WEBVTT - SEC and FTC Lose Major Cases 0:00:03.200 --> 0:00:08.000 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:09.160 --> 0:00:13.600 Cryptocurrency scored a victory over the Securities and Exchange Commission 0:00:13.840 --> 0:00:17.759 when a federal judge ruled that Ripple Labs XRP token 0:00:18.000 --> 0:00:21.880 is a security when sold to institutional investors, but not 0:00:22.120 --> 0:00:25.840 the general public. Ripple's CEO, Brad Garlinghouse said it was 0:00:25.880 --> 0:00:28.160 a victory for Ripple and the industry. 0:00:28.560 --> 0:00:31.600 The sec clearly lost as a matter of law, and 0:00:31.880 --> 0:00:36.360 the judge wrote XRP is not a security as a 0:00:36.440 --> 0:00:39.839 kind of intrinsic thing. In certain circumstances, which is a 0:00:39.920 --> 0:00:44.280 kind of a narrow definition around institutional sales, it could 0:00:44.320 --> 0:00:47.320 be a security. So look, the market reacted in a 0:00:47.520 --> 0:00:51.519 very positive way. Certainly, Team Ripple's very happy with the decision. 0:00:51.880 --> 0:00:55.000 Joining me is securities law attorney Robert him a partner 0:00:55.000 --> 0:00:59.200 at Tartar krinskyin Drogan How important is the decision in 0:00:59.240 --> 0:01:05.520 this Ripple case for determining regulatory authority over crypto assets? 0:01:06.240 --> 0:01:09.319 Well, the decision in the Ripple case is usually important 0:01:09.480 --> 0:01:12.560 because it really shifts the legal landscape in terms of 0:01:12.640 --> 0:01:17.319 how the United States may start looking at regulating cryptocurrency. 0:01:17.680 --> 0:01:21.160 Up till now, the SEC has been the primary enforcer, 0:01:21.480 --> 0:01:25.040 and it's been using enforcement actions, which is called regulation 0:01:25.120 --> 0:01:28.640 by enforcement, to try to help define the parameters of 0:01:28.720 --> 0:01:32.320 what companies and investors can do in terms of developing 0:01:32.360 --> 0:01:36.440 new cryptocurrencies and selling new cryptocurrencies. And this has created 0:01:36.480 --> 0:01:39.760 a huge problem for the industry because without any rules 0:01:39.760 --> 0:01:43.320 of the road, it's inherently gone to stifle innovation and 0:01:43.400 --> 0:01:47.600 hold back investors from investing in new crypto projects until 0:01:47.640 --> 0:01:50.920 there's more clarity about whether you're sale and the promotion 0:01:51.000 --> 0:01:53.840 of these products is in fact legal. So this is 0:01:53.880 --> 0:01:56.920 going to be a big game changer in my opinion 0:01:57.000 --> 0:02:00.200 with regards to how cryptocurrency is regulated in the United States. 0:02:00.480 --> 0:02:04.080 But this is a ruling by one judge. Are people 0:02:04.120 --> 0:02:06.560 reading too much into this? Should we wait for an 0:02:06.600 --> 0:02:09.840 appellate court ruling? I mean, do other judges in Manhattan 0:02:09.840 --> 0:02:11.400 even have to follow this decision? 0:02:11.960 --> 0:02:15.480 Well, no, other judges don't technically have to follow this decisions. 0:02:15.560 --> 0:02:19.160 But the decision itself is very well written and the 0:02:19.240 --> 0:02:22.959 reasoning behind the decision, perhaps even more importantly, is very 0:02:23.040 --> 0:02:26.399 logical and I think will be very persuasive to other judges. 0:02:26.840 --> 0:02:29.840 What happened in the Ripple case is that this judge, 0:02:30.000 --> 0:02:33.040 like many others, Judge Torres, went to an old Supreme 0:02:33.120 --> 0:02:36.160 Court case Howie case set up this test to see 0:02:36.520 --> 0:02:39.799 when is a particular financial instrument of security and when 0:02:39.840 --> 0:02:42.720 is it not a security? And there's various elements to 0:02:42.800 --> 0:02:45.240 that test. But the judge in the Ripple case held 0:02:45.280 --> 0:02:48.680 that the XRP token did not meet the definition of 0:02:48.680 --> 0:02:51.359 a security at least the extent that it was sold 0:02:51.400 --> 0:02:56.320 on crypto exchanges to investors in the aftermarket. And I 0:02:56.320 --> 0:02:58.800 think that reasoning is going to be very persuasive to 0:02:58.840 --> 0:03:03.280 other judges, particularly as the SEC continues to try to 0:03:03.400 --> 0:03:06.359 do regulation by enforcement, as we could see with its 0:03:06.400 --> 0:03:11.480 recent cases against Coinbase and Bittrex, which are crypto exchanges. 0:03:12.560 --> 0:03:16.960 The SEC chair Gary Gensler, said he was both pleased 0:03:17.080 --> 0:03:20.240 and disappointed. Tell us about why there's a little bit 0:03:20.280 --> 0:03:21.919 of it that he might be pleased with. 0:03:22.240 --> 0:03:25.680 There is some sunshine for the SEC in the Rippled decision. 0:03:26.000 --> 0:03:28.280 Not much, but there is some because it was only 0:03:28.320 --> 0:03:32.760 a partial victory for Ripple, and the procedural context is 0:03:32.760 --> 0:03:35.240 is that this decision came out on a motion for 0:03:35.320 --> 0:03:39.040 some rejudgment, which happens after all the discovery in the 0:03:39.080 --> 0:03:42.240 case has taken place, and we have to remember that 0:03:42.360 --> 0:03:46.040 this case the SEC originally filed against Ripple in December 0:03:46.280 --> 0:03:48.119 twenty twenty, so it's been about two and a half 0:03:48.160 --> 0:03:51.400 years of litigation and discovery. So there's a very well 0:03:51.440 --> 0:03:55.640 developed record that the judge made her decision on. And 0:03:55.920 --> 0:03:59.400 what happened here is that the judge really, in a sense, 0:03:59.520 --> 0:04:02.360 gave the decision to Ripple. What she did is she 0:04:02.440 --> 0:04:07.080 drew a line between the XRP tokens that were sold 0:04:07.280 --> 0:04:12.200 by Ripple Labs directly to institutional investors. In that case, 0:04:12.560 --> 0:04:15.440 Ripple got the money from the investors, and the judge 0:04:15.440 --> 0:04:18.919 said that is traditionally like a security, that's almost like 0:04:19.000 --> 0:04:23.080 selling a stock because when an investor purchases the token. 0:04:23.279 --> 0:04:27.520 Under those circumstances, Ripple used the money to further develop 0:04:27.600 --> 0:04:31.840 the Ripple ecosystem to help banks and other financial institutions 0:04:31.880 --> 0:04:36.640 to start adopting the XRP token. And in contrast, Judge 0:04:36.640 --> 0:04:40.600 Torres said that those sales that occurred on exchanges where 0:04:41.000 --> 0:04:43.640 buyers did not know who the sellers were and also 0:04:43.680 --> 0:04:46.960 had no expectation that the money that they were using 0:04:47.000 --> 0:04:50.039 to purchase XRP would in any way be used to 0:04:50.120 --> 0:04:55.320 help further development of the Ripple network and ecosystem. Those 0:04:55.360 --> 0:04:58.440 were not securities, and those are more akin to currencies 0:04:58.560 --> 0:05:02.200 or other sorts of things like bitcoin and not securities 0:05:02.200 --> 0:05:04.000 that were subject SEC regulation. 0:05:05.160 --> 0:05:08.159 Is the SEC going to appeal this or are there 0:05:08.839 --> 0:05:10.120 risks for an appeal? 0:05:10.520 --> 0:05:12.880 I think that there's a high chance that the SEC 0:05:12.960 --> 0:05:16.240 is going to appeal this decision. This is just one 0:05:16.480 --> 0:05:19.520 district court's ruling, and so far, the SEC has been 0:05:19.600 --> 0:05:25.640 very successful in its enforcement actions against cryptocurrency companies, and 0:05:26.000 --> 0:05:29.039 this decision in the Ripple case is a very notable 0:05:29.120 --> 0:05:33.200 blow and probably the first major defeat the SEC has 0:05:33.240 --> 0:05:37.680 suffered in court in its efforts to regulate cryptocurrency. There's 0:05:37.800 --> 0:05:40.840 low risk for the SEC that the appellate court would 0:05:41.120 --> 0:05:44.719 either expand the ruling or engage in any sort of 0:05:44.760 --> 0:05:48.600 reasoning that could help other cryptocurrencies. So I think, in 0:05:48.720 --> 0:05:51.880 light of the procedural posture and the reasoning that the 0:05:51.960 --> 0:05:54.840 trial court judge gave for her decision, that there would 0:05:54.880 --> 0:05:57.440 be a good chance the SEC would see appellate court 0:05:57.520 --> 0:05:58.720 review of the decision. 0:05:59.800 --> 0:06:05.360 The Second Circuit affirms the judge's decision, then that's binding 0:06:05.600 --> 0:06:10.360 on federal courts in New York, Connecticut, and Vermont. 0:06:11.760 --> 0:06:14.880 Yes, that's correct. If the Second Circuit affirms the District 0:06:14.920 --> 0:06:19.520 Court's decision, then we have binding precedent. And the fact 0:06:19.560 --> 0:06:22.440 that it's in the Second Circuit would also be very 0:06:22.440 --> 0:06:27.000 critical for the crypto industry because Number one, many cases 0:06:27.200 --> 0:06:29.520 are brought up in the Southern District of New York, 0:06:29.680 --> 0:06:33.960 which covers Manhattan, which is the center of the financial 0:06:33.960 --> 0:06:37.880 industry in the United States, and as a result, the 0:06:37.920 --> 0:06:41.599 Second Circuit has a lot of weight when it comes 0:06:41.640 --> 0:06:45.760 to its decisions in this space and many other circuit 0:06:45.800 --> 0:06:50.080 courts outside of New York and Connecticut and Vermont. Also, 0:06:50.600 --> 0:06:53.320 we'll look to the Second circuits reasoning and decisions and 0:06:53.480 --> 0:06:57.360 help them inform their own decisions with respect to how 0:06:57.760 --> 0:07:01.360 securities laws could develop and whether or not they are 0:07:01.400 --> 0:07:05.240 the appropriate vehicle to regulate cryptocurrencies. 0:07:05.920 --> 0:07:10.320 Is there another avenue for the sec besides pursuing an appeal? 0:07:10.800 --> 0:07:13.720 The SEC could turn its attention to try to maybe 0:07:13.960 --> 0:07:18.480 create draft legislation or lobbying Congress to come out with 0:07:18.560 --> 0:07:22.320 a new set of rules that are specifically applicable to 0:07:22.360 --> 0:07:26.680 the crypto industry. We've seen other jurisdictions in other countries 0:07:26.760 --> 0:07:30.760 and particularly the EU recently, where many countries have come 0:07:30.800 --> 0:07:34.240 together to come up with a framework that's specifically designed 0:07:34.640 --> 0:07:39.280 to regulate cryptocurrencies and digital tokens like XRP and these 0:07:39.280 --> 0:07:43.680 schemes include licensing, inspection, and what companies can can't do, 0:07:44.440 --> 0:07:47.120 and really a lot of what the crypto industry is 0:07:47.160 --> 0:07:49.480 asking the SEC to do is just to set out 0:07:49.480 --> 0:07:52.600 what the rules of the road are so that people 0:07:53.080 --> 0:07:56.160 can know where the lines are. Just having some firm 0:07:56.440 --> 0:07:59.760 rules will help investors come into the industry and help 0:07:59.800 --> 0:08:02.920 with early adoption of a lot of these technologies. The 0:08:03.000 --> 0:08:06.160 industry argues that the way things are now with the 0:08:06.240 --> 0:08:09.760 SEC just picking and choosing which cases to bring and 0:08:09.840 --> 0:08:13.720 just bringing enforcement cases against companies and their senior executives, 0:08:14.000 --> 0:08:17.200 is really no way to run a new and merging industry. 0:08:17.840 --> 0:08:21.720 As you mentioned, the SEC has filed lawsuits against Coinbase 0:08:21.800 --> 0:08:25.400 and Binance, two of the world's largest crypto platforms, for 0:08:25.480 --> 0:08:29.120 failing to register as securities exchanges. How does the Ripple 0:08:29.240 --> 0:08:31.480 decision affect those cases. 0:08:32.200 --> 0:08:34.960 The Ripple decision is going to be very helpful for 0:08:35.040 --> 0:08:37.920 the defendants in those cases to push back against the 0:08:38.000 --> 0:08:41.200 SEC's narrative and against the SEC's theory of the case 0:08:41.760 --> 0:08:46.840 Ripple one on the argument that exchange sales of cryptocurrencies 0:08:46.880 --> 0:08:50.600 and digital tokens of XRP at least were not securities 0:08:50.679 --> 0:08:55.680 because the investors in those transactions had no expectation that 0:08:55.679 --> 0:08:58.120 that money was going to be ultimately sent to the 0:08:58.160 --> 0:09:01.800 company or used to further develop the platform. Is really 0:09:01.840 --> 0:09:05.800 just speculation. So Coinbase and bittrix will have exactly the 0:09:05.840 --> 0:09:09.360 same arguments that as exchanges they are just helping to 0:09:09.400 --> 0:09:14.440 facilitate these sort of aftermarket transactions, and the court in 0:09:14.679 --> 0:09:17.320 the Ripples case held that those were not securities and 0:09:17.400 --> 0:09:22.160 therefore not subject to either registration at the SEC. And 0:09:22.280 --> 0:09:25.600 once it's determined that those types of digital tokens are 0:09:25.640 --> 0:09:30.400 not securities, companies like coinbase and pittricks have no obligation 0:09:30.600 --> 0:09:34.520 to register with the SEC as exchanges because that obligation 0:09:34.760 --> 0:09:37.599 merely flows from the type of instruments to trades, and 0:09:37.640 --> 0:09:41.439 if they're not securities, they don't need to register securities exchanges. 0:09:41.840 --> 0:09:44.600 Does the SEC have to argue that the judge in 0:09:44.880 --> 0:09:47.599 Ripple was wrong, Yes. 0:09:47.480 --> 0:09:50.040 That's exactly right. But the SEC is going to have to 0:09:50.160 --> 0:09:52.640 argue that the judge and the Ripple case got it wrong, 0:09:53.160 --> 0:09:56.520 and that that decision is not finding precedent for other 0:09:56.640 --> 0:09:59.840 cases and be fair too, a lot of the determination 0:10:00.240 --> 0:10:03.720 regarding whether a particular instrument is a security or not 0:10:03.960 --> 0:10:06.720 are very fact specific. That's why the Ripple case had 0:10:06.760 --> 0:10:09.520 to wait until after discovery was concluded so that a 0:10:09.600 --> 0:10:13.160 record could be developed that looks at, particularly how these 0:10:13.200 --> 0:10:16.840 instruments are marketed to people, what proceeds are used for, 0:10:17.440 --> 0:10:20.640 and what sort of communications are sent out the marketplace. 0:10:21.240 --> 0:10:24.760 And that's the determinative factor and something that the judge 0:10:24.760 --> 0:10:27.440 and the Ripple case spent a lot of time analyzing 0:10:27.640 --> 0:10:31.360 in her decision. Where those types of very factually nuanced 0:10:31.440 --> 0:10:32.480 type of elements. 0:10:32.840 --> 0:10:36.080 So was this Ripple case the first major setback for 0:10:36.200 --> 0:10:40.600 the SEC in its decade of trying to enforce against 0:10:40.640 --> 0:10:42.240 the cryptocurrency industry. 0:10:42.720 --> 0:10:42.880 Yes. 0:10:43.120 --> 0:10:46.560 The reason that the Ripple decision is so important and 0:10:46.640 --> 0:10:50.040 so noteworthy is that it really was the first major 0:10:50.120 --> 0:10:53.040 setback that the SEC has suffered in terms of its 0:10:53.160 --> 0:10:58.520 enforcement actions against cryptocurrencies. And even more importantly the nature 0:10:58.559 --> 0:11:02.040 of this setback is crucial because the judge held that 0:11:02.520 --> 0:11:05.520 the XRP token is not a security, So this really 0:11:05.559 --> 0:11:09.880 goes to the fundamental arguments that the SEC is making 0:11:09.960 --> 0:11:13.240 in many other cases just to assert their jurisdiction over 0:11:13.320 --> 0:11:16.360 this market. And Ripple, of course, is one of the 0:11:16.360 --> 0:11:20.720 most popular digital tokens. It's very well known in the market. 0:11:21.320 --> 0:11:25.600 The SEC's complaint alleges that over a billion dollars worth 0:11:25.640 --> 0:11:28.760 of XRP was sold over the years. So it's a 0:11:28.840 --> 0:11:32.079 very very significant decision just due to the fact that 0:11:32.480 --> 0:11:35.400 Ripple and XRP are such key players in the industry. 0:11:35.960 --> 0:11:39.360 But also it's noteworthy because the judge really knocked the 0:11:39.400 --> 0:11:43.160 footing out from the SEC in terms of the fundamental 0:11:43.240 --> 0:11:46.120 question of whether the SEC even has any sort of 0:11:46.200 --> 0:11:50.560 jurisdiction over these types of virtual tokens and digital assets. 0:11:50.840 --> 0:11:53.199 We'll have to wait and see whether the SEC actually 0:11:53.200 --> 0:11:55.679 does appeal. It's a pleasure to have you on, Bob. 0:11:55.720 --> 0:11:58.720 Thanks so much. That's Robert him, our partner at Tartar, 0:11:58.800 --> 0:12:04.680 Krinsky and Drogan. FTC chair Lena Kahn's aggressive agenda to 0:12:04.720 --> 0:12:09.200 beef up anti trust enforcement has suffered one setback after another, 0:12:09.840 --> 0:12:12.959 the latest a major defeat when a judge rejected the 0:12:13.000 --> 0:12:17.960 agency's efforts to block Microsoft's seventy five billion dollar acquisition 0:12:18.040 --> 0:12:21.680 of activision Blizzard, and then con had to endure hours 0:12:21.720 --> 0:12:25.760 of criticism and ridicule, along with a few questions from 0:12:25.840 --> 0:12:30.240 Republicans on the House Judiciary Committee last Thursday, questions like 0:12:30.320 --> 0:12:35.200 this from Republican Representative Kevin Kylie about the FTC's zero 0:12:35.240 --> 0:12:38.920 to four record in merger challenges. We fight hard when 0:12:38.920 --> 0:12:42.160 we believe that there is a law violation, and unfortunately 0:12:42.200 --> 0:12:46.319 things don't always go our way, but we make determinations. 0:12:46.400 --> 0:12:48.240 Or are you bringing cases that you expect to lose? 0:12:49.040 --> 0:12:51.120 You repeat, are you bringing cases that you expect to lose? 0:12:51.120 --> 0:12:54.800 Absolutely not joining me, is Anthony Sabino, Professor of Law 0:12:54.840 --> 0:12:58.440 at the Peter Tobin College of Business at Saint John's University. 0:12:59.160 --> 0:13:04.480 How big a blame bo was this Microsoft activision decision 0:13:04.720 --> 0:13:06.880 to Lena Khan's agenda. 0:13:07.480 --> 0:13:10.280 Well, it's certainly a setback, but it's only one case 0:13:10.320 --> 0:13:13.640 out of many, but certainly gives a moment of pause 0:13:13.679 --> 0:13:17.719 where she probably should be reconsidering her position again. One 0:13:17.720 --> 0:13:21.960 of the reasons that Judge Jennifer Scott Corleyott in California 0:13:22.200 --> 0:13:25.880 rejected the preliminary injunction was that she believed that the 0:13:25.960 --> 0:13:28.120 FTC did not make a strong enough showing on the 0:13:28.240 --> 0:13:31.839 facts that they would ultimately prevail with respect to blocking 0:13:31.880 --> 0:13:34.800 the merger. So what it says to the FTC going 0:13:34.840 --> 0:13:38.240 forward is that they should really pick their battles like 0:13:38.240 --> 0:13:40.959 anything else in life June, they should pick the battles 0:13:40.960 --> 0:13:42.920 that they're going to have and be more sure of 0:13:42.920 --> 0:13:46.800 themselves going forward. A litigate first, think about it later, 0:13:47.000 --> 0:13:50.560 and no compromise whatsoever is not a winning strategy. And 0:13:50.640 --> 0:13:54.080 again this is something for the Commission to consider with 0:13:54.160 --> 0:13:58.000 regard to doing more to making a compromise with the 0:13:58.040 --> 0:14:01.280 parties as opposed to going to court and only to court. 0:14:02.000 --> 0:14:06.680 So her theory, I believe is that even with losses 0:14:06.720 --> 0:14:11.640 in court, you would gradually reform the theories of antitrust 0:14:11.720 --> 0:14:15.240 and also you would send a strong signal that you 0:14:15.280 --> 0:14:18.600 know the agency is becoming a tougher sheriff. 0:14:19.320 --> 0:14:22.400 I disagree with the first and only slightly agree with 0:14:22.440 --> 0:14:25.480 the second, as follows number one, A loss is a 0:14:25.520 --> 0:14:28.200 loss is a loss, and it does not necessarily change 0:14:28.240 --> 0:14:31.120 the law. And again, while it sets forth a position, 0:14:31.600 --> 0:14:33.960 the bottom line is that if you don't prevail, well 0:14:34.040 --> 0:14:36.400 you've lost. You have not prevailed, So that's not going 0:14:36.440 --> 0:14:39.080 to change the law. At all with respect to the 0:14:39.160 --> 0:14:42.520 other intention of the current FTC chair is the fact 0:14:42.560 --> 0:14:45.560 that again she wants to show strength. But strength is 0:14:45.640 --> 0:14:49.360 demonstrated to you not only by going to court and litigating. 0:14:49.720 --> 0:14:53.480 It also can be demonstrated across the conference room table 0:14:53.920 --> 0:14:57.040 is seeking compromise with the parties to any particular for 0:14:57.080 --> 0:15:00.480 post transaction. And you can be strong in the ward room, 0:15:00.560 --> 0:15:03.160 you can be strong in settlement talks and so forth 0:15:03.400 --> 0:15:06.280 and reach a negotiated compromise, and in doing so you 0:15:06.400 --> 0:15:10.280 set a workable precedence going forward for all other cases. 0:15:10.320 --> 0:15:14.160 Because everyone it's a small, relatively small community, both legal, 0:15:14.520 --> 0:15:16.360 both in terms of the legal and business community, and 0:15:16.760 --> 0:15:19.960 everybody knows what the other side is doing. So again 0:15:20.200 --> 0:15:23.160 that awareness of being the tough cop out there is 0:15:23.200 --> 0:15:25.840 satisfied just as well. And again there's a difference, I 0:15:25.840 --> 0:15:29.800 think between being a tough cop and again being forgive 0:15:29.880 --> 0:15:33.200 me don't know, disrespect intended, but being a bit full 0:15:33.200 --> 0:15:34.840 of bluster and losing anyway. 0:15:35.680 --> 0:15:40.840 So do you know how were there any negotiations with 0:15:41.040 --> 0:15:43.960 the Microsoft over activision Blizzard? 0:15:44.840 --> 0:15:46.600 No, I can't speak to that. I'm not aware if 0:15:46.600 --> 0:15:50.480 there were in negotiations there certainly was tremendous amounts of discovery, 0:15:50.840 --> 0:15:54.160 both before Judge Corley in the District Court and also 0:15:54.200 --> 0:15:57.360 before the FTC Administrative Judge, who I believe is going 0:15:57.400 --> 0:16:00.760 to start hearing the FTC administrative action in early August. 0:16:01.160 --> 0:16:04.680 Because Judge Corley makes a strong mention of the fact 0:16:05.040 --> 0:16:07.440 that there were dozens and dozens of people in both 0:16:07.520 --> 0:16:12.320 cases deposed and literally millions of pages of exhibits, and 0:16:12.440 --> 0:16:14.400 so you know that tells you that there was certainly 0:16:14.440 --> 0:16:17.160 a lot of activity here. But again it speaks to 0:16:17.200 --> 0:16:19.440 the point that if you're going to spend all this 0:16:19.480 --> 0:16:22.360 time doing discovery, well you must have something to talk 0:16:22.360 --> 0:16:25.760 about in terms of negotiation, because the whole purpose of discovery, 0:16:25.840 --> 0:16:29.160 among other things, is to demonstrate the relative strength and 0:16:29.680 --> 0:16:32.760 strengths and weaknesses of each side. So having been so 0:16:32.880 --> 0:16:35.680 well informed, again, one can help the things that after 0:16:35.800 --> 0:16:38.920 deposing all these witnesses, all these experts, viewing millions of 0:16:38.920 --> 0:16:42.840 pages of documents, each side is not very cognizant of 0:16:42.840 --> 0:16:45.920 what the other side has in terms of their strengths 0:16:45.920 --> 0:16:48.320 and weaknesses. So therefore, sit down and talk. 0:16:49.200 --> 0:16:53.760 So but do you think that the US and particularly 0:16:53.800 --> 0:16:59.640 the FTC has not been tough enough in antitrust matters. 0:16:59.680 --> 0:17:02.000 I mean, and if you look at the European Union, 0:17:03.120 --> 0:17:03.800 they seem to be. 0:17:03.800 --> 0:17:07.760 Much tougher, right, And I think before I address that 0:17:08.800 --> 0:17:11.639 is the fact that one cannot really rely upon the 0:17:11.680 --> 0:17:14.280 European model, and with all due respect to our cousins 0:17:14.280 --> 0:17:17.359 across the ocean, is the fact that traditionally the European 0:17:17.480 --> 0:17:22.120 enter trust model has always been one where they safeguard competitors, 0:17:22.920 --> 0:17:25.320 as opposed to the distinct American model, which is where 0:17:25.359 --> 0:17:28.880 we protect competition, in other words, protect the competitive process. 0:17:29.400 --> 0:17:31.760 And again I think that's just a reflection of history. 0:17:31.760 --> 0:17:33.639 That's why they're the old world. In the new world. 0:17:33.920 --> 0:17:36.800 You have many businesses in Europe that are entrenched, important 0:17:36.840 --> 0:17:40.080 parts of the local economy and in years past partly 0:17:40.080 --> 0:17:42.840 owned by state governments, are otherwise supported for whatever reason. 0:17:43.119 --> 0:17:46.720 In America, with our tradition of free enterprise and during 0:17:46.720 --> 0:17:50.199 certain points in our history laisse fair economics, the bottom 0:17:50.240 --> 0:17:54.280 line is we're more worried about protecting competition. When the 0:17:54.359 --> 0:17:57.919 Landmark Standard Oil case was brought and the old Standard 0:17:57.920 --> 0:18:01.280 old monopoly is broken up, it wasn't to protect specific 0:18:01.640 --> 0:18:05.199 competitors of John D. Rockefeller Senior. It was done to 0:18:05.200 --> 0:18:08.640 protect the competitive process in the petroleum market. As far 0:18:08.720 --> 0:18:12.680 as being tough, again I reiterate, you can be tough 0:18:12.800 --> 0:18:15.240 in corporate you can also be tough with the negotiating table. 0:18:15.600 --> 0:18:19.000 And that varies because it is very much where I 0:18:19.040 --> 0:18:22.240 should say, at least important to influenced by politics. And again, 0:18:22.280 --> 0:18:26.240 American history is shown that a Republican administration traditionally is 0:18:26.280 --> 0:18:28.639 a little more laissez fair, a little more open to 0:18:29.160 --> 0:18:33.880 mergers and acquisitions, whereas a democratic administration is usually a 0:18:33.960 --> 0:18:37.440 little less pro business and a little more against mergers 0:18:37.440 --> 0:18:40.760 and so forth. But again that's a political choice based 0:18:40.800 --> 0:18:43.280 upon who the American people put it into office. Okay, 0:18:43.560 --> 0:18:47.240 and you can still have so we call it a 0:18:47.240 --> 0:18:51.120 skeptical view towards mergers and acquisitions, but it doesn't mean 0:18:51.160 --> 0:18:54.479 that that takes shape by going to court for every 0:18:54.520 --> 0:18:57.399 single case that comes along and refusing to or at 0:18:57.480 --> 0:19:01.359 least not pursuing thoughtfully negotiations with the relevant parties. 0:19:02.000 --> 0:19:05.080 Do you think that the Justice Department has done better? 0:19:05.160 --> 0:19:07.840 I mean, I look at they pushed the envelope with 0:19:07.960 --> 0:19:10.480 that random House Penguin merger. 0:19:10.960 --> 0:19:12.920 Yeah, I think the Justice Department is doing what they 0:19:13.000 --> 0:19:15.960 usually do and again it's interesting to see the byplay 0:19:16.040 --> 0:19:20.119 because again not to split hairs, but the role of 0:19:20.160 --> 0:19:23.439 the Anti Trust division of the DOJ is again to 0:19:23.640 --> 0:19:26.480 prosecute and enforce the anti trust laws, whereas the FTC's 0:19:26.520 --> 0:19:30.720 bailiwick is more their primary motivations more to protect competition 0:19:30.960 --> 0:19:34.280 for the purpose of protecting the consumer. And with respect 0:19:34.280 --> 0:19:37.200 to the DOJ, I think they've been somewhat more thoughtful 0:19:37.560 --> 0:19:40.200 in the cases they've brought, the Penguin Press Day the 0:19:40.240 --> 0:19:44.200 publishing case being one example. But again that's one of 0:19:44.240 --> 0:19:46.359 the other points here where one would like to see 0:19:46.600 --> 0:19:49.760 a little more shall we call it efficiency between these 0:19:49.800 --> 0:19:53.760 two components of the executive branch, to be better coordinated 0:19:53.800 --> 0:19:57.280 in that respect and maybe balance each other and again 0:19:57.320 --> 0:19:59.840 find a motive of venting as to what cases they bring. 0:20:00.000 --> 0:20:01.760 Shortantly is disposed to separately. 0:20:02.560 --> 0:20:07.800 She was before Congress last week, and Republicans at the 0:20:07.880 --> 0:20:13.399 hearing ridiculed her many times. I mean, was that appropriate? 0:20:13.960 --> 0:20:16.800 Well, I don't think it's appropriate for any American in 0:20:16.920 --> 0:20:19.840 public office or private citience to be ridiculed by Congress. 0:20:20.200 --> 0:20:24.040 But again, what is appropriate is for Congress to questions 0:20:24.080 --> 0:20:28.399 exercise oversight because the FTC is an executive agency and 0:20:28.440 --> 0:20:30.840 its job is to enforce the laws. And who makes 0:20:30.840 --> 0:20:33.639 those laws Congress, and who also has the power of 0:20:33.640 --> 0:20:37.360 the purse, and that is likewise Congress. And again, one 0:20:37.359 --> 0:20:39.639 of the points that's been raised by some others and 0:20:40.359 --> 0:20:42.520 to a lesser extent myself, I have to be honest, 0:20:42.920 --> 0:20:45.119 is that was it really was for the FTC to 0:20:45.320 --> 0:20:49.960 go so gung ho on the Microsoft Slash Activision Blizzard 0:20:49.960 --> 0:20:52.760 merger and oppose it and spend a lot of taxpayer 0:20:52.840 --> 0:20:56.320 dollars of fighting that when again, the same results are 0:20:56.320 --> 0:20:59.240 a similar result that still enforces the law still shows 0:20:59.280 --> 0:21:03.560 itself on me, still shows rigorous enforcement, aniti trust law 0:21:03.640 --> 0:21:05.720 is still good for the American public for the consumer. 0:21:06.160 --> 0:21:07.800 Could have been done. The same result could have been 0:21:07.840 --> 0:21:12.320 reached by negotiating deals with Microsoft, for example. Okay, was 0:21:12.359 --> 0:21:15.080 it necessary. In One of the things the court case 0:21:15.119 --> 0:21:17.600 bood and again Judge Curley made quite a big deal 0:21:17.600 --> 0:21:20.560 about this is the fact that the CEO of Microsoft 0:21:20.640 --> 0:21:24.080 took the stand and underwead said he promised to uphold 0:21:24.560 --> 0:21:27.200 sales of call of duty to sowning Nintendo and other 0:21:27.240 --> 0:21:29.879 competing platforms, which was a major concern of the FTC. 0:21:30.680 --> 0:21:33.480 Did you need to go to court and spend taxpayer 0:21:33.560 --> 0:21:37.440 dollars to extract the concession from the CEO of Microsoft, 0:21:37.680 --> 0:21:40.040 not to mention also the CEO of Activision Blizzards on 0:21:40.040 --> 0:21:42.000 the other side of the merger. Or could that have 0:21:42.080 --> 0:21:45.560 been done across the conference room table at far less 0:21:45.600 --> 0:21:49.399 costs and then be reduced to a stipulation? Okay? I 0:21:49.480 --> 0:21:53.400 think the latter is far more cost efficient and beneficial 0:21:53.440 --> 0:21:55.719 to the taxpayer than the former approach. 0:21:56.280 --> 0:22:00.640 Do you think that these FDC losses embold and companies 0:22:00.880 --> 0:22:05.520 to go forward with mergers or acquisitions they might not have. 0:22:06.320 --> 0:22:08.320 No, I really don't think they do. I don't think 0:22:08.320 --> 0:22:12.280 it emboldens anyone. I think what the companies do is say, look, 0:22:12.359 --> 0:22:15.720 what's good the first point of course, and this is 0:22:15.800 --> 0:22:17.840 part of the joy of speaking to your particular audiences. 0:22:18.000 --> 0:22:21.240 These are business people, okay, These are person's in business. 0:22:21.359 --> 0:22:24.000 So they're going to make a dollars and cents analysis 0:22:24.040 --> 0:22:26.439 as to what's good for their business with respect to 0:22:27.320 --> 0:22:30.119 their due diligence as to well, how will the dog 0:22:30.320 --> 0:22:33.200 react to this, how will FTC react to this? Okay? 0:22:33.240 --> 0:22:35.320 What are our obligations on the law? For example, the 0:22:35.359 --> 0:22:38.840 Partscott Reginal Act for pre mergering notification. Okay, that is 0:22:39.000 --> 0:22:41.320 just part of the calculus with respect to a course 0:22:41.359 --> 0:22:45.040 of doing business. So I don't think it emboldens anyone, 0:22:45.119 --> 0:22:48.720 but in a way it makes potential merger partners better 0:22:48.840 --> 0:22:51.840 prepared to say, Okay, well, you know what, we may 0:22:51.880 --> 0:22:54.800 have a fight with the FTC over this, so we're 0:22:54.880 --> 0:22:57.840 just going to be better prepared. And again that's something 0:22:57.920 --> 0:23:01.520 that from the government's side, is something to because if 0:23:01.560 --> 0:23:05.040 business is more on the alert for aggressive or some 0:23:05.119 --> 0:23:08.800 might even venture over aggressive enforcement by the FTC, then 0:23:08.960 --> 0:23:11.760 the constituent parties to the merger can conford and say, look, 0:23:12.160 --> 0:23:14.720 we know you're not gonna like this, okay, but we're 0:23:14.760 --> 0:23:17.960 prepared to make this concession, that concession, etc. And put 0:23:18.000 --> 0:23:20.840 things on the table. And that's really where the FTC 0:23:21.080 --> 0:23:23.080 or and even DOJ has to take a step back, 0:23:23.080 --> 0:23:25.919 in my humble opinion, say okay, fine, instead of running 0:23:25.920 --> 0:23:29.080 to court and again going through discovery and spending tax 0:23:29.080 --> 0:23:31.600 payer money on this, why don't we sit down in 0:23:31.640 --> 0:23:35.040