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

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Speaker 2: Last month, jurors sided with football fans who said the

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Speaker 2: NFL conspired with DirecTV to raise the prices of subscriptions

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Speaker 2: to watch out of market games to the tune of

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Speaker 2: damages in the amount of four point seven billion dollars,

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Speaker 2: which stands to be tripled to fourteen billion under federal law.

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Speaker 2: While the NFL is asking a federal judge to toss

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Speaker 2: that verdict in part, accusing jurors of relying on a

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Speaker 2: made up methodology to come up with damages the league

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Speaker 2: called nonsensical. Joining me is Jenniferree, Bloomberg Intelligence senior litigation

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Speaker 2: analyst jen tell Us about this class action antitrust case

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Speaker 2: against the NFL.

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Speaker 1: You know, this is actually a really complicated case. It

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Speaker 1: doesn't seem like it should be it's the NFL, but

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Speaker 1: it is, and it's been around for ten years and

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Speaker 1: by the way, almost made a trip to the Supreme

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Speaker 1: Court rite, So there's a lot of history here. But

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Speaker 1: what this is about are people who pay for something

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Speaker 1: called Sunday Ticket. Now, Sunday Ticket is a package of

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Speaker 1: out of market football games during the football season. So

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Speaker 1: Let's say I live in New York, but I'm a

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Speaker 1: Cleveland Browns fan, and all I can get over the

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Speaker 1: weekend is a Giants game or a Jets game, and

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Speaker 1: I want to watch the Browns. In order to see

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Speaker 1: that game, I have to buy Sunday ticket. And you

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Speaker 1: know what, Sunday ticket is expensive, and commercial establishments buy

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Speaker 1: it too. So if you went to a sports bar

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Speaker 1: where they're playing all the games, it's because they bought

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Speaker 1: this Sunday ticket from the NFL. Well not from the NFL,

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Speaker 1: but from Direct TV. Now it's YouTube. So basically what

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Speaker 1: the objection was was that NFL member teams are supposed

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Speaker 1: to be competitors. They are separate teams, they are separate businesses,

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Speaker 1: and they are supposed to compete, but for the purposes

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Speaker 1: at least of licensing their telecasts and producing the telecasts

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Speaker 1: of their games, they were pooling them in the NFL,

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Speaker 1: creating these telecasts, pulling them in the NFL, and then

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Speaker 1: giving the NFL itself, whatever you want to call it,

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Speaker 1: a joint venture of the league, right to then sell

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Speaker 1: it license it at the time to Direct TV, giving

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Speaker 1: DirecTV exclusive rights, allowing DirecTV therefore to praise it anywhere

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Speaker 1: they want to, because they're the only one that has

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Speaker 1: it and it's quite expensive. There were actually really similar

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Speaker 1: lawsuits brought against MLB and National Hockey League as well,

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Speaker 1: long long time ago. They settled, so those cases are gone.

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Speaker 1: I sort of thought this one would go the same route,

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Speaker 1: but the NFL is going to fight it. And what

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Speaker 1: has happened is that the plaintiffs, which are both commercial

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Speaker 1: establishments and people who bought Sunday Ticket, won a jury verdict.

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Speaker 1: They basically showed that pooling these rights, these telecast rights,

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Speaker 1: is anti competitive under the anti trust laws. At least

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Speaker 1: this is what the jury decided based on the evidence

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Speaker 1: they heard at trial, and that because of that, people

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Speaker 1: were overcharged for many years for Sunday Ticket, and they

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Speaker 1: determined that the overcharges amounted to what you said, something

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Speaker 1: over four billion before tripling, close to fight before tripling.

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Speaker 1: Anti trust damages are always tripled, So we're talking four

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Speaker 1: fourteen billion really here at the end of the day

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Speaker 1: if this sticks, So that's something a judge will have

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Speaker 1: to decide. So what the plaintiffs we're looking for here

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Speaker 1: are damages, but also injunctive relief and preventing them from

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Speaker 1: exclusively giving all the rights to these out of market games.

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Speaker 1: It's now to YouTube, not DirecTV anymore to YouTube for

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Speaker 1: YouTube to turn around and sell a subscription, that's something

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Speaker 1: the judge will have to decide after the post trial

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Speaker 1: motions were in that process. Now, after those are all

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Speaker 1: finished up, the jury just decided on liability and on damages, the.

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Speaker 2: NFL wants the judge to toss the verdict explain the

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Speaker 2: reasons they've given.

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Speaker 1: So the NFL's making a lot of claims here that,

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Speaker 1: first of all, that based on the evidence presented, the

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Speaker 1: jury's finding was simply irrational. That first, they're indirect purchasers.

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Speaker 1: They're not direct purchasers. And that's a weird little antitrust thing, right.

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Speaker 1: A long time ago the Supreme Court said only direct

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Speaker 1: purchasers of a product can sue under the federal antitrust laws.

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Speaker 1: And they're saying they didn't buy this from us. They

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Speaker 1: bought it from DirecTV, so they are indirect purchasers. Now,

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Speaker 1: the court has already rejected that claim, saying that this

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Speaker 1: was a conspiracy and they bought it from one of

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Speaker 1: your co conspirators. But what the NFL said is they

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Speaker 1: did not provide evidence and trial that there was a

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Speaker 1: conspiracy or that DirecTV was a co conspirator. You need

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Speaker 1: what's called a conscious commitment to a common scheme to

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Speaker 1: be conspirators. And it is complicated, and that the NFL

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Speaker 1: teams might have gotten together to pool all of their

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Speaker 1: telecasts and give those telecasts to the NFL for the

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Speaker 1: NFL to do with them what they would DirecTV wasn't

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Speaker 1: a party to that. They separately have an agreement with

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Speaker 1: the NFL, but they weren't a party to this overall conspiracy.

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Speaker 1: And so they're saying this simply isn't evidence that there was.

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Speaker 1: And without DirecTV being one of the co conspirators, they

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Speaker 1: then plaintiffs become indirect purchasers and they didn't have standing here.

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Speaker 1: So that's one thing that they're claiming. You know, they're

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Speaker 1: basically really challenging sort of across the board everything that

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Speaker 1: was decided. They're also saying something else quite complicated. There

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Speaker 1: was a law passed in the nineteen sixties called the

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Speaker 1: Sports Broadcasting Act. And what that act did. Congress passed

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Speaker 1: this act to say NFL has an exemption from Section

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Speaker 1: one of the Sherman Act. Section one is the conspiracy

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Speaker 1: law right that is being alleged in this lawsuit four

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Speaker 1: purposes of pooling telecasts to get together and organize as

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Speaker 1: a league and get those games on air for the

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Speaker 1: people that are interested in those games. The catch is

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Speaker 1: that the SBA said for sponsored television, and sponsored television

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Speaker 1: is free televisions. It's television that existed in the nineteen

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Speaker 1: sixties that we all forget about now, where you just

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Speaker 1: have an antenna on your TV and there are commercials

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Speaker 1: and you don't pay a thing, right, You've got your

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Speaker 1: antenna free TV because it's supported by advertising and that's

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Speaker 1: where the revenue comes from. So it was limited to

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Speaker 1: sponsored telecasts and this is not a sponsored telecast CBS

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Speaker 1: and Fox which air Sunday games at least it's a

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Speaker 1: little bit different now, but at the time the history

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Speaker 1: of this, when the allegations were being made, it was

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Speaker 1: CBS and Fox that would do the telecasts for the

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Speaker 1: regular Sunday games that we could all see our in

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Speaker 1: market team at home. They are basically over the air stations.

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Speaker 1: They're not cable networks, right, So they're saying the Sports

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Speaker 1: Broadcasting Act applies to our pooling of all the teams

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Speaker 1: coming together and pooling their rights to these telecasts, giving

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Speaker 1: them to the NFL to let CBS and Fox air

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Speaker 1: them on Sundays may not apply to Direct TV, which

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Speaker 1: is paid for subscription, but it does apply to the

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Speaker 1: other one. And the judge here and the jury here

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Speaker 1: improperly said that the Sports Broadcasting Act doesn't apply. So

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Speaker 1: there are a lot a lot of complications to this case.

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Speaker 2: It's anti trust, so I expect complications. But didn't the

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Speaker 2: judge rule on some of these before trial?

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Speaker 1: So the judge did. There was a summary judgment motion.

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Speaker 1: The judge's hands were a little bit tied, and the

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Speaker 1: reason is because the judge actually dismissed this case on

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Speaker 1: a motion to dismiss It was a different judge. The

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Speaker 1: judges changed in the course of the litigation because it's

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Speaker 1: been going so long, But the case was dismissed. This

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Speaker 1: is how it took a route to the Supreme Court.

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Speaker 1: You know that that's very early complaints filed. The defendants say,

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Speaker 1: there's nothing in this complaint that alleges any kind of

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Speaker 1: facts that would mean that the law has been violated.

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Speaker 1: Judge agreed, dismissed the case. It went to the Ninth

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Speaker 1: Circuit on appeal, and the Ninth Circuit reversed. The NFL

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Speaker 1: sought a review by the Supreme Court. Supreme Court interestingly

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Speaker 1: didn't take the case, but Justice Kavanaugh issued a statement

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Speaker 1: along with not taking the case, basically saying he agreed

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Speaker 1: with the NFL's position and practically inviting the NFL to

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Speaker 1: come back and try again in front of the Supreme

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Speaker 1: Court should they lose. So that June is the reason.

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Speaker 1: I'll tell you, I think they have a very good

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Speaker 1: shot on appeal here.

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Speaker 2: No matter what, it's going to end up at the

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Speaker 2: Supreme Court again, and the NFL has at least one

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Speaker 2: vote there to take the case.

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Speaker 1: They got one, and maybe they'll get there. So the

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Speaker 1: reason that the judge is a little bit tied is

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Speaker 1: because when the Ninth Circuit ruled, the Ninth Circuit said, no,

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Speaker 1: we don't think the SBA applies Sports Broadcasting Act. We

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Speaker 1: don't think they're indirect purchasers here. So the judge kind

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Speaker 1: of went back and looked at that and said, all right,

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Speaker 1: you know, I mean I need to kind of align

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Speaker 1: with what the Ninth Circuit has already said, and I'm

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Speaker 1: going to put this in front of the jury. You know,

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Speaker 1: the judge on a summary judgment doesn't decide if there's liability,

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Speaker 1: just decides if there are enough facts that it should

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Speaker 1: go before a jury to decide. And he said, yes,

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Speaker 1: it should go before the jury, and the jury decided.

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Speaker 2: What we all know, it would be a big step

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Speaker 2: for a judge to toss out a four point seven

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Speaker 2: billion dollar verdict. Might you just knock it down?

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Speaker 1: I think there's a good chance here, And the reason

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Speaker 1: is because it seems a bit arbitrary. If what the

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Speaker 1: NFL is saying is true, and it sounds like it's correct,

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Speaker 1: it seems like the jury, rather than going with what

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Speaker 1: the plaintiff's experts models said they should do with respect

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Speaker 1: to damages, came up with their own calculation, maybe on

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Speaker 1: their eye phones, with their calculators. It's a very strange

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Speaker 1: damages determination. It looks like what they did was took

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Speaker 1: the list price for Sunday tickets somewhere around two hundred

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Speaker 1: and fifty for the season, something like that, and then

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Speaker 1: the average actual price paid. You know, people get discounts,

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Speaker 1: they get coupons, they get specials, and they get sales.

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Speaker 1: So what the experts had shown is the actual price paid.

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Speaker 1: The average is around one hundred and twenty some somewhere

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Speaker 1: in there. And what they did is they took the

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Speaker 1: list price and they subtracted that actual price. That difference

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Speaker 1: that one ninety nine or so. They considered that the overcharge,

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Speaker 1: and they multiply that by the number of subscribers. That's

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Speaker 1: quite arbitrary and antitrust because anti trust damages should be

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Speaker 1: in a butt four world, if this anti competitive conduct

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Speaker 1: were not taking place, there was healthy, appropriate competition, what

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Speaker 1: would the price have been. And you look at that

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Speaker 1: price and then you look at how much more was

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Speaker 1: paid over that. That's your overcharge, not the difference between

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Speaker 1: the list price and the actual average price paid. So

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Speaker 1: it seems a little arbitrary. It seems a little disconnected

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Speaker 1: to the alleged anti competitive conduct. And I do think

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Speaker 1: there's a shot here at the judge saying, Okay, they

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Speaker 1: may have determined liability, but the damage's decision doesn't really

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Speaker 1: make sense and we need to do something with that.

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Speaker 2: Is there a possibility that they could settle this whole

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Speaker 2: thing and avoid retrials and appeals on and on.

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Speaker 1: They absolutely could settle, which is what I thought five

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Speaker 1: years ago would happen because MLB and NHL settled really

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Speaker 1: quite easily. All they did is what plaintiffs wanted. They

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Speaker 1: offered up a la carte options. So instead of forcing

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Speaker 1: people to buy, for a very high price, the entire

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Speaker 1: season of games that they may not want, they allowed

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Speaker 1: them to pick and choose teams. So I live in

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Speaker 1: New York, I'm a Cleveland Browns fan. It would let

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Speaker 1: me just say, I just want to buy Cleveland Browns games,

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Speaker 1: I don't want everybody else's, and let me do that

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Speaker 1: for a reduced price. And this is what NHL and

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Speaker 1: MLB did, and it seems to have worked out really

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Speaker 1: well for them and really well for fans.

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Speaker 2: So this case provides the perfect example for why Google

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Speaker 2: did not want a jury trial. Google wrote a two

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Speaker 2: point three million dollar check to avoid a jury trial

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Speaker 2: in an anti trust case, and it worked. They got

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Speaker 2: away with it.

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Speaker 1: They did get away with it, yes, And I get

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Speaker 1: why they don't want a jury trial. I think it's

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Speaker 1: pretty easy for a lawyer who's good to get up

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Speaker 1: and paint Google as a big, bad bully. And that's

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Speaker 1: happened Epic Games versus Google essentially what happened, and the

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Speaker 1: jury ruled against Google in that one and we're waiting

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Speaker 1: to see what the remedy will be there. But what

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Speaker 1: they did is normally the Department of Justice the United

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Speaker 1: States has to have a bench trial because you only

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Speaker 1: have a right to a jury trial if you have

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Speaker 1: monetary damages. So this is an unusual case with the

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Speaker 1: DJ said, we used Google's products. This is about Google's

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Speaker 1: ad tech products. So it's these this software that basically

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Speaker 1: connects digital advertisers and digital publishers together, and you pay

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Speaker 1: Google to use them. DOJ said, we have agencies that

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Speaker 1: advertised use these products and therefore were overcharged. So not

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Speaker 1: only do we want injunctive relief here with this case,

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Speaker 1: we also want we have damages, and so we have

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Speaker 1: the right to a jury trial. So a lot of

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Speaker 1: litigation has happened, right, we're not at the beginning. We're

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Speaker 1: getting near trial here. So we've had a lot of

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Speaker 1: expert reports submitted, We've had summary judgment motions filed, and

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Speaker 1: the US the Department of Justices experts came in and said,

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Speaker 1: here's what we think the damages are, and here's our range,

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Speaker 1: our low range, in our high range. So Google took

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Speaker 1: the highest range that the DOJ's own experts said, could

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Speaker 1: possibly be the damages trebled it because under antitrust damages

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Speaker 1: are tripled and even added prejudgment interest. You know, basically

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Speaker 1: as much as they could possibly have gotten if they'd

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Speaker 1: gotten a jury verdict for damages and they paid that,

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Speaker 1: and it basically made the damages claim moot. And that's

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Speaker 1: what the judge said. She said, the DJ actually had

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Speaker 1: already sort of sanctioned this range by their own experts,

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Speaker 1: said this is the range, right, because the DJ kind

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Speaker 1: of came back and said no, no, no, no, the damages

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Speaker 1: are higher than that. And the judge said, no, you

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Speaker 1: really already kind of accepted this as your top range.

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Speaker 1: They've paid it. Your claim is moved, and there was

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Speaker 1: some legal precedent for that that once the damages are paid,

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Speaker 1: the claim becomes moot. And once it becomes moot, all

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Speaker 1: you have left is your injunctive relief request and that

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Speaker 1: has to be before me, a said judge in a

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Speaker 1: bench trial. And so that's how we're going to proceed.

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Speaker 2: Okay, stay with me. Jen. Coming up next on the

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Speaker 2: Bloomberg Lass Show, more about Google's three high profile anti

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Speaker 2: trust trials in the past year plus. The Biden administration

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Speaker 2: is cracking down on mergers from mattresses to handbags. I'm

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Speaker 2: June Grosso and you're listening to Bloomberg. How much did

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Speaker 2: Google want to avoid an unpredictable jury trial in a

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Speaker 2: high stakes antitrust case while it wrote out a check

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Speaker 2: for two point three million dollars to ensure a judge

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Speaker 2: would decide the case against it rather than a jury.

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Speaker 2: The Justice Department is looking to break up Google's multi

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Speaker 2: billion dollar ad business that publishers and advertisers use to buy, sell,

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Speaker 2: and service video and display ads online, and Google was

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Speaker 2: taking no chances with a jury. I've been talking to

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Speaker 2: Jennifer Ree, Bloomberg Intelligence senior litigation analyst. So Jen, explain

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Speaker 2: how Google accomplished this.

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Speaker 1: What they did is normally the Department of Justice the

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Speaker 1: United States has to have a bench trial because you

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Speaker 1: only have a right to a jury trial if you

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Speaker 1: have monetary damages. So this is an unusual case with

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Speaker 1: the DJ said, we used Google's products. This is about

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Speaker 1: Google's ad tech products. So it's these this software that

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Speaker 1: basically connects digital advertisers and digital publishers together and you

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Speaker 1: pay Google to use them. DJ said, we have agencies

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Speaker 1: that advertised use these products and therefore were overcharged. So

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Speaker 1: not only do we want injunctive relief here with this case,

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Speaker 1: we also we have damages and so we have the

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Speaker 1: right to a jury trial. So a lot of litigation

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Speaker 1: has happened, right, We're not at the beginning, we're getting

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Speaker 1: near trial here. So we've had a lot of expert

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Speaker 1: reports submitted, We've had summary judgment motions filed, and the

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Speaker 1: US the Department of Justices experts came in and said,

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Speaker 1: here's what we think the damages are, and here's our range,

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Speaker 1: our low range, in our high range. So Google took

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Speaker 1: the highest range that the DOJ's own experts said could

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Speaker 1: possibly be the damages, trebled it because under antitrust damages

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Speaker 1: are tripled and even added pre judgment interest, you know,

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Speaker 1: basically as much as they could possibly have gotten if

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Speaker 1: they'd gotten a jury verdict for damages, and they paid that,

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Speaker 1: and it basically made the damages claim moot. And that's

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Speaker 1: what the judge said. She said, the DJ actually had

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Speaker 1: already sort of sanctioned this range by their own experts,

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Speaker 1: so that this is the range, right, Because the DJ

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Speaker 1: kind of came back and said no, no, no, no, the

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Speaker 1: damages are higher than that, and the judge said, no,

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Speaker 1: you really already kind of accepted this as your top range.

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Speaker 1: They've paid it. Your claim is moot, and there was

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Speaker 1: some legal precedent for that that once the damages are paid,

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Speaker 1: the claim becomes moot. And once it becomes moot, all

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Speaker 1: you have left is your injunctive relief request and that

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Speaker 1: has to be before me as a judge and a

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Speaker 1: bench trial, and so that's how we're going to proceed.

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Speaker 2: And Jen tell us what's at stake in another bench

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Speaker 2: trial over Google Search business, which wrapped up in San

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Speaker 2: Francisco in May, and they're for the judge's decision. What's

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Speaker 2: at stake there?

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Speaker 1: A lot is actually at stake there, because that was

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Speaker 1: a trial about Google paying Apple and Mozilla and other

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Speaker 1: entities to place Google's search engine as the default search

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Speaker 1: engine in sort of all the places on a phone

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Speaker 1: or a device or a tablet where you might need

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Speaker 1: a search engine. So let's say I'm on Safari on

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Speaker 1: my phone and I'm doing a search. People don't know it,

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Speaker 1: but the entity doing that search for you is Google Search.

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Speaker 1: So Google had all these default positions and basically the

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Speaker 1: allegation is that, well, it foreclosed other search engines. You know,

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Speaker 1: there is duc doc go, there is being it foreclosed

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Speaker 1: these engines. And you know what, people say, Google is better,

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Speaker 1: and they may not like being or they may not

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Speaker 1: like duc dot go. But what the DOJ alleges is

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Speaker 1: that those search engines never got a chance to become

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Speaker 1: good because you need scale and they were deprived scale

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Speaker 1: by Google because Google locked up all of these channels

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Speaker 1: to people. Right. So the trial ended in the end

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Speaker 1: of last year, the closing arguments. There was a time

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Speaker 1: lapse between the end and the closing arguments in May,

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Speaker 1: and I think, really any day now we're waiting for

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Speaker 1: the liability decision by the judge. I would expect it

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Speaker 1: this year, probably not in the next few weeks, but

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Speaker 1: I would think sometime in three q probably. And that's

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Speaker 1: just on liability. That's it.

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Speaker 2: And the third antitrust case was with Epic Games, which

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Speaker 2: Google lost. Tell us about where that stands.

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Speaker 1: It's a private case Epic Games versus Google. This is

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Speaker 1: about the playstore where we all download. If you have

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Speaker 1: an Android phone, you download your apps through the Playstore.

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Speaker 1: If you have an iPhone, you do it through the

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Speaker 1: App store. So Epic Games has challenged both Apple and

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Speaker 1: Google two separate trials, because Epic Games wants access to

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Speaker 1: Android and iOS. They want to have their own app store.

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Speaker 1: They want to be a third party app store on

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Speaker 1: those phones so people can go in, buy the apps,

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Speaker 1: install the apps from Epic Games store. And they also

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Speaker 1: want to be able to use their own payment processor,

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Speaker 1: so if somebody did buy an Epic Games game or

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Speaker 1: make an in app purchase through the playstore, Epic Games

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Speaker 1: can process that payment rather than being forced to do

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Speaker 1: it through Google. And they did win that. They did

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Speaker 1: not win as against Apple. That trial is also finished,

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Speaker 1: but they did win before a jury with respect to Google,

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Speaker 1: and we're now in the process of waiting for the

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Speaker 1: judge to tell us what the remedy is going to

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Speaker 1: be there, and I think he's going to force Google

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Speaker 1: to allow other app stores on the Android devices.

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Speaker 2: Yet another reason why Google doesn't want to face a jury.

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Speaker 2: And whatever happens, Google will appeal.

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Speaker 1: And Google will appeal absolutely.

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Speaker 2: Let's now go to what I call Mergermania or the

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Speaker 2: FTC trying to stop merger mania. These cases were interesting

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Speaker 2: because I didn't realize that there was a market for

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Speaker 2: accessible luxury handbags and a market for premium mattresses. So

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Speaker 2: let's start with the FTC suing to block temper Cely's

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Speaker 2: acquisition of Mattress Firm for four billion dollars, which would

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Speaker 2: bring together the US's biggest mattress seller with its largest

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Speaker 2: mattress retail store. So here the FTC is defining the

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Speaker 2: market as a market of premium mattresses. Is there really

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Speaker 2: a market for just premium mattresses?

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Speaker 1: You know, you put your finger exactly on the crux

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Speaker 1: of the issue. In almost all merger challenges, it's always

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Speaker 1: about what we call that relevant market the way the

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Speaker 1: FDC or DOJ defines the market, because that can be

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Speaker 1: just positive, right, and they figure out a way to

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Speaker 1: define it in a manner that makes that market concentrated. Right.

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Speaker 1: So if they say premium mattresses here, it creates an

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Speaker 1: issue for this deal. If it wasn't premium mattresses, you

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Speaker 1: probably would have a lot more competition from online sellers

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Speaker 1: because what the FTC says is that when people buy

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Speaker 1: a mattress online, let's say, from Amazon or anybody else,

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Speaker 1: they tend to buy the beginner mattresses. Starter mattresses they

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Speaker 1: call them, you know, they're lower priced much lower price.

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Speaker 1: But people who are ready to spend the money for

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Speaker 1: a really good premium mattress. You know, you get a

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Speaker 1: little older, your back starts start. You need that good mattress.

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Speaker 2: It made me think that I need a new mattress

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Speaker 2: by the way, I started thinking about you're can.

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Speaker 1: To spend a lot of money. You want to go

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Speaker 1: in and you want to lie down, touch, feel, see

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Speaker 1: that mattress, and you need brick and mortar to do that.

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Speaker 1: So they define this premium mattress market, and I think

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Speaker 1: you are exactly right that the outcome of this very

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Speaker 1: much could depend on whether or not they can prove

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Speaker 1: that that is an appropriate, relevant market and whether the

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Speaker 1: judge accepts that, because it really limits the competition both

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Speaker 1: in terms of who's making those premium mattresses and who's

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Speaker 1: selling those premium mattresses.

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Speaker 2: So this is a vertical deal. Do vertical deals usually

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Speaker 2: get challenged?

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Speaker 1: Well? Today yes, but the thirty years before this administration no.

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Speaker 2: So explain a vertical deal first for those not up

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Speaker 2: on antitrust lingo.

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Speaker 1: So, vertical deals are two companies that don't compete with

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Speaker 1: each other in the market, but they're at different levels

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Speaker 1: of distribution. So often it's like this, it's a company

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Speaker 1: that makes a product and then a company that sells

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Speaker 1: the product, or maybe a company that makes the product

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Speaker 1: company that distributes the product. Right, two different levels, same

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Speaker 1: product chain, supply chain. And for many, many years, sort

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Speaker 1: of the orthodoxy was that vertical deals way more pro

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Speaker 1: competitive than harmful because they actually can really reduce costs

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Speaker 1: for a company that's now becoming vertically integrated. Vertical integration

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Speaker 1: for a company can create efficiencies within that company. It

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Speaker 1: can reduce costs. There's something called believe it or not,

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Speaker 1: elimination of double marginalization. I believe that I won't. I

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Speaker 1: don't even want to hear about what it is. So

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Speaker 1: and the main issue with vertical deals is that it

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Speaker 1: can allow the merged firm to foreclosed rivals. Right, a

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Speaker 1: rival might need access like to mattress firm to sell

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Speaker 1: your mattresses. I've got to get my mattress in that store,

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Speaker 1: otherwise I don't really have a good way to get

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Speaker 1: to customers. So foreclosure is fairly easily fixed remedy just

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Speaker 1: by a promise, you know, signing on the bottom line

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Speaker 1: to the Department of Justice or FTC that you know,

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Speaker 1: as a condition to allowing us to go ahead and

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Speaker 1: close this deal, we promise we won't discriminate against rivals.

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Speaker 1: We promise will treat them as the same way we

434
00:21:59,119 --> 00:22:01,360
Speaker 1: treat our own products, et cetera. And that's the way

435
00:22:01,400 --> 00:22:04,640
Speaker 1: these deals got closed for years and years and years, right,

436
00:22:04,880 --> 00:22:07,840
Speaker 1: they didn't really get challenged, but they often had behavioral

437
00:22:07,880 --> 00:22:11,159
Speaker 1: remedies like that. This FTC came along and said, you

438
00:22:11,200 --> 00:22:12,919
Speaker 1: know what, part of the problem we have in so

439
00:22:12,960 --> 00:22:15,480
Speaker 1: many industries in our country in high prices is because

440
00:22:15,800 --> 00:22:18,480
Speaker 1: we allowed so much vertical integration for the last thirty

441
00:22:18,520 --> 00:22:21,600
Speaker 1: forty years to take place. And vertical integration is much

442
00:22:21,600 --> 00:22:24,439
Speaker 1: more harmful than the orthodoxy would say. It is that

443
00:22:24,600 --> 00:22:27,359
Speaker 1: we're learning that it's actually harmful, even though there was

444
00:22:27,400 --> 00:22:29,480
Speaker 1: a school of thought that it was more pro competitive.

445
00:22:29,520 --> 00:22:31,680
Speaker 1: And we're going to challenge and they have been good

446
00:22:31,680 --> 00:22:34,280
Speaker 1: to their word. They've challenged quite a few vertical deals.

447
00:22:34,720 --> 00:22:38,240
Speaker 2: So has temper seally offered any remedies.

448
00:22:38,720 --> 00:22:41,359
Speaker 1: So apparently they have. It's really vague. They haven't been

449
00:22:41,400 --> 00:22:44,760
Speaker 1: at all clear. There isn't very detailed public information about

450
00:22:44,760 --> 00:22:47,879
Speaker 1: what they've offered up Apparently they've offered some supply agreements

451
00:22:48,160 --> 00:22:50,280
Speaker 1: to some of the companies that are concerned about losing

452
00:22:50,320 --> 00:22:52,679
Speaker 1: an outlet. I think you know Certa Simmons is a

453
00:22:52,680 --> 00:22:55,920
Speaker 1: big competitor with premium mattresses, a company called Purple. They

454
00:22:55,960 --> 00:22:58,439
Speaker 1: both sell currently through Mattress Firm and are afraid that

455
00:22:58,520 --> 00:23:00,840
Speaker 1: they won't be able to where they'll be discreptated against.

456
00:23:01,040 --> 00:23:04,320
Speaker 1: They've got some supply agreements. Apparently we're willing to sell

457
00:23:04,400 --> 00:23:07,359
Speaker 1: some Mattress Firm stores, but the FDC has said it's insufficient.

458
00:23:07,680 --> 00:23:10,640
Speaker 1: There's very little detail about what it is they've offered up.

459
00:23:10,880 --> 00:23:13,959
Speaker 2: The FTC voted unanimously to block the deal, and so

460
00:23:14,000 --> 00:23:18,800
Speaker 2: you have the two Republican FTC commissioners voting to suit

461
00:23:18,800 --> 00:23:19,360
Speaker 2: a block.

462
00:23:19,160 --> 00:23:22,000
Speaker 1: Which is meaningful to me. I think that's.

463
00:23:22,000 --> 00:23:23,720
Speaker 2: Unusual, but meaningful. It was a better way.

464
00:23:23,920 --> 00:23:26,879
Speaker 1: I think it's meaningful because one of them made a point.

465
00:23:27,160 --> 00:23:30,600
Speaker 1: Melissa Holyoake made a point, a concurring statement, saying, look,

466
00:23:30,600 --> 00:23:34,040
Speaker 1: I'm voting to sue, although I tend to. She basically

467
00:23:34,119 --> 00:23:37,239
Speaker 1: laid out the old orthodoxy that vertical deals are not

468
00:23:37,320 --> 00:23:40,280
Speaker 1: deals between competitors. They tend to be more pro competitive.

469
00:23:40,720 --> 00:23:43,200
Speaker 1: Usually they're going to be fine, but in this case,

470
00:23:43,240 --> 00:23:47,439
Speaker 1: I think there's substantial evidence that the intention of Temper

471
00:23:47,480 --> 00:23:50,760
Speaker 1: Seeley in buying Mattress firm is to block out its rivals.

472
00:23:51,119 --> 00:23:53,560
Speaker 2: This deal has been in limbo since it was announced

473
00:23:53,600 --> 00:23:57,880
Speaker 2: in May of twenty twenty three. Yes, what's the timing here?

474
00:23:58,440 --> 00:24:00,800
Speaker 1: These things are taking longer and longer longer, so.

475
00:24:00,960 --> 00:24:03,840
Speaker 2: Because the FDC is bringing more and more and more rights.

476
00:24:03,520 --> 00:24:06,080
Speaker 1: And they're slowing them down. They're asking for concessions from

477
00:24:06,080 --> 00:24:09,000
Speaker 1: the companies that sort of slows down the investigation, asking

478
00:24:09,000 --> 00:24:11,800
Speaker 1: for timing agreements and more time. So I think pending

479
00:24:11,840 --> 00:24:15,080
Speaker 1: since May is becoming more than norm Look, they have

480
00:24:15,240 --> 00:24:18,280
Speaker 1: time worked into their agreement to get through the initial

481
00:24:18,520 --> 00:24:23,720
Speaker 1: FTC lawsuit in federal court. The FDC always brings two suits, right,

482
00:24:23,960 --> 00:24:26,280
Speaker 1: They bring a suit in federal court asking just for

483
00:24:26,359 --> 00:24:30,000
Speaker 1: a preliminary a temporary block on closing the deal, because

484
00:24:30,040 --> 00:24:33,280
Speaker 1: the main suit they bring is internal before an administrative

485
00:24:33,359 --> 00:24:35,640
Speaker 1: law judge at the FTC. It's called a Part three

486
00:24:35,800 --> 00:24:38,560
Speaker 1: and that's the lawsuit that is intended to determine whether

487
00:24:38,600 --> 00:24:42,040
Speaker 1: the deal actually violates antitrust laws. The federal court process

488
00:24:42,040 --> 00:24:44,119
Speaker 1: can get done quickly. It can get done four to

489
00:24:44,160 --> 00:24:47,399
Speaker 1: six months, so it'll get done this year. Theoretically, the

490
00:24:47,440 --> 00:24:50,919
Speaker 1: part three takes a very very long time. So these companies,

491
00:24:51,160 --> 00:24:53,560
Speaker 1: in order to get this deal closed and not have

492
00:24:53,680 --> 00:24:55,840
Speaker 1: to extend their end date for the merger agreement, will

493
00:24:55,840 --> 00:24:59,280
Speaker 1: have to win in first that first level, that preliminary injunction.

494
00:24:59,040 --> 00:25:03,040
Speaker 2: Processllion dollar breakup fee, yes, right, if the deal fails

495
00:25:03,040 --> 00:25:07,080
Speaker 2: to close. So now we're going from premium mattresses to

496
00:25:07,760 --> 00:25:13,920
Speaker 2: accessible luxury handbags. Okay, I never knew about accessible luxury

497
00:25:13,920 --> 00:25:15,640
Speaker 2: handbags if this was a market.

498
00:25:15,480 --> 00:25:18,320
Speaker 1: Nor did I.

499
00:25:17,200 --> 00:25:19,880
Speaker 2: Leave it to the FTC to figure it out. So

500
00:25:20,000 --> 00:25:24,200
Speaker 2: the FTC is suing to stop tapestries eight point five

501
00:25:24,280 --> 00:25:28,880
Speaker 2: billion dollar takeover of rival Capri Holdings, the first time

502
00:25:28,920 --> 00:25:34,159
Speaker 2: the Biden administration has used its aggressive antitrust enforcement to

503
00:25:34,200 --> 00:25:37,240
Speaker 2: try to stop a deal in the fashion accessories sector.

504
00:25:37,600 --> 00:25:40,280
Speaker 2: I know a lot about this NFL Sunday ticket, not

505
00:25:40,400 --> 00:25:40,960
Speaker 2: so much.

506
00:25:41,400 --> 00:25:43,639
Speaker 1: And it made it hard on analysts like me because

507
00:25:43,720 --> 00:25:45,879
Speaker 1: usually we go back to look at what is the

508
00:25:45,920 --> 00:25:48,040
Speaker 1: FTC or DD done in the past for this kind

509
00:25:48,040 --> 00:25:50,000
Speaker 1: of industry, this kind of deal, and I realized there

510
00:25:50,000 --> 00:25:50,679
Speaker 1: aren't any.

511
00:25:51,000 --> 00:25:53,040
Speaker 2: You have to look on the shelves of Bloomingdale's and

512
00:25:53,119 --> 00:25:55,640
Speaker 2: Sex to find the answer. So, Jen, why is the

513
00:25:55,720 --> 00:26:00,760
Speaker 2: FTC trying to block tapestries acquisition of Caprice holdings?

514
00:26:01,800 --> 00:26:04,600
Speaker 1: So, you know, I think a lot like the tempor

515
00:26:04,600 --> 00:26:07,199
Speaker 1: Sari Le Mattress Firm deal, what they're saying is it's

516
00:26:07,240 --> 00:26:09,760
Speaker 1: a lot about the documents. I think the similarity between

517
00:26:09,800 --> 00:26:12,439
Speaker 1: the two cases is that it seems that the FTC

518
00:26:12,560 --> 00:26:14,440
Speaker 1: is saying there are a lot, a lot, a lot,

519
00:26:14,480 --> 00:26:17,760
Speaker 1: a lot of documents that support our case in these matters.

520
00:26:17,960 --> 00:26:20,320
Speaker 1: I think back to when the DOJ challenged AT and

521
00:26:20,359 --> 00:26:23,480
Speaker 1: T in time Warner. It was unbelievable how few documents

522
00:26:23,720 --> 00:26:26,680
Speaker 1: there were introduced in court that actually supported the DOJ's theory.

523
00:26:26,720 --> 00:26:29,280
Speaker 1: But here we've heard that there are a lot of documents,

524
00:26:29,280 --> 00:26:32,240
Speaker 1: and in particular with Tapestry and Capri, what they're saying

525
00:26:32,320 --> 00:26:34,680
Speaker 1: is that the companies themselves have a lot of ordinary

526
00:26:34,680 --> 00:26:37,840
Speaker 1: course documents that suggest they really only view each other

527
00:26:37,920 --> 00:26:41,160
Speaker 1: as their primary competitors, and that they price against each other,

528
00:26:41,200 --> 00:26:43,639
Speaker 1: they move against each other. If one goes on sale,

529
00:26:43,680 --> 00:26:46,040
Speaker 1: the other one does, if one raises prices the other

530
00:26:46,080 --> 00:26:49,440
Speaker 1: one does, and that they really kind of disregard all

531
00:26:49,440 --> 00:26:53,040
Speaker 1: the other fringe sort of what we called accessible luxury handbags,

532
00:26:53,280 --> 00:26:56,919
Speaker 1: because we're talking now about Coach, Kate Spade and Michael Core's.

533
00:26:57,240 --> 00:26:59,760
Speaker 1: Those are the three brands of handbags that would come

534
00:26:59,760 --> 00:27:00,560
Speaker 1: to get right.

535
00:27:00,600 --> 00:27:03,680
Speaker 2: But they have also Versace and Jimmy cho and Stuart Whitesman,

536
00:27:03,720 --> 00:27:05,320
Speaker 2: who are much more expensive.

537
00:27:05,359 --> 00:27:07,600
Speaker 1: They do. But when the market that they're talking about

538
00:27:07,640 --> 00:27:11,400
Speaker 1: the accessible luxury handbag, they're really focusing on the handbag

539
00:27:11,440 --> 00:27:14,600
Speaker 1: makers Stuart Whiteesman's More Shoes, Jimmy Choo's More Shoes, And

540
00:27:14,640 --> 00:27:18,520
Speaker 1: they're saying that it's really based on the company's documents,

541
00:27:18,560 --> 00:27:20,800
Speaker 1: that they define this market, that the company looks at

542
00:27:20,800 --> 00:27:23,399
Speaker 1: the market that way, that the company defines the market

543
00:27:23,440 --> 00:27:27,120
Speaker 1: that way, and that the company really views only each

544
00:27:27,160 --> 00:27:30,040
Speaker 1: other as their primary competitors, and that you lose that

545
00:27:30,080 --> 00:27:31,560
Speaker 1: competition if they come together.

546
00:27:31,800 --> 00:27:33,480
Speaker 2: So it's not based on price point.

547
00:27:33,720 --> 00:27:35,960
Speaker 1: Well, that's the difficult thing. You know, when you have

548
00:27:36,000 --> 00:27:39,000
Speaker 1: a market that's based on price point, what is that range?

549
00:27:39,160 --> 00:27:41,639
Speaker 1: You know, where does it stop. Markets are supposed to

550
00:27:41,680 --> 00:27:45,720
Speaker 1: be defined by people and demand side substitutability with if

551
00:27:45,720 --> 00:27:47,800
Speaker 1: somebody is buying something and the price goes up and

552
00:27:47,840 --> 00:27:49,919
Speaker 1: it's unpalatable to them at that price, what do they

553
00:27:49,960 --> 00:27:52,920
Speaker 1: switch to? So you have this situation where you've got

554
00:27:53,040 --> 00:27:55,480
Speaker 1: handbags priced a little lower, you've got handbags priced a

555
00:27:55,480 --> 00:27:58,479
Speaker 1: little higher, and you have consumers that might go either direction,

556
00:27:58,840 --> 00:28:01,119
Speaker 1: and so I think it becomes very hard to define

557
00:28:01,119 --> 00:28:04,000
Speaker 1: the contours of the market. And in fact, early on

558
00:28:04,440 --> 00:28:07,480
Speaker 1: the defendants asked the judge to force the FDC to

559
00:28:07,520 --> 00:28:10,000
Speaker 1: define the contours of the market, and the judge said, no,

560
00:28:10,080 --> 00:28:10,840
Speaker 1: I'm not going to do that.

561
00:28:11,200 --> 00:28:14,160
Speaker 2: I mean, Tapestry is saying that it's trying to get

562
00:28:14,160 --> 00:28:16,560
Speaker 2: the Michael Core's brand back on track and that this

563
00:28:16,760 --> 00:28:17,439
Speaker 2: would help that.

564
00:28:18,000 --> 00:28:18,119
Speaker 3: Well.

565
00:28:18,200 --> 00:28:20,639
Speaker 1: Part of getting Michael Core's back on track means raising

566
00:28:20,640 --> 00:28:24,320
Speaker 1: prices for Michael Cores. So I think that it probably

567
00:28:24,400 --> 00:28:26,960
Speaker 1: isn't really going to be a great defense. It won't

568
00:28:27,040 --> 00:28:31,560
Speaker 1: necessarily be considered a great pro competitive, legitimate business justification

569
00:28:31,640 --> 00:28:33,960
Speaker 1: for the deal if that is what the documents show,

570
00:28:34,000 --> 00:28:35,920
Speaker 1: that the intention would be to increase prices.

571
00:28:36,080 --> 00:28:42,000
Speaker 2: We've talked before about this very aggressive antitrust enforcement policy

572
00:28:42,240 --> 00:28:45,160
Speaker 2: of the Biden administration, whether it's the FTC or the

573
00:28:45,280 --> 00:28:48,600
Speaker 2: Justice Department. Are they being too aggressive at this point?

574
00:28:49,320 --> 00:28:52,880
Speaker 1: You know? Too aggressive? Is an interesting question because I

575
00:28:52,880 --> 00:28:55,600
Speaker 1: think I think in my mind, i'd say yes, because

576
00:28:55,640 --> 00:28:59,360
Speaker 1: I think they should be picking and choosing what they're fighting,

577
00:28:59,400 --> 00:29:03,720
Speaker 1: maybe with a little finer tooth comb, but I think

578
00:29:04,200 --> 00:29:07,720
Speaker 1: their position is so few deals over the last forty

579
00:29:07,760 --> 00:29:10,200
Speaker 1: years have actually gone through litigation and been challenged. We

580
00:29:10,240 --> 00:29:13,360
Speaker 1: don't have precedent. We need court decisions. And if we

581
00:29:13,400 --> 00:29:15,360
Speaker 1: want to push the antitrust laws, if we want to

582
00:29:15,360 --> 00:29:18,120
Speaker 1: expand them out, and we want to reach some of

583
00:29:18,120 --> 00:29:20,560
Speaker 1: these conglomerate deals, and some of these vertical deals that

584
00:29:20,600 --> 00:29:23,720
Speaker 1: have just constantly been cleared with remedies are not challenged

585
00:29:23,760 --> 00:29:25,840
Speaker 1: at all. We've got to get to court, and to

586
00:29:25,920 --> 00:29:28,120
Speaker 1: get to court, you have to sue, and so to them,

587
00:29:28,520 --> 00:29:30,400
Speaker 1: this is what they're attempting to do, and that's where

588
00:29:30,440 --> 00:29:31,640
Speaker 1: all the lawsuits are coming from.

589
00:29:31,880 --> 00:29:33,880
Speaker 2: Have they been successful in litigation?

590
00:29:34,680 --> 00:29:37,520
Speaker 1: It's been mixed. In the beginning, it was rocky start,

591
00:29:37,640 --> 00:29:40,160
Speaker 1: I think for the FTC, not so much for the DOJ,

592
00:29:40,640 --> 00:29:44,000
Speaker 1: And now it's quite mixed, you know. I would even

593
00:29:44,040 --> 00:29:46,920
Speaker 1: say fifty to fifty. I think that the FTC has

594
00:29:46,920 --> 00:29:49,680
Speaker 1: a good shot with the upcoming challenge to Kroger and

595
00:29:49,720 --> 00:29:52,760
Speaker 1: Albertson's and their deal. I'm not so sure about the

596
00:29:52,800 --> 00:29:55,200
Speaker 1: Tapestry Capri. I mean based on what we talked about,

597
00:29:55,240 --> 00:29:57,640
Speaker 1: I think it's very difficult to define that market. I

598
00:29:57,640 --> 00:30:00,720
Speaker 1: think it's difficult to say that entry is to for

599
00:30:00,880 --> 00:30:03,360
Speaker 1: luxury handbags. I mean, you get somebody carrying your bag

600
00:30:03,360 --> 00:30:06,000
Speaker 1: on TikTok and you know you're good to go right

601
00:30:06,720 --> 00:30:09,960
Speaker 1: through the roof. I think Temper Seedley Mattress Firm is

602
00:30:10,320 --> 00:30:13,040
Speaker 1: difficult because it's a vertical deal. But if the documents

603
00:30:13,080 --> 00:30:14,880
Speaker 1: look the way they sound like they look, they have

604
00:30:14,920 --> 00:30:17,800
Speaker 1: a good shot there too. So as we're coming toward

605
00:30:17,800 --> 00:30:21,320
Speaker 1: the end of Biden's first term, we may see that

606
00:30:21,400 --> 00:30:23,960
Speaker 1: their record gets better. They may turn it around. We

607
00:30:24,080 --> 00:30:26,080
Speaker 1: may be getting some decisions in the fourth quarter this

608
00:30:26,200 --> 00:30:28,720
Speaker 1: year that turn them around and put them more on

609
00:30:28,760 --> 00:30:30,320
Speaker 1: the winning side than on the losing side.

610
00:30:30,360 --> 00:30:33,680
Speaker 2: Always Fungeen, thanks so much. We get an education and

611
00:30:33,800 --> 00:30:38,120
Speaker 2: antitrust law whenever you're on. That's Bloomberg Intelligence Senior litigation

612
00:30:38,280 --> 00:30:42,120
Speaker 2: analyst jenniferree Boeing will have a felony conviction if it

613
00:30:42,200 --> 00:30:45,560
Speaker 2: follows through on an agreement with prosecutors to plead guilty

614
00:30:45,640 --> 00:30:49,640
Speaker 2: to criminal conspiracy to defraud the United States in connection

615
00:30:49,720 --> 00:30:53,200
Speaker 2: with approval of it's seven thirty seven max before two

616
00:30:53,320 --> 00:30:56,520
Speaker 2: of the planes crashed, killing three hundred and forty six

617
00:30:56,560 --> 00:31:01,440
Speaker 2: people in twenty eighteen and twenty nineteen. The US planemaker

618
00:31:01,520 --> 00:31:05,000
Speaker 2: has apparently made the calculation that admitting to a crime

619
00:31:05,600 --> 00:31:08,400
Speaker 2: is better than fighting the charge and enduring a long

620
00:31:08,480 --> 00:31:12,080
Speaker 2: public trial. However, the plea deal is not a sure thing.

621
00:31:12,560 --> 00:31:15,880
Speaker 2: Relatives of some of the passengers who died have indicated

622
00:31:15,960 --> 00:31:19,120
Speaker 2: they'll ask a federal judge to throw out the agreement,

623
00:31:19,360 --> 00:31:22,560
Speaker 2: which they say is too lenient considering the lives that

624
00:31:22,640 --> 00:31:26,520
Speaker 2: were lost. Nadilla Millern, whose daughter died in the Boeing

625
00:31:26,600 --> 00:31:30,960
Speaker 2: Max crash in Ethiopia in twenty nineteen, says, the families

626
00:31:31,040 --> 00:31:32,240
Speaker 2: want a jury trial.

627
00:31:33,080 --> 00:31:36,160
Speaker 3: When you have a trial, you get witnesses and you

628
00:31:36,200 --> 00:31:40,840
Speaker 3: can bring up evidence, and so by Boeing pleading guilty,

629
00:31:40,920 --> 00:31:44,160
Speaker 3: they don't have that process happening. So that's not what

630
00:31:44,280 --> 00:31:46,880
Speaker 3: the victims want. That's not what the victims' families want.

631
00:31:47,200 --> 00:31:50,400
Speaker 2: A federal judge in Texas will decide whether to approve

632
00:31:50,480 --> 00:31:53,560
Speaker 2: the deal or not. Joining me is Andreas Muno's a

633
00:31:53,600 --> 00:31:57,200
Speaker 2: litigation partner with Romano Law. What does it mean when

634
00:31:57,200 --> 00:32:00,960
Speaker 2: a company pleads guilty to a felony? Is going to prison?

635
00:32:01,080 --> 00:32:03,800
Speaker 2: So what's the import.

636
00:32:03,320 --> 00:32:06,920
Speaker 4: Well, when a company pleads guilty to authelity, there's certainly

637
00:32:06,960 --> 00:32:11,800
Speaker 4: a record that's created, notably where the charges are fraud based. Right,

638
00:32:11,920 --> 00:32:16,840
Speaker 4: any plea of guilty could impair the company's ability to

639
00:32:16,960 --> 00:32:20,320
Speaker 4: enter into contracts, you know, especially to government related work,

640
00:32:20,800 --> 00:32:23,680
Speaker 4: and so there is you know, some negative impact there.

641
00:32:23,920 --> 00:32:26,160
Speaker 4: You're right, no one is really going to jail, but

642
00:32:26,800 --> 00:32:30,280
Speaker 4: you know, there are penalties associated. There's you know oftentimes

643
00:32:30,320 --> 00:32:32,920
Speaker 4: fines as well, and so that's you know, that's really

644
00:32:32,960 --> 00:32:34,800
Speaker 4: the impact of a criminal play on the company.

645
00:32:35,200 --> 00:32:37,800
Speaker 2: And tell us about this specific plea deal.

646
00:32:38,440 --> 00:32:41,640
Speaker 4: In this plea deal, which is a deferred prosecution agreement

647
00:32:42,000 --> 00:32:47,200
Speaker 4: which basically is sort of an informal probationary agreement between

648
00:32:47,200 --> 00:32:51,640
Speaker 4: the government and Boeing. Under this deal, Boeing will be

649
00:32:51,960 --> 00:32:55,720
Speaker 4: pleading guilty to a felony and also, you know, is

650
00:32:55,760 --> 00:33:00,000
Speaker 4: promising to abide by certain requirements and obligations. For example,

651
00:33:00,080 --> 00:33:03,480
Speaker 4: ball the payment of a pretty healthy fined. Boeing will

652
00:33:03,520 --> 00:33:09,120
Speaker 4: also be obligated to have an independent monitor appointed to

653
00:33:09,240 --> 00:33:13,640
Speaker 4: monitor there. You know, there are certain operational aspects. They

654
00:33:13,680 --> 00:33:17,440
Speaker 4: will also be required to I believe in best about

655
00:33:17,480 --> 00:33:22,720
Speaker 4: four hundred million to improve and implement additional safety protocols

656
00:33:23,120 --> 00:33:26,760
Speaker 4: so that you know, future accidents are avoided. In other words, this.

657
00:33:26,680 --> 00:33:30,720
Speaker 2: Is an update to the twenty twenty one settlement that

658
00:33:30,800 --> 00:33:33,920
Speaker 2: the company not engage in wrongdoing for a three year period,

659
00:33:33,960 --> 00:33:37,800
Speaker 2: which it broke. Why is the government entering into this?

660
00:33:38,040 --> 00:33:40,120
Speaker 2: Is it because you're not going to get much more

661
00:33:40,160 --> 00:33:42,400
Speaker 2: if they go to trial, Because it sounds like Boeing

662
00:33:42,520 --> 00:33:43,560
Speaker 2: is a bad actor.

663
00:33:44,480 --> 00:33:47,920
Speaker 4: So the upside for the DOJ And you're right, like,

664
00:33:48,480 --> 00:33:51,000
Speaker 4: we're here because of that twenty twenty one agreement, and

665
00:33:51,040 --> 00:33:54,400
Speaker 4: the DOJ is alleging that they've breached that agreement and

666
00:33:54,800 --> 00:33:58,920
Speaker 4: now we're facing another deferred prosecution agreement. With that being said,

667
00:33:59,440 --> 00:34:03,080
Speaker 4: there is a huge upside for the DJ. You know, first,

668
00:34:03,120 --> 00:34:07,040
Speaker 4: it's another commitment by Boeing to as part of essentially

669
00:34:07,120 --> 00:34:11,080
Speaker 4: the conditional plea, to pay the fine to install the monitor.

670
00:34:11,600 --> 00:34:14,360
Speaker 4: But the bigger upside for the DJ is that it

671
00:34:14,440 --> 00:34:18,640
Speaker 4: avoids the prosecution and actual trial of these charges, which

672
00:34:18,840 --> 00:34:21,000
Speaker 4: you know, as I'm sure you know, a trial is

673
00:34:21,040 --> 00:34:22,480
Speaker 4: just inherently unpredictable.

674
00:34:22,920 --> 00:34:25,799
Speaker 2: Is it odd that part of the plea deal is

675
00:34:25,800 --> 00:34:29,120
Speaker 2: that the Boeing board of directors meet with families of

676
00:34:29,120 --> 00:34:31,520
Speaker 2: the victims. I don't know what the purpose.

677
00:34:31,200 --> 00:34:31,680
Speaker 1: Of that is.

678
00:34:32,080 --> 00:34:34,680
Speaker 4: I believe the purpose of that was to appease, you know,

679
00:34:34,960 --> 00:34:38,520
Speaker 4: the victims' families. As part of these deferred prosecution agreements,

680
00:34:38,680 --> 00:34:41,640
Speaker 4: both parties negotiate the terms. You know, this is an

681
00:34:41,719 --> 00:34:44,959
Speaker 4: interesting term. I think, like I said, it was meant

682
00:34:44,960 --> 00:34:48,480
Speaker 4: to appease the victim's families, get them a factor of

683
00:34:48,560 --> 00:34:50,320
Speaker 4: either apology or accountability.

684
00:34:50,719 --> 00:34:53,560
Speaker 2: So I don't think the families are placated by this.

685
00:34:53,960 --> 00:34:57,160
Speaker 2: In a separate document, they call this a sweetheart deal

686
00:34:57,280 --> 00:35:00,719
Speaker 2: that fails to recognize that because of Boeing's can conspiracy,

687
00:35:01,080 --> 00:35:04,640
Speaker 2: three hundred and forty six people died. So what does

688
00:35:04,680 --> 00:35:08,640
Speaker 2: it mean that they're opposing the deal? What kind of

689
00:35:08,800 --> 00:35:09,799
Speaker 2: impact does that have?

690
00:35:10,440 --> 00:35:14,000
Speaker 4: So from a technical perspective, the agreement is going to

691
00:35:14,000 --> 00:35:16,880
Speaker 4: be negotiated between the DOJ and Boeen. To the extent

692
00:35:17,280 --> 00:35:20,920
Speaker 4: that the victims' families have, you know, express criticism, it

693
00:35:20,960 --> 00:35:26,080
Speaker 4: doesn't really impact anything. However, the deal will be subject

694
00:35:26,160 --> 00:35:28,960
Speaker 4: to court approval by the judge, and in that sense,

695
00:35:29,040 --> 00:35:32,840
Speaker 4: the family's opinions or perspectives could be considered by the

696
00:35:32,920 --> 00:35:35,719
Speaker 4: judge and it might be a factor in denying the

697
00:35:36,080 --> 00:35:36,920
Speaker 4: terms of the agreement.

698
00:35:38,120 --> 00:35:41,840
Speaker 2: So could part of the reason why the plaintiff's lawyers,

699
00:35:41,960 --> 00:35:44,480
Speaker 2: the lawyers for the families don't want a settlement is

700
00:35:44,560 --> 00:35:47,640
Speaker 2: because they wanted more to come out at trial that

701
00:35:47,719 --> 00:35:51,680
Speaker 2: they could use in their own case. And here Boeing

702
00:35:51,760 --> 00:35:54,120
Speaker 2: hasn't made any admissions that are helpful to it.

703
00:35:54,440 --> 00:35:56,680
Speaker 4: I think that is very likely the case. You know,

704
00:35:56,920 --> 00:35:59,880
Speaker 4: On one hand, I'm sure the victims' families wanted some

705
00:36:00,400 --> 00:36:03,880
Speaker 4: you know, large factor of public accountability via a trial,

706
00:36:04,440 --> 00:36:07,120
Speaker 4: you know, having witnesses come forward and having you know,

707
00:36:07,280 --> 00:36:11,280
Speaker 4: very public me coopa if you will. Under the terms

708
00:36:11,040 --> 00:36:15,520
Speaker 4: of the proposed DPA, yes, Boeing will be required to

709
00:36:16,040 --> 00:36:19,560
Speaker 4: pretty guilty. However, you know, you're right, like, there may

710
00:36:19,600 --> 00:36:22,120
Speaker 4: not be a very detailed allocation and they may not

711
00:36:22,480 --> 00:36:26,520
Speaker 4: admit all the elements that a plant's explawyer would need

712
00:36:26,719 --> 00:36:29,759
Speaker 4: to prove a civil case. So that's certainly part of it.

713
00:36:30,080 --> 00:36:35,200
Speaker 2: Could the government still go after employees or corporate executives

714
00:36:35,840 --> 00:36:39,880
Speaker 2: with this deal in place if they somehow find new evidence.

715
00:36:40,160 --> 00:36:42,960
Speaker 4: There might be a small chance that they could. However,

716
00:36:43,040 --> 00:36:47,239
Speaker 4: I'm sure that you know, once the final deal is negotiated,

717
00:36:47,840 --> 00:36:51,320
Speaker 4: it will have some terminology that would you know, essentially

718
00:36:51,560 --> 00:36:55,000
Speaker 4: prohibit or preclude those types of individual prosecutions.

719
00:36:55,360 --> 00:37:00,200
Speaker 2: Boeing is also being investigated by the SEC, Congress and

720
00:37:00,280 --> 00:37:04,560
Speaker 2: a Seattle grand jury about an accident in January a

721
00:37:04,680 --> 00:37:07,759
Speaker 2: board an Alaska Airlines plane where the door blew off.

722
00:37:07,920 --> 00:37:11,319
Speaker 2: So this deal has nothing to do with that, right,

723
00:37:11,400 --> 00:37:13,600
Speaker 2: those investigations still go forward.

724
00:37:13,560 --> 00:37:16,399
Speaker 4: That's correct. As part of this deal, the DOJ will

725
00:37:16,440 --> 00:37:20,480
Speaker 4: be resolving their allegations and potential claims to the extent

726
00:37:20,560 --> 00:37:24,840
Speaker 4: that Boeing has violated state specific statutes or criminal laws.

727
00:37:25,239 --> 00:37:26,440
Speaker 4: That's definitely separate.

728
00:37:26,640 --> 00:37:30,880
Speaker 2: When you have these plea deals with the government and companies,

729
00:37:31,080 --> 00:37:34,960
Speaker 2: I mean, do judges often say no, I'm not going

730
00:37:35,000 --> 00:37:35,960
Speaker 2: to prove that deal.

731
00:37:36,400 --> 00:37:40,640
Speaker 4: These deferred prosecution agreements are ultimately at the court's discretion.

732
00:37:41,120 --> 00:37:44,440
Speaker 4: With that being said, you know, they do offer pretty

733
00:37:44,440 --> 00:37:48,360
Speaker 4: wide latitude the DOJ and the defendants to negotiate the

734
00:37:48,400 --> 00:37:51,839
Speaker 4: proper terms. They'll review the agreement and it's very likely

735
00:37:51,880 --> 00:37:54,160
Speaker 4: that they will approve it. It is very rare that

736
00:37:54,280 --> 00:37:55,719
Speaker 4: they would object to it.

737
00:37:55,719 --> 00:37:59,680
Speaker 2: It seems like Boeing keeps making promises and then hides

738
00:37:59,760 --> 00:38:03,480
Speaker 2: it's misdeeds, and then we have another agreement. What's the

739
00:38:03,520 --> 00:38:05,000
Speaker 2: monitor like in this case?

740
00:38:05,480 --> 00:38:07,879
Speaker 4: I mean I totally agree with that. You know, it's

741
00:38:07,920 --> 00:38:09,320
Speaker 4: sort of like a pool of me one to me

742
00:38:09,400 --> 00:38:11,480
Speaker 4: twice kind of thing, right that the twenty twenty one

743
00:38:11,920 --> 00:38:15,839
Speaker 4: for prosecution had certain requirements. You know, we're here because

744
00:38:15,920 --> 00:38:20,120
Speaker 4: the DJ is saying that Boeing has violated that, and

745
00:38:20,160 --> 00:38:22,480
Speaker 4: so now we're talking about another one. It's almost like

746
00:38:22,560 --> 00:38:25,480
Speaker 4: how many DPAs is too many? So your last point,

747
00:38:25,600 --> 00:38:28,680
Speaker 4: the interesting thing is that Boeing will be required to

748
00:38:29,480 --> 00:38:32,840
Speaker 4: have a monitor. That is not that they're choosing. I

749
00:38:33,000 --> 00:38:36,120
Speaker 4: believe under the terms, the DOJ will choose the monitor.

750
00:38:36,840 --> 00:38:40,000
Speaker 2: Thanks for being on the show. That's Andreas Munoz, a

751
00:38:40,080 --> 00:38:43,160
Speaker 2: litigation partner at Romano Law. And that's it for this

752
00:38:43,320 --> 00:38:46,040
Speaker 2: edition of The Bloomberg Law Show. Remember you can always

753
00:38:46,040 --> 00:38:49,000
Speaker 2: get the latest legal news on our Bloomberg Law podcast.

754
00:38:49,280 --> 00:38:52,279
Speaker 2: You can find them on Apple Podcasts, Spotify, and at

755
00:38:52,440 --> 00:38:57,480
Speaker 2: www dot Bloomberg dot com, slash podcast Slash Law, and

756
00:38:57,560 --> 00:39:00,640
Speaker 2: remember to tune into The Bloomberg Law Show every weeknight

757
00:39:00,719 --> 00:39:04,160
Speaker 2: at ten pm Wall Street Time. I'm Jim Grosso and

758
00:39:04,200 --> 00:39:05,680
Speaker 2: you're listening to Bloomberg