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

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Speaker 2: Every day, every day from now until the election. We're

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Speaker 2: giving out a million dollar prize. That is, and all

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Speaker 2: you have to do is sign a petition in support

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Speaker 2: of a constitution. It's very straightforward. You don't even have

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Speaker 2: to vote. You don't have to vote, You just have

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Speaker 2: to sign a petition saying you believe in the constitution.

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Speaker 1: The Department of Justice has warned Elon Musk that his

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Speaker 1: pro Trump packs one million dollars a day sweepstakes targeting

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Speaker 1: swing state voters might violate federal law. But now the

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Speaker 1: Philadelphia District Attorney has taken the first legal action against

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Speaker 1: the sweepstakes. DA Larry Krasner is suing Musk and his

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Speaker 1: pack and asking a Pennsylvania state court to stop the

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Speaker 1: illegal lottery, which quote lulls Philadelphia's citizens and others in

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Speaker 1: the Commonwealth to give up their personal identifying information and

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Speaker 1: make a political pledge in exchange for the chance to

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Speaker 1: win one million dollars. Here's President Joe Biden's reaction after

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Speaker 1: he cast his early vote in Delaware. Today, Sir Elon

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Speaker 1: Musk is handing out checks to registered voters.

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Speaker 3: Do you think that's legal conduct?

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Speaker 4: Do you think that's election in our parents?

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Speaker 1: I think it's joining me is election? Law expert Douglas Spencer,

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Speaker 1: a professor of law at the University of Colorado, explain

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Speaker 1: the concerns about Musk's million dollar a day giveaway.

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Speaker 4: The concern is that Elon Musk is using this lottery

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Speaker 4: to encourage voter registration and voting, which on its face

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Speaker 4: doesn't sound bad. We want more people to be registered

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Speaker 4: and to vote. It does promote democracy, but there are

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Speaker 4: federal laws that prevent people from paying or buying votes,

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Speaker 4: or paying people to register, and so there's been allegations

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Speaker 4: that the scheme that he has created is doing just that,

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Speaker 4: rewarding people for registering and then turning out to vote.

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Speaker 4: The DA in Philadelphia has raised the lawsuit is challenging

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Speaker 4: this not just as a violation of these federal laws,

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Speaker 4: but it sounds like there's also some state laws about

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Speaker 4: consumer protection and some other issues related to fraud. There

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Speaker 4: is some sense of seriousness about the allegations that these

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Speaker 4: federal laws are being violated, which is why the Department

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Speaker 4: Justice itself has commenced an investigation. They haven't charged him

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Speaker 4: with any crime, but they see some of the concerns

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Speaker 4: about the way this program is being run and they're

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Speaker 4: investigating it.

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Speaker 1: So the DA in Philadelphia is going on a different

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Speaker 1: kind of track. He's saying that this is a lottery

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Speaker 1: and as such, it's illegal in Pennsylvania because all lotteries

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Speaker 1: have to be operated and administered by the state. So

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Speaker 1: he's trying to get around the questions about federal law.

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Speaker 4: That sounds right. There's been a concern about operating a lottery,

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Speaker 4: you know, and whether it's been regulated or registered or

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Speaker 4: as you said, as operated by the state itself. And

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Speaker 4: then also, at least in the statement that I read,

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Speaker 4: says that the lottery is being used to kind of

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Speaker 4: lull or dupe Philadelphians and Pennsylvanians into giving away their

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Speaker 4: personal data in exchange for money, which could be a

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Speaker 4: violation of you know, a state false advertising or some

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Speaker 4: kind of consumer protection law.

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Speaker 1: I mean, it would put it into a whole different

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Speaker 1: sphere because now he would have to follow all the

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Speaker 1: rules for sweep stakes in Pennsylvania and the other swing states.

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Speaker 4: That's right, And what I don't know is in the

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Speaker 4: state how to define a sweet stake or a lottery

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Speaker 4: because nobody's buying a ticket or giving Musk any cash

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Speaker 4: in order to enter the lottery. They're entering the lottery

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Speaker 4: by signing a political petition. And so one, there could

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Speaker 4: be an argument that the active sending a petition is

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Speaker 4: different than buying a lottery ticket, which would distinguish this.

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Speaker 4: And secondly, the active sending a petition is a First

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Speaker 4: Amendment protected act that buying a lottery ticket is not.

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Speaker 4: And so you'd have to see the interaction of this

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Speaker 4: regulation of lotteries to the First Amendment. But if the

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Speaker 4: state defines sweepstakes as you know, entering yourself for a

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Speaker 4: chance to win a large sum of money based on

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Speaker 4: chance or random draw then this lottery is in violation

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Speaker 4: of that state laws. He has not properly registered or

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Speaker 4: operating under those state regulations.

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Speaker 1: Interesting he also alleges because Musk said that the winners

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Speaker 1: are at random, and he said that appears false because

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Speaker 1: multiple winners that have been selected are individuals who have

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Speaker 1: shown up at Trump rallies in Pennsylvania.

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Speaker 3: Correct.

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Speaker 4: So that's an allegation that in order to prove it,

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Speaker 4: if a judge is willing to take the case. In

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Speaker 4: one element of a lawsuit is what's called discovery, and

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Speaker 4: elon Us would have to provide some evidence of the

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Speaker 4: selection mechanism to prove that the decisions were being made randomly.

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Speaker 4: He'd have to have a record of the random number

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Speaker 4: generation or a video of him pulling a ping pong

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Speaker 4: ball out. And if he's not, then he's not actually

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Speaker 4: running a lottery, in which case he's falsely advertising what

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Speaker 4: he's actually doing. But at the same time, if he's

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Speaker 4: not randomly choosing people, then what he's doing may not

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Speaker 4: be a lottery, and that could cut in favor of

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Speaker 4: Elon Musk because then he can say I'm not actually

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Speaker 4: violating the state prohibition because I'm just giving money away

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Speaker 4: to the people that I want to give money away to.

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Speaker 1: I know you don't know Pennsylvania courts per se, but

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Speaker 1: do you think that they could move this quickly? I

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Speaker 1: mean election day is next week.

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Speaker 4: Yeah, I don't because typically speaking, when you file charges

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Speaker 4: against the state law civil charges like this, the opposing

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Speaker 4: party has fourteen days to respond. The state courts will

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Speaker 4: likely ask for a response much sooner. But that's basically

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Speaker 4: the phase of the litigation.

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Speaker 3: Would get to.

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Speaker 4: We'd have an allegation in the public sphere, we'd have

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Speaker 4: a response so we could say what the arguments are.

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Speaker 4: There'd be no time to hold a trial to do

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Speaker 4: this kind of discovery unless a judge really decided it

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Speaker 4: was in the public's interest to move extraordinarily quickly. But

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Speaker 4: even nine or ten days, including weekends, is just too

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Speaker 4: fast to pull this all off.

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Speaker 1: And as you mentioned last week, the Justice Department sent

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Speaker 1: Trump and his pack a letter warning that this could

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Speaker 1: be a violation of federal election law. And apparently Musk

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Speaker 1: is ignoring it because he's still giving away million dollar checks,

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Speaker 1: so it doesn't appear so far that anything is going

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Speaker 1: to stop him before election day.

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Speaker 4: I think the letter from the Department of Justice does

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Speaker 4: two things. Once the public statement that lets everyone in

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Speaker 4: the public know that what Elon Musk is doing maybe

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Speaker 4: a violation of the law, but under the federal life,

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Speaker 4: a violation is punishable by a fine up to ten

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Speaker 4: thousand dollars unless you are knowingly and willingly violating the law,

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Speaker 4: in which case then you can serve jail time up

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Speaker 4: to five years. So I think this letter from the

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Speaker 4: DOJ puts the pack on notice that you are doing

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Speaker 4: something willfully and knowingly even though we've told you that

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Speaker 4: what you're doing risks of violation, so that the potential

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Speaker 4: penalties which will come after the election in any case,

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Speaker 4: could be much more serious trying to get them to change.

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Speaker 4: I will note that the lottery has changed a little

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Speaker 4: bit since the DJ sent its letter. It used to expire.

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Speaker 4: Eligibility used to expire on midnight October twenty first, which

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Speaker 4: was the deadline for voter registration in Pennsylvania, which was

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Speaker 4: a really strong signal that the motivation for this lottery

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Speaker 4: was to pay people to register, not something else. That

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Speaker 4: deadline has now changed until election day, so there was

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Speaker 4: some recognition that that was a problem for them, and

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Speaker 4: they have changed their tactics a little bit. So they

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Speaker 4: are aware and they're reading these letters, and the question

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Speaker 4: will be after the fact if there's any accountability.

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Speaker 1: I mean, they also changed it a little bit, and

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Speaker 1: that he said at one of the giveaways, one of

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Speaker 1: the early ones, that all you have to do is

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Speaker 1: now be a spokesperson for us, so sort of making

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Speaker 1: it into a job offer.

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Speaker 4: I guess correct. He's trying lots of different ways. A

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Speaker 4: judge will have to determine whether or not they think

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Speaker 4: that's his true intent or not. If I pay you

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Speaker 4: to register to vote, but I also say that you

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Speaker 4: have to walk outside and breathe fresh air and then

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Speaker 4: you get the money. A judge will say, I know

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Speaker 4: you told me that you're paying these people for breathing

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Speaker 4: fresh air, but they also have to register. I just

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Speaker 4: think that's a scam. So the question is for somebody

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Speaker 4: signing a petition that doesn't ask for anything, just says

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Speaker 4: I think the First and Second Amendment are important. Is

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Speaker 4: that something that's a legitimate petition or do we think

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Speaker 4: that the Musk has been using it as a way

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Speaker 4: to insulate himself from just out and out buying people

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Speaker 4: to register to vote. To make it look somewhat differently,

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Speaker 4: and that will be a fact determining by a judge

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Speaker 4: if it gets to this litigation. They can look at

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Speaker 4: emails between Musk and his pack and other communications. They

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Speaker 4: can make determinations based on public statements where America packs

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Speaker 4: as we want to get a million people registered to

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Speaker 4: vote in these swing states, and they'll make a determination

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Speaker 4: whether or not that was the intent of this lottery.

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Speaker 4: Even though there are facts that cut in different directions.

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Speaker 1: A lot of people are going to say this is

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Speaker 1: a move by a Democratic da against Mosk who's spending

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Speaker 1: millions to get Trump elected.

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Speaker 4: I will say I think the political side of this

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Speaker 4: is as important as the legal side. So the Department

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Speaker 4: of Justice sending this letter does send a signal for voters,

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Speaker 4: whether or not there's an actual violation, that what they're

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Speaker 4: doing is a close violation of the law. And it

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Speaker 4: could be the same for a district attorney who wants

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Speaker 4: to make sure that this issue is framed in the

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Speaker 4: press and in the political sphere as a legal mumbo jumbo,

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Speaker 4: as a opposed to a really exciting money giveaway. So

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Speaker 4: there's a political aspect where bringing these charges changes the

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Speaker 4: news coverage, changes the dynamics, and that may be just

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Speaker 4: as important as any finding of guilt or innocence. And

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Speaker 4: so that's not something that the lawyers like me can

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Speaker 4: really comment on whether that's the right way to go

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Speaker 4: about it. But there's definitely a political angle to this.

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Speaker 1: Do you remember anything else like this in our history,

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Speaker 1: any kind of giveaways like this?

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Speaker 4: Not in our modern history. Way back in the seventeen

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Speaker 4: to eighteen hundreds, you used to have this was before

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Speaker 4: the ballot was secrets, but you'd have parties who would

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Speaker 4: basically give away free booze to people you'd vote for

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Speaker 4: their party'd get whiskey, and it's very well known. And

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Speaker 4: in part to avoid that kind of bribery, we adopted

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Speaker 4: the secret ballot and since then nothing so open as

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Speaker 4: not driven by the parties. The parties, of course, are

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Speaker 4: always trying to incentivize and motivate people to get out

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Speaker 4: to vote, not with payments, but no lottery like this,

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Speaker 4: specifically from a healthy billionaire either.

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Speaker 1: Thanks so much for joining me today. That's Douglas Spencer,

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Speaker 1: a professor of law at the University of Colorado. A

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Speaker 1: court hearing on the Philadelphia DA's application for a preliminary

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Speaker 1: injunction against Mosque and his pack that would block them

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Speaker 1: from continuing the sweepstakes is set for Friday morning in Philadelphia.

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Speaker 1: Coming up next on the Bloomberg Law Show, we'll tell

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Speaker 1: you what's next. After a judge stopped the eight point

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Speaker 1: five billion dollar Tapestry Capri merger. I'm June Grosso and

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Speaker 1: you're listening to Bloomberg Today. Tapestry and Capri Holdings have

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Speaker 1: filed their notice to appeal last Thursday's decision by a

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Speaker 1: federal judge freezing Tapestry's eight point five billion dollar acquisition

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Speaker 1: of Capri. The decision was a major victory for the

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Speaker 1: FTC's chair, Lena Kahan, who's tried to sing takeovers deemed

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Speaker 1: anti competitive in sectors ranging from tech to grocer, with

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Speaker 1: mixed results. The FDC sued to block the deal six

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Speaker 1: months ago, saying it would eliminate direct competition between the

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Speaker 1: fashion company's brands like Coach and Michael Core's in the

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Speaker 1: so called affordable luxury handbag market and her consumers, and

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Speaker 1: the judge agreed following seven days of testimony. Joining me

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Speaker 1: is anti trust expert Harry First, a professor at NYU

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Speaker 1: Law School. Harry, this was FTC chair Lena Khan's first

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Speaker 1: foray into fashion. How big a victory is this for her?

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Speaker 3: So this is a big case, important case, and your

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Speaker 3: remark about fashion is good because the judge starts her opinion,

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Speaker 3: as you know, with a great line any trust has

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Speaker 3: come into fashion, so a nice double play on it's

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Speaker 3: in fashion and it's in the fashion industry. So the

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Speaker 3: FTC has been on sort of a little bit of

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Speaker 3: a successful run now and this is one of those

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Speaker 3: clear victories in a case that in many ways is

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Speaker 3: sort of a standard case. It's not a far out

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Speaker 3: legal theories, it's pretty close to sort of the middle

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Speaker 3: of the road legal theories, but a big win over

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Speaker 3: spread over many pages in which clearly the judge like

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Speaker 3: what the FCC was doing.

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Speaker 1: Explain what the judge's reasoning was here.

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Speaker 3: So you have a number of particularly important questions, But

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Speaker 3: a key question that starts out with is how do

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Speaker 3: you define the product market? You know, who are the competitors?

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Speaker 3: Because once you do that sort of everything doesn't quite

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Speaker 3: completely flow from it, but legally it goes in very

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Speaker 3: orderly fashion. Use the fashion word again. So the critical

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Speaker 3: question is is the market all handbags? Or actually started

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Speaker 3: out by saying, what's the definition of a handbag? So

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Speaker 3: I can answer that right, yes, trying not to use

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Speaker 3: the where we're going in a handbag race? But yeah,

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Speaker 3: that seems like an obvious thing, but you know that's

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Speaker 3: the kind of thing. You know, you have to define everything.

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Speaker 3: So we've got these three different ideas of what handbags

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Speaker 3: might be, and then a fourth. A fourth is all handbags,

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Speaker 3: you know, so everyone a handbag has a function. So

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Speaker 3: you could have a cheap handbag or a really expensive handbag.

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Speaker 3: But it's all the same thing, and they're all in

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Speaker 3: competition because consumers can decide among them. And then the

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Speaker 3: FTC comes in and says, well, actually, you have three

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Speaker 3: different types of handbags, and it depends in some large

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Speaker 3: part but not completely, on the price. So the mass

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Speaker 3: market which is fast fashion, accessible luxury, which is where

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Speaker 3: the parties to the merger compete, and true luxury, really

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Speaker 3: high luxury. I have to to say, I'm glad I

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Speaker 3: don't have to buy these handbags because the true luxury

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Speaker 3: handbags seem ridiculously expensive to me. In the thousands of dollars.

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Speaker 3: These handbags that the parties make are not there, sort

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Speaker 3: of between one hundred and five hundred dollars. And a

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Speaker 3: lot of the fight was do we accept these divisions

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Speaker 3: in the handbag market or do we look at it

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Speaker 3: all together. So the smaller you can make the market,

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Speaker 3: the more you can focus on those divisions, particularly since

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Speaker 3: these companies compete in that division. The higher the market share,

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Speaker 3: the more concentrated the market, the more it looks like

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Speaker 3: competition's going to be hurt.

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Speaker 1: Did she accept the FTC's determination that this would create

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Speaker 1: a company where fifty nine percent share of the accessible

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Speaker 1: luxury market would be controlled by this new company.

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Speaker 3: Yes, she did so, she accepted the definition, but she

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Speaker 3: really she went through all the facts.

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Speaker 1: You know.

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Speaker 3: It wasn't just sort of yeah, you're right, you know,

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Speaker 3: I got it. She pretty meticulously went through a lot

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Speaker 3: of the testimony, a lot of the documents, the documents,

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Speaker 3: you know, slides, the reasons for the merger, the SEC filings.

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Speaker 3: I love this. You know, they may make filings the SEC.

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Speaker 3: Way have to describe their business. What do they describe?

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Speaker 3: They don't describe. They described this market. So they were

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Speaker 3: caught every which way. Plus she then discredited the merging

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Speaker 3: parties expert witness, saying that her testimony basically wasn't incredible

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Speaker 3: and that you know, these parties compete directly. The two

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Speaker 3: brands that Tapestry controls and the one that pre controls

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Speaker 3: compete directly, and they compete in this segment of accessible luxury.

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Speaker 1: And was there correspondence that were kept confidential that she

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Speaker 1: also referred to to discredit some of the company's arguments.

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Speaker 3: Well, yeah, there was. There was some redacted stuff, but

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Speaker 3: there was a lot that was you know, emails and

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Speaker 3: you know, and a lot of explanation of why the

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Speaker 3: Tapestry wanted to acquire Cores and what they thought they

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Speaker 3: could do with the brand. There were emails about pricing

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Speaker 3: and how you know, this was a race to the

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Speaker 3: bottom because Cores keeps discounting and my god, we've got

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Speaker 3: a discount. So she relied a lot on what is

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Speaker 3: called ordinary course documents, documents that are kept in the

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Speaker 3: ordinary course of business, as opposed to some of their

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Speaker 3: you know, the executives from these firms coming in and saying,

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Speaker 3: oh no, we compete against everybody. Oh no, you know,

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Speaker 3: and you know, trying to put a different face on

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Speaker 3: what the reality was.

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Speaker 1: Tapestry and Capri say they're going to appeal the decision,

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Speaker 1: but they have a February tenth expiration date on the deal.

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Speaker 3: Yeah, well they have filed an appeal. You know, they're

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Speaker 3: free to extend things if they think they've got a

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Speaker 3: real shot at this or or not. And you know,

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Speaker 3: I don't know what they're going to do, but I

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Speaker 3: do think they're going to have a hard time getting

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Speaker 3: this reverse. So you know, if if you were in

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Speaker 3: management of these firms, you know, you might be leery

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Speaker 3: of extending this. And you know, staying in this limbo

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Speaker 3: for a while, you know, while it works through the

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Speaker 3: Court of Appeals.

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Speaker 1: This is a temporary measure that the judge has put

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Speaker 1: into place here. They have to go through an administrative hearing,

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Speaker 1: which is set for December ninth. I don't know how

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Speaker 1: these things interact.

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Speaker 3: Well, this is it's a preliminary injunction. So the formal

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Speaker 3: way of doing this is that the Federal Trade Commission

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Speaker 3: itself tries the case in its own administra of court

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Speaker 3: with an administrative law judge. But they have the power

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Speaker 3: in which they exercise here to go into federal court

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Speaker 3: to say, we want to stop this merger from happening

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Speaker 3: so that we can adjudicate its whether it's lawful or not.

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Speaker 3: And we don't have to take the parties apart if

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Speaker 3: we find it's unlawful, so we can keep them from

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Speaker 3: merging until we make our final decision. So as a

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Speaker 3: technical matter, this just keeps the status quo. They can't

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Speaker 3: merge now until the FTC's administrative procedures are completed.

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Speaker 1: Now.

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Speaker 3: As a practical matter, most cases, most FTC merger cases

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Speaker 3: end up not all end up being decided at the

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Speaker 3: preliminary injunction stage because parties can't wait around for you know,

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Speaker 3: the FTC to go through its own full hearing, you know,

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Speaker 3: and that may involve this appeal to the Court of Appeals.

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Speaker 3: So if that's unsuccessful, if they do take the appeal

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Speaker 3: and the Court of Appeal says no, the preliminary junction

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Speaker 3: is correctly entered, then they would have to go to

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Speaker 3: this hearing before the Federal Trade Commission's own administrative law judge.

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Speaker 1: I mean, I understand the Court of Appeals backup as

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Speaker 1: something like a year. I mean, is there any way

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Speaker 1: they could get a Court of Appeals decision before the

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Speaker 1: February tenth expiration date of the deal?

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Speaker 3: To me, it seems highly unlikely forget whatever delay there is.

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Speaker 3: I mean, normally it takes probably about a year to

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Speaker 3: get from filing to decision. Maybe they could expedite it,

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Speaker 3: but just simply the timing of filing a brief, the

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Speaker 3: reply brief from the Federal Trade Commission or reply brief

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Speaker 3: to that your past the past February. So I don't

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Speaker 3: see how they can get something from the Court of

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Speaker 3: Appeals before that date passes. So they're going to have

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Speaker 3: to figure out really what they want to do about

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Speaker 3: this merger at this point.

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Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 1: this conversation with NYU law professor Harry First. What are

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Speaker 1: the company's chances on appeal? Tapestry and Capri Holdings have

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Speaker 1: filed their notice to jointly appeal the decision by a

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Speaker 1: federal judge to temporarily halt the merger between the makers

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Speaker 1: of Coach and Michael Core's Handbags. I've been talking to

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Speaker 1: anti trust expert Harry First, a professor at NYU Law School. So, Harry,

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Speaker 1: as far as the in house hearing, after you've had

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Speaker 1: a judge give one hundred and sixty nine page ruling

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Speaker 1: that really covered everything, I mean, what is left for

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Speaker 1: the in house hearing.

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Speaker 3: Hey, that's a great point. They could say, hey, just

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Speaker 3: why do just facts over that? You know they still

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Speaker 3: use facts. I guess the government the facts over that

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Speaker 3: opinion and will just rubber stamp. But well, what should happen?

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Speaker 3: I mean, you have to have a hearing, so you

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Speaker 3: know you have to represent this evidence. It doesn't look

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Speaker 3: good for I mean, maybe you do it quickly, maybe

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Speaker 3: you stipulate to the record. I don't know, but in

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Speaker 3: any way, something has to happen. That's some formal and

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Speaker 3: the administrative law judge has to you know, has to

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Speaker 3: then write an opinion and it has to be well considered.

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Speaker 3: Then that goes to the full Commission for sort of

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Speaker 3: an appeal process, and then it can be appealed to

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Speaker 3: a Court of Appeals. So that process in itself also

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Speaker 3: can be lengthy, and you know, it can be a

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Speaker 3: repeat of the hearing that they just had in Federal Court,

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Speaker 3: which was held fairly quickly. And you know, these days

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Speaker 3: every litigant is attacking the whole process in the Federal

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Speaker 3: Trade Commission. So if they're you know, if they decide

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Speaker 3: they've got all the time in the world, they'll probably

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Speaker 3: go back and Federal Court and seek to enjoin the

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Speaker 3: FTC from having this hearing, arguing that the Federal Trade

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Speaker 3: Commission is completely unconstitutional. That's been how these cases have

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Speaker 3: been going withly, there was.

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Speaker 1: This whole thing that Capri might fail if this deal

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Speaker 1: doesn't go through. Morning Star analyst David Schwart said, the

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Speaker 1: whole business has been run to be sold for quite

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Speaker 1: some time. They have to go back to square one

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Speaker 1: if Capri fails or is sold off. How does that affect.

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Speaker 1: I mean, Lena Khan's big victory if you're losing one

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Speaker 1: of the companies that's in competition here.

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Speaker 3: Well, we've had this in the airline industry too. You

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Speaker 3: know where recent merger at Blue Spirit and Spirit is

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Speaker 3: along the financial ropes. So the traditionally trust answer is

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Speaker 3: we have markets. So this company acquiring Capri, right, it

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Speaker 3: wouldn't be a defense that they were a failing company.

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Speaker 3: I mean it might be defense if they were a

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Speaker 3: failing company. They never raised this defense that they were

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Speaker 3: a failing company, so from the point of view of

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Speaker 3: the anty Trust court, they weren't. Whether they are in

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Speaker 3: fact or aren't as yet to be seen. And if

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Speaker 3: they can't maintain themselves as a separate business, the assets

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Speaker 3: get sold in some way or an other course, is

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Speaker 3: still a brand. Maybe some other company will take it,

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Speaker 3: or maybe you know, maybe the analysts or offer who

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Speaker 3: knows what exactly, And that's what markets will decide. But

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Speaker 3: I think what the judge is saying, this particular solution,

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Speaker 3: if it's a solution, may you know, may look good

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Speaker 3: to cores, but it does not look good to consumers.

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Speaker 3: You know, we're not in the business of trying to

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Speaker 3: protect companies, is the anti trust answers to protect competition.

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Speaker 1: If the deal falls apart, Tapestry will have to pay

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Speaker 1: Capri as much as fifty million to reimburse merger expenses.

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Speaker 3: So there is a breakup fee.

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Speaker 1: Ah, is that a breakup fee? Yeah, because I was

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Speaker 1: going to ask if merger expenses could be that much.

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Speaker 3: See if it is, I'm in the wrong business, sess.

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Speaker 3: I mean, that's a breakup fee. And you know, sometimes

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Speaker 3: companies use that to sort of invigorate their business. The

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Speaker 3: classic case is AT and T T Mobile, which fell apart,

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Speaker 3: and T Mobile got this big breakup fee and then

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Speaker 3: used it to reinvigorate its business. You know, again the

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Speaker 3: ins and outs of those things from an any trust

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Speaker 3: point of view. You know, these get negotiated among private parties,

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Speaker 3: and it's an interesting view about how the party saw

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Speaker 3: the merger and maybe how much Tapestry wanted the merger

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Speaker 3: they were willing to risk that big breakup fee. In

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Speaker 3: light of the documents, I don't get it. I mean

437
00:25:58,800 --> 00:26:02,480
Speaker 3: the documents were terrible from the point of view of

438
00:26:03,160 --> 00:26:08,280
Speaker 3: Tapestry in what way. Well, documents basically saying what we've

439
00:26:08,320 --> 00:26:10,560
Speaker 3: got to do is make consumers better off by raising

440
00:26:10,640 --> 00:26:15,880
Speaker 3: the prices of Cors handbags. I mean, you don't really

441
00:26:15,960 --> 00:26:19,080
Speaker 3: want to, you know, go in and justify your merger

442
00:26:19,119 --> 00:26:20,920
Speaker 3: by saying, you know, this is really great, Judge, We'll

443
00:26:20,920 --> 00:26:23,440
Speaker 3: be able to raise the prices. So you know, those

444
00:26:23,640 --> 00:26:26,280
Speaker 3: those women buying these bags will feel so much better

445
00:26:27,119 --> 00:26:30,680
Speaker 3: now that they're getting the same darn bags but paying more.

446
00:26:31,080 --> 00:26:31,119
Speaker 1: So.

447
00:26:31,400 --> 00:26:33,440
Speaker 3: I mean, that's how I read those documents, and those

448
00:26:33,440 --> 00:26:34,879
Speaker 3: are the documents that judge quota.

449
00:26:35,040 --> 00:26:37,600
Speaker 1: So I don't know when will they learn not to

450
00:26:37,640 --> 00:26:38,680
Speaker 1: put things in emails?

451
00:26:38,760 --> 00:26:41,840
Speaker 3: I don't know. No, this wasn't in emails. These were

452
00:26:41,960 --> 00:26:47,040
Speaker 3: slides that justify the deal. These were internal slides saying

453
00:26:47,119 --> 00:26:48,560
Speaker 3: this is what we're trying to achieve.

454
00:26:49,040 --> 00:26:51,720
Speaker 1: Wow, okay, well we'll see why the judge came out

455
00:26:51,760 --> 00:26:55,879
Speaker 1: that way. So one FTC officials said, the ruling is

456
00:26:55,960 --> 00:26:59,440
Speaker 1: an endorsement of its new merger guidance that the Biden

457
00:26:59,440 --> 00:27:02,800
Speaker 1: administration should put out. Do you think that that is true?

458
00:27:03,640 --> 00:27:06,920
Speaker 3: So I think that's eighty percent true in this sense.

459
00:27:07,920 --> 00:27:12,480
Speaker 3: The judge, at the beginning of her opinion says, the

460
00:27:12,560 --> 00:27:16,800
Speaker 3: defendants say, no one's ever relied on those terrible guidelines.

461
00:27:17,080 --> 00:27:20,200
Speaker 3: Twenty twenty three guidelines, but you know, they just came out,

462
00:27:20,280 --> 00:27:23,520
Speaker 3: and in fact, the defendants were wrong that other courts

463
00:27:23,560 --> 00:27:27,360
Speaker 3: have begun to cite them, and she then cites them

464
00:27:27,560 --> 00:27:31,920
Speaker 3: a lot. So it's very clear that in certain ways,

465
00:27:31,960 --> 00:27:36,480
Speaker 3: in particular, she was endorsing. There's one change that I

466
00:27:36,560 --> 00:27:40,359
Speaker 3: think she did endorse, which is changing the threshold levels

467
00:27:40,840 --> 00:27:45,240
Speaker 3: of when Marcus would be considered concentrated. The twenty ten

468
00:27:45,359 --> 00:27:48,960
Speaker 3: guidelines had raised those thresholds, and she said, you know,

469
00:27:49,160 --> 00:27:52,840
Speaker 3: all the other guidelines had lower thresholds, were there, and

470
00:27:53,000 --> 00:27:55,879
Speaker 3: we're there with the twenty twenty three thresholds. On the

471
00:27:55,960 --> 00:27:59,840
Speaker 3: other hand, this didn't push the thresholds. These numbers are

472
00:28:00,080 --> 00:28:04,320
Speaker 3: ad under you know, any of the guidelines. So she

473
00:28:04,560 --> 00:28:09,560
Speaker 3: did endorse the approach in that sense, but didn't have

474
00:28:09,720 --> 00:28:13,240
Speaker 3: to really say, this is a case that you know

475
00:28:13,400 --> 00:28:16,879
Speaker 3: would have been okay under previous guidelines, but not under this,

476
00:28:17,040 --> 00:28:19,560
Speaker 3: and I'm following these guidelines. That's why I say it's

477
00:28:19,600 --> 00:28:23,320
Speaker 3: sort of eighty percent. She embraces them, but with numbers

478
00:28:23,400 --> 00:28:27,760
Speaker 3: that are comfortable under any approach you can think of.

479
00:28:28,200 --> 00:28:30,600
Speaker 3: And that's true of other parts of the series as well,

480
00:28:31,440 --> 00:28:34,840
Speaker 3: where you know she cites them over and over again,

481
00:28:35,400 --> 00:28:39,760
Speaker 3: but for propositions that in a sense are not that controversial.

482
00:28:40,920 --> 00:28:44,120
Speaker 1: She really did this quickly, Yet we're still waiting for

483
00:28:44,200 --> 00:28:46,480
Speaker 1: the Kroger Albertson's decision.

484
00:28:46,600 --> 00:28:55,160
Speaker 3: Right, Yes, that case has proceeded less quickly, and it's

485
00:28:55,200 --> 00:28:59,000
Speaker 3: also more complicated with some state litigation as well. Going

486
00:28:59,560 --> 00:29:04,400
Speaker 3: there's one aspect that this case may help the Kroger

487
00:29:04,440 --> 00:29:11,520
Speaker 3: Albertson's decision for the FTC because the judge in this case,

488
00:29:11,600 --> 00:29:15,840
Speaker 3: Jez Roshan, looked at documents where the parties clearly took

489
00:29:16,360 --> 00:29:21,840
Speaker 3: we're pre merger, we're taking account of competition from you know,

490
00:29:22,240 --> 00:29:26,800
Speaker 3: looking at prices of the commpetitor who was acquired and saying,

491
00:29:26,880 --> 00:29:30,240
Speaker 3: my god, they're putting pressure on us. So you know,

492
00:29:30,360 --> 00:29:36,000
Speaker 3: the people who were running the Kate Spade brand, they

493
00:29:36,000 --> 00:29:38,960
Speaker 3: were looking at cores and cores pricing, and Coach brand

494
00:29:39,240 --> 00:29:43,240
Speaker 3: looking at cores pricing, and there's a lot of similar

495
00:29:43,320 --> 00:29:47,040
Speaker 3: evidence in Kroger Albertson that they were very attuned to

496
00:29:47,160 --> 00:29:50,120
Speaker 3: each other's pricing. So, you know, this may be a

497
00:29:50,160 --> 00:29:53,840
Speaker 3: little boost to the relevance of you know, that kind

498
00:29:53,920 --> 00:29:55,240
Speaker 3: of head to head competition.

499
00:29:55,960 --> 00:30:00,400
Speaker 1: But do you think that this decision is pretty solid,

500
00:30:00,600 --> 00:30:02,440
Speaker 1: not likely to be overturned on appeal.

501
00:30:02,840 --> 00:30:05,280
Speaker 3: I think it's pretty hard to overturn it. She found

502
00:30:05,360 --> 00:30:09,440
Speaker 3: the facts very clearly in favor of the FTC, went

503
00:30:09,520 --> 00:30:14,200
Speaker 3: through methodically the weakness of the defense arguments. I think

504
00:30:14,200 --> 00:30:16,560
Speaker 3: it'd be hard to overturn, and the you know, the

505
00:30:16,880 --> 00:30:19,920
Speaker 3: legal approach. She took us very standard on you know,

506
00:30:20,120 --> 00:30:24,200
Speaker 3: on the nose, citing other District court opinions in the

507
00:30:24,480 --> 00:30:28,160
Speaker 3: Second Circuit of the Court of Appeals back to you

508
00:30:28,240 --> 00:30:30,560
Speaker 3: know a number of important Supreme Court cases. I think

509
00:30:30,560 --> 00:30:32,320
Speaker 3: it would be really hard to reverse.

510
00:30:32,720 --> 00:30:35,120
Speaker 1: Always a pleasure to have you on, Harry, Thanks so much.

511
00:30:35,720 --> 00:30:39,320
Speaker 1: That's Professor Harry First of NYU Law School. And that's

512
00:30:39,400 --> 00:30:42,000
Speaker 1: it for this edition of The Bloomberg Law Show. Remember

513
00:30:42,040 --> 00:30:44,120
Speaker 1: you can always get the latest legal news on our

514
00:30:44,160 --> 00:30:48,280
Speaker 1: Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

515
00:30:48,480 --> 00:30:53,480
Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,

516
00:30:53,960 --> 00:30:56,480
Speaker 1: and remember to tune into The Bloomberg Law Show every

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00:30:56,560 --> 00:31:00,480
Speaker 1: weeknight at ten pm Wall Street Time. I'm Junie Grosso

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00:31:00,600 --> 00:31:02,160
Speaker 1: and you're listening to Bloomberg

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Speaker 2: M