WEBVTT - Coinbase, Google, TikTok and Other Catalysts 0:00:15.520 --> 0:00:18.919 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:18.960 --> 0:00:22.720 by the Litigation and policy team at Bloomberg Intelligence, the 0:00:22.720 --> 0:00:26.960 investment research platform of Bloomberg LP. Just a quick word 0:00:27.000 --> 0:00:30.000 about Bloomberg Intelligence for those who don't know. We are 0:00:30.160 --> 0:00:33.919 the investment research platform on the Bloomberg terminal, with five 0:00:34.040 --> 0:00:38.240 hundred analysts and strategists working across the globe and focused 0:00:38.280 --> 0:00:41.920 on all major markets. Our coverage includes over two thousand 0:00:42.000 --> 0:00:45.239 equities and credits, and we have outlooks on more than 0:00:45.320 --> 0:00:49.959 ninety industries and one hundred market indices, currencies and commodities. 0:00:50.040 --> 0:00:54.480 This podcast series examines the intersection of business policy and law, 0:00:54.960 --> 0:00:57.720 and today we'll be looking at the litigation and policy 0:00:57.800 --> 0:01:01.840 catalysts that we're watching in September twenty twenty four and 0:01:01.880 --> 0:01:04.520 that we think will impact companies across a number of 0:01:04.600 --> 0:01:08.440 different sectors. My name's Elliot Stein. I'm a senior litigation 0:01:08.560 --> 0:01:12.200 analyst covering litigation in the financial sector, and I'll be 0:01:12.240 --> 0:01:15.600 your host for today, September third, twenty twenty four. If 0:01:15.640 --> 0:01:17.920 you have any questions about any of the matters we 0:01:18.000 --> 0:01:21.280 discuss on this episode, please don't hesitate to reach out 0:01:21.280 --> 0:01:24.760 to us at your convenience with questions. So we'll be 0:01:24.840 --> 0:01:28.840 discussing a handful of sectors today. First, Matt Schettenhelm, who 0:01:28.920 --> 0:01:33.360 covers TMT policy and litigation, we'll discuss a key hearing 0:01:33.480 --> 0:01:37.559 in TikTok's fight against the US government's sale or ban 0:01:37.760 --> 0:01:41.520 law targeting the platform. After that, we'll talk antitrust and 0:01:41.640 --> 0:01:44.280 we'll bring in Jen Ree to update us on the 0:01:44.319 --> 0:01:48.440 trial in the FTCs challenge to the Kroger Albertsons deal, 0:01:48.840 --> 0:01:51.480 and Jen will also tell us about a key post 0:01:51.560 --> 0:01:55.120 trial hearing coming up in the Justice Department's case against 0:01:55.160 --> 0:01:58.600 Google over search, and she'll also tell us about a 0:01:58.640 --> 0:02:03.000 preliminary injunction here in the FTC's challenge of the Tapestry 0:02:03.080 --> 0:02:07.760 Capri deal. Sticking with anti trust, Justin Tarsi will then 0:02:07.800 --> 0:02:12.320 preview a trial starting September ninth in the Justice Department's 0:02:12.360 --> 0:02:16.080 case against Google over the company's two hundred billion dollar 0:02:16.280 --> 0:02:19.960 ad tech stack. After that, Holly Frome will tell us 0:02:19.960 --> 0:02:24.040 about a securities fraud trial against bouch Health, and she'll 0:02:24.040 --> 0:02:28.000 also talk about a separate trial starting September thirtieth against 0:02:28.040 --> 0:02:32.200 Abbott and Reckett's Meet Johnson unit concerning the safety of 0:02:32.280 --> 0:02:37.240 their infant formula products. Sticking with healthcare, Dwayne Wright, who 0:02:37.280 --> 0:02:41.160 covers healthcare policy in Washington, will update us on drug 0:02:41.200 --> 0:02:45.760 pricing cuts under the Inflation Reduction Act. We'll then move 0:02:45.800 --> 0:02:49.359 to financials and we'll bring in Nathan Dean, our financials 0:02:49.400 --> 0:02:53.320 policy analyst in Washington, to talk about what a Kamala 0:02:53.360 --> 0:02:57.359 Harris presidency could look like in terms of industry impacts. 0:02:57.760 --> 0:03:00.160 And Nathan will also talk about his views on the 0:03:00.200 --> 0:03:05.440 possibility of a marijuana rescheduling. I'll wrap up after that 0:03:05.560 --> 0:03:08.880 with some previews of a few things I'm watching in September, 0:03:09.280 --> 0:03:12.680 including a proposed class action a legend rigging of UK 0:03:12.840 --> 0:03:17.359 government bonds filed against several banks. I'll also talk about 0:03:17.400 --> 0:03:20.919 a Robinhood bid to beat class certification in a lawsuit 0:03:21.000 --> 0:03:25.400 over best execution disclosures. And I'll briefly talk about a 0:03:25.440 --> 0:03:29.600 September twenty seventh hearing in a coinbase lawsuit seeking to 0:03:29.680 --> 0:03:35.040 force the SEC to engage in crypto rulemaking. So all 0:03:35.080 --> 0:03:38.360 of this research is available on the Bloomberg terminal at 0:03:38.480 --> 0:03:41.960 BIG But with all that out of the way, let's 0:03:42.040 --> 0:03:45.800 get started with the content, and Matt, let's bring you 0:03:45.880 --> 0:03:50.400 in to talk some TikTok Us government, as most people 0:03:50.440 --> 0:03:55.120 probably know, pasted the law that would force TikTok to 0:03:55.640 --> 0:03:58.600 either be divested or to be banned in the US. 0:03:59.120 --> 0:04:01.200 And it sounds like there is a key hearing in 0:04:01.240 --> 0:04:03.520 the case later this month. Why don't you come in 0:04:03.600 --> 0:04:05.960 tell us more about the case and this hearing, and 0:04:06.000 --> 0:04:08.000 in particular, should my kids be worried that they might 0:04:08.040 --> 0:04:10.320 lose access to their precious TikTok. 0:04:09.920 --> 0:04:14.240 At Yeah, thanks Elliott. Yeah, this is not a drill. 0:04:14.400 --> 0:04:17.200 This ban this effective van is law. 0:04:17.360 --> 0:04:17.640 Now. 0:04:18.400 --> 0:04:21.520 Congress passed this in April. President Biden signed it and 0:04:21.600 --> 0:04:26.279 effectively bans TikTok in the United States on January nineteenth, 0:04:26.440 --> 0:04:29.600 less than five months from now. Companies can't host it 0:04:29.760 --> 0:04:32.200 or carry it in their app stores after that date, 0:04:32.600 --> 0:04:36.320 and TikTok only has two ways around that. As you said, 0:04:36.320 --> 0:04:38.920 you could sell the app to a company that doesn't 0:04:39.240 --> 0:04:42.360 have a parent located in China, or it could win 0:04:42.440 --> 0:04:45.080 this legal case. And TikTok has said it's not going 0:04:45.160 --> 0:04:50.840 to sell, so everything is about this litigation. That's the 0:04:50.880 --> 0:04:53.320 only way that the company is going to be able 0:04:53.320 --> 0:04:56.640 to continue to operate in the US after January nineteenth. 0:04:56.920 --> 0:04:59.359 TikTok and its users have brought a lawsuit in the 0:04:59.440 --> 0:05:03.440 DC saying that the court should block this law because 0:05:03.440 --> 0:05:06.480 it violates the First Amendment right of the company and 0:05:06.680 --> 0:05:12.280 of its users. Will TikTok succeed in blocking that January 0:05:12.360 --> 0:05:15.640 nineteenth date? So let me first say why there's a 0:05:15.760 --> 0:05:18.400 chance it may not. First of all, the US usually 0:05:18.480 --> 0:05:21.560 wins in this court. It wins about two thirds of 0:05:21.600 --> 0:05:22.239 its cases. 0:05:22.320 --> 0:05:22.599 Here. 0:05:23.480 --> 0:05:27.640 This case involves a national security matter where courts are 0:05:28.160 --> 0:05:29.080 very cautious. 0:05:29.240 --> 0:05:30.280 They tread carefully. 0:05:30.400 --> 0:05:34.160 Judges aren't experts on China or how it poses a risk. 0:05:34.560 --> 0:05:38.320 They're hesitant to second guest national security experts on that. 0:05:38.920 --> 0:05:43.440 And in terms of the politics, the anti TikTok movement 0:05:43.520 --> 0:05:47.320 in the US has been especially strong among Republicans. Over 0:05:47.360 --> 0:05:50.840 twenty Republican attorneys general filed in the suit, saying TikTok's 0:05:50.839 --> 0:05:55.360 First Amendment argument doesn't work. And this panel that will 0:05:55.360 --> 0:05:58.359 decide this three judges. Two of the three were nominated 0:05:58.400 --> 0:06:03.400 by Republican presidents. So if I'm TikTok this there's reason 0:06:03.520 --> 0:06:07.160 for real concern here. I don't find this an easy 0:06:07.200 --> 0:06:10.600 case to call. I think it's close more likely than 0:06:10.640 --> 0:06:13.440 not though I think TikTok convinces the Court to stop 0:06:13.520 --> 0:06:16.159 this January nineteenth deadline. I give it a sixty percent 0:06:16.240 --> 0:06:19.599 chance to win at that stage, and why despite all 0:06:19.640 --> 0:06:21.760 the points above, I think the Court is going to 0:06:21.800 --> 0:06:24.719 take the First Amendment seriously here, and one of the 0:06:24.720 --> 0:06:27.560 most important things they're going to ask is did Congress 0:06:27.640 --> 0:06:30.240 have to go this far or could it have addressed 0:06:30.279 --> 0:06:33.960 this potential risk with something that was less disruptive to speech? 0:06:34.800 --> 0:06:38.599 And I think Congress's problem here, the US's problem is 0:06:38.600 --> 0:06:42.440 that there's very little record to justify the approach that 0:06:42.520 --> 0:06:45.599 it did take, and Congress went so fast that it 0:06:45.720 --> 0:06:48.359 really didn't show its work. So I think it's very 0:06:48.480 --> 0:06:51.000 likely that even though the US can win this case, 0:06:51.160 --> 0:06:53.719 I bet it won't win the case right away in 0:06:53.760 --> 0:06:57.279 the first round, and more likely than not, the Court says, no, 0:06:57.600 --> 0:06:59.880 go back and tell us why you needed to do 0:07:00.080 --> 0:07:03.279 that build a record to justify it. So key dates 0:07:03.320 --> 0:07:06.960 to watch, though, as Elliott said, September sixteenth, is the 0:07:07.080 --> 0:07:11.120 oral argument here in Washington, DC before that three judge panel. 0:07:11.360 --> 0:07:14.240 That's going to be the best chance to evaluate how 0:07:14.320 --> 0:07:17.320 these three judges are thinking about the case. Then we 0:07:17.320 --> 0:07:20.440 should see a decision from this court. This case has 0:07:20.480 --> 0:07:23.240 been expedited. We should see a decision in early December 0:07:23.680 --> 0:07:26.040 on whether that's going to prevail or not, and then 0:07:26.080 --> 0:07:28.480 based on how they decide, we'll either see a scramble 0:07:28.520 --> 0:07:31.400 for en banc review at that court or Supreme Court 0:07:31.440 --> 0:07:36.280 review all before that January nineteenth deadline. So, in my view, 0:07:36.440 --> 0:07:40.720 real risk for TikTok, which means real upside for its competitors, 0:07:41.280 --> 0:07:44.080 but I think more likely than not TikTok wins this 0:07:44.120 --> 0:07:45.440 opening round of the litigation. 0:07:46.520 --> 0:07:48.840 Back to you, Elliott, great stuff, Thanks Matt. We'll be 0:07:48.840 --> 0:07:53.200 watching that and nothing better than a potential December scramble. Right, 0:07:55.120 --> 0:07:59.560 all right, Janrie, let's bring you in to talk some 0:07:59.640 --> 0:08:03.360 anti trust. You were in Portland, Oregon last week for 0:08:03.360 --> 0:08:08.160 a trial in the FTC's lawsuit challenging the Kroger Albertsons deal, 0:08:08.640 --> 0:08:12.120 and in September you'll be watching a hearing in the 0:08:12.200 --> 0:08:16.400 Justice Department's case against Google over search, and you're also 0:08:16.400 --> 0:08:19.160 going to be watching a preliminary injunction hearing in the 0:08:19.240 --> 0:08:24.400 FTC's case challenging the Tapestrie Capre deal. Why don't you 0:08:24.440 --> 0:08:27.000 come in tell us about all these cases and what 0:08:27.080 --> 0:08:28.280 investors should be watching. 0:08:28.960 --> 0:08:30.000 Yeah, thanks Elliot. 0:08:31.080 --> 0:08:34.400 So with the Kroger Albertsons matter, we're one week in 0:08:34.440 --> 0:08:37.040 to a three week trial, and for now, at least, 0:08:37.120 --> 0:08:39.800 I'm sticking with my initial call that I think it's 0:08:39.840 --> 0:08:41.920 more likely than not that the FTC is going to 0:08:41.920 --> 0:08:44.560 win this one. And just a brief update on what's 0:08:44.559 --> 0:08:48.120 happening here. The FTC challenged this merger because they say, 0:08:48.480 --> 0:08:51.240 in thousands of local markets, the combination of Kroger and 0:08:51.280 --> 0:08:54.840 Albertson stores will create a market concentration presumed to be 0:08:54.880 --> 0:08:57.880 anti competitive, and that means that basically, it just doesn't 0:08:57.960 --> 0:09:01.439 leave enough options for consumers to shop traditional grocery stores, 0:09:01.720 --> 0:09:03.800 which is how the FTC views the market, and that 0:09:03.840 --> 0:09:07.160 could allow these companies to increase prices. So to try 0:09:07.160 --> 0:09:10.000 to fix this, the companies offered to divest almost six 0:09:10.080 --> 0:09:13.680 hundred stores and some ancillary assets to a company called CNS, 0:09:14.080 --> 0:09:18.080 which is primarily a grocery wholesaler. The FTC didn't accept 0:09:18.080 --> 0:09:21.240 this as sufficient to replace the competitions that's lost by 0:09:21.280 --> 0:09:24.440 virtue of Albertsons and prose merging. So I think really 0:09:24.480 --> 0:09:26.320 the main issue with this trial is going to be 0:09:26.360 --> 0:09:32.240 over cns's suitability as the buyer, and another issue will 0:09:32.240 --> 0:09:34.880 be about how the market's being defined. But I think 0:09:35.000 --> 0:09:37.960 really what's going to be dispositive here is CNS, and 0:09:38.040 --> 0:09:41.600 so the testimony in this first week wasn't good for 0:09:41.679 --> 0:09:42.720 the companies. 0:09:42.280 --> 0:09:43.280 On that matter. 0:09:43.679 --> 0:09:46.840 It did shed doubt on whether CNS can successfully run 0:09:46.880 --> 0:09:50.120 retail stores, especially almost six hundred of them, And it 0:09:50.200 --> 0:09:53.320 also shed some doubt on whether CNS is actually interested 0:09:53.360 --> 0:09:56.200 in keeping and running all these stores rather than selling 0:09:56.200 --> 0:09:59.600 them to independent grocers or smaller chains in order to 0:09:59.640 --> 0:10:02.600 obtain the wholesale business of that store or chain, because 0:10:02.600 --> 0:10:06.480 they're a bigger wholesaler than they are retailer. Now, the 0:10:06.480 --> 0:10:08.720 companies did a better job last week than I expected 0:10:08.720 --> 0:10:11.680 them to in supporting their defense and rehabilitating some of 0:10:11.679 --> 0:10:14.440 their witnesses, but I still think over all, the FTC 0:10:14.559 --> 0:10:17.880 scored more points than the companies did in that first week. 0:10:18.520 --> 0:10:21.680 The judge isn't really helping much. She's pretty unreadable. She 0:10:21.760 --> 0:10:24.280 says very little and asks no questions, so there's not 0:10:24.320 --> 0:10:27.280 a lot of insight coming from there on which arguments 0:10:27.280 --> 0:10:28.440 that she may or may not. 0:10:29.320 --> 0:10:31.040 That may or may not resonate with her. 0:10:31.200 --> 0:10:33.760 So I'll be continuing to follow that trial and updating 0:10:33.760 --> 0:10:37.480 my material supportingly, and we'll see when the companies put 0:10:37.480 --> 0:10:39.320 on their case in chief, which is yet to come, 0:10:39.640 --> 0:10:43.760 how they support cns a's a divestiture buyer. So let 0:10:43.800 --> 0:10:46.440 me move on over. You're talking about DOJ and the 0:10:46.480 --> 0:10:48.360 Google Search case, which has been in the news a 0:10:48.400 --> 0:10:53.000 lot because the DOJ already won this trial essentially on liability. 0:10:53.040 --> 0:10:55.600 There was a decision that was issued in August and 0:10:55.640 --> 0:10:58.480 the judge basically ruled that Google had unlawfully acted to 0:10:58.559 --> 0:11:01.600 maintain its monopoly and it general search market and a 0:11:01.679 --> 0:11:06.440 search text advertising market by entering exclusionary agreements with third 0:11:06.480 --> 0:11:09.800 parties that foreclosed access to the market by search competitors 0:11:09.800 --> 0:11:12.520 and then prevented those competitors from gaining the scale that 0:11:12.559 --> 0:11:15.720 they need to improve. So the next phase is the remedy, 0:11:15.840 --> 0:11:19.559 and that launches this week because on September sixth, there 0:11:19.600 --> 0:11:21.720 will be a hearing to work out the next steps 0:11:21.760 --> 0:11:24.800 and a schedule. I think the DOJ will be seeking 0:11:24.840 --> 0:11:26.800 in order to try to break up the company, but 0:11:26.840 --> 0:11:29.680 we really think that that's probably not how this is 0:11:29.720 --> 0:11:32.120 going to come out. It's more likely going to be 0:11:32.160 --> 0:11:36.880 a series of behavioral modifications like a ban on these 0:11:36.920 --> 0:11:41.400 exclusionary agreements that Google has, possibly some required data sharing, 0:11:41.920 --> 0:11:45.600 maybe choice screens on Android phones, and possibly even some 0:11:45.720 --> 0:11:48.920 bands on Google in the way it uses other websites 0:11:48.960 --> 0:11:52.559 to train AI models, So it could be some sort 0:11:52.559 --> 0:11:55.120 of grouping like that. I don't think it's going to 0:11:55.200 --> 0:11:58.400 end up being a structural remedy in this case. And 0:11:58.440 --> 0:12:00.760 I also think we're several months away from the decision 0:12:00.800 --> 0:12:04.080 on the remedies this starting with this Friday meeting, but 0:12:04.240 --> 0:12:06.640 that meeting might shed some light on timing and when 0:12:06.640 --> 0:12:09.760 the judge intends to decide. Last coming up in front 0:12:09.800 --> 0:12:13.920 of us on Monday, FTC versus Tapestry and Caprie. So 0:12:14.040 --> 0:12:17.120 this is another effort to block a proposed merger between 0:12:17.160 --> 0:12:20.640 two American fashion houses. And the concern here is about 0:12:20.679 --> 0:12:25.760 a market that the FTC calls affordable or accessible luxury handbags. 0:12:26.000 --> 0:12:29.200 And that's because Tapestry manufacturers and selles coach In Kate 0:12:29.280 --> 0:12:33.520 Spade handbags, and Caprete makes some manufacturers Michael Core's handbags, 0:12:33.760 --> 0:12:36.360 and according to the FTC, these are in a category 0:12:36.440 --> 0:12:40.160 called affordable luxury, and they define this market as new 0:12:40.200 --> 0:12:44.040 handbags as opposed to resold used ones that range from 0:12:44.040 --> 0:12:46.720 one hundred dollars to one thousand dollars and are apparently 0:12:46.760 --> 0:12:50.640 purchased by households with average incomes of seventy five thousand 0:12:50.640 --> 0:12:53.760 to eighty thousand a year. And in that define market, 0:12:53.840 --> 0:12:56.480 the combined company would have well over fifty percent market 0:12:56.480 --> 0:12:59.400 share and would be able to raise prices. Now, if 0:12:59.400 --> 0:13:01.680 this all sounds it's a little bit silly to some people, 0:13:02.160 --> 0:13:05.120 I note that the FTC's mission under the antitrust laws 0:13:05.240 --> 0:13:08.800 is to try to stop any proposed consolidation that could 0:13:08.840 --> 0:13:11.839 harm a market, no matter how trivial that market might seem, 0:13:11.920 --> 0:13:16.040 or how discretionary those purchase purchases in that market might be. 0:13:16.600 --> 0:13:19.760 And apparently in this case, there is overwhelming evidence gathered 0:13:19.760 --> 0:13:23.960 from the company's files during the investigatory period did show 0:13:24.040 --> 0:13:26.920 that they really view each other as their only competitor 0:13:27.120 --> 0:13:29.400 and that they price against each other. So if one 0:13:29.440 --> 0:13:32.520 goes on sale, the other goes on sale and the others. 0:13:32.559 --> 0:13:35.640 They don't view other brands as competitors, and other brands 0:13:35.679 --> 0:13:38.640 don't constrain their prices, and this is particularly so in 0:13:38.720 --> 0:13:42.480 outlet stores. All that competition would be lost if they merged. 0:13:43.520 --> 0:13:47.160 So the trial starts Monday, September ninth. This is before 0:13:47.320 --> 0:13:49.760 Jennifer Roshan in the Southern District of New York. 0:13:50.160 --> 0:13:51.600 She's a Biden appointee. 0:13:51.800 --> 0:13:54.720 And I think outcome is a really tough call at 0:13:54.720 --> 0:13:58.360 this stage, partly because an enormous portion of this case 0:13:58.400 --> 0:14:01.360 more than I've ever seen the filings and the evidence 0:14:01.440 --> 0:14:04.640 is sealed, meaning it's kept confidential, and so we can 0:14:04.679 --> 0:14:06.880 only take the FTC's word for it for now that 0:14:06.920 --> 0:14:11.120 there are a lot overwhelmingly bad documents that support the 0:14:11.200 --> 0:14:15.120 FTC's position. Once I've observed the trial itself, where I 0:14:15.160 --> 0:14:17.360 hope they open a little more information to the public, 0:14:17.400 --> 0:14:20.160 I think it'll be easier to make the call tentatively 0:14:20.200 --> 0:14:23.000 at the outset. I lean toward the FDC for one 0:14:23.040 --> 0:14:26.040 main reason, and that's because the vote to sue was 0:14:26.120 --> 0:14:29.360 five to zero and the two Republican commissioners voted yes 0:14:29.520 --> 0:14:32.280 based on the evidence that they saw, and that suggests 0:14:32.320 --> 0:14:36.920 the FTC isn't exaggerating these extent of bad documents. But 0:14:36.960 --> 0:14:38.960 where the FTC might have a lot of trouble is 0:14:39.080 --> 0:14:43.520 establishing the successful luxury handbag market definition and explaining who's 0:14:43.520 --> 0:14:45.840 in it and who's not, and how they get to 0:14:45.880 --> 0:14:50.240 that fifty percent share, because that is a very difficult 0:14:50.320 --> 0:14:53.040 thing to do where you have a big sliding scale 0:14:53.080 --> 0:14:57.080 in terms of price, and I think that's going to 0:14:57.120 --> 0:15:00.520 be where the biggest fight is in this deal. And 0:15:00.600 --> 0:15:02.880 I think the second biggest fight is going to be 0:15:03.000 --> 0:15:06.000 with respect to whether or not this judge accepts new 0:15:06.040 --> 0:15:09.680 merger guidelines the FTC issued on a partisan basis in 0:15:09.680 --> 0:15:14.480 twenty twenty three, because those guidelines say the FTC that 0:15:14.520 --> 0:15:17.520 a deal is anti competitive if the FTC can prove 0:15:17.600 --> 0:15:20.440 that the two companies are each other's main competitors. 0:15:20.800 --> 0:15:22.440 So we'll have to see what happens a trial. 0:15:22.480 --> 0:15:24.120 It's supposed to be a week and a half long, 0:15:24.280 --> 0:15:26.680 and I think a decision will probably be issued in 0:15:26.720 --> 0:15:30.080 mid October, and I'll be updating my report on this 0:15:30.320 --> 0:15:33.360 deal partway probably the beginning of trial, and then part 0:15:33.360 --> 0:15:35.800 way through and at the end. So anyone interested in 0:15:35.800 --> 0:15:39.040 this particular matter please watch for those updates. And with that, 0:15:39.120 --> 0:15:40.040 Elliott back to you. 0:15:41.040 --> 0:15:41.280 Great. 0:15:41.280 --> 0:15:43.720 Thanks a lot, Jen, as always, so mu's going on 0:15:43.920 --> 0:15:47.880 in antitrust world. You're following that trial starting September ninth, 0:15:47.960 --> 0:15:52.400 but there's another trial that's also starting September ninth in 0:15:52.440 --> 0:15:55.160 your world. So let's bringing Justin Tesi because he's going 0:15:55.200 --> 0:15:57.960 to be following that case, and that's the DOJ's case 0:15:57.960 --> 0:16:03.160 against Google over Google's ad tech stack. So Justin, why 0:16:03.200 --> 0:16:05.880 don't you come in tell us about this trial, what 0:16:05.880 --> 0:16:08.000 the case is about, and what you're watching for. 0:16:08.640 --> 0:16:09.600 Yeah, sure, Eliot. 0:16:09.640 --> 0:16:13.800 So Google phases a second antitrust trial this month versus DOJ, 0:16:14.280 --> 0:16:17.440 following last month's verdict, the finding that the company acted 0:16:17.440 --> 0:16:20.280 anti competitively with regard to its search products, as Gen 0:16:20.440 --> 0:16:23.360 was just discussing, So this month the focus turns the 0:16:23.360 --> 0:16:27.160 company's position in the advertising technology or ad tech space, 0:16:27.200 --> 0:16:31.520 and the dominance and conduct of Google in that particular sector. First, 0:16:31.600 --> 0:16:34.400 what we're talking about when we say are ad tech, Well, 0:16:34.400 --> 0:16:36.160 think of those ads you see when you visit most 0:16:36.200 --> 0:16:39.400 websites like CNN dot com or Facebook, those little ads 0:16:39.440 --> 0:16:42.160 that appear in the sidebar or within the page content itself. 0:16:42.480 --> 0:16:44.240 And if you think those ads seem like they're tailored 0:16:44.240 --> 0:16:47.040 to you, you're right, because they absolutely are. How it 0:16:47.080 --> 0:16:49.440 works is there are three main components of how those 0:16:49.480 --> 0:16:53.200 ads get placed. There's the advertiser side or buyer side, which, 0:16:53.240 --> 0:16:55.560 as it sounds is simply the companies that are seeking 0:16:55.600 --> 0:16:58.160 to place an advertisement, usually in hopes of reaching a 0:16:58.200 --> 0:17:01.960 target demographic. There's all to the publisher side or sell side, 0:17:02.080 --> 0:17:04.600 which involves the use of tools by those websites who 0:17:04.640 --> 0:17:08.880 have advertising space to sell. And lastly, there's an advertising exchange, 0:17:09.119 --> 0:17:11.440 which acts as sort of a middleman between those two 0:17:11.800 --> 0:17:14.240 in a fraction of a second. At exchanges work to 0:17:14.280 --> 0:17:18.200 match bids by advertisers with pricing offered by publishers. At 0:17:18.200 --> 0:17:21.320 the same time seek to match website visitors through cookies 0:17:21.359 --> 0:17:25.680 and other information like user profiles, with advertising that they're likely. 0:17:25.520 --> 0:17:26.439 To respond to. 0:17:26.880 --> 0:17:29.320 And that all happens in an auction in a fraction 0:17:29.359 --> 0:17:31.639 of a second, with the winning bind resulting on the 0:17:31.680 --> 0:17:34.680 advertisement you ultimately see on a web page. 0:17:35.000 --> 0:17:36.399 So enter the problem here. 0:17:36.840 --> 0:17:39.840 Google has a widely dominant market position and not one, 0:17:40.000 --> 0:17:43.520 not two, but all three portions of this advertising stack, 0:17:43.880 --> 0:17:47.160 and doj alleges a series of anti competitive efforts by 0:17:47.240 --> 0:17:50.080 the company over the last decade or so that's that 0:17:50.119 --> 0:17:52.840 are meant to maintain the dominance of Google at the 0:17:52.840 --> 0:17:56.840 exclusion of its potential competitors. So dj alleges that it 0:17:56.880 --> 0:17:59.359 was once the case that Google only had dominance on 0:17:59.400 --> 0:18:01.960 the advertise a re side of that spectrum with its 0:18:01.960 --> 0:18:04.560 AdWords product, but it wasn't quite happy with that and 0:18:04.640 --> 0:18:08.679 instead endeavored to build a moat around the entire industry. 0:18:09.119 --> 0:18:11.720 In two thousand and eight, Google acquired double Click, which 0:18:11.760 --> 0:18:14.639 gave it the Double Click for Publisher's Product or DFP, 0:18:15.200 --> 0:18:17.840 which at the time already had a sixty percent market 0:18:17.840 --> 0:18:21.399 share of the cell side for publisher websites. It also 0:18:21.480 --> 0:18:24.040 acquired add Acts, which at the time was a nascent 0:18:24.080 --> 0:18:28.960 ad exchange. These purchases and subsequent behavior by Google really 0:18:29.000 --> 0:18:31.159 set the stage for the anti trust issues that are 0:18:31.200 --> 0:18:35.000 at play here. So the alleged anti competitive behaviors by 0:18:35.080 --> 0:18:38.520 Google over several years to solidify its dominance in every 0:18:38.560 --> 0:18:42.080 segment of the ante stack. Those include configuring adds on 0:18:42.119 --> 0:18:44.760 Addicts in such a way that it actually increased the 0:18:44.840 --> 0:18:48.080 price of advertising to the benefit of publishers and to 0:18:48.119 --> 0:18:53.719 the detriment of Google's own advertising customers, effectively effectively strengthening 0:18:53.720 --> 0:18:56.800 its cell side DFP product and making it difficult for 0:18:56.920 --> 0:19:00.000 ribal ad exchanges to compede at all. It also gave 0:19:00.040 --> 0:19:02.720 of its own addicts an advantage over those rival at 0:19:02.760 --> 0:19:07.320 exchanges through a process known as dynamic allocation, which essentially 0:19:07.400 --> 0:19:11.160 gave addicts the opportunity to buy prime website placement opportunities 0:19:11.160 --> 0:19:13.920 before anyone else could get their hands on them, often 0:19:13.960 --> 0:19:18.399 at artificially low prices. So DJ also alleges that whenever 0:19:18.480 --> 0:19:22.000 competitions attempted to spring up over the past decade, Google's 0:19:22.040 --> 0:19:25.240 either simply acquired that threat or tweaked its own algorithms 0:19:25.320 --> 0:19:28.680 in a self preferential manner, notably in the case of 0:19:28.720 --> 0:19:32.000 a competing technology known as header bidding, which was an 0:19:32.000 --> 0:19:35.920 attempt to circumvent Google's ecosystem. In response to that, Google 0:19:36.000 --> 0:19:39.960 launched something called open bidding, which DOJ says actually was 0:19:40.000 --> 0:19:43.400 a trojan horse that was packaged nicely, but in reality 0:19:43.480 --> 0:19:46.200 gave Google is seated in almost every auction out there 0:19:46.480 --> 0:19:50.000 with visibility into how rival ad exchangers were bidding on placements. 0:19:50.480 --> 0:19:52.560 So as a result of this contact, the government says 0:19:52.560 --> 0:19:56.520 Google now receives thirty five cents of every advertiser advertising 0:19:56.560 --> 0:20:00.000 dollars spent through its services through fees levied at HND 0:20:00.080 --> 0:20:03.600 of the transaction and actuality. There's no viable alternative now 0:20:03.640 --> 0:20:06.560 for advertisers or publishers in this space. According to DOJ, 0:20:07.320 --> 0:20:09.879 So lots of questions here about remedies and what they 0:20:09.880 --> 0:20:13.119 could look like if Google's found liable, and we'll definitely 0:20:13.119 --> 0:20:16.200 talk about that again in a later episode, but for now, 0:20:16.240 --> 0:20:18.600 what's important to know is this sub bench trial taking 0:20:18.640 --> 0:20:22.240 place before Judge Leoni Brinkhema in the Eastern District of Virginia, 0:20:22.400 --> 0:20:24.960 and it's proceeding that way without a jury after Google 0:20:25.000 --> 0:20:28.119 took steps to pay a government experts estimation of what 0:20:28.160 --> 0:20:32.159 the government's actual monetary damages was, thereby refute removing their 0:20:32.200 --> 0:20:33.800 right to a jury in the civil action. 0:20:34.440 --> 0:20:36.160 And lastly, Google's likely going to. 0:20:36.080 --> 0:20:38.440 Be off to a difficult start here, we think, after 0:20:38.440 --> 0:20:41.360 the government filed a motion for adverts inference, which would 0:20:41.359 --> 0:20:44.520 allow the judge to essentially infer bad facts where Google 0:20:44.560 --> 0:20:47.959 may have acted to destroy evidence, such as internal chats 0:20:48.240 --> 0:20:51.280 which were sought as part of discovery. Judge Brinkman was 0:20:51.400 --> 0:20:54.040 very critical of Google's actions at a hearing on the motion, 0:20:54.520 --> 0:20:57.920 but it's taken the matter under advisement. We'll note ourgue 0:20:57.920 --> 0:21:00.879 that while a court order breakup is an extremely rare remedy, 0:21:01.000 --> 0:21:03.199 the nature of this case could be such that this 0:21:03.359 --> 0:21:05.960 risk really is on the table, and the government is 0:21:05.960 --> 0:21:08.400 sure to at least try this to get this remedy 0:21:08.440 --> 0:21:09.000 if they win. 0:21:09.640 --> 0:21:12.160 Right now, we think Google continues to face an uphill. 0:21:11.880 --> 0:21:14.119 Battle, but it's slightly better odds than it would have 0:21:14.160 --> 0:21:17.200 if it faced a jury instead of what's now proceeding 0:21:17.200 --> 0:21:19.760 as a bench trial. So I'll be attending portions of 0:21:19.760 --> 0:21:22.600 this trial this month in Alexandria, and so meat updating 0:21:22.600 --> 0:21:25.360 our content on a terminal as Warren's developed, so I'll 0:21:25.400 --> 0:21:26.040 get it back to you. 0:21:26.400 --> 0:21:28.800 Great, thanks, justin How long is that trial is supposed 0:21:28.840 --> 0:21:29.280 to last? 0:21:29.480 --> 0:21:31.680 So I think we're looking at at least the next 0:21:31.680 --> 0:21:34.320 couple of months. Here's a little bit murky at the moment, 0:21:34.320 --> 0:21:36.679 but I think through October is a safe bet at 0:21:36.680 --> 0:21:37.040 the moment. 0:21:37.880 --> 0:21:41.320 All right, good stuff on antitrust. Let's move on to 0:21:41.520 --> 0:21:45.760 health care litigation and bring in Holly Frome. Holly, I 0:21:45.760 --> 0:21:48.640 believe a trial started today in a securities fraud case 0:21:48.640 --> 0:21:52.439 against bouch Health, and then you'll also be following a 0:21:52.440 --> 0:21:56.920 different trial starting September thirtieth against Abbott and Reckitt related 0:21:56.920 --> 0:22:00.359 to infant formula. So many trials going on in all 0:22:00.400 --> 0:22:03.320