January fifth, and when it reached about fourteen fifteen thousand feet,

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Speaker 6: the cabin pressure suddenly dropped. And what happened was there's

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Speaker 6: what is known as a door plug, which is basically

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Speaker 6: just a beefed up panel that covers an unused exit door,

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Speaker 6: and it blew off the side of the plane. And

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Speaker 6: if you can imagine the air pressure and an airliner

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Speaker 6: is about the equivalent of usually somewhere around five thousand

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Speaker 6: feet altitude, but they were well above that. So nature

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Speaker 6: of horrors of vacuum, there's a tremendous amount of force

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Speaker 6: pushing from the inside where the pressure is higher out

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Speaker 6: and this plug blew off, and then you know, all

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Speaker 6: the air inside the car wants to get outside, and

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Speaker 6: so there's like a river, if you will, of pressurized

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00:26:05,880 --> 00:26:10,480
Speaker 6: air flowing out through this. It can be quite powerful.

437
00:26:11,160 --> 00:26:14,080
Speaker 6: Luckily they were not at you know, thirty five thousand feet,

438
00:26:14,080 --> 00:26:16,600
Speaker 6: where it would have been even more intense. And also

439
00:26:16,720 --> 00:26:20,600
Speaker 6: luckily nobody was seated next to where the door plug

440
00:26:20,760 --> 00:26:23,560
Speaker 6: was or in the middle seat, so the two closest

441
00:26:23,560 --> 00:26:26,480
Speaker 6: seats were empty. On a very full plane, it's kind

442
00:26:26,480 --> 00:26:31,000
Speaker 6: of lucky as dramatic as this was. Nobody was injured,

443
00:26:31,400 --> 00:26:37,400
Speaker 6: amazing no damage to the aircraft structure, and the pilots

444
00:26:37,400 --> 00:26:40,560
Speaker 6: were able to return and make an emergency landing.

445
00:26:41,480 --> 00:26:47,840
Speaker 2: The NTSB has determined that those missing bolts caused the incident.

446
00:26:48,080 --> 00:26:51,760
Speaker 6: So it's a little early to say the cause, but

447
00:26:51,800 --> 00:26:55,520
Speaker 6: the NTSB did put out a preliminary report and they

448
00:26:55,560 --> 00:27:00,080
Speaker 6: said it appears, and probably even a little stronger than that,

449
00:27:00,320 --> 00:27:04,240
Speaker 6: there's very strong indications that this flug or this panel

450
00:27:04,400 --> 00:27:09,959
Speaker 6: over the unused door was not attached properly in the factory.

451
00:27:10,560 --> 00:27:14,400
Speaker 6: It's in rent in Washington that Boeing uses to complete

452
00:27:14,480 --> 00:27:18,960
Speaker 6: the construction of these seven thirty seven Max jets. In particular,

453
00:27:19,440 --> 00:27:24,399
Speaker 6: there's an extensive mechanism to hold the pressure on the door,

454
00:27:24,520 --> 00:27:28,800
Speaker 6: about a dozen points of these pins that interact with

455
00:27:28,880 --> 00:27:32,280
Speaker 6: the plane that hold the pressure, but they don't ensure

456
00:27:32,320 --> 00:27:36,960
Speaker 6: the door will never come off. So Boeing ads four

457
00:27:37,200 --> 00:27:42,160
Speaker 6: bolts that prevent the door from sliding, and before they

458
00:27:42,240 --> 00:27:44,920
Speaker 6: ship a plane out, they put four bolts in there

459
00:27:44,960 --> 00:27:48,880
Speaker 6: so it can never move and if installed correctly, they

460
00:27:48,880 --> 00:27:52,520
Speaker 6: work pretty well. Because this has never happened before, but

461
00:27:52,640 --> 00:27:56,200
Speaker 6: in this case, all the evidence suggests that the bolts

462
00:27:56,280 --> 00:28:00,359
Speaker 6: were not installed, and so the plane was delivered not October.

463
00:28:00,560 --> 00:28:06,439
Speaker 6: It went into service in November, and it bumped around

464
00:28:06,600 --> 00:28:10,359
Speaker 6: enough that it came loose on this flight in early January.

465
00:28:11,080 --> 00:28:16,119
Speaker 2: So the NTSB accident investigators still don't know who performed

466
00:28:16,119 --> 00:28:18,800
Speaker 2: the work on that panel that failed.

467
00:28:19,440 --> 00:28:20,040
Speaker 4: That's correct.

468
00:28:20,119 --> 00:28:26,720
Speaker 6: It's quite extraordinary actually how this investigation has evolved, if

469
00:28:26,720 --> 00:28:30,919
Speaker 6: you will, so any factory, you know, you theoretically have

470
00:28:31,080 --> 00:28:34,919
Speaker 6: records of the construction of whatever widgets they're making, But

471
00:28:35,520 --> 00:28:39,600
Speaker 6: in the aviation industry, the record keeping is on steroids.

472
00:28:39,720 --> 00:28:42,920
Speaker 6: Anytime you do a safety critical thing, you're supposed to

473
00:28:43,240 --> 00:28:46,360
Speaker 6: memorialize it. You know, in this case it's a computer system.

474
00:28:46,720 --> 00:28:49,800
Speaker 6: When that happens, for a safety critical item like this,

475
00:28:50,200 --> 00:28:53,560
Speaker 6: there's supposed to be a second set of eyes. So

476
00:28:53,600 --> 00:28:56,959
Speaker 6: not only does the workers supervisor have to oversee it,

477
00:28:57,080 --> 00:29:00,320
Speaker 6: but you know, in some cases there's a secondary set

478
00:29:00,320 --> 00:29:04,160
Speaker 6: of eyes who comes in afterward and certifies that it

479
00:29:04,240 --> 00:29:09,480
Speaker 6: was done properly. Now, in this case, Boeing has said

480
00:29:09,920 --> 00:29:13,680
Speaker 6: that they do not have a record of this work

481
00:29:13,720 --> 00:29:18,880
Speaker 6: being performed, and in fact, they an extraordinary admission last

482
00:29:18,880 --> 00:29:21,880
Speaker 6: week in a letter to the Senate. They said that

483
00:29:21,960 --> 00:29:25,840
Speaker 6: it was a violation of their processes and so, as

484
00:29:25,880 --> 00:29:28,800
Speaker 6: you say, as a part of that, they do not

485
00:29:29,120 --> 00:29:34,600
Speaker 6: know who performed the work, and the NTSB has been

486
00:29:34,640 --> 00:29:39,840
Speaker 6: asking Boeing for information. The NTSB is frustrated because they

487
00:29:39,880 --> 00:29:42,680
Speaker 6: can't get the names of the key people to interview,

488
00:29:42,840 --> 00:29:46,560
Speaker 6: so instead they had to ask for the names of

489
00:29:47,160 --> 00:29:51,240
Speaker 6: every person who might have done work on a door

490
00:29:51,280 --> 00:29:54,640
Speaker 6: assembly in the plant at the time this plane was

491
00:29:54,640 --> 00:29:58,760
Speaker 6: moving through. Told it's twenty five people. They were in

492
00:29:59,280 --> 00:30:03,120
Speaker 6: rent and Washington at this plant doing interviews last week.

493
00:30:03,320 --> 00:30:06,880
Speaker 6: But the head of the NTSB, Jennifer Hammandy, this week

494
00:30:07,080 --> 00:30:10,480
Speaker 6: told senators that they still have been unable to determine

495
00:30:10,520 --> 00:30:11,120
Speaker 6: who did it.

496
00:30:12,320 --> 00:30:17,760
Speaker 2: And Boeing overrode security camera footage of repair work on

497
00:30:18,080 --> 00:30:22,600
Speaker 2: the door plug, and they said that's consistent with standard practice.

498
00:30:22,720 --> 00:30:26,000
Speaker 2: Video recordings are maintained on a rolling thirty day basis.

499
00:30:26,480 --> 00:30:28,440
Speaker 2: Is Is that a problem as well?

500
00:30:28,800 --> 00:30:32,520
Speaker 6: I don't see that as a huge problem. So, you know,

501
00:30:32,560 --> 00:30:35,920
Speaker 6: this work was done in late September. Boeing has a

502
00:30:35,960 --> 00:30:40,080
Speaker 6: policy to overwrite ape every thirty days, so they have,

503
00:30:40,280 --> 00:30:43,960
Speaker 6: you know, videos showing the shop floor. Presumably we don't

504
00:30:43,960 --> 00:30:47,800
Speaker 6: know precisely, but they're not a key safety tool such

505
00:30:47,840 --> 00:30:52,320
Speaker 6: as performing the secondary inspection on work would be they're there,

506
00:30:53,080 --> 00:30:56,400
Speaker 6: you know, just to ensure people aren't stealing tools and

507
00:30:56,840 --> 00:31:01,400
Speaker 6: et cetera. You know, the NTSB always for video records

508
00:31:01,440 --> 00:31:04,920
Speaker 6: because there's so there's so many surveillance cameras and so

509
00:31:05,000 --> 00:31:09,440
Speaker 6: many people just randomly taking video with their phones. They

510
00:31:09,480 --> 00:31:12,160
Speaker 6: always sort of ask for that. In this case, it

511
00:31:12,280 --> 00:31:15,400
Speaker 6: wasn't available, but there was no indication there was any

512
00:31:16,280 --> 00:31:18,400
Speaker 6: anything untoward or about that.

513
00:31:18,920 --> 00:31:23,320
Speaker 2: So now you also had a Federal Aviation Administration audit

514
00:31:24,000 --> 00:31:28,840
Speaker 2: of Boeing seven thirty seven MAX that found a plethora

515
00:31:28,880 --> 00:31:31,240
Speaker 2: of issues with the production process.

516
00:31:32,040 --> 00:31:37,400
Speaker 6: That's correct. We understand there were dozens of violations, but

517
00:31:37,640 --> 00:31:41,400
Speaker 6: we still don't know the detail. I would add that

518
00:31:41,480 --> 00:31:45,840
Speaker 6: the fa also audited a second company called Spirit Aerospace,

519
00:31:46,800 --> 00:31:51,560
Speaker 6: which builds the raw fuselage parts for the seven thirty

520
00:31:51,600 --> 00:31:56,240
Speaker 6: seven and then ships them to Washington State where Boeing

521
00:31:56,280 --> 00:31:59,800
Speaker 6: does the final assembly, and they found violations that Spirit

522
00:32:00,000 --> 00:32:05,080
Speaker 6: as well. It's relevant because the reason this door plug

523
00:32:05,160 --> 00:32:07,880
Speaker 6: got removed in the first place at the factory is

524
00:32:07,880 --> 00:32:13,479
Speaker 6: that there were improperly done rivets by the Spirit folks,

525
00:32:13,520 --> 00:32:15,480
Speaker 6: and so they had to go in and fix those.

526
00:32:15,640 --> 00:32:18,680
Speaker 6: But the bottom line is, yeah, the FAA has done

527
00:32:18,720 --> 00:32:22,400
Speaker 6: this audit. We don't know the precise details of how

528
00:32:22,440 --> 00:32:25,680
Speaker 6: bad the violations were, but they did find dozens of

529
00:32:25,720 --> 00:32:30,720
Speaker 6: cases where there were shortfalls in the safety processes and

530
00:32:30,800 --> 00:32:33,880
Speaker 6: record keeping, etc. That FAA expects.

531
00:32:34,360 --> 00:32:40,360
Speaker 2: So we've seen several mishaps with Boeing aircraft recently, flaming engines,

532
00:32:40,600 --> 00:32:44,760
Speaker 2: tires falling from the sky, engine failures over the Pacific,

533
00:32:44,920 --> 00:32:50,640
Speaker 2: malfunctioning rudders, issues with wiring gears and hydraulic systems. Am

534
00:32:50,640 --> 00:32:53,160
Speaker 2: I overstating it? It sounds like a lot.

535
00:32:53,480 --> 00:32:57,520
Speaker 6: Well. I have two almost contradictory points here. One is

536
00:32:57,560 --> 00:33:00,480
Speaker 6: that in the case of the tire falling off, it

537
00:33:00,560 --> 00:33:05,200
Speaker 6: was quite dramatic. Somebody videotaped it and the tire came

538
00:33:05,240 --> 00:33:07,120
Speaker 6: down and hit a car in a parking lot. It

539
00:33:07,160 --> 00:33:10,800
Speaker 6: was in San Francisco. You know, that's not a good look,

540
00:33:11,040 --> 00:33:14,080
Speaker 6: but it was a twenty plus year old plane. That

541
00:33:14,600 --> 00:33:17,640
Speaker 6: failure had absolutely nothing to do with Boeing. We don't

542
00:33:17,640 --> 00:33:20,080
Speaker 6: know what happened, but you think it would be related

543
00:33:20,160 --> 00:33:25,800
Speaker 6: to maintenance somehow. Quite frankly, if you keep an eye

544
00:33:26,120 --> 00:33:31,280
Speaker 6: on incidents on a daily basis. As I've done many years,

545
00:33:32,000 --> 00:33:35,800
Speaker 6: these things happen all the time. I think it's fair

546
00:33:35,840 --> 00:33:40,200
Speaker 6: to say the accident rates are remarkable. They'd never been better,

547
00:33:40,800 --> 00:33:45,360
Speaker 6: and these incidents, I think demonstrate that the safety net

548
00:33:45,400 --> 00:33:49,520
Speaker 6: is pretty robust. But I would also say that one

549
00:33:49,600 --> 00:33:53,760
Speaker 6: of those incidents that you mentioned does speak to broader

550
00:33:53,800 --> 00:33:57,400
Speaker 6: issues with Boeing. There was a notice by the federal

551
00:33:57,480 --> 00:34:02,680
Speaker 6: government last week that thirty seven MAX wiring had been

552
00:34:02,720 --> 00:34:07,600
Speaker 6: improperly installed. When that happens, sometimes it chased, and what

553
00:34:07,760 --> 00:34:11,680
Speaker 6: happened was a flight control device known as a spoiler

554
00:34:12,520 --> 00:34:17,239
Speaker 6: was activating without a pilot intending for it to activate.

555
00:34:17,640 --> 00:34:21,080
Speaker 6: That speaks to some of these very same issues with

556
00:34:21,239 --> 00:34:25,440
Speaker 6: quality that we've seen with Boeing in this door plugse.

557
00:34:25,680 --> 00:34:30,279
Speaker 2: The Justice Department has opened a criminal investigation into that

558
00:34:30,520 --> 00:34:36,239
Speaker 2: Alaska Airlines incident, examining whether it falls under the government's

559
00:34:36,280 --> 00:34:42,120
Speaker 2: twenty twenty one deferred prosecution agreement with Boeing. The accident

560
00:34:42,120 --> 00:34:44,719
Speaker 2: took place just two days before the expiration of the

561
00:34:44,760 --> 00:34:46,800
Speaker 2: deferred prosecution agreement.

562
00:34:46,760 --> 00:34:52,080
Speaker 6: Several years ago. After these two fatal accidents in twenty

563
00:34:52,080 --> 00:34:56,920
Speaker 6: eighteen and twenty nineteen involving seven thirty seven MAX aircraft.

564
00:34:57,200 --> 00:35:01,080
Speaker 6: If you recall, the accidents were caused at least in

565
00:35:01,160 --> 00:35:07,160
Speaker 6: part by a bad design that Boeing put into the plane,

566
00:35:07,520 --> 00:35:13,040
Speaker 6: and afterward the Justice Department reached an agreement not to

567
00:35:13,080 --> 00:35:19,239
Speaker 6: prosecute Boeing, and in exchange, Boeing admitted to a violation

568
00:35:19,560 --> 00:35:23,640
Speaker 6: and agreed to pay a large civil penalty and then

569
00:35:23,760 --> 00:35:28,160
Speaker 6: also agreed to essentially clean up its act over a

570
00:35:28,239 --> 00:35:31,520
Speaker 6: three year period. That period, as you say, was about

571
00:35:31,560 --> 00:35:36,880
Speaker 6: to expire. The Justice Department has six months to decide

572
00:35:36,920 --> 00:35:42,640
Speaker 6: whether Boeing has violated is this earlier agreement. We understand

573
00:35:42,680 --> 00:35:47,160
Speaker 6: that they've convened a grand jury to look at whether

574
00:35:47,200 --> 00:35:51,760
Speaker 6: there are criminal charges to be brought. There are two possibilities.

575
00:35:51,800 --> 00:35:56,560
Speaker 6: We understand. It's possible they could say that Boeing violated

576
00:35:56,800 --> 00:36:00,000
Speaker 6: the earlier agreements and then they would bring the charge

577
00:36:00,560 --> 00:36:05,359
Speaker 6: on that score, or they are also potentially looking at

578
00:36:05,440 --> 00:36:11,080
Speaker 6: bringing charges related to the actual January fifth failure. Now

579
00:36:11,120 --> 00:36:15,840
Speaker 6: I would note some countries France, for example, almost always

580
00:36:16,280 --> 00:36:20,399
Speaker 6: files a criminal charge after an airline accident, but it's

581
00:36:20,719 --> 00:36:25,000
Speaker 6: very unusual in the US and quite controversial. We're very

582
00:36:25,000 --> 00:36:27,359
Speaker 6: early on. It's unclear how it's going to play out.

583
00:36:27,360 --> 00:36:30,239
Speaker 6: But it's a very sticky, complicated situation.

584
00:36:30,760 --> 00:36:34,480
Speaker 2: Seems like Bowen's been here before. Thanks so much, Alan.

585
00:36:34,840 --> 00:36:39,120
Speaker 2: That's Alan Levin, Bloomberg Aviation Safety Reporter. And that's it

586
00:36:39,200 --> 00:36:42,160
Speaker 2: for this edition of the Bloomberg Law Podcast. Remember you've

587
00:36:42,200 --> 00:36:44,920
Speaker 2: can always get the latest legal news by subscribing and

588
00:36:44,960 --> 00:36:48,480
Speaker 2: listening to the show on Apple Podcasts, Spotify, and at

589
00:36:48,520 --> 00:36:52,840
Speaker 2: Bloomberg dot com, slash podcast, slash Law. I'm June Grosso

590
00:36:53,040 --> 00:36:54,520
Speaker 2: and this is Bloomberg