Speaker 1: You're listening to Bloomberg Law with June Grasso from Bloomberg Radio.
Speaker 1: It was a new virtual experience for the four big
Speaker 1: tech titans on Wednesday, five hours of often combative questions
Speaker 1: from lawmakers who accuse them of using their company's immense
Speaker 1: power to crush rivals and squash competition. The CEOs, Facebook's
Speaker 1: Mark Zuckerberg, Apple's Tim Cook, Google's Sundar Pachai, and Amazon's
Speaker 1: Jeff Bezos, whose platforms have a combined value of nearly
Speaker 1: five trillion dollars, testified that their companies face tough competition.
Speaker 1: Our business model is advertising, and we face intense competition.
Speaker 1: I would describe it as a street fight for market
Speaker 1: share in the smartphone business. Competition drives us tenovid and
Speaker 1: it also leads to better products. We have a policy
Speaker 1: against using seller specific data to aid our private label business,
Speaker 1: but I can't guarantee you that that policy has never
Speaker 1: been violated. Joining me as Jennifer Re Bloomberg Intelligence Senior
Speaker 1: Litigation analyst, so Jender, the House Antitrust Subcommittee make the
Speaker 1: case that the big tech companies use their power to
Speaker 1: stifle competition and have to be reined in well to
Speaker 1: some extent they did. I mean, what they showed is
Speaker 1: that they have, through their investigation, found documents that suggests
Speaker 1: that there has been anti competitive conductor or potentially anti
Speaker 1: competitive conduct by these companies, and they highlighted some of
Speaker 1: those documents. So, you know, but what we saw here
Speaker 1: is a snippet, and antitrust really relies on, you know,
Speaker 1: the totality of the evidence and all of the issues
Speaker 1: and decisions with respect to different conducts and different contracts
Speaker 1: and strategies of companies. So you know, we saw this
Speaker 1: just a granule of really what needs to be looked
Speaker 1: at to determine whether these companies are violating the anti
Speaker 1: trust laws. But from this window that we saw with
Speaker 1: Cherry Pick documents, yes, what they suggested is that these
Speaker 1: companies have been ways abuse power in certain markets. Mark
Speaker 1: Zuckerberg got the most questions and seemed to have the
Speaker 1: toughest time, as representatives repeatedly cited internal documents to show
Speaker 1: how Facebook has either copied or simply acquired competitors. Did
Speaker 1: you warn Evan Spiegel, the founder of Snapchat, that Facebook
Speaker 1: was in the process of cloning the features of his
Speaker 1: company while also attempting to buy Snapchat congresswoman. I don't
Speaker 1: remember those specific conversations, but that was also an area
Speaker 1: where it was very clear that we were going to
Speaker 1: be building something. And Zuckerberg was also grilled over the
Speaker 1: acquisition of Instagram. How did he fare? Yeah, I think
Speaker 1: if you think in terms of the four different companies
Speaker 1: and which one came out the worst from an antitrust perspective,
Speaker 1: you know, in my mind it would be Facebook, and
Speaker 1: it would be this issue. I think Facebook, of these
Speaker 1: four companies, is the one that's most at risk to
Speaker 1: ultimately down the road, whether it's through enforcement or through legislation,
Speaker 1: may face efforts to divest Instagram and or WhatsApp. And
Speaker 1: what the representative was able to do was show documents
Speaker 1: that suggested that the reason for buying Instagram was to
Speaker 1: take out a rival. Now, again, as I said, antitrust
Speaker 1: violations depend on the totality of the evidence, and so
Speaker 1: we need to see what the other side of the
Speaker 1: story is. And there's always more to a story. But
Speaker 1: it doesn't look good, you know, if you go back
Speaker 1: to the Microsoft case, which is sort of I guess,
Speaker 1: the bible for how to move forward against these companies
Speaker 1: on a question of illegal monopolization, you know, the standard
Speaker 1: that was set out there was sort of shown to
Speaker 1: be met in certain ways by the documents that were
Speaker 1: shown and the responses that Mark Zuckerberg gave, you know,
Speaker 1: and whether as a general matter, the exclusion of this
Speaker 1: particular rival or threat is capable reasonably capable of helping
Speaker 1: the exclude or maintain their monopoly that was the Facebook,
Speaker 1: which seemingly it does. And whether or not, at the
Speaker 1: time that the company was acquired, did it reasonably constitute
Speaker 1: a NACAN threat And you know, it looks like it too,
Speaker 1: because Mark Zuckerberg said yes that it did. So in
Speaker 1: your mind, then Mark Zuckerberg didn't give a really good
Speaker 1: answer or explanation for Facebook's actions that they were not
Speaker 1: anti competitive. Well, he wasn't really given an opportunity. I mean,
Speaker 1: the format really was much more of a cross examination
Speaker 1: type format than it was information gathering. You know, with
Speaker 1: each of the lawmakers only able to have five minutes
Speaker 1: of questioning and wanting to get out all of the
Speaker 1: questions they had in mind, they weren't really offering the
Speaker 1: CEOs much time to explain anything. And so again what
Speaker 1: we saw is part of the story and not all
Speaker 1: the facts and not the entire story, And so it's
Speaker 1: important what else is out there and what other reasons
Speaker 1: Facebook may have had for deciding to acquire Instagram and
Speaker 1: what it's other documents look like. At the time that
Speaker 1: acquired the company. I mean, there were three different regulators,
Speaker 1: or at least two different regulators that looked at this deal.
Speaker 1: The FTC did look at it for some time. It
Speaker 1: wasn't a long investigation. That looks like about four or
Speaker 1: five months that they looked at the Instagram acquisition before
Speaker 1: they cleared it. And I believe it was also the
Speaker 1: UK antitrust regulator that looked at that deal and concluded
Speaker 1: that the companies at the time didn't compete, that Instagram
Speaker 1: didn't really have much of a foothold on the market,
Speaker 1: and that it wasn't an anti competitive deal. So, you know,
Speaker 1: we also have to go back and look at all
Speaker 1: the documents that those two regulators were looking at at
Speaker 1: the time of the deal to to look at the
Speaker 1: whole story to understand what happened there. Tell me up
Speaker 1: next on the Bloomberg Law Show, what are the prospects
Speaker 1: for actual antitrust action by regulators? And we'll look at
Speaker 1: the testimony of the CEOs of Amazon, Apple, and Google.
Speaker 1: So my first question, Mr richis why does Google steal
Speaker 1: content from honest businesses? Mr Chapman, with respect, I disagree
Speaker 1: with that characterization. I'm June Rosso and this is Bloomberg.
Speaker 1: For the last year, the House Judiciary's Antitrust Subcommittee has
Speaker 1: been investigating the business practices of the tech giants for
Speaker 1: anti competitive conduct that might lead to more regulation or
Speaker 1: even breakups. That investigation showed on Wednesday, as the CEOs
Speaker 1: of Amazon, Apple, Facebook, and Google faced some tough focused
Speaker 1: questions backed up by a mountain of subpoena documents. The
Speaker 1: chairman of the committee, David Ceceilini, challenged Google CEO Sundar
Speaker 1: Pachai about tactics used to stifle competition. Investigation shows that
Speaker 1: Google's response was to threaten to delist Yelp entirely. In
Speaker 1: other words, the choice Google gave YELP was let us
Speaker 1: steal your content or effectively disappear from the web. Stupid Chai.
Speaker 1: Isn't that anti competitive? Congressman? Uh, you know, when I
Speaker 1: run the company, I'm really focused on giving uses what
Speaker 1: they want. We conduct ourselves to the highest standard. I've
Speaker 1: been talking to Jennifer Ree, Bloomberg Intelligence senior litigation analyst,
Speaker 1: it seemed as if PAI strong goal to answer the
Speaker 1: questions about advertising tech, where the company built a dominant
Speaker 1: position mostly through acquisitions, So explain that issue and how
Speaker 1: he handled it. I think that overall he was generally
Speaker 1: trying to follow what was probably guidance to stick with
Speaker 1: his own talking points and where he might have had
Speaker 1: difficulty answering a question, to go back to his own
Speaker 1: storyline and what he wanted to say, and I think
Speaker 1: that's what he was doing a bit there. But again,
Speaker 1: you know, you have to go back and look. The
Speaker 1: Double Click acquisition, which is part of this at tech
Speaker 1: by was extensively and intensely investigated by want of the
Speaker 1: antitrust authorities in the US, extensively and thoroughly looked at
Speaker 1: before it was determined that video could go forward. And again,
Speaker 1: all of the documents that are available today were available
Speaker 1: to those regulators at that time, and so certainly mistakes
Speaker 1: can be made. And maybe it was one of the
Speaker 1: other smaller acquisitions down the chain, and not just the
Speaker 1: Double Click acquisition that gave Google this control that they
Speaker 1: seemed to have across that whole chain of distribution from
Speaker 1: advertiser to publisher. But I don't think that he handled
Speaker 1: it all that well. But I will say again what
Speaker 1: I've said before that the format was really more like
Speaker 1: a cross exam and without giving the CEOs much time
Speaker 1: to really respond and explain away what they were doing
Speaker 1: and what they were thinking and what the purpose for
Speaker 1: some of the their conduct was. So no, I don't
Speaker 1: think he came off very well there. And along with Facebook,
Speaker 1: I would say Google has risk and they have risk
Speaker 1: in that area, and we are aware that the Department
Speaker 1: of Justice has looked at targeted that specific area, the
Speaker 1: ad tech space, with respect to their own investigation, which
Speaker 1: we understand may culminate in a lawsuit against Google or
Speaker 1: some sort of an action against Google. This year. This
Speaker 1: was Amazon CEO Jeff bezos first appearance at a congressional hearing.
Speaker 1: Many of the questions to him focused on the company's
Speaker 1: treatment of small merchants who use Amazon's online market ice
Speaker 1: to reach customers. Here's Democratic Congresswoman Lucy macbeth asking questions
Speaker 1: about frustrated sellers. If Amazon didn't have monopoly power over
Speaker 1: these sellers, do you think they would choose to stay
Speaker 1: in a relationship that is characterized by bullying, fear, and panic.
Speaker 1: With all respect, Congresswoman, I do not accept the premise
Speaker 1: of your question. You know, I would say that when
Speaker 1: companies compete vigorously, they often are going to invoke fear
Speaker 1: and even the concept of bullying among smaller competitors. I mean,
Speaker 1: intense competition can engender that same reaction as can anti
Speaker 1: competitive exclusionary conduct. I imagine there are suppliers to Walmart
Speaker 1: that would say the exact same thing. I'm only guessing,
Speaker 1: you know, it's scary to have to negotiate against such
Speaker 1: a powerful company. And again we have these cherry picked documents. Now,
Speaker 1: you know, I'm not saying that Amazon hasn't crossed the
Speaker 1: line with respect to the way it treats online sellers,
Speaker 1: But you'd also have to see what else is out
Speaker 1: there and what everyone else is saying, and for each
Speaker 1: of those sellers, what their particular situations were with respect
Speaker 1: to the pushback that they got from Amazon. So I
Speaker 1: would say once again that because antitrust and the decision
Speaker 1: as to whether conduct is anti competitive really is fact intensive.
Speaker 1: It's a fact intensive decision that's based on the totality
Speaker 1: of evidence, and not just certain cherry picked items. You know,
Speaker 1: you'd have to see everything else. But like some of
Speaker 1: these other companies, what was highlighted does look problematic. So
Speaker 1: it does suggest there could be a problem there, But
Speaker 1: we just don't know the whole story. And until that
Speaker 1: whole story comes out, which it would if there were
Speaker 1: some sort of a trial against one of these companies,
Speaker 1: you know, we can't really determine what the outcome might be.
Speaker 1: Amazon has been accused of using data from independent sellers
Speaker 1: to create copycat products, and they've categorically denied that until
Speaker 1: this hearing, when Bazo said he couldn't guarantee that didn't happen. Yes,
Speaker 1: that's right, and that's not helpful to him. It's definitely
Speaker 1: not helpful to Amazon. I mean, I think the issue
Speaker 1: was that there is a policy within Amazon, and it
Speaker 1: looks like that policy may have been broken. This happens
Speaker 1: in companies more often than it should, and it's at
Speaker 1: least according to Bezos. They're still looking at it. After
Speaker 1: the Wall Street Journal it reported on it. They're still
Speaker 1: doing their own internal investigation to understand what happened. And
Speaker 1: that's why he can't respond to it. But you know,
Speaker 1: if in fact that is going on. It's not a
Speaker 1: good sign for Amazon, and it's just yet more ammunition
Speaker 1: to the extent that the Department of Justice or the
Speaker 1: Federal Trade Commission decided to bring an enforcement action, or
Speaker 1: Congress decides to go forward with some sort of legislation,
Speaker 1: it's just yet more on in their arsenal as a
Speaker 1: reason to do something like that. Apple and CEO Tim
Speaker 1: Cook seemed to get the least heat, And the questions
Speaker 1: were really based on the App Store, Sir, we have
Speaker 1: never increased commissions in the store since the first day
Speaker 1: it operated in two thousand, and there's nothing to you
Speaker 1: from doing so, is it, no, sir? I disagree strongly
Speaker 1: with that. There is a competition for developers, just like
Speaker 1: there's a competition for customers. First, I think it's not
Speaker 1: surprising that Apple got the least heat. I think of
Speaker 1: all these companies, Apples at the least risk here and
Speaker 1: its conduct is less sort of blatantly anti competitive to
Speaker 1: the outside observer. The idea that it charges commission at
Speaker 1: least in the beginning to some of the apps in
Speaker 1: its app store, really, to me, isn't an anti trust
Speaker 1: violation When a company has a product or a service
Speaker 1: that they can price the way they want to. And
Speaker 1: even if it's monopoly pricing, if they've achieved the monopoly lawfully,
Speaker 1: they can lawfully price in the monopolistic manner. You know,
Speaker 1: if they've achieved that monopoly unlawfully, that's a different thing.
Speaker 1: But I'm not so sure that there are allegations that
Speaker 1: the development of the app store in itself was an
Speaker 1: unlawful monopoly. So I don't know that they got very
Speaker 1: far with Apple on this and the other idea that
Speaker 1: I think they were questioning Apple on that it might
Speaker 1: treat different app developers differently. You know, companies strike different
Speaker 1: kinds of deals with their suppliers all the time. This
Speaker 1: doesn't necessarily violate the laws. You know, where a company
Speaker 1: is supplying another company in bulk, they might get better
Speaker 1: pricing than a company that isn't. That's negotiation, and I'm
Speaker 1: not so sure that that rises to the level of
Speaker 1: an antitrust violation. So of all of the companies, I
Speaker 1: think Apple came out the most unscathed, and they don't
Speaker 1: think that's surprising because I think that they're at the
Speaker 1: lowest level of risk for an enforcement action to begin with.
Speaker 1: There are state and federal antitrust investigations into these tech companies.
Speaker 1: Which companies look like there might be some kind of
Speaker 1: legal action taken against them. Well, my assumption is that
Speaker 1: all four of these companies are under investigation by the
Speaker 1: FTC and or d o J. The ones we know
Speaker 1: for a fact are Google and Facebook because they've disclosed
Speaker 1: that when these investigations go forward their confidentials less the
Speaker 1: company discloses it or somehow it otherwise gets leaked. You know,
Speaker 1: we don't know for sure, but they probably all for
Speaker 1: have been under investigation. And what we know, because I
Speaker 1: think the d o J has been somewhat transparent about it,
Speaker 1: is that right now the most advanced investigation seems to
Speaker 1: be against Google. And we've heard a lot about the
Speaker 1: possibility of some complaint or challenge being filed against Google
Speaker 1: this year. You know, I say some sort of complaint
Speaker 1: or challenge because if it's challenged, there's always the possibility
Speaker 1: of a settlement, although I tend to doubt it. I
Speaker 1: think the d o J would like to bring a
Speaker 1: lawsuit against Google, and they'd like to do that before
Speaker 1: the election, So there's a good possibility we'll see that
Speaker 1: and they could focus in this ad tex space. It
Speaker 1: could also focus on other areas as well, but we
Speaker 1: have heard a lot about the d o J looking
Speaker 1: at this ad tech space and having some issues with
Speaker 1: Google's control of sort of the whole supply chain there.
Speaker 1: It also looks like the FTC may be fairly well
Speaker 1: advanced with respect to its investigation of Facebook leaks that
Speaker 1: are reported in the news that it's possible there could
Speaker 1: be some sort of an action again Facebook as early
Speaker 1: as the first quarter or maybe even the fourth quarter,
Speaker 1: And that could be significant because I think of all
Speaker 1: four companies, if any of the antitrust authorities are going
Speaker 1: to go forward and seek a court ordered breakup, in
Speaker 1: my mind, Facebook has the most risk for that. So
Speaker 1: that could be an interesting development if that's the kind
Speaker 1: of remedy that they look for, if they file a
Speaker 1: lawsuit against Facebook. It looks like, you know, if Amazon
Speaker 1: and Apple are actually being investigated, they're a little bit
Speaker 1: farther behind, but it doesn't mean that there won't also
Speaker 1: be actions brought against those two companies next year. The
Speaker 1: instructive case here is Microsoft, and in the end, there
Speaker 1: was no breakup of Microsoft. So what are the chances that,
Speaker 1: let's say, Facebook would be required to divest Instagram or what'sapp.
Speaker 1: It would be an uphill climb to get there in court.
Speaker 1: And you said it, I mean, this is what we
Speaker 1: saw in Microsoft. Microsoft was a really good case for
Speaker 1: the Department of Justice. They did a good job. There
Speaker 1: was a lot of evidence of these long list of
Speaker 1: conduct and contracts and strategies that Microsoft engaged in that
Speaker 1: we're just blatantly exclusionary and intended for no other reason
Speaker 1: but to hurt its rival. You know, when asked what
Speaker 1: is your business reason for doing this? In many cases,
Speaker 1: Microsoft had nothing to say, and in some cases they
Speaker 1: did have something to say, but whatever they were saying
Speaker 1: was deemed to be a sham. So that's what has
Speaker 1: to happen here. You have to look at the anti
Speaker 1: competitive conduct in the harm and then balanced it against
Speaker 1: whatever the pro competitive, legitimate business reasons for that exclusion was.
Speaker 1: And so in Microsoft, where you had a case where
Speaker 1: you really had this blatantly anti competitive conduct and no
Speaker 1: flip side, no pro competitive business justification that could be
Speaker 1: weighed against it. And even then the regulators weren't able
Speaker 1: to achieve a breakup. You know, it's hard to see
Speaker 1: what it's going to take to get there. But Microsoft
Speaker 1: does lay out that possibility. You know what Microsoft in
Speaker 1: the appellate decision, the decision that resulted in reversing um
Speaker 1: the possibility of a breakup. What they said was that
Speaker 1: it will be in the legal exercise of market power if,
Speaker 1: as a general matter, the exclusion of that threat is
Speaker 1: the type of conduct reasonably capable of contributing to the
Speaker 1: defendants continued monopoly power. Well, you know, it's fairly easy
Speaker 1: to say that's probably the case in Facebook situation. And
Speaker 1: then the second standard they said is whether or not
Speaker 1: that excluded company in this case, Instagram reasonably constituted in
Speaker 1: Mason threat at the time that it was acquired. These
Speaker 1: the two standards Microsoft lays out to say, First, is
Speaker 1: it anti competitive? Doesn't violate the anti dress laws, and
Speaker 1: it looks like Facebook fits into that. But then what
Speaker 1: the Microsoft appellate court said was that the appropriate remedy
Speaker 1: is a really difficult decision because dibesseture is only imposed
Speaker 1: with great caution, and that's because it's long term efficacy
Speaker 1: is rarely certain. An absent some measure of confidence that
Speaker 1: there's been an actual loss to competition that has to
Speaker 1: be Restored Wisdom Council against adopting that kind of radical
Speaker 1: structural release. It's that clause in Microsoft. I think in
Speaker 1: my mind that that makes a little bit tough here,
Speaker 1: because it's so hard for any judge to look into
Speaker 1: a crystal ball and to say, what's going to happen
Speaker 1: if what what will happen if we require Facebook to
Speaker 1: digest Instagram or WhatsApp? What what will happen to those companies?
Speaker 1: And certainly a world in which those companies exist for
Speaker 1: users and exist in the way they do, well capitalized
Speaker 1: and with R and D behind them is a better
Speaker 1: world where they cease to exist for consumers or exist
Speaker 1: but not in the same shape that they're in now.
Speaker 1: And I think that's a very difficult decision that that
Speaker 1: judges are going to be very cautious about making. Thanks
Speaker 1: jen that's Jennifer re Bloomberg Intelligence Senior litigation analyst. You're
Speaker 1: listening to from Bloomberg Radio Bloomberg Law with June Grazzo Boolberg.
Speaker 1: Postmates and door Dash are pushing a million dollar ballot
Speaker 1: initiative to overturn a California law designed to force them
Speaker 1: to treat rideshare and delivery drivers as employees. At the
Speaker 1: same time, an elite legal team at Gibson, Dunn and
Speaker 1: Crutcher is trying to avoid a court ruling they say
Speaker 1: could decimate the f based business model playing the long
Speaker 1: game in California courts. Joining me as Christopher for Bloomberg
Speaker 1: Law team leader in the Business of Law, Chris tell
Speaker 1: us about attorney Ted Boutros, who leads the go team
Speaker 1: at Gibson Dunne. So. Ted Boutros is a partner at
Speaker 1: Gibson Dune, which is a well known white chee law firm. Uh.
Speaker 1: He's based in the Los Angeles office. Um. This is
Speaker 1: a guy who is the Seasons litigator, high profile Southern
Speaker 1: California attorney who's well known for representing a lot of
Speaker 1: big name clients. He's also known for having like a
Speaker 1: very noticeable shock whull head of white hair that's kind
Speaker 1: of become his calling art in some legal circles. That's uh,
Speaker 1: it's the way that people think of him. Uh. Um.
Speaker 1: You know when you talk about Ted Ted bou trust,
Speaker 1: that's one of the first things that comes up. Um.
Speaker 1: But he's a famed First Amendment lawyer who these days
Speaker 1: has spent a lot of time going up against President
Speaker 1: Donald Trump and the Trump administration in court. Among other
Speaker 1: notable clients, he recently represented Mary Trump, the president's nie,
Speaker 1: as well as John Bolton, the president's former national security advisor,
Speaker 1: in a pair of cases in which Trump was trying
Speaker 1: to prevent the publication of tell All books. Who Trust
Speaker 1: has also represented a number of media figures. He was
Speaker 1: the lawyer for CNN in a case revolving around anchor
Speaker 1: Jim maccassas the revocation of his press pat Uh. He
Speaker 1: handled a similar case involving a reporter at Playboy, and
Speaker 1: he's been involved in related litigation involving Rachel Maddow. So recently,
Speaker 1: really a lot of his uh high profile has come
Speaker 1: from those cases, these First Amendment cases. He's also an
Speaker 1: outspoken Trump administration critic on Twitter. He's gone so far
Speaker 1: as to offer to pick up the legal fees for
Speaker 1: anyone who um finds himself in court on the other
Speaker 1: end of the free speech lawsuit by the Trump administration,
Speaker 1: and Boo Truck himself has said he will defend those
Speaker 1: people in court free of charge. So so this is
Speaker 1: somebody you've got a high profile. Also, self identified as
Speaker 1: a liberal Democrat, has been involved in a number of
Speaker 1: social related issues as well. Uh. He teamed up with
Speaker 1: Ted Olsen, who is also a Gifts and Done partner
Speaker 1: and a former George W. Bush Splicitor General, to challenge
Speaker 1: California's ban on same sex marriage about a decade ago
Speaker 1: and successfully had that overturned. He's a liberal Democrat, but
Speaker 1: he represents big companies in court against a little guy
Speaker 1: against environmental concerns. Or is that his firm that does that.
Speaker 1: It's a little bit of both. So boot Trow himself also,
Speaker 1: you know, a little more quietly, has also been representing
Speaker 1: some of the biggest employers in the country in class
Speaker 1: action litigation brought by workers who have said their labor
Speaker 1: unemployment rights have been violated. Most notably was the case
Speaker 1: called Walmart se. Dukes, which went all the way up
Speaker 1: to the U. S. Supreme Court, who trusts Um argued
Speaker 1: that case on behalf of Walmart, and he convinced the
Speaker 1: Supreme Court to rule um that a large group of
Speaker 1: thousands of Walmart workers who were doing for paid discrimination
Speaker 1: and harassment simply couldn't do that all in one class
Speaker 1: action lawsuit, and instead they had to bring individual lawsuits.
Speaker 1: And that's a really good example of some of the
Speaker 1: legal work that he's done, particularly in respect to defending
Speaker 1: large corporations in court. UH. It's those sort of procedural
Speaker 1: almost some some of his critics might say technicality, UH,
Speaker 1: sort of the legal wrangling over the details UH and
Speaker 1: the intricacies of the law rather than getting to the
Speaker 1: actual accusations in any of those cases and and getting
Speaker 1: to a judge saying whether or not, you know, the
Speaker 1: employer actually violated the law here. And that's you know,
Speaker 1: really been key part of his and and the rest
Speaker 1: of the Gibsons Done UH playbooks in terms of defending
Speaker 1: Uber and some of the other economy companies in court.
Speaker 1: Do you know how many cases they've represented Uber and
Speaker 1: Postmates and door Dash in Based on our analysis of
Speaker 1: the DOCUS, it looks like roughly the Gibsons Done team
Speaker 1: has represented Uber and roughly fifty cases they've represented UH
Speaker 1: door Dash I think in something like fifteen, and I
Speaker 1: want to say there were nine or so UH for Postmates.
Speaker 1: And all of that litigation revolves around the same central
Speaker 1: legal question that's really been dogging all of the gig
Speaker 1: economy companies, and that is whether or not that the
Speaker 1: drivers or couriers or food deliverers that these companies connect
Speaker 1: with end users via their app platforms, Whether those workers
Speaker 1: need to be classified as company employees or whether, as
Speaker 1: the companies are doing now, UH, they can simply make
Speaker 1: them independent contractors who are largely considered basically self employee entrepreneurs.
Speaker 1: Is their strategy in these cases, just to avoid the
Speaker 1: main question with procedural maneuvering, to avoid the question of
Speaker 1: whether drivers are employees. There is and that's for a
Speaker 1: couple of reasons. So number one, UH, the classification of
Speaker 1: the drivers as h contractors is really a central part
Speaker 1: of the business model. And if Uber and the other
Speaker 1: companies were all of a sudden force to make those
Speaker 1: drivers employees, they would have to pick up the tabs
Speaker 1: where things like workers compensation, over time, minimum wages, unemployment insurance,
Speaker 1: and they would also have to start kicking in tax money.
Speaker 1: We see in New Jersey, for example, the state has
Speaker 1: gone after Uber, alleging that the company should have been
Speaker 1: classifying drivers as employees, and as a result of that
Speaker 1: gets out on six hundred and fifty million dollars worth
Speaker 1: of taxes. So we're talking about a ton of money here,
Speaker 1: and that's why it's really important for the companies to
Speaker 1: try to avoid a court ruling UH forcing them to
Speaker 1: reclassify the drivers, and so they've done that. They've avoided
Speaker 1: that in a couple of ways. One thing is arbitration.
Speaker 1: That's gotten a lot of publicity the company's use of
Speaker 1: arbitration agreement. So when drivers signed up for the platform
Speaker 1: to start driving for Uber, they sign an agreement that
Speaker 1: there's any discuse that they wind up having with the
Speaker 1: company have to be taken to private arbitration. So that's
Speaker 1: behind closed doors, not in court. Those rulings are subjects
Speaker 1: to confidentiality, and so we really have very little idea
Speaker 1: about how those are playing out. But what we do
Speaker 1: know is that the debates over the legal disbuse over
Speaker 1: arbitration have been sort of bin ponging around the courts,
Speaker 1: and so you'll dedicate this has happened several times in
Speaker 1: which the class actions filed, but the parties may spend
Speaker 1: years or more just debating the question of whether or
Speaker 1: not the case needs to go to arbitration without ever
Speaker 1: getting to the question of whether or not the drivers
Speaker 1: have to be classified as employees. So that's the main
Speaker 1: tactics there, and we've seen that UM throughout California in
Speaker 1: particular has been a battleground states for that. But in
Speaker 1: addition to that, you know, Uber has been tactical in
Speaker 1: terms of settling cases when they need to. There is
Speaker 1: a long running case I think it's spanned seven years
Speaker 1: and then finally will less than a year ago, Uber
Speaker 1: agreed to settle that one for about twenty million dollars.
Speaker 1: And so what the plane Eff lawyers say is that
Speaker 1: they're using some strategic maneuvers in the settlement phase as well.
Speaker 1: Because these are class actions, Uber is more often faced
Speaker 1: with several similar lawsuits filed by different groups of drivers
Speaker 1: and different attorneys representing those drivers. And what the Planets
Speaker 1: attorneys say is that the company has used this reverse
Speaker 1: auction strategy and which basically, uh they play the Planett
Speaker 1: lawyers against each other to try to drive down the
Speaker 1: settlement off reaching a settlement agreement with the lowest bidder
Speaker 1: and then drafting that agreement in a way that it
Speaker 1: applies to all of the cases and essentially knocks all
Speaker 1: of them out in one self swoop. So those are
Speaker 1: the two primary tools that they've been using to keep
Speaker 1: these spaces from getting decided before a judge. As far
Speaker 1: as we know, only one case and that was the
Speaker 1: case involving actually grub hub drivers has ever been decided
Speaker 1: by a court, and that was two or three years ago.
Speaker 1: A magistrate judge in California said drub hub drivers in
Speaker 1: fact are properly classified as contractors. They don't need to
Speaker 1: be made employees. But what's interesting about that is that
Speaker 1: since that decision, California is updated its law in a
Speaker 1: way that most people think makes it much much harder
Speaker 1: for company to continue treating drivers as contractors. Yeah, so
Speaker 1: tell us about that is that the provision that authorizes
Speaker 1: local government lawyers to intervene in these cases, it is
Speaker 1: so a B five was a very contentious piece of
Speaker 1: legislation that went into effect late flat year in California,
Speaker 1: and the primary goal there by and large was to
Speaker 1: make uber Lip and other gig company start treating their
Speaker 1: their drivers as employees. And it created a bunch of
Speaker 1: hoops that the comp they have to jump through if
Speaker 1: they want to keep treating those drivers as contractors instead.
Speaker 1: And the general thinking throughout the legal community is that
Speaker 1: the companies are really gonna have a hard time meeting
Speaker 1: that standards and are likely going to have to reclassify
Speaker 1: the drivers as employees. And as a results of that,
Speaker 1: the companies have banded together and pledged a hundred and
Speaker 1: ten million dollars on the valid initiatives. So in November,
Speaker 1: when voters go to the polls to vote in uh
Speaker 1: state and local elections as well as the federal presidential
Speaker 1: election um, they'll also be voting on a ballot initiative
Speaker 1: which would essentially carve uver Lift and other gig companies
Speaker 1: out of this new classification law of giving them a
Speaker 1: legal shield. But what's interesting is that buried in A
Speaker 1: B five is a provision that not only allows the state,
Speaker 1: the California Attorney General, to enforce the law, but it
Speaker 1: also gives the power of enforcement to local lawyers, so
Speaker 1: city attorney, the district attorney, and the life which is
Speaker 1: out of the ordinary. Typically state laws are enforced at
Speaker 1: the state level by the by an attorney general. And
Speaker 1: so what that means is that expands the pool of
Speaker 1: government lawyers who are going after uber Lifts and other
Speaker 1: gig companies now in court, and that could be a
Speaker 1: bit of a game changer for boot Rows and the
Speaker 1: Gibson's Done lawyers who are representing these companies because some
Speaker 1: of the strategic moves they've been using are not likely
Speaker 1: to have the same effects on government lawyers. Uh. And
Speaker 1: there's a couple of reasons for that. Number One, the
Speaker 1: arbitration agreements that the drivers signed don't apply to government
Speaker 1: lawyers because the government doesn't sign those agreements. The lawyers
Speaker 1: prosecuting those cases didn't sign those agreements, they're not bound
Speaker 1: by arbitration and they're not forced to take those cases
Speaker 1: to arbitration, so they can take those cases in court
Speaker 1: and there's no real legal wrangling over the question of
Speaker 1: arbitration at all. As a result of that. Number Two,
Speaker 1: the incentive to settle is a lot different. So when
Speaker 1: we're talking about the government lawyers, these are people who
Speaker 1: are salaried attorneys who are paid by the government. They
Speaker 1: have no personal financial incentive to settle here, Like they
Speaker 1: don't get legal fees, they don't get a piece of
Speaker 1: anything that that Uber would pay in settlement, and so
Speaker 1: there's really little reason for them to agree to a
Speaker 1: settlement unless Uber and the like, as part of that settlement,
Speaker 1: would agree to reclassify the drivers as employees. And so
Speaker 1: that really eliminates two of the major tools that that Uber,
Speaker 1: Postmates and others have been used. Again court is Gibson
Speaker 1: Done involved not only the litigation strategy, but in the
Speaker 1: strategy you know, of getting a different law passed. Their
Speaker 1: names have not shown up on the lobbying disclosures. The
Speaker 1: companies that you might imagine have a small army of
Speaker 1: lobbyists both in California and at the federal level trying
Speaker 1: to get laws changed in their favor on this particular issue.
Speaker 1: But certainly they're aware of it, and you know, just
Speaker 1: by looking at some of the defensive tactics that they
Speaker 1: used to try to slow things down avoid a ruling,
Speaker 1: you can see where they're going with this. That the
Speaker 1: roadmap really is, let's pump the brakes here, hope for
Speaker 1: a win at the ballot box in November, and then
Speaker 1: we'll go back and settle or try to resolve any
Speaker 1: remaining litigation and we'll move forward from there. Did anyone
Speaker 1: to Gibson Done comment on the strategy that you've written about, Yes,
Speaker 1: they did. Um A declined an interview, but but via email.
Speaker 1: Josh Lipschit, who was one of the main Gibson's Done
Speaker 1: attorneys who's part of Ted Boutrous's team said that the
Speaker 1: teams pure objective was simple and that's just to win
Speaker 1: the cases. Um and he he he. And Sienna Evangelie,
Speaker 1: who is another one of the top lawyers on the team,
Speaker 1: did a couple of things that we've heard elsewhere, which is,
Speaker 1: you know, the line from the companies is always, uh,
Speaker 1: driver simply don't want to be employees. They like the
Speaker 1: freedom that comes with being a contractor, which means they
Speaker 1: can work when they want, where they want, and for
Speaker 1: however long they want. UM. At the same time, they
Speaker 1: sort of try to pour cold water on this idea
Speaker 1: UM that they're using arbitration as any sort of shields.
Speaker 1: They point out that, you know, the the terms of
Speaker 1: the arbitration agreements are clear to drivers when the juice
Speaker 1: to sign up, and they didn't really touch on the
Speaker 1: reverse auction piece of it. UM. But in court filings
Speaker 1: you can sort of piece together some of their thoughts
Speaker 1: on that, which is essentially from the defense bars position.
Speaker 1: You know, the companies are just getting hit with a
Speaker 1: slew of class action which are often overlapping UM and
Speaker 1: maybe brought by planis attorneys looking for some fees uh.
Speaker 1: And then there from their perspective. They never, you know,
Speaker 1: outwardly try to drive down the price, but certainly they're
Speaker 1: looking settled these cases and if they can resolve them
Speaker 1: on optimal terms, um, that's just good lawyering. Turning out
Speaker 1: to a wildly different topic. What do we know about
Speaker 1: Alex Rodriguez and Jennifer Lopez wanting to buy the Mets?
Speaker 1: So we know that they're interested in purchasing the club.
Speaker 1: It has been reported that they've made some initial offer
Speaker 1: to buy the club from their long time owners earlier
Speaker 1: this year, and we also know that they recently signed
Speaker 1: up a new legal representation firm called Wattel, which is
Speaker 1: a New York City firm that's known for being involved
Speaker 1: in a wide variety of high profile deals, including those
Speaker 1: involving some pro sports team purchases. It seemed that if
Speaker 1: the Mets were going to get sold, what happened to
Speaker 1: stop that? That's right, it's really been a long time coming.
Speaker 1: Seems like even Cohen, the hedge fund manager here in
Speaker 1: New York, was really the primary buyer and was likely
Speaker 1: to purchase the team. That deal appeared to be as
Speaker 1: good as done until in February Cohen abruptly backed out
Speaker 1: talking at some of the terms of the deal, and
Speaker 1: interestingly enough, in that round of negotiations, Cohen was also
Speaker 1: represented by the folks that walked out, and so he
Speaker 1: bowed out in February, and since that time has had
Speaker 1: a change of heart. He'd come back trying to make
Speaker 1: another play at purchasing the team, competing with A Rod
Speaker 1: and j Lo, but of course this time around because
Speaker 1: they're represented by wacked out Cohens in the market for
Speaker 1: new legal representation. Thanks Chris. That's Chris op for Bloomberg Law,
Speaker 1: team leader in the Business of Law. And that's it
Speaker 1: for this edition of Bloomberg Law. I'm John Grosso and
Speaker 1: this is Bloomberg