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

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Speaker 2: It's a landmark legal doctrine that affects agency power over

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Speaker 2: everything from workplace conditions and drug safety to climate change

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Speaker 2: and cryptocurrency. The Chevron doctrine requires judges to defer to

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Speaker 2: agencies when they offer a reasonable interpretation of an ambiguous statute,

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Speaker 2: and the challenge to the forty year old doctrine puts

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Speaker 2: regulations in countless areas at risk. Billions of dollars are

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Speaker 2: potentially at stake in front of a court where four

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Speaker 2: of its conservative members, including Justice Neil Gorsich, have previously

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Speaker 2: signaled opposition to Chevron, as they did during the oral arguments.

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Speaker 3: Is the judge persuaded at the end of the day

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Speaker 3: with proper deference given to a coequal branch of government?

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Speaker 3: Or does the judge addicate that responsibility and say automatically

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Speaker 3: whatever the age and see says Wins.

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Speaker 2: On the other hand, the three liberal justices supported Chevron

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Speaker 2: and the expertise of agencies. Here's Justice Katanji Brown Jackson.

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Speaker 2: I see Chevron as doing the very important work of

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Speaker 2: helping courts stay away from policy making. The decision may

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Speaker 2: depend on Chief Justice John Roberts and Justice Amy Coney Barrett,

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Speaker 2: with Barrett repeatedly voicing concerns about a possible legal upheaval

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Speaker 2: if Chevron is reversed, alluding to the more than fifteen

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Speaker 2: thousand cases that have cited the doctrine.

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Speaker 1: So maybe nothing happens immediately to those cases. But isn't

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Speaker 1: the door then opened for litigants to come back and say, well,

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Speaker 1: stationary source really means X or you know, broadband or

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Speaker 1: whatever the specific term was in brand X. So isn't

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Speaker 1: it inviting a flood of litigation even if for the

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Speaker 1: moment those holdings stay in tech.

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Speaker 2: Joining me is constitutional law expert Harold Krant, a professor

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Speaker 2: with the Chicago Kent College of Law. The Chevron doctrine,

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Speaker 2: by the way, champion by conservatives when it was established

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Speaker 2: in a case that cut back on regulations, but now

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Speaker 2: vilified by them, it's become a pillar of administrative law.

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Speaker 2: Tell us how it's used in practice, What the practical

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Speaker 2: application is.

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Speaker 4: The Pepper application of Chevron is enormous. It allows a

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Speaker 4: structured way for courts to determine whether to uphold agency

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Speaker 4: interpretations of statutes, whether it's in woolmaking or in a

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Speaker 4: case and adjudication, And so if the statute is vague

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Speaker 4: a reasonable size for a truck or in the famous

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Speaker 4: case of Chevron itself, what's the stationary source? A court

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Speaker 4: will have to decide whether Congress has been clear, and

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Speaker 4: if the Congress has been clear, that's the end of

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Speaker 4: the matter, and the court's interpretation will hold. The agency

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Speaker 4: can appeal if it disagrees, up to the Supreme Court,

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Speaker 4: but in many cases the court are leftlet doubt. I mean,

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Speaker 4: what is a reasonable investigation? What is an adequate measure?

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Speaker 4: And they're not certain how to interpret it, and so

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Speaker 4: then the court will defer to any kind of reasonable

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Speaker 4: agency interpretation. Reasonableness is in the eye of the beholder.

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Speaker 4: That means that there's an array of possible interpretations for

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Speaker 4: one statute and they all would be upheld by a

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Speaker 4: court on review as long as it's ambiguous and as

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Speaker 4: long as the agency's interpretation has some degree of plausibility.

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Speaker 4: That of course gives agencies more power, and it gives

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Speaker 4: agencies the ability to change their interpretation of regulations as

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Speaker 4: social or political conditions evolve, and that has enormous significance

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Speaker 4: both for business and for individuals regulated by the government.

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Speaker 2: Many of the Conservative justices have expressed opposition to Chevron.

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Speaker 2: Why are they so opposed to Chevron just as.

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Speaker 4: I opposed, I think for two different reasons. Is in

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Speaker 4: all other contexts, judges make the final call as to

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Speaker 4: what Congress meant in passing statutes. So if there's ambiguity,

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Speaker 4: courts have the final say. That's what courts do, and

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Speaker 4: courts think that they're better at it, and that's their

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Speaker 4: special function. So under Chevron, the courts have to share

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Speaker 4: this special function with agencies who they view as sort

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Speaker 4: of unelected bureaucrats or politicians. So that's an affront to

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Speaker 4: judicial respect. I think that's one argument. The other argument

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Speaker 4: or reason is that this particular court is very skeptical

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Speaker 4: of administrative agencies and administrative agencies power. They love presidential power,

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Speaker 4: they don't like the power of the bureaucrats beneath him.

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Speaker 4: And there's no question but that agencies under both Republican

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Speaker 4: and democratic administration have more authority and more influence. If

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Speaker 4: the Chevron document is applied accurately.

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Speaker 2: Members of the Conservative majority, several members of it, immediately

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Speaker 2: made their concerns known. Justice Neil Gorsich questioned why a

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Speaker 2: judge who thinks the agency's interpretation of the law is

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Speaker 2: wrong would quote abdicate that responsibility and say automatically whatever

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Speaker 2: the agency says wins. Did certain of the justices express

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Speaker 2: real opposition.

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Speaker 4: It's clear that a super majority of the Court is

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Speaker 4: very worried about uncomfortable with Chevron. But it's not clear

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Speaker 4: whether there is a majority of justice who want to

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Speaker 4: overturn Chevron outright, as opposed to continue what they've done before,

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Speaker 4: which is to regin choven for lower courts. And as

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Speaker 4: the justices themselves noted that several times during the oral argument,

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Speaker 4: the Supreme Court is not itself relied upon Chevron for

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Speaker 4: something like seven years in deciding a case, which means

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Speaker 4: that they're sort of ignoring it because they just try

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Speaker 4: to decide what a statute means itself without formally using

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Speaker 4: the Chevron framework. And so the question is whether they

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Speaker 4: can allow Chevron to die a slow death, or at

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Speaker 4: least to be left in a weakened state, or whether

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Speaker 4: instead the conservative justices will decide to overturn Chevron outright,

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Speaker 4: And as was definitely remarked upon in oral argument, that

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Speaker 4: would cause a great deal of instability, because the question

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Speaker 4: would then be, what about all these cases have been

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Speaker 4: decided in reliance upon Chevron. Does that mean that they

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Speaker 4: will have to be reopened to determine whether courts want

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Speaker 4: to rethink what is the correct interpretation to give to

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Speaker 4: the statute that was challenged?

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Speaker 2: The liberal justices defended Chevron and the status quo. Justice

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Speaker 2: Katanji Brown Jackson said Chevron helps courts stay away from policymaking,

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Speaker 2: just as Elena Kagan gave some practical examples like should

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Speaker 2: courts defer to an agency's expertise as to whether a

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Speaker 2: cholesterol lowering product should be classified as a dietary supplement

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Speaker 2: or a drug? So, I mean those arguments seem to

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Speaker 2: make sense when you consider you know on the ground

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Speaker 2: level what agencies are deciding. Well.

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Speaker 4: In addition to that, there's long been a debate about

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Speaker 4: what Congress intends. There's been studies that suggest that Congress

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Speaker 4: is comfortable with Chevron, understand Chevron and indeed would want

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Speaker 4: the agency to fill in statutory gaps or clarify statutory

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Speaker 4: language as opposed to the court. Why because agencies are

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Speaker 4: seen as Congress's partner in trying to you know look

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Speaker 4: at safe drug policy, or try to understand immigration policy,

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Speaker 4: or try to understand how to regulate the airwaves. So

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Speaker 4: Congress indeed would prefer or intend for courts to help

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Speaker 4: them interstitially by trying to clarify ambiguous language as opposed

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Speaker 4: to the Court, which doesn't have the same kind of

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Speaker 4: expertise some kind of flexibility in trying to figure out

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Speaker 4: what statutes mean. So I view from that perspect cheven

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Speaker 4: is in the consistent with separation of powers. Once one

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Speaker 4: comes to the conclusion that Congress would prefer to have

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Speaker 4: the agency's flesh out statutory meaning if the statute is

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Speaker 4: unclear as opposed to the Court, because the agency has

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Speaker 4: the expertise and it works with Congress in trying to

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Speaker 4: accomplish the congressionally delegated admission. This which is why conservative

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Speaker 4: justices like antonin Scalia used to applaud it, because it

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Speaker 4: reflects Congress's intent that the two entities, Congress and agencies

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Speaker 4: are really working together to accomplish a similar mission.

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Speaker 2: So the Solicitor General Elizabeth free Lager argued that overruling

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Speaker 2: a past Supreme Court decision requires quote a truly extraordinary

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Speaker 2: justification and petitioners don't have one, But does it really

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Speaker 2: require a truly extraordinary justification for this court to overturn precedent.

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Speaker 4: There was a discussion during the oral argument about what

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Speaker 4: type of president Chevron was. It's different than the subject

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Speaker 4: due process question that arose in the Dom's case that

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Speaker 4: the interpretive approach. The analogy was made to if you

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Speaker 4: don't rely upon legislative history in the same way in

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Speaker 4: one case as opposed to another. Yes, were turning a case,

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Speaker 4: but it's not really a story of SISIs because individuals

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Speaker 4: haven't relied upon it the same way over the past

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Speaker 4: fifty years. But I think Congress has legislated in the

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Speaker 4: wager in the shadow of Chevron, and so it would

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Speaker 4: be undermining what Congress's intent has been in drafting statutes

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Speaker 4: for the last fifty years. So I think that would

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Speaker 4: be the real change. If Chevron is Jettison's as it

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Speaker 4: looks like it'll least be winnowed down, if not Jettison completely.

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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 Harold Krant of the Chicago Kent

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Speaker 2: College of Law, and we'll look at the possible lineup

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Speaker 2: of the justices in the case. I'm June Grass. When

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Speaker 2: you're listening to Bloomberg, I've been talking to Professor Harold

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Speaker 2: Brentt of Chicago Kent College of Law about Supreme Court

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Speaker 2: oral arguments today over a longstanding legal doctrine that gives

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Speaker 2: federal agencies a wide berth to interpret unclear laws. Did

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Speaker 2: it seem like there were four Justices Clarence Thomas, Neil Gorsich,

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Speaker 2: Brett Kavanaugh, and Samuel Alito who were ready to completely

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Speaker 2: jettison Chevron.

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Speaker 4: My guess would be that the four justices you mentioned, Alito, Thomas, Cavanaugh,

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Speaker 4: and Gorsch were clearly opposed to Chevron and didn't want

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Speaker 4: to have any kind of lasting legacy on the Court

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Speaker 4: at all with respect to that decision, whereas Justice Sparriit

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Speaker 4: and to Justice Roberts were more on the fence in

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Speaker 4: terms of what kind of response to court you take.

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Speaker 4: Should the Court go all the way and over WRLL Chevron,

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Speaker 4: or should they just limit Chevron even further than had

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Speaker 4: been previously limited by the Major Question Soccer. Indeed, many

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Speaker 4: commentators think that because Chevron has been watered down, particularly

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Speaker 4: with this Major Questions exception that gives the cord enough

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Speaker 4: leeway to limit the kind of power that agencies would

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Speaker 4: otherwise wield under Chevron.

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Speaker 2: Yeah, I'm Barrett express concerns about the disruptive consequences of

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Speaker 2: overturning the precedent. Yeah.

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Speaker 4: So one of the things that litigators don't remember today

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Speaker 4: is what life was like before Chevron. And the problem

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Speaker 4: that arises is when the agency makes an interpretation, it

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Speaker 4: can be challenged in many different circuits around the country,

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Speaker 4: and then oftentimes different district court judges will interpret ambiguous

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Speaker 4: statutory language differently, and so you have the prospect and

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Speaker 4: you will have the prospect again if Chevron is overturned

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Speaker 4: of having a disarray seven different or three different interpretations

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Speaker 4: of one statute that are enforced in different circuits, and

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Speaker 4: that may planning and makes even stability for businesses very difficult.

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Speaker 4: That's the kind of a cacophony that was discussed in

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Speaker 4: oral argument, and I think it's very real what happened

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Speaker 4: before Chevron. And one of the advantages with Chevron was

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Speaker 4: trying to get a uniformity of approach to limit the

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Speaker 4: splits among the circuits and the delay in trying to

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Speaker 4: get stability of an interpretation approved and.

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Speaker 2: Just noting that in these cases, both the DC Circuit

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Speaker 2: and the First Circuit sided with the federal government affirming

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Speaker 2: lower court decisions. So this wasn't a case where the

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Speaker 2: justices had to take it. It was a case where

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Speaker 2: four of the justices, and I think we probably know

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Speaker 2: which four took it to change things up right.

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Speaker 4: I think? So what's intriguing about the case too? This

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Speaker 4: was a policy that was adopted by the Trump administration

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Speaker 4: and defended by the Biden administration. You know, would suggests

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Speaker 4: it's a good vehicle Chevron because it's not a case

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Speaker 4: that looks more republic it looks more democratic. This just

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Speaker 4: looks governmental and just this did have an interesting comment

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Speaker 4: that just like if we get rid of Chevron, businesses

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Speaker 4: will be advantaged, but at the same time, so may immigrants, veterans,

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Speaker 4: and social security claimants because all those individuals who litigate

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Speaker 4: against the government have the burden of trying to persuade

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Speaker 4: a court that the statutory language has been attributed incorrectly

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Speaker 4: by the agency. But they can do that more readily

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Speaker 4: if Chevron doesn't exist, because otherwise they have to overcome

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Speaker 4: the presumption that the agency's interpretation is correct in case

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Speaker 4: of an interpretation of a vague statutory provision. And if

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Speaker 4: Chevron were totally overturned, then if these theoretically and it

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Speaker 4: would be true in some cases that individuals would have

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Speaker 4: more advantage in litigating against the government, but of course,

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Speaker 4: at the same time, so will businesses.

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Speaker 2: I remember one or argument last term. The Chief Justice

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Speaker 2: took account of the fact that you know, they're always

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Speaker 2: saying this is something for Congress, that Congress is gridlocked.

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Speaker 4: The comment was made from both conservative and liberal justices,

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Speaker 4: was that that ambiguity exists everywhere. It's impossible to get

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Speaker 4: rid of ambiguity, and so there was no expectation that

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Speaker 4: Congress would legislate with much more clarity. And indeed, if

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Speaker 4: you overturn Chevron at the margin, it would give a

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Speaker 4: little more incentive for Congress to minimize ambiguity. But they

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Speaker 4: seem to be dubious that Congress would change very much

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Speaker 4: at all. So it's not a question of the amount

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Speaker 4: of legislation. Rather it's the question of what kind of

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Speaker 4: specificity would Congress legislate.

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Speaker 2: With these two cases. I'm wondering if there is any

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Speaker 2: question about whether it's moved because The program that they're

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Speaker 2: complaining about was suspended last year and the agency reimburse

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Speaker 2: the monitoring cost that had incurred under it. So why

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Speaker 2: is this even before the court at this point?

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Speaker 4: The Court in the past has taken a very narrow

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Speaker 4: view of routness, and as long as a laws in

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Speaker 4: the books or could be put easily back on the books,

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Speaker 4: it is considered that too it is reached out to

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Speaker 4: answer those kinds of challenges. So my guess is this

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Speaker 4: will be the same in this case. That the regulation

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Speaker 4: has not been repealed, it could be reinstated, and therefore

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Speaker 4: the controversy is still alive. But I will say that

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Speaker 4: there's very little argument that I heard that were touched

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Speaker 4: upon that issue whatsoever.

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Speaker 2: So if they decide to do something limiting Chevron, I mean,

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Speaker 2: what would that look like.

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Speaker 4: They might say that Chevron can be used only when

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Speaker 4: the expertise of an agency is clearly needed, or they

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Speaker 4: might say that a Chevron can be used only if

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Speaker 4: the Congress is otherwise indicated that it intends for the

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Speaker 4: agency to address the issue. So there was discussion to

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Speaker 4: an alignment today about whether or not one can slice

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Speaker 4: and dice and get different kinds of context in which

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Speaker 4: Chevron arises as again to sort of understand that Congress

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Speaker 4: may have anticipator may welcome agencies interpretations more in some

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Speaker 4: contexts than others. If in Congress is just silent, as

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Speaker 4: in this case for the Herring fisherment that there was

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Speaker 4: nothing in the statute about who pays for monitors on

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Speaker 4: fishing vessels. In that kind of silence, there would be

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Speaker 4: no reason to defer to the agency, but rather the

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Speaker 4: agency should only get difference if there's more peculiar or

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Speaker 4: more specific indicators that Congress ten of the agencies to

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Speaker 4: have some kind of interpretive role in administering a statute.

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Speaker 4: That's when Chevron might be applied, not in the case

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Speaker 4: with congresseemingly just forgot about an issue as in the

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Speaker 4: who pays for the fishing monitors that was involved in

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Speaker 4: this case.

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Speaker 2: Thanks so much, how that's Professor Harrold Krant of the

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Speaker 2: Chicago Kent College of Law. Coming up next on the

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Speaker 2: Bloomberg Law Show, we'll take a look at a judge

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Speaker 2: blocking the Jet Blue Spirit deal on anti trust grounds.

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Speaker 2: What happens next. A federal judge has blocked the three

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Speaker 2: point eight billion dollar deal between Jet Blue Airways and

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Speaker 2: Spirit Airlines over anti trust concerns. It leaves the two

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Speaker 2: carriers adrift and means Jet Blue will continue to be

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Speaker 2: relegated to second tier status behind the industry's big four carriers,

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Speaker 2: which wield unmatched pricing power and command vastly bigger fleets,

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Speaker 2: and for Spirit, the consequences may be Direoin me is

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Speaker 2: Bloomberg Intelligence senior litigation analyst Jennifer Ree, just how big

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Speaker 2: a win is this for the Biden administration, which has

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Speaker 2: been aggressive in antitrust enforcement?

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Speaker 5: You know, I guess I would classify it as a

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Speaker 5: big win only because I think the administration needs wins

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Speaker 5: on the M and A front, the M and A

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Speaker 5: challenge front. But in terms of this specific case, I

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Speaker 5: don't necessarily see it as surprising or a big win

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Speaker 5: because this just seemed like an anti competitive deal from

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Speaker 5: the beginning, and it seemed like it should have been

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Speaker 5: an easy case for the Department of Justice to win.

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Speaker 5: So it's not a great feat in other words, that

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Speaker 5: they succeeded in court, but just generally, I think in

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Speaker 5: stopping any kind of consolidation and in kind of furthering

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Speaker 5: the aggressive push to stop consolidation to stop a lot

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Speaker 5: of deals in that way. It's a big win.

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Speaker 2: Tell us why the judge William Young decided against the

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Speaker 2: merger of Jetblu and Spirit.

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Speaker 5: You know, I think with this really came down to

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Speaker 5: is the fact that there are flights that Spirit flies

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Speaker 5: where Jet Blue doesn't. So it's odd because most deals

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Speaker 5: will come down to where they compete, but I think

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Speaker 5: this came down to where they do not compete because

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Speaker 5: Jet Blue was very clear about plans to take those

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Speaker 5: Spirit flights, retrofit the planes to the Jet Blue model,

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Speaker 5: and probably therefore raise the fares and lower capacity because

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Speaker 5: the seats would be bigger and there would be fewer passengers.

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Speaker 5: And for those routes, there's no way from an antitrust

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Speaker 5: perspective that you can fix those higher prices for routes

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Speaker 5: where they compete. They could sell the route to a

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Speaker 5: Legiant or two Frontier that might continue to compete as

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Speaker 5: a very low unbundled fair option. But now what you're

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Speaker 5: doing is taking Spirit, which is considered an ultra low

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Speaker 5: cost carrier and offers these very low unbundled fares. You're

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Speaker 5: taking them out of the market for certain routes altogether.

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Speaker 5: And there are absolutely consumers that depended on those low

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Speaker 5: fares for those particular routes, and they would be hurt

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Speaker 5: by the deal, and that's what the judge ultimately decided.

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Speaker 2: So that means that Jet Blue will continue to be

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Speaker 2: relegated to second tier status behind the industries for big carriers,

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Speaker 2: and Samuel Engel of ICF told Bloomberg they don't have

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Speaker 2: an easy path to grow. They'll continue to be at

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Speaker 2: scale disadvantaged compared to the largest airlines. So this decision

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Speaker 2: sort of relegates Jet Blue, you know, to a position

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Speaker 2: that's in or even.

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Speaker 5: Worse, you know, I guess it does. And Jet Blue argued, look,

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Speaker 5: we need to combine with Spirit in order to grow.

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Speaker 5: That's really the only way nowadays to grow as an airline.

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Speaker 5: And if we grow, we can compete more vigorously against

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Speaker 5: the legacy airlines like Delta, United American, and Southwest, and

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Speaker 5: that would be a good thing for consumers. That's pro competitive.

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Speaker 5: And the judge actually agreed with that in this case,

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Speaker 5: that this would help Jet Blue if they could combine

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Speaker 5: with Spirit, help it to grow, increase its map and

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Speaker 5: or compete with some of the bigger airlines. But it

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Speaker 5: wasn't enough. It wasn't enough to overcome the harm to

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Speaker 5: the consumers that I just talked about, And I think

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Speaker 5: that's why, in a way, yes, the decision does tend

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Speaker 5: to relegate Jet Blue to its position sort of as

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Speaker 5: a second tier. But one of the things that happened

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Speaker 5: here June that was pretty effective is that what the

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Speaker 5: Department of Justice argued is that look, in this kind

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Speaker 5: of second tier place that Jet Blue sits, now, it's

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Speaker 5: a kind of a maverick, right, it does something called

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Speaker 5: the jet Blue effect. It really competes hard against the

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Speaker 5: legacy airlines, and when it enters a route or the

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Speaker 5: route sets in, it forces these airlines to bring down

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Speaker 5: their prices. And what they argued is, look, if they

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Speaker 5: buy Spirit, they're telling you they'll better compete against the legacies,

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Speaker 5: but in fact, they're really just going to become just

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Speaker 5: like one of them. They're going to be bigger, they're

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Speaker 5: going to be more in a position that's more similar

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Speaker 5: to the legacy airlines. They're going to take on a

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Speaker 5: huge amount of debt from buying Spirit, and they're going

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Speaker 5: to need to keep their prices up. So instead of

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Speaker 5: actually continue to exert this competitive pressure, they just become

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Speaker 5: like the legacies, and they increase their prices.

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Speaker 2: The market appeared to like the news for Jet Blue.

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Speaker 2: Jet Blue stock rows almost five percent after the news.

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Speaker 2: Is that, you think because the company won't have to

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Speaker 2: shell out billions of dollars and be saddled with a

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Speaker 2: discount carrier.

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Speaker 5: I think so. I mean, first, it was a very

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Speaker 5: large amount of debt they would have taken on to

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Speaker 5: finish this acquisition. That's the first thing. Their debt debt

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Speaker 5: ratio would have been much worse than it's been in

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Speaker 5: the past. And they themselves aren't really doing all that

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Speaker 5: well right now. You know, all the airlines are struggling

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Speaker 5: a little bit with air traffic controller shortages and airline shortages,

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Speaker 5: and there's some engine problems for some planes, and you know,

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Speaker 5: everybody's recovering after COVID. And then at the same time,

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Speaker 5: what they're paying for Spirit now seems like an overpayment

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Speaker 5: given what Spirit is worth today. So I think many

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Speaker 5: analysts actually saw getting out of this deal is a

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Speaker 5: good thing for Jet Blue.

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Speaker 2: For Spirit not so much. It shares We're cut in

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Speaker 2: hand Tuesday and their worst loss ever. And if Spirit

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Speaker 2: doesn't survive, doesn't that mean the judges analysis was wrong

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Speaker 2: or at least was not prescient.

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Speaker 5: Well, I think what happened here is that Spirits lawyers

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Speaker 5: could have made a more full throated flailing firm or

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Speaker 5: failing firm defense. Within the guidelines that the agencies used

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Speaker 5: to assess the deal, there is a defense to an

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Speaker 5: otherwise anti competitive deal called a failing firm defense or

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Speaker 5: a flailing firm defense, and it was sort of suggested

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Speaker 5: in trial that Spirit's not doing well. They're struggling financially,

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Speaker 5: they don't expect to make money next year, they don't

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Speaker 5: know when they'll be in a better financial position going forward,

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Speaker 5: and some of the issues they're having were outlined, and

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Speaker 5: the judge said, look, you know, they didn't really meet

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Speaker 5: the elements they need to meet. Legal cases have set

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Speaker 5: out the precedent, set out what has to be proven

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Speaker 5: in order to establish that defense, and the companies just

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Speaker 5: didn't do it. They didn't meet that defense, and that's

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Speaker 5: why the judge rejected it. I sat through most of

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Speaker 5: the trial, and I tend to agree. I don't think

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Speaker 5: that they provided the evidence they needed to provide that

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Speaker 5: would have allowed the judge to say, Okay, I'll let

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Speaker 5: an otherwise the anti competitive deal go forward because of

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Speaker 5: the fact that Spirit might actually go under if we

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Speaker 5: don't allow the deal to close.

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Speaker 2: The judge wrote, the Airlines are welcome to take another

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Speaker 2: run at a merger at any time. The courthouse doors

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Speaker 2: remain open should the defendant Airlines decide to try again,

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Speaker 2: and the government then wishes to prevent such an attempt.

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Speaker 2: Why say that, Well.

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Speaker 5: First, the DJ asked for a permanent injunction that would

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Speaker 5: prevent these two from ever trying to merge again. So

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Speaker 5: they didn't quite get fully what they wanted. And it's

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Speaker 5: exactly what's playing out in the marketplace now that this

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Speaker 5: judge was worried about. I mean, he specifically asked during trial, well,

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Speaker 5: what happens if there is no Spirit? If I don't

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Speaker 5: allow this deal, what happens then that's a worse situation.

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Speaker 5: As he was sort of questioning the lawyers and thinking

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Speaker 5: through the theories and sort of in a ruminating kind

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Speaker 5: of way, he was asking that, and if he wanted

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Speaker 5: to leave the door open if marketplace dynamics did change

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Speaker 5: to allow these companies to try to merge again in

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Speaker 5: the future, if in fact Spirit went belly up and

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Speaker 5: couldn't be restructured out of bankruptcy, or some other suitor

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Speaker 5: didn't step up, like maybe Frontier to buy Spirit, so

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Speaker 5: that the Spirit routes would continue to exist. And he

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Speaker 5: specifically wrote the injunction that way to allow for another

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Speaker 5: deal possibly to go forward. But you know what, June

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Speaker 5: easier said than done, because these things are difficult. It's

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Speaker 5: not just like you can jump into a merger agreement,

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Speaker 5: get a DOJ investigation finished up, go to trial. It

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Speaker 5: takes time, it hurts your business, it's expensive, and suffice

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Speaker 5: it to say, it seems likely that if Frontier or

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Speaker 5: again jet Blue tried to acquire Spirit, they'd probably still

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Speaker 5: face another Department of Justice fight.

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Speaker 2: In a joint statement, jet Blue and Spirit said they're

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Speaker 2: evaluating their next steps as part of the legal process.

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Speaker 2: So that means will they appeal or the appeal.

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Speaker 5: Exactly right, they're thinking about it, and.

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Speaker 2: What do you think about their chances on appeal?

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Speaker 5: You know, I think their chances aren't great. And it's

437
00:26:09,200 --> 00:26:13,320
Speaker 5: because this was really a question of interpreting the evidence,

438
00:26:13,560 --> 00:26:18,320
Speaker 5: the testimony by the experts and the documents and ultimately deciding,

439
00:26:18,880 --> 00:26:22,080
Speaker 5: you know, which arguments were stronger and more valid than others.

440
00:26:22,560 --> 00:26:25,119
Speaker 5: And that kind of a decision is given deference by

441
00:26:25,160 --> 00:26:27,919
Speaker 5: an appellate panel because it needs to be shown that

442
00:26:27,960 --> 00:26:31,119
Speaker 5: it was clearly erroneous, and that's hard to meet. So

443
00:26:31,280 --> 00:26:33,679
Speaker 5: I do think an appeal would probably be an uphill

444
00:26:33,720 --> 00:26:36,239
Speaker 5: climb for the airlines. And time is a little bit

445
00:26:36,280 --> 00:26:39,119
Speaker 5: tight too, because it could take five to six months,

446
00:26:39,600 --> 00:26:42,080
Speaker 5: let's say, from notice of appeal to decision, and they

447
00:26:42,119 --> 00:26:44,600
Speaker 5: do have a merger and date of July twenty fourth,

448
00:26:44,800 --> 00:26:46,640
Speaker 5: so the timing's a little tight there too.

449
00:26:47,000 --> 00:26:50,080
Speaker 2: And how much does Jet Blue have to pay if

450
00:26:50,119 --> 00:26:51,280
Speaker 2: the deal doesn't go through?

451
00:26:51,560 --> 00:26:54,399
Speaker 5: So they've agreed to pay four hundred and seventy million.

452
00:26:54,560 --> 00:26:57,120
Speaker 5: Part of that goes to shareholders, part of it goes

453
00:26:57,160 --> 00:26:59,920
Speaker 5: to Spirit and that's minus some prepayments that have already

454
00:26:59,920 --> 00:27:02,640
Speaker 5: been made. I don't actually know how much has been made,

455
00:27:02,640 --> 00:27:05,719
Speaker 5: but the whole grand total of pre payments plus post

456
00:27:05,760 --> 00:27:07,800
Speaker 5: failure fee is four hundred and seventy million.

457
00:27:08,280 --> 00:27:11,080
Speaker 2: Not a drop in the bucket, No, not at all.

458
00:27:11,240 --> 00:27:16,280
Speaker 2: Could this ruling spell trouble for Jet blues rival Alaska

459
00:27:16,320 --> 00:27:19,399
Speaker 2: Airlines and its acquisition of Hawaiian.

460
00:27:19,400 --> 00:27:21,680
Speaker 5: You know, may I may be in the minority here,

461
00:27:22,320 --> 00:27:25,119
Speaker 5: but I don't actually think it makes any difference, And

462
00:27:25,160 --> 00:27:28,639
Speaker 5: I'll tell you why, because I always thought that that

463
00:27:28,840 --> 00:27:31,480
Speaker 5: deal would probably get challenged by the DOJ. Theyre just

464
00:27:31,520 --> 00:27:35,600
Speaker 5: simply think that the airline industry is already too consolidated,

465
00:27:35,640 --> 00:27:38,200
Speaker 5: and if they go in with that position, they may

466
00:27:38,280 --> 00:27:41,520
Speaker 5: be more interested in trying to challenge this deal in

467
00:27:41,560 --> 00:27:43,960
Speaker 5: court than allowing it to go through. So I've always

468
00:27:44,000 --> 00:27:46,359
Speaker 5: thought that there was a chance of that. I think

469
00:27:46,400 --> 00:27:49,239
Speaker 5: that that deal's much easier to fix than this deal is,

470
00:27:49,480 --> 00:27:54,440
Speaker 5: because really that's just a straightforward combination of two competitors

471
00:27:54,800 --> 00:27:58,359
Speaker 5: that overlap for I understand, a pretty small number of

472
00:27:58,440 --> 00:28:02,360
Speaker 5: routes overall, and they can divest those routes to other carriers,

473
00:28:02,400 --> 00:28:05,720
Speaker 5: which is generally the way past airline mergers have been

474
00:28:05,800 --> 00:28:08,440
Speaker 5: remediated in the past. And I think that if they

475
00:28:08,520 --> 00:28:11,440
Speaker 5: can they divest a sufficient number of routes to the

476
00:28:11,560 --> 00:28:13,960
Speaker 5: right buyers, it seems to me they have a very

477
00:28:14,000 --> 00:28:17,119
Speaker 5: good chance of winning in court. With Jet Blue and Spirit,

478
00:28:17,240 --> 00:28:19,760
Speaker 5: you had this whole other problem of these routes where

479
00:28:19,800 --> 00:28:22,880
Speaker 5: they didn't compete, where it was only Spirit flying the route,

480
00:28:22,960 --> 00:28:24,680
Speaker 5: but it was now going to become Jet Blue, and

481
00:28:24,720 --> 00:28:27,160
Speaker 5: the prices we're going to go up, so they had

482
00:28:27,200 --> 00:28:30,880
Speaker 5: a different problem then will exist with the Hawaiian Alaska combination.

483
00:28:31,640 --> 00:28:34,160
Speaker 2: This is the second time in less than a year

484
00:28:34,240 --> 00:28:37,680
Speaker 2: that Jet Blue has lost a federal anti trust challenge.

485
00:28:38,040 --> 00:28:39,360
Speaker 2: Is it time to just give up?

486
00:28:41,520 --> 00:28:43,160
Speaker 5: I would have said it was time to give up

487
00:28:43,200 --> 00:28:46,520
Speaker 5: before they end that the merger agreement with Spirit. I

488
00:28:46,560 --> 00:28:49,520
Speaker 5: don't think it's really any big surprise that that deal

489
00:28:49,640 --> 00:28:52,080
Speaker 5: was challenged and that the DOJ want it in court.

490
00:28:52,440 --> 00:28:55,720
Speaker 5: And I still wonder sometimes whether the whole reason for

491
00:28:55,880 --> 00:28:58,800
Speaker 5: entering that agreement was just to stop Frontier in Spirit

492
00:28:58,880 --> 00:29:01,560
Speaker 5: from merging. The very skeptical side of me.

493
00:29:01,560 --> 00:29:04,440
Speaker 2: I guess, lawyer, I was supposed to be skeptical.

494
00:29:03,960 --> 00:29:07,480
Speaker 5: So exactly I'm supposed to approach this skeptically. You know,

495
00:29:07,640 --> 00:29:10,120
Speaker 5: I think it's pretty clear that they'd have a tough

496
00:29:10,160 --> 00:29:13,680
Speaker 5: time buying up another airline. You know, at the very least,

497
00:29:13,720 --> 00:29:15,800
Speaker 5: they would be challenged and have to fight it in

498
00:29:15,840 --> 00:29:18,160
Speaker 5: court and try to win in court. I'll tell you

499
00:29:18,200 --> 00:29:20,400
Speaker 5: that on the NEA, I was a little bit surprised.

500
00:29:20,640 --> 00:29:23,280
Speaker 5: I sat through that trial too, and I actually thought

501
00:29:23,320 --> 00:29:26,200
Speaker 5: that the NEA would stay in place with some modifications

502
00:29:26,240 --> 00:29:28,040
Speaker 5: to it, and so I was a little bit surprised

503
00:29:28,040 --> 00:29:30,960
Speaker 5: that the judge abolished it altogether. And I actually think

504
00:29:31,000 --> 00:29:33,600
Speaker 5: that there was a chance that he may have allowed

505
00:29:33,960 --> 00:29:37,600
Speaker 5: for the NEA to stay in place, but without the

506
00:29:37,640 --> 00:29:40,000
Speaker 5: revenue sharing that was part of it, and without some

507
00:29:40,080 --> 00:29:43,000
Speaker 5: capacity coordination that was part of it. So really it

508
00:29:43,040 --> 00:29:45,560
Speaker 5: was just a code sharing agreement. But at the time

509
00:29:45,680 --> 00:29:48,360
Speaker 5: the companies were ready to present that to the judge,

510
00:29:48,520 --> 00:29:51,160
Speaker 5: jet Blue had backed out. The termination date had come

511
00:29:51,200 --> 00:29:53,080
Speaker 5: and gone, and Jet Blue had backed out, which was

512
00:29:53,080 --> 00:29:55,160
Speaker 5: their right because they thought it would help them to

513
00:29:55,200 --> 00:29:58,160
Speaker 5: win this spirit trial, and so the judge never entertained

514
00:29:58,160 --> 00:29:59,080
Speaker 5: that possibility.

515
00:30:00,000 --> 00:30:04,280
Speaker 2: An administration is doing very well with antitrust concerns in

516
00:30:04,400 --> 00:30:07,680
Speaker 2: the airline industry, but what about other industries? Is it

517
00:30:07,760 --> 00:30:08,640
Speaker 2: faring as well?

518
00:30:09,280 --> 00:30:12,480
Speaker 5: I would say in my mind, they're doing better I

519
00:30:12,520 --> 00:30:16,200
Speaker 5: think than many are giving them credit for. And the DOJ.

520
00:30:16,400 --> 00:30:18,720
Speaker 5: Now this is three wins in a row for the DOJ,

521
00:30:18,960 --> 00:30:22,960
Speaker 5: after the NEAID case that you mentioned and also successfully

522
00:30:23,000 --> 00:30:26,440
Speaker 5: blocking Penguin, Random House and Simon and Schuster from completing

523
00:30:26,480 --> 00:30:30,320
Speaker 5: their deal. The FTC has had some very big losses

524
00:30:30,480 --> 00:30:33,360
Speaker 5: that have been in the news, but they've also succeeded

525
00:30:33,400 --> 00:30:36,640
Speaker 5: in achieving a lot of abandonments and abandonments are also

526
00:30:36,720 --> 00:30:40,680
Speaker 5: considered a success because essentially it's done what they intend

527
00:30:40,680 --> 00:30:43,160
Speaker 5: to do. It has stopped the consolidation that they don't

528
00:30:43,200 --> 00:30:45,880
Speaker 5: think should go forward. So I think people aren't really

529
00:30:45,960 --> 00:30:49,560
Speaker 5: giving the FTC enough credit for the abandonments of deals

530
00:30:49,560 --> 00:30:52,040
Speaker 5: that they've achieved. And I would also say that the

531
00:30:52,040 --> 00:30:54,920
Speaker 5: cases that they have brought have been very difficult cases

532
00:30:54,960 --> 00:30:58,600
Speaker 5: to win in court. They have been novel theories they challenge,

533
00:30:58,680 --> 00:31:02,000
Speaker 5: and Microsoft Activision was a vertical integration case. It's very

534
00:31:02,040 --> 00:31:05,560
Speaker 5: hard to win a vertical integration case. And perhaps they

535
00:31:05,600 --> 00:31:09,280
Speaker 5: haven't picked and chosen the cases to challenge quite as

536
00:31:09,280 --> 00:31:13,320
Speaker 5: well as the Department of Justice has. But I think

537
00:31:13,400 --> 00:31:16,120
Speaker 5: that now they're gaining some steam and now they're kind

538
00:31:16,120 --> 00:31:17,760
Speaker 5: of getting their legs under them, and I think it

539
00:31:18,040 --> 00:31:20,880
Speaker 5: still remains to be seen what happens in the rest

540
00:31:20,880 --> 00:31:23,920
Speaker 5: of this year. If the FTC actually does too to

541
00:31:24,040 --> 00:31:28,160
Speaker 5: challenge Kroger and Albertson's deal, what happens there and with

542
00:31:28,240 --> 00:31:30,080
Speaker 5: other deals that are pending right now as well.

543
00:31:30,280 --> 00:31:33,080
Speaker 2: Always a pleasure to have you on, jen That's Bloomberg

544
00:31:33,160 --> 00:31:36,920
Speaker 2: Intelligence senior litigation analyst, Jenniferree, And that's it. For this

545
00:31:37,080 --> 00:31:40,200
Speaker 2: edition of the Bloomberg Law Podcast. Remember you've been always

546
00:31:40,200 --> 00:31:42,960
Speaker 2: get the latest legal news by subscribing and listening to

547
00:31:43,000 --> 00:31:47,160
Speaker 2: the show on Apple Podcasts, Spotify, and at Bloomberg dot com,

548
00:31:47,200 --> 00:31:51,440
Speaker 2: slash podcast, slash Law. I'm June Grosso, and this is

549
00:31:51,480 --> 00:31:52,080
Speaker 2: Bloomberg