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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight an analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. New York is

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Speaker 1: leading a group of states that are set to sue

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Speaker 1: to block Timoa's proposed point five billion dollar takeover of

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Speaker 1: Sprint on antitrust grounds, putting pressure on the Justice Department

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Speaker 1: as it nears a final decision on the merger of

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Speaker 1: the two wireless carriers. Joining me is Bloomberg Intelligent Senior

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Speaker 1: litigation analyst Jennifer ree So, Jenna, why are the state

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Speaker 1: ags suing? Well, they're basically suing because on the basis

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Speaker 1: that they believe this deal is more harmful than it

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Speaker 1: is hopeful, and that the remedy that's already been decided

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Speaker 1: by the FCC and looks like it will be adopted

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Speaker 1: by the FCC isn't good enough according to the states. Now,

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Speaker 1: they don't know what the Department of Justice is going

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Speaker 1: to do, but obviously they believe that even if the

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Speaker 1: Department of just this imposes more remedy or additional measures

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Speaker 1: on the companies and clears it that that isn't going

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Speaker 1: to be good enough. And they basically say, look, this

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Speaker 1: is a market of four mobile providers to three, that

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Speaker 1: the competition that's posed by an entity like let's say

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Speaker 1: a Comcast that might piggyback on the infrastructure of one

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Speaker 1: of these isn't good enough, and that not only nationally,

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Speaker 1: but also in certain regions, the market shares exceed the

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Speaker 1: thresholds that are considered not to be harmful under the

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Speaker 1: anti dress guidelines, and that this creates a concentrated market

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Speaker 1: that's likely to have harm. But why not wait until

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Speaker 1: justice makes the decision? Perhaps they'll block the deal. I

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Speaker 1: think that's the question that we're all wondering about. Now.

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Speaker 1: Let me just say I believe this likely suggests that

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Speaker 1: the States believe the d o J won't block the

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Speaker 1: deal because they are in communication and even if they

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Speaker 1: don't understand what the d OJ's ultimate decision is, I

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Speaker 1: think if they were very assured that the d o

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Speaker 1: J was actually going to suit a block, they would

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Speaker 1: have waited and they would have joined that complaint because

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Speaker 1: that's what's typically done. So this suggests to me it

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Speaker 1: in their communications with the Department of Justice and aligning

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Speaker 1: with them on the investigation here. They believe that the

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Speaker 1: d o J may be getting ready to go ahead

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Speaker 1: and clear this deal with the remedy. The deal has

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Speaker 1: always seemed tenuous to me. It's clear as one roadblock

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Speaker 1: and then it faces another. So, as you mentioned last month,

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Speaker 1: the f c C announced support for the deal. Does

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Speaker 1: that play at all into the Justice Department's decision whether

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Speaker 1: to support the deal or not? You know, it doesn't.

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Speaker 1: It doesn't. They'll want to look at the rationale for

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Speaker 1: the f CC's decision. But the FCC has a different

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Speaker 1: standard than the Department of Justice, So it is conceivable

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Speaker 1: that there could be a situation where one of the

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Speaker 1: agency's finds that the deal should go through with the

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Speaker 1: remedy and the other finds that it's anti competitive. Because

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Speaker 1: the FCC has a little bit of a broader standard,

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Speaker 1: it can ask whether this is in the public interest,

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Speaker 1: and they can look at these issues like the five

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Speaker 1: G and development of five G and bringing it to

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Speaker 1: all these rural communities, whereas the d o J really

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Speaker 1: has to take that and balance that decide whether it's

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Speaker 1: merger specific. And you know whether they can do it

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Speaker 1: with or without the merger, and then if it they

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Speaker 1: do believe that they really need the merger in order

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Speaker 1: to do what they say they can do with five

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Speaker 1: G whether that exceeds the harm that might be caused

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Speaker 1: from going down to three mobile operators. Does the suit

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Speaker 1: by the States put pressure on Makon Delraheem, who is

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Speaker 1: the head of Justice Department's antitrust division, to block the

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Speaker 1: deal or get better remedies. You know, I think to

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Speaker 1: some extent it does, because I think that if the

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Speaker 1: States go ahead with this and that the companies decided

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Speaker 1: to litigate, and then the States win, what will be

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Speaker 1: on the table in court will be whatever remedy. So

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Speaker 1: let's just say the d o J clears with the remedy, Well,

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Speaker 1: they will have to prove the States in court why

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Speaker 1: that remedy is insufficient, and if they do, if they

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Speaker 1: win this, it makes the d o J look a

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Speaker 1: little bit foolish and the FCC because the States have

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Speaker 1: now brought the evidence to a judge, a fact finder,

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Speaker 1: and they have proven to this judge that even with

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Speaker 1: the remedy, this is going to cause harm to consumers.

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Speaker 1: And it does make the DJ look like it's a

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Speaker 1: lax antitrust enforcer, which of course has been and something

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Speaker 1: that has been a concern to many, you know, in

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Speaker 1: many industries. Did the States have any new information or

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Speaker 1: did they analyze the information that was already there in

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Speaker 1: a different way. They would have the same information because

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Speaker 1: usually these investigations are aligned, so any documents or data

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Speaker 1: the companies turn over to the d o J, it's

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Speaker 1: the same documents and data that the States will get.

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Speaker 1: They have analyzed this. We don't know yet whether the

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Speaker 1: analysis is different than the d o J is because

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Speaker 1: the d o J hasn't spoken yet. But what we

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Speaker 1: do know is that the States have decided that there

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Speaker 1: isn't an appropriate remedy that can fix this. They don't

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Speaker 1: believe the FCC's remedy fixes the harm, and apparently they

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Speaker 1: don't believe a remedy that the do o J might

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Speaker 1: be able to agree with what the companies would remedy

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Speaker 1: the harm, because if they did, they would wait and

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Speaker 1: see what that is. So the analysis is essentially the same,

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Speaker 1: but there's a balancing act that has to happen here.

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Speaker 1: In antitrust, it's a very gray area and there's no

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Speaker 1: black or white, or yes or no. You have to

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Speaker 1: ask what the harm is, and then you have to

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Speaker 1: ask what the benefit is, and then you have to

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Speaker 1: balance those two against each other. And really, when you

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Speaker 1: think about it, that is somewhat subjective. So it's not

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Speaker 1: unreasonable that two different entities could come up with two

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Speaker 1: different decisions in that. Now, there have been several rumors

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Speaker 1: about what d o J might be trying to forge

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Speaker 1: as a remedy, including creating another network right when they're

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Speaker 1: trying to merge to become one. What do you know

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Speaker 1: about some of the remedies that have been floating around. Well,

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Speaker 1: first of all, that is the standard. So if the

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Speaker 1: DJ is determined that this deal is likely to cause

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Speaker 1: harm and likely to violate the antitrust laws, the remedy

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Speaker 1: is to recreate the competition, restore the competition that's going

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Speaker 1: to be lost by virtue of the deal. So that

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Speaker 1: means creating another network, having four networks instead of three.

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Speaker 1: So you ask yourself, well, does that make any sense

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Speaker 1: for these these companies. It makes sense if their arguments

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Speaker 1: are not pretextual, Because if their arguments are not pretextable,

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Speaker 1: they're saying what they can do together is far better

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Speaker 1: than what they can do individually, and that means what

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Speaker 1: they can do together, even if a fourth network is created,

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Speaker 1: is still better than what they can do now. So

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Speaker 1: it generally to me, would make sense if they really

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Speaker 1: believe they need to come together to be a viable

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Speaker 1: competitor in five G to Verizon and a T and T.

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Speaker 1: What kind of challenges will these companies face if the

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Speaker 1: deal doesn't go through. Well, you know, Sprint has said

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Speaker 1: if the deal doesn't go through, obviously that they're in

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Speaker 1: difficult financial position. My colleague John Butler has done a

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Speaker 1: lot of analysis on this because he does believe T

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Speaker 1: Mobile will actually be in a fine position going it alone.

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Speaker 1: They'll continue to develop five G, they'll continue to innovate

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Speaker 1: and put capital into their innovation in R and D,

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Speaker 1: that Sprint may be in a worse position without getting

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Speaker 1: some injection of capital. We have talked about how antitrust

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Speaker 1: is just a legal area that keeps on giving what's

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Speaker 1: the latest. Well, obviously the latest is what's happening with

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Speaker 1: big tech. And you know the fact that it looks

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Speaker 1: like the FTC and d o J may be investigating

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Speaker 1: were ready to investigate any of Google, Facebook, Apple, and Amazon,

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Speaker 1: So you know that's a big deal because an investigation

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Speaker 1: can turn into nothing, but it can also turn into

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Speaker 1: a lawsuit and actions taken. And we also have UM

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Speaker 1: House Judiciary Committee hearings that started today and they're going

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Speaker 1: to be looking at these issues with the mind of legislating.

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Speaker 1: So that's something else down the road that that could happen,

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Speaker 1: a new antitrust legislation or privacy legislation, or something completely

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Speaker 1: separate from both. I don't think you can go on

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Speaker 1: vacation this. I don't think so either. That's Bloomberg Intelligence

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Speaker 1: Senior Litigation analyst Jennifer Rey and for more of our

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Speaker 1: analysis going to be I go on the Bloomberg Terminal.

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Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can

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Speaker 1: subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brolso

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Speaker 1: this is Bloomberg