Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the Litigation and Policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP on the Bloomberg Terminal.
Speaker 1: Bloomberg Intelligence has five hundred analysts and strategists working across
Speaker 1: the globe and focused on all major markets. Our coverage
Speaker 1: includes over two thousand equities and credits, and we have
Speaker 1: outlooks on more than ninety industries and one hundred market industries,
Speaker 1: currencies and commodities. This podcast series examines the intersection of
Speaker 1: business policy and law, and today's our weekly check in
Speaker 1: on the litigation and policy catalysts that we're watching and
Speaker 1: that we think will impact companies and markets and sectors
Speaker 1: and industries. My name is Elliot Stein. I'm in analysts
Speaker 1: with Bloomberg Intelligence covering litigation in the financial sector. I'm
Speaker 1: delighted as always to be joined by a handful of
Speaker 1: my colleagues from the Litigation and policy team here at BI.
Speaker 1: As a reminder, you can find all of our research
Speaker 1: on the Bloomberg terminal at BI go, and you can
Speaker 1: find all of our litigation and policy research on our
Speaker 1: dashboard which is available at BI laws Go. Today is
Speaker 1: June twelfth. It's about one pm. And we always timestamp
Speaker 1: things because inevitably things happen quickly, and sometimes they happen
Speaker 1: as we're talking on this podcast. All right, So Nathan Dean,
Speaker 1: let's bring you in. Nathan is our chief policy analyst
Speaker 1: down in Washington, DC. He's been following the stable coin
Speaker 1: bill that seems like it's about to pass the Senate
Speaker 1: and eventually get to the President's desk. I guess pretty soon.
Speaker 1: Why don't you tell us what the latest is and
Speaker 1: what happens next.
Speaker 2: Yeah, So last night, so Thursday night, Senator John Thune
Speaker 2: filed cloture, which means that's the first vote of several
Speaker 2: votes that ultimately ends up with this bill passing the Senate.
Speaker 2: And that vote went sixty eight to thirty. And just
Speaker 2: as a reminder, you need sixty to get past the filibuster.
Speaker 2: There were significant number of Democrats who came on board
Speaker 2: to vote for this, and so when the bill does
Speaker 2: come up for vote on Monday, we do think this
Speaker 2: bill is going to pass. And just as a reminder,
Speaker 2: this is called the Genius Act. This bill would require
Speaker 2: stable coin issuers like Circle that have a greater ten
Speaker 2: billion dollar the market capitalization to register with either the
Speaker 2: Federal Reserve or the Office of the Control or the Currency.
Speaker 2: If you're under ten billion, you have to register with
Speaker 2: a state regulator, and you're required to have one hundred
Speaker 2: percent high quality liquid assets backing up your stable coin,
Speaker 2: and you're not allowed to pay yield. And so you know,
Speaker 2: there was a lot of discussion in the stable coin
Speaker 2: community about whether or not they could pay interest. Under
Speaker 2: this bill, you were prohibited from paying yield. Now, I
Speaker 2: do think this is going to pass the Senate on
Speaker 2: Monday night. Then it goes to the House, and while
Speaker 2: the House could tinker with it, I don't think they will.
Speaker 2: I think they more likely than not just want to
Speaker 2: get this over the line, and the question on whether
Speaker 2: or not passes the House.
Speaker 3: It should pass the House fairly easily.
Speaker 2: The biggest issue has always been to pass the Senate,
Speaker 2: and that's something that I think you know now that
Speaker 2: it's the culture votes, and this is the second culture
Speaker 2: vote for what it's worth that has attracted enough Democrats
Speaker 2: to get above that sixty vote threshold.
Speaker 3: So I think this passes probably.
Speaker 2: Late June, but more likely early July, and then it
Speaker 2: goes to the regulators to implement their proposals. That would then,
Speaker 2: you know, for those of you with Bloomberg terminals come back.
Speaker 2: You know, we'll be writing about how that rulemaking process
Speaker 2: plays out. But if you're a stable cooid issue or
Speaker 2: you should be feeling pretty good right now. But the
Speaker 2: regulatory clarity that's coming down the line.
Speaker 1: Did the House pass its own version before the Senate
Speaker 1: worked on theirs?
Speaker 2: Yeah, so the House has their own version and that
Speaker 2: had a lit a little bit more technical differences between
Speaker 2: that and the Senate version, and I think for the
Speaker 2: sake of speed, and one of the bigger questions is
Speaker 2: this idea to pay yield. You know, there are some
Speaker 2: folks in Congress that think stable coin issuers can pay yield.
Speaker 2: But the problem is is that you'll then if stable
Speaker 2: cooin issuers are paying yield, the banks aren't gonna like that,
Speaker 2: and then the banks all of a sudden start to
Speaker 2: get upset. And you know, that's the other major hiccup
Speaker 2: that I should have said earlier is there is an
Speaker 2: amendment process that was playing out behind the scenes that
Speaker 2: potentially could.
Speaker 3: Have derailed this bill.
Speaker 2: And that comes to the form of this bill called
Speaker 2: the credit card Competition Act. So if you've flown through
Speaker 2: LaGuardia or Rayan or hair, keep your eyes out and
Speaker 2: I think over in the Guardia, it's over in the
Speaker 2: new Delta or not Delta. It's probably what's the new
Speaker 2: terminal the New Yorkers or Guardia.
Speaker 1: I'd never find I title avoid LaGuardia. There's so many
Speaker 1: Jersey guy. I just got into work.
Speaker 2: There's this new terminal, and I the New Yorkers listening
Speaker 2: to this podcast and to be like, yep, I know
Speaker 2: exactly what you're talking about. It's not the Delta terminal.
Speaker 2: Last time I was in the ne La Guardia, keep
Speaker 2: your eyes out, because I did see the advert there.
Speaker 2: And this advertisement is because Senator Marshall of Kansas, Roger
Speaker 2: Marshall is teamed up with Senator Dick Durban of Illinois,
Speaker 2: a Republican and a Democrat, to come together and they
Speaker 2: want to put forth this bill that increases competition for
Speaker 2: Visa MasterCard. Now, without getting into the great details, what
Speaker 2: you need to know is is that the airlines think
Speaker 2: that's going to kill the credit card rewards programs for
Speaker 2: these airlines. So you've got an issue that has banks
Speaker 2: versus retailers versus airlines. And when you have that, all
Speaker 2: the senators are just like, I can't vote for this.
Speaker 2: This is too dangerous. And had Senator Marshall gotten amendment's
Speaker 2: vote on this bill, it could have derailed the stablequin invote.
Speaker 1: So why did he even try to put it in there?
Speaker 1: I mean, it seems sort of like so random.
Speaker 2: It Well, it's the easiest way to get passage, and
Speaker 2: you avoid committee, and you avoid the ability of having
Speaker 2: tough votes, and you put it through at the final hour,
Speaker 2: and so you only need one vote to get it
Speaker 2: over across the line. And when you have something that
Speaker 2: has like luke warm bipartisan support but has a lot
Speaker 2: of detractors and not it's a way of jamming up
Speaker 2: the final bill.
Speaker 3: And trying to force passage.
Speaker 2: There's been other instances of where this has worked over
Speaker 2: the last fifteen twenty years that I've covered Washington. But
Speaker 2: the problem with this one is that everybody knows it's coming,
Speaker 2: and also Senator Thune had so the funny thing that
Speaker 2: happened here is that Senator Marshall put this amendment on.
Speaker 2: The next thing that happened Senator Holly Republican from Missouri
Speaker 2: said no, no, no, no, no, I'm gonna put my amendments
Speaker 2: that caps all credit card interest rates at ten percent.
Speaker 2: That he's teamed up with Senator Bernie Sanders. He's like, no, no, no,
Speaker 2: I'm putting my amendment on there. And next thing, you know,
Speaker 2: everybody had amendments. So Senator John Thune on Monday night
Speaker 2: of earlier this week came said, no, we're done.
Speaker 3: We tried it. I'm actually devoiding all the amendments. Called
Speaker 3: an amendment tree, he invoided all the amendments.
Speaker 2: He brought forth a new amendment tree that only was
Speaker 2: really related to the stable coin bill and.
Speaker 3: Said that's what we're going forward with.
Speaker 2: So that process does it and could potentially play out
Speaker 2: in the House, but I don't think it will.
Speaker 3: I think the House will just pass it and be
Speaker 3: done with it.
Speaker 1: And so what happens to those credit card amendments. I mean,
Speaker 1: it's two different bills. I assume they're going to try
Speaker 1: to raise them later this time.
Speaker 2: So I think watch out for the September Continuing Resolution
Speaker 2: period just because I think that's where they'll try and
Speaker 2: attach it next. Senator Durbin tried this with the NDAA
Speaker 2: last year, the National Defense Authorization Act. So between now
Speaker 2: and the end of the congressional term, if there's any
Speaker 2: must pass piece of legislation, watch out probably about three
Speaker 2: to four weeks in advance. Senator Marshall and Senator Durbin
Speaker 2: will try and attach it. I still think it's not
Speaker 2: going to happen. I still think a forty percent chance.
Speaker 1: Both of that, both bills. I mean, it sounds like
Speaker 1: the credit card competition maybe might be able to get
Speaker 1: more bipartisan support than capping credit card f viesa ten percent.
Speaker 2: Yeah, our Holly's build the cap credit card fees that
Speaker 2: that we're at a twenty percent chance of that. But this,
Speaker 2: this Credit Card Competition Act, it's one of those things.
Speaker 3: Where I think it's like, you know, I call it
Speaker 3: bipartisan warmth.
Speaker 2: Because there was a hearing in the Senate Judiciary Committee
Speaker 2: hearing last December, it was like novembery December, and they
Speaker 2: had it was about Visa MasterCard, and I was surprised
Speaker 2: at the amount of Republicans who came out against Visa MasterCard.
Speaker 2: And what this bill does is it requires banks to
Speaker 2: issue their retailers so their merchants. Requires these banks to say, Okay,
Speaker 2: we're going to offer you Visa and somebody else or
Speaker 2: MasterCard and somebody else. And the way the bills written,
Speaker 2: it can't be Visa and MasterCard. It either has to
Speaker 2: be Visa, an American Express or MasterCard. And Discover still Discover,
Speaker 2: even though it Discovers taken over by Capital One, it's
Speaker 2: still the Discovered network according to our greater according to
Speaker 2: our great equity animals, Benelliot, they're keeping the Discovered network
Speaker 2: as is right now, but until they change it, it's
Speaker 2: the Discover Net.
Speaker 3: Okay, interesting and so, but you know this bill.
Speaker 2: The reason why the banks hate it is because it
Speaker 2: lowers the fees that they get from the retailers.
Speaker 3: The retailers love it.
Speaker 2: So now you have Walmart and Target and Home Depot
Speaker 2: lobbying their folks saying we want this. And you've got
Speaker 2: Bank of America and JP Morgan in the United Airlines
Speaker 2: and American Airlines telling their folks, we hate this.
Speaker 3: And from a senatorial perspective.
Speaker 2: They're like, I got two of my kids fighting here, right,
Speaker 2: go and get out of the room.
Speaker 1: So wow, yeah, that's like battle of a heavyweight lobbyists exactly.
Speaker 1: That's gonna be fascinating.
Speaker 3: But that's why we can definitely do another podcast on
Speaker 3: this one. But yeah, that's what we will.
Speaker 2: Yeah, that's why it didn't you know, that's why the
Speaker 2: Senators were like, no, no, no, you can't attach into
Speaker 2: the Genius Act.
Speaker 3: Let's get the stable Coin Bill without the other.
Speaker 1: So here's a stupid question. Why are they calling the
Speaker 1: stable Coin Bill the Genius Act and not the Stable Act?
Speaker 1: Or what there was a Stable Act? What did that
Speaker 1: refer to?
Speaker 2: So the Stable Act was from the last Congressional I'm sorry,
Speaker 2: the Stable Act was taken by the House.
Speaker 1: Oh, so you have this Stable Act and the Genius Act,
Speaker 1: the Stable Genius Acts.
Speaker 2: So the Genius Acting, if you give me about two
Speaker 2: seconds to look up what the Genius stands for, it's
Speaker 2: the Guiding and Establishing National Innovation for US stable Coins
Speaker 2: of twenty twenty five or the Genius Act of twenty
Speaker 2: twenty five.
Speaker 1: All right, good stuff, Nathan. Let's move over to antitrust
Speaker 1: and bring in one of our anti trust analysts, Justin Tesi. So, Justin,
Speaker 1: let's talk about this case brought by the State of
Speaker 1: Texas and a dozen other Red states against Black Rock,
Speaker 1: Vanguard and State Street accusing these companies of colluding to
Speaker 1: reduce coal output. You've been following this case since it
Speaker 1: was filed, and even before that when it was threatened
Speaker 1: and discussed. I guess you know, why don't you come
Speaker 1: in tell us about the case, give us your thoughts
Speaker 1: on the strengths and the weaknesses of it.
Speaker 4: Yeah, yeah, definitely, But really important before I jump into this, Nathan,
Speaker 4: the name of the new terminal quaritia is Terminal B.
Speaker 4: They really went for the stars, the stars in the
Speaker 4: moon on that one. That is it, Big Fountain, great
Speaker 4: food Cork, food court, terminal be that that's what they
Speaker 4: got there for you.
Speaker 3: I was really impressed with the food court, Like, yeah,
Speaker 3: I mean I loved it.
Speaker 4: Yeah, yeah, No, It's definitely a step in the right direction,
Speaker 4: I think. But all right, back back to business as
Speaker 4: usual here. But yeah, this case that we saw file
Speaker 4: last year right around Thanksgiving in Texas was brought by
Speaker 4: Attorney General Ken pax And representing Texas and a whole
Speaker 4: host of Red states, and it really was the first
Speaker 4: of I think what we're probably about to see a
Speaker 4: wave of new anti trust litigation kind of directing the
Speaker 4: anti trust laws at things like ESG initiatives or other
Speaker 4: corners of anti trust worty. Maybe haven't seen these kinds
Speaker 4: of cases brought before, but in a nutshell, what's been
Speaker 4: a last year is that these really large asset managers,
Speaker 4: so think black Rock, Vanguard and State Street in this
Speaker 4: case many of times, who are holding index funds right
Speaker 4: and by virtue of holding funds in these kind of
Speaker 4: index you know, mutual funds have really large shareholder ownership
Speaker 4: in a wide array of companies, including in this case
Speaker 4: coal companies, coal mining and core production companies. So what's
Speaker 4: the issue. The issue is that you know, these banks
Speaker 4: and several others have joined on to these climate change initiatives,
Speaker 4: in this case net zero and Climate Action one hundred plus.
Speaker 4: Those the two kinds of climate initiatives that are that
Speaker 4: are issue in this case, these ESG initiatives and further
Speaker 4: participation in these initiatives. You know, what's alleged here is
Speaker 4: that those agreements that participate in these these kinds of
Speaker 4: accords basically are an anti trust violation and that these
Speaker 4: these managers have come together and agreed to kind of
Speaker 4: act in a way that limits coal production and turn
Speaker 4: raises coal prices for consumers and turned electricity process or whatever,
Speaker 4: and all these different things were coals coming into play.
Speaker 4: That's the kind of novel theory behind this case, that
Speaker 4: the participation in those climate accords just.
Speaker 1: A participation, not even like some yeah, agreement to morrow.
Speaker 4: Right right, you know. And that's the interesting thing that
Speaker 4: was kind of a hanging chat, if you will, as
Speaker 4: as to whether or not they were they were hanging
Speaker 4: their hat on those kinds of agreements being the subject matter,
Speaker 4: you know, that forms the anti trust violation itself. But
Speaker 4: if there was any question, really in Attorney General Paxton's case,
Speaker 4: there was a statement of interest file by the Department
Speaker 4: of Justice and the Federal Trade Commission that really said
Speaker 4: or it took the position that that participation in and
Speaker 4: of itself can be the foundation for an anti trust violation.
Speaker 4: So whether or not, you know, the complaint itself actually
Speaker 4: made that allegation, the federal agencies that filed that statement
Speaker 4: of interest in the case and support really took it
Speaker 4: a step further and said, yes, that participation in and
Speaker 4: of itself can can really lay the found word for
Speaker 4: liability from an anti trust perspective. So that's interesting, you know,
Speaker 4: I think our view is that look there's still really
Speaker 4: is that this whole aspect of an agreement here, a
Speaker 4: specific agreement to really step in and somehow limit coal
Speaker 4: production that at the end of the day, probably hampers
Speaker 4: this case from getting too much further than the motion
Speaker 4: to dismiss where it's at now. But there's that issue
Speaker 4: and also just one of causation.
Speaker 3: Right.
Speaker 4: Did these companies, you know, these independent companies like Peabody
Speaker 4: Coal and our Tree Sources, did they limit coal production
Speaker 4: because these asset managers were exerting their pressure, you know,
Speaker 4: via other participation in these accords? Were there real external
Speaker 4: factors involved in lowering coal production? Perhaps there was a
Speaker 4: decline in demand for coal, Perhaps there were countervailing kind
Speaker 4: of political realities, good decline and coal you know, coming
Speaker 4: from Ukraine? Did that somehow affect the price of coal worldwide?
Speaker 2: Right?
Speaker 4: So those kinds of things seem to be missing from
Speaker 4: the complaint, and I think for that reason it runs
Speaker 4: into semantic trust issues, you know, in terms of liability
Speaker 4: down the road.
Speaker 1: Here, although some of those things could be factual questions. Right,
Speaker 1: the judge sort of uses to let the case get
Speaker 1: pass this initial motion to dismiss.
Speaker 4: I think that's right. And I think I think between
Speaker 4: the fact questions and the if quite frankly, the political
Speaker 4: the political players involved here. You know, the case is
Speaker 4: filed in federal just recording Tyler, Texas. We're talking about
Speaker 4: a conservative forum in the Fifth Circuit, you know, and
Speaker 4: I think, you know, with with the fact questions being
Speaker 4: what they are and with the political actors involved, I
Speaker 4: would imagine it's really hard press to shut this thing
Speaker 4: down at a motion to the Smiths phase.
Speaker 1: Speaking of the Fifth Circuit, it was interesting that I
Speaker 1: think it was black Rocks. The lawyer representing black Rock,
Speaker 1: I think in this case was Greg Costa, who's a
Speaker 1: former Fifth Circuit judge the point of my democrat, I believe,
Speaker 1: so not not not the traditional conservative Fifth Circuit judge,
Speaker 1: but still you know, obviously know it's the Circuit.
Speaker 4: I would imagine quite intentional on the part of black Rock.
Speaker 3: Yes, exactly.
Speaker 1: Also interesting to see Gibson Done you know, representing the
Speaker 1: companies in this case, because in so many cases that
Speaker 1: we follow, Gibson Gun represents you know, the trade groups
Speaker 1: challenging uh, you know, a government policy. So just going
Speaker 1: back to the statement of interest by DOJ and the FTC,
Speaker 1: you know, how how common is that and have you
Speaker 1: seen that in other cases?
Speaker 4: Yeah, you know, we have. You know, the one that
Speaker 4: comes to mind, you know, most recently is that DJ
Speaker 4: stepped in in terms of these real page algorithm cases
Speaker 4: that where we're kind of saying, hey, you know, this
Speaker 4: kind of sharing through an independent AI algorithm by by landlords,
Speaker 4: you know, about what the rental prices or vacancy rates
Speaker 4: might be. You know, there was a big question whether
Speaker 4: or not that itself could be this kind of anti
Speaker 4: trust you know, violation in terms that it's this hub
Speaker 4: and spoke agreement between the software provider and the landlords
Speaker 4: all working together to kind of you know, uh collude
Speaker 4: to price fixed rental prices and for apartments nationwide. Right,
Speaker 4: DOJ stepped into that case of file the statement of
Speaker 4: interest there, so that you know, these things are fairly common.
Speaker 4: What wasn't you know, really common about this is that
Speaker 4: typically it's DOJ that steps in and does that on
Speaker 4: its own, to have the FDC and do o J
Speaker 4: kind of jointly filing this statement of interest here, especially
Speaker 4: at a time where the FDC is anti trust authority,
Speaker 4: you know, and of itself has been under attack by
Speaker 4: some Congressional Republicans. Well, that was a really interesting, uh
Speaker 4: you know wrinkle on all of this too, to see
Speaker 4: kind of a joint statement that both of those those
Speaker 4: agencies here.
Speaker 1: What do you think that means?
Speaker 4: Yeah, I think there's a probably a real effort here,
Speaker 4: no surprise by by FDC share Ferguson, to really cement
Speaker 4: the anti trust authority at the FTC that you know,
Speaker 4: that goes part and parcel with its actual consert protection authority.
Speaker 4: You know, it's interesting from from that angle, I think
Speaker 4: we're we're we're seeing a very strong FTC in terms
Speaker 4: of anti trust enforcement here, and I think probably you know,
Speaker 4: a push to really maintain that authority, uh, you know,
Speaker 4: in the face of some questioning, you know, for folks
Speaker 4: on the hill whether or not there should be this
Speaker 4: dual enforcement regime between the two agencies.
Speaker 1: And you know, I mean what another interesting rinkle in
Speaker 1: that case is that a lot of these companies have
Speaker 1: left these climate accords right sort of to avoid the
Speaker 1: anti trust issues. You know, does that matter in this
Speaker 1: case and does it matter for potential future cases?
Speaker 4: Yeah? You know, I think in this case, you know,
Speaker 4: so you've seen folks like State Street and JP Morgan
Speaker 4: completely leave clevi At Action one hundred plus for example.
Speaker 4: As you know, I would say likely as a result
Speaker 4: of wanting to avoid litigation like this in the future,
Speaker 4: if not just you know, this case in and of itself,
Speaker 4: but Black Rocks still you know, it's cons curtailed, it's involvement.
Speaker 4: You know, there's still this tangential kind of involvement in
Speaker 4: ESG agreements or coords like this. So I don't think
Speaker 4: it means the end of this case, you know, I think,
Speaker 4: by by and large, I think the goal of the case,
Speaker 4: if it was to get folks to leave these initiatives,
Speaker 4: that's been successful. But I think there's also this desire
Speaker 4: probably to scare of folks from joining them again in
Speaker 4: the future. You know, I think the creation of precedent
Speaker 4: around that is probably something that Paxson and the plaintiffs
Speaker 4: here are are interested in doing. And we're kind of
Speaker 4: seeing the same thing in relation to this advertising book
Speaker 4: co question right with the the X case. And you
Speaker 4: know what, you know, can you this whole idea of
Speaker 4: a group of boycott by advertisers, you know, not placing
Speaker 4: adds on X. Yeah, the trust liability there is really
Speaker 4: dubious in my mind, that's a tough case.
Speaker 3: To really prove.
Speaker 4: I don't know that the facts line up with the
Speaker 4: with the with the assertions of the complaint in terms
Speaker 4: of what the counts that have been alleged. But you know,
Speaker 4: it's it's seemed to be getting folks to buy advertising
Speaker 4: on X right. So I think the goal of these cases,
Speaker 4: the goals of these cases, you know, they're kind of
Speaker 4: coming to fruition whell or not the case that kicks
Speaker 4: gritting across the finicial line.
Speaker 1: Got it? All? Right, let's pivot slightly. We'll stick with
Speaker 1: anti trust, but we'll pivot to Visa and the Justice
Speaker 1: Environments monopolization case against Visa leging a series of anti
Speaker 1: competitive contracts with merchants and would be rivals that you know,
Speaker 1: allegedly would exclude competition from from the debit transaction processing market.
Speaker 1: I know you've been following this case. You went to
Speaker 1: the motion to dismiss hearing I think on May twenty nine.
Speaker 4: Yes, that's right, right right after the royal It was
Speaker 4: a great time right after.
Speaker 1: Yeah, so what's the latest in that case?
Speaker 4: Yeah, So, you know, this case really zeros in on
Speaker 4: you know, Visa's behavior following the implementation of Dodd Frank
Speaker 4: and rolls around debit transactions that came out of that
Speaker 4: that bill when it was past twenty ten, right, And
Speaker 4: really what Don Frank did was create the situation where
Speaker 4: debit cards had to be able to be processed over
Speaker 4: more than one network.
Speaker 1: Right.
Speaker 4: So let's say you've got Visa on the front of
Speaker 4: the card. Sometimes you'll see a secondary network like Pulse
Speaker 4: or Plus on the back of your card, which is
Speaker 4: another network that those debit transactions can be processed over,
Speaker 4: typically at a lower fee than whatever Visa would charge
Speaker 4: for that transaction to go over its network. Now, I
Speaker 4: think seeing the thread of competition here, what DOJ's alleging
Speaker 4: Visa did in response to this is they created all
Speaker 4: these kind of new fees, if you will, following Dodd
Speaker 4: Frank and then Visa said, hey, will either reduce or
Speaker 4: eliminate the fee that we charge you if you promise
Speaker 4: to send a certain percentage of your debit transactions over
Speaker 4: in our network instead of the cheaper networks that might
Speaker 4: appear on the back of a cart. Who loses in
Speaker 4: that are the merchants, right? Do end up paying these fees,
Speaker 4: so that that's the central allegation of the case. There's that,
Speaker 4: and then there's also some other allegations, you know, claiming
Speaker 4: that Visa basically paid off Apple and others from developing
Speaker 4: their own kind of debit networks, you know, and by
Speaker 4: kind of you know, giving them fee concessions and things
Speaker 4: of that of that sort too, right, are saying, hey,
Speaker 4: we don't have to work with you in the future
Speaker 4: if you develop your own network. Right, So, those are
Speaker 4: the two central themes of this this case. You know,
Speaker 4: I think the second the second set of allegations against
Speaker 4: Apple and you know, regarding Visa's behavior with Apple, PayPal, others,
Speaker 4: you know, to stop them from building a competitor's network,
Speaker 4: those seem a little bit more questionable. There's you know,
Speaker 4: there there have been heavily redacted but versions of contracts
Speaker 4: between Visa and those entities that were submitted to the court.
Speaker 4: The argument seems to be that those contracts are what
Speaker 4: they are, and they don't really spell out the kind
Speaker 4: of antitrust violation in those documents that DJ is saying,
Speaker 4: you know, actually happened, so that one seems a little
Speaker 4: bit more shaky. But regardless of that, the judge certainly
Speaker 4: is saying these are all facts questions, and there's certainly
Speaker 4: not issues that I'm willing to set aside right now
Speaker 4: in a motion to dismiss hearing. So I think we
Speaker 4: probably see that denied, you know, relatively soon, and then
Speaker 4: you know what rolls up through discovery does.
Speaker 1: But yeah, right, right, yeah, so that's still pretty early stages.
Speaker 1: So is this similar to the interchange feed litigation that's
Speaker 1: been going on for twenty years now?
Speaker 4: You know, it's not related to it, but in an
Speaker 4: interesting wrinkle, I think, you know, Visa is trying to
Speaker 4: say that the fees that are covered that were covered
Speaker 4: as part of its class settlement with merchants and the
Speaker 4: interser change fee litigation, that it also covers the debit
Speaker 4: fees that are at issue here in private suits that
Speaker 4: are brought kind of as a copycats the DJ case.
Speaker 4: You know, whether or not that's going to be successful,
Speaker 4: I really question that because there's been of a different
Speaker 4: factual nexus here in terms of, you know, the case
Speaker 4: that is being brought here versus what was brought you know,
Speaker 4: twenty years ago now, right, things are a bit different,
Speaker 4: and the thing the behavior being alleged, the bad behavior
Speaker 4: being alleged on the part of VISA here wasn't even
Speaker 4: occurring right at the time that the interchange fee case
Speaker 4: was brought originally in two thousand and five, allegedly, So
Speaker 4: I think that's a bit of a stretch, but certainly
Speaker 4: a different case, same kind of you know, network fees
Speaker 4: we're talking about in some ways, but different kind of
Speaker 4: set of allegations and facts altogether, and.
Speaker 1: Trying to fold it into I guess the settlement with
Speaker 1: the merchants case that would have affected this DOJ case anyways.
Speaker 4: No, No, I think absolutely not. You know, a DOJ. You know,
Speaker 4: the previous deals made between VISA and DUJ and merchants
Speaker 4: all really, you know, I think are kind of especially DJ.
Speaker 3: It's just it's.
Speaker 4: Separate factual predicates altogether. So I think we're separate apart
Speaker 4: from that, definitely don't affect the DOJ litigation, got it.
Speaker 1: All right, So you're waiting for some emotion decisions. Emotions
Speaker 1: are dismissing this case and in the cultivation they come after.
Speaker 4: Summer Relli'll absolutely that's the rule.
Speaker 1: So all right, good stuff, justin thanks, all right, let's
Speaker 1: bring in Holly from Holly has been doing a ton
Speaker 1: of work on tariffs, both in terms of the lawsuits
Speaker 1: challenging them. She also spearheads our deep dive reports here
Speaker 1: at Bloomberg Intelligence related to tariffs, which are like huge
Speaker 1: collaborative efforts where she has to heard like fifty different
Speaker 1: analysts into one report. But it's really great content, which
Speaker 1: I highly recommend. If you have a terminal, you can
Speaker 1: find it all at BI space. Tariffs Go. All right, Holly,
Speaker 1: let's bring you in for an update on where these
Speaker 1: lawsuits are. When we had you on last a couple
Speaker 1: of weeks ago, it was I think the day after
Speaker 1: the Court of International Trade ruled. Then the following morning
Speaker 1: we got a decision from a judge in Federal Court
Speaker 1: in Washington, d C. Both those courts essentially found the terriffs,
Speaker 1: the AIPA tariffs to be unlawful. And then while we
Speaker 1: were recording the podcast two weeks ago, the Federal Circuit
Speaker 1: put an administrative stay on the Court of International Trades decision.
Speaker 1: Why don't you come in and tell us, you know
Speaker 1: what's happened since then and sort of what the latest is.
Speaker 5: Yeah, So the ucit the Court of International Trade issue
Speaker 5: it's ruling. On May twenty eighth, the District Court's decision
Speaker 5: was me twenty ninth, and the District Court on its
Speaker 5: own stated decision pending appeal. The May twenty decision by
Speaker 5: the International Trade Court was immediately stayed by the Federal well,
Speaker 5: not immediately, but the next day, on May twenty ninth,
Speaker 5: was stayed pending the appellate court's consideration of whether it
Speaker 5: would stay the the ruling pending appeal, so whether the
Speaker 5: terriffs would be kept in place while it considers the appeal,
Speaker 5: and so. On June tenth, the Federal Circuit decided that
Speaker 5: it would keep the tariffs in place, it would grant
Speaker 5: the government a stay of that ruling until it issues
Speaker 5: a decision on the appeal. So I don't expect a
Speaker 5: decision from the Federal Circuit until three Q because they
Speaker 5: they said that be put in it at an order
Speaker 5: saying you know, we intend to hold or a argument
Speaker 5: on July thirty first, So I don't expect a decision
Speaker 5: until you know, earliest to August.
Speaker 1: So in that same decision where they put the Court
Speaker 1: of International Trade decision on hold, that effectively let the
Speaker 1: tariffs stay in place while the appeal plays out. But
Speaker 1: at the same time they said they would expedite the
Speaker 1: proceedings on appeal, right, so, like you said, or an
Speaker 1: argument will be July thirty first out. That'll be fun.
Speaker 5: Yeah, And it's also going to be bank caring. So
Speaker 5: the entire panel is going to be deciding this appeal.
Speaker 1: Which is pretty unusual. Right, Usually in the initial instance
Speaker 1: it's three judges and then you know, whichever party loses
Speaker 1: can ask for the full and bank hearing. So obviously
Speaker 1: the Federal Circuit I guess has taken this very seriously.
Speaker 5: Yeah, I mean they said in the order that due
Speaker 5: to like the importance of this decision, that the entire
Speaker 5: panel is going to be on it, and also truncates
Speaker 5: the process so they don't take to wait for, you know,
Speaker 5: a ruling from the three member panel and then on
Speaker 5: bank they could just go straight to on bank.
Speaker 1: And so what do you make of them? I mean,
Speaker 1: how much would we read into them put in the
Speaker 1: lower courts decision on hold and allowing the tariffs to
Speaker 1: play out, because you know, I mean, one of the
Speaker 1: factors is likelihood of success on the merits, but then
Speaker 1: you know it's also a reparable harm and the equities
Speaker 1: and like public interest, you know, and I mean, their
Speaker 1: decision like did not give any details, right, it was like, oh,
Speaker 1: we just considered the factors, but what do you make
Speaker 1: of it?
Speaker 2: Right?
Speaker 5: Well, I mean they did say that, you know, we're
Speaker 5: considering the equities. This is not a ruling on the merits.
Speaker 5: So I think they're implying that they're you know, that
Speaker 5: that this is not based on the you know, the merits,
Speaker 5: not that factor of you know, because when when you
Speaker 5: do try to get a stay, you have to show
Speaker 5: these four different factors in one of them is, as
Speaker 5: you said, likelihood of success on the merits, and I
Speaker 5: don't think that was the you know, determining factor in
Speaker 5: this case. I think they probably didn't want to be
Speaker 5: you know, they probably don't know how they're going to
Speaker 5: rule yet, even though it's sort of everybody knows about
Speaker 5: this case, but they haven't written any decisions and they
Speaker 5: have the full panel that they have to confer with,
Speaker 5: so they probably you know, to be on the more
Speaker 5: cautious side. They said, we're going to keep these terrors
Speaker 5: in place. We're going to preserve the status quo until
Speaker 5: we you know, render a final ruling with a written decision.
Speaker 5: And so that's why I think they kept it in
Speaker 5: place and not not because they plan to. So I
Speaker 5: don't read anything into it. I don't think that that
Speaker 5: means that they're going to reverse.
Speaker 1: Right, And and in some ways it might be easier
Speaker 1: to keep the teriffs in place, and if the government
Speaker 1: then loses, right, it's easier for the government to sort
Speaker 1: of pay a refund to the companies that have paid
Speaker 1: terriffs than if the government then if you like remove
Speaker 1: the tariffs for now and then the government wins, the
Speaker 1: government can't then go back and like collect terriffs from importers, right, So.
Speaker 5: They can't the government can't go back and collect, but
Speaker 5: they can issue refunds. But I'm hearing that it's not
Speaker 5: as easy as you think, you know, so the people
Speaker 5: are people are going to have to file lawsuits to
Speaker 5: probably get the refa oh really.
Speaker 1: Oh yeah, well full time ter Litigation Employment Act.
Speaker 5: Right, right, But but it you know, you would if
Speaker 5: if the Trade Court is wrong, then you're right, the
Speaker 5: government would not be able to collect all those terraffs
Speaker 5: and in the meantime that they lost. So that's you know,
Speaker 5: probably one of the factors that the court considered.
Speaker 1: Yeah, so what's your sort of base case as to
Speaker 1: you know, the ultimate outcome of these cases.
Speaker 5: So I think it's close because I don't think that
Speaker 5: you know, any this is an emergency statute, and the
Speaker 5: President has declared emergencies, and I don't the courts have
Speaker 5: been very reluctant to you know, second guests the president
Speaker 5: when he's declaring an emergency. But I don't think that
Speaker 5: the trade deficit constitutes an emergency under APA. I don't
Speaker 5: know that the Supreme Court would rule on that specific issue.
Speaker 5: But because of that, I think that they're going to
Speaker 5: reverse and so they may use other doctrines to try
Speaker 5: to get to the result that reciprocal tariffs are you know, unlawful,
Speaker 5: like people have been saying, they may use major questions
Speaker 5: and that was you know, something that the International Trade
Speaker 5: Court raised and it's it's decision, although it wasn't you know,
Speaker 5: they didn't really explain this in a lot of detail.
Speaker 5: But commentators, I'm saying that the Supreme Court may use
Speaker 5: the major questions doctrine or the non delegation doctrine to
Speaker 5: get to the result the reciprocal terrifts are not lawful,
Speaker 5: but the sentinal trafficing tariffs are closer call because they're
Speaker 5: you know, the the sentinel emergency is emergency, and so
Speaker 5: no one's going to say that that's not an emergency.
Speaker 5: And in fact, the challenger has never even said that
Speaker 5: that's not an emergency. But I think that the Supreme
Speaker 5: Court is going to be very reluctant to allow lower
Speaker 5: courts and even itself to say that the president is
Speaker 5: not addressing an emergency properly as a as an international
Speaker 5: Trade court did when it said that the tariffs weren't
Speaker 5: related to the emergency and that pressure on countries to
Speaker 5: address the crisis is not dealing with the emergency. I
Speaker 5: think that they're going to have a hard time with
Speaker 5: that reasoning. So I think that those may be affirmed.
Speaker 5: I'm sorry, I think those they may be kept in place,
Speaker 5: and I think that they the court may say that
Speaker 5: the president has parachu impose those terriffts, but not with
Speaker 5: respect to reciprocal terrats. But again, the issue is very
Speaker 5: close on the reciprocal terrats as well.
Speaker 1: Okay, great, so you so we so in the Federal
Speaker 1: circuit we have an argument. So I thirty first and
Speaker 1: you expect a decision what in August?
Speaker 5: Yeah, I mean, I think that are well, obviously the
Speaker 5: earliest would be August, but yeah, I think because of
Speaker 5: the import of this, they're probably not going to wait
Speaker 5: too long. Remember that the International Trade Court rendered this
Speaker 5: decision within a week of its last rural argument, So
Speaker 5: that's how important this is.
Speaker 1: Oh, there's more more judges here that we'll have to
Speaker 1: that is true, come to an agreement or right opinions.
Speaker 1: But that's true, and then from there, presumably whoever loses
Speaker 1: or if it's a split opinion, both sides may gout
Speaker 1: of the Supreme Court.
Speaker 5: Yeah, I think this will go to the Supreme Court.
Speaker 1: Yeah, yeah, And I mean they could take it up
Speaker 1: probably as soon as October yep, I think, yeah, yep,
Speaker 1: and then maybe maybe a decision by your end. I think,
Speaker 1: so it would have to be pretty quickly, but.
Speaker 5: Yeah, I think I think that's possible. And you know,
Speaker 5: that's what I think is the likely out come. Then
Speaker 5: it will be four.
Speaker 3: Q got it?
Speaker 1: And what about the case in GDC the Federal District
Speaker 1: Court in Washington, So that one.
Speaker 5: Was interesting because the judge stayed his own ruling pending appeal,
Speaker 5: So that one is sort of following what the Fed
Speaker 5: Circuit decides to do, so, they don't have a briefing
Speaker 5: schedule yet the court asked yesterday the court or the
Speaker 5: parties to within fourteen days, you know, tell them about
Speaker 5: the status of the case and how they should move forward.
Speaker 5: So I think that the party and and the parties
Speaker 5: had previously said that they would, you know, follow the
Speaker 5: briefing schedule that set fourth that the Fed Circuit uses.
Speaker 5: So I think that those two are going to be
Speaker 5: on like, very similar tracks in terms of timing.
Speaker 1: Got it. And I mean so in addition to sort
Speaker 1: of the substance of the case, we have this issue
Speaker 1: of like, which is the proper court for these cases
Speaker 1: to even.
Speaker 3: These cases.
Speaker 5: Yeah, and that's an issue that's making its way around
Speaker 5: various circuits. So it's an issue that's going to be
Speaker 5: presented on appeal at the DC Circuit. And it's also
Speaker 5: an issue that's being presented on appeal in the Ninth
Speaker 5: Circuit because the case is brought there that was dismissed
Speaker 5: because the court there said, the lower court said there
Speaker 5: was no jurisdiction, that only the Trade Court has exclusive jurisdiction.
Speaker 5: So so that's on appeal now.
Speaker 1: Yeah, and it's an issue in the Federal Circuit case too.
Speaker 5: That's right, right, Well, no, actually the Federal Circuit case, no,
Speaker 5: I mean, it's not an issue because no one can
Speaker 5: tested it there. But but they're going to decide whether
Speaker 5: i EVA authorize this tariffs at all, So it's a law. Well,
Speaker 5: there are various grounds on which the International Trade Court
Speaker 5: said they had jurisdiction. But one of the grounds is
Speaker 5: that they said AIPA must authorize some TIFFs. And if
Speaker 5: the if AIPA authorizes tariffs at all, then it would
Speaker 5: go to the International Trade Court. They would have exclusive jurisdiction.
Speaker 5: But if the Fed Circuit says there's no that AIPA
Speaker 5: does not authorized tariffs at all, then then the the
Speaker 5: International Trade Court court did not have jurisdiction and and
Speaker 5: but that's a ruling, So the Fed Circuit will say
Speaker 5: there's no jurisdiction before the Trade Court, and then I
Speaker 5: guess you'd have a bunch of other courts saying, you know,
Speaker 5: in different circuits, saying whatever they determine, right, and because
Speaker 5: now they have jurisdiction. But then ultimately LEA will go
Speaker 5: up to the Supreme Court. So I don't think you
Speaker 5: need a whole bunch of these decisions from the circuit
Speaker 5: courts in order for the Supreme Court to decide death.
Speaker 1: Yeah, they're gonna take it regardless, and they're gonna have
Speaker 1: both the jurisdictional and substantive issue presumably to decide. All right, well,
Speaker 1: it should be a fun second half of the year.
Speaker 1: All right, I think we're gonna leave it there. Thanks, Holly,
Speaker 1: I think we'll wrap up this episode of Votes and Verdicts.
Speaker 1: As always, thank you to the listener for listening. If
Speaker 1: you have any questions about anything we've talked about today,
Speaker 1: please don't hesitate to reach out to us at your
Speaker 1: convenience with questions. As a reminder, again, you can find
Speaker 1: all of our research on the Bloomberg terminal at BI
Speaker 1: go or on our litigation and policy dashboard at BI
Speaker 1: laws go. Thank you again for listening, and have a
Speaker 1: great day.