WEBVTT - 3M, Synopsys, Capital One & Other Catalysts 0:00:12.320 --> 0:00:16.600 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:16.640 --> 0:00:20.239 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:20.280 --> 0:00:25.720 investment research platform of Bloomberg LP. This podcast series examines 0:00:25.760 --> 0:00:29.240 the intersection of business policy and law, and today we'll 0:00:29.240 --> 0:00:32.319 be looking at the litigation and policy catalysts that we're 0:00:32.360 --> 0:00:35.280 watching in March twenty twenty four and that we think 0:00:35.320 --> 0:00:39.000 will impact companies across a number of different sectors. My 0:00:39.080 --> 0:00:42.839 name's Eliot Stein. I'm a senior litigation analyst covering litigation 0:00:42.960 --> 0:00:45.680 in the financial sector, and I'll be your host for 0:00:45.720 --> 0:00:49.400 today March first, twenty twenty four. If you have any 0:00:49.440 --> 0:00:51.840 questions about any of the matters that we'll be talking 0:00:51.920 --> 0:00:55.040 about on this episode, please don't hesitate to reach out 0:00:55.080 --> 0:00:59.080 to us at your convenience with your questions. So we'll 0:00:59.120 --> 0:01:03.800 be discussing a hand and full of sectors and issues today. First, 0:01:03.920 --> 0:01:07.480 our anti trust analyst Jen Ree will discuss the anti 0:01:07.560 --> 0:01:12.400 trust challenges likely to face a pair of recently announced deals, 0:01:13.040 --> 0:01:16.920 the first being the thirty thirty five billion dollars Synopsis 0:01:16.959 --> 0:01:20.959 Ancest deal and the second being the Capital One Discover deal. 0:01:21.880 --> 0:01:25.360 Will then bring in Nathan Dean, our financials policy analyst 0:01:25.400 --> 0:01:28.240 in Washington, DC, who will also talk a little bit 0:01:28.240 --> 0:01:31.440 about the Capital One discovered deal, but from a bank 0:01:31.680 --> 0:01:36.000 regulator perspective, and he'll also talk about the SEC's climate 0:01:36.040 --> 0:01:39.720 disclosure rule, which looks like it'll be finalized in the 0:01:39.720 --> 0:01:43.800 coming week. Sticking with DC will then bring in our 0:01:43.959 --> 0:01:48.240 health care policy analyst Dwane Wright to discuss health insurer 0:01:48.320 --> 0:01:51.160 earnings and the potential impact of the twenty twenty four 0:01:51.200 --> 0:01:55.400 elections on the drug pricing provisions of the Inflation Reduction Act. 0:01:56.200 --> 0:02:01.000 After that, Justin Terteresi, who covers consumer and industrialiityation and policy, 0:02:01.560 --> 0:02:05.320 we'll talk about two major proposed rules expected in March 0:02:05.360 --> 0:02:10.080 by the EPA addressing pfast substances, or forever chemicals as 0:02:10.080 --> 0:02:14.320 they're commonly known. After that, Matt Schettenhelm, our TMT litigation 0:02:14.400 --> 0:02:17.640 and policy analysts, will discuss a March first hearing in 0:02:17.840 --> 0:02:21.240 Meta's lawsuit challenging the FTC's plan to tough in terms 0:02:21.600 --> 0:02:24.959 of the social media giant's five billion dollar settlement from 0:02:25.000 --> 0:02:30.520 twenty twenty concerning privacy violations. Last, but not least, I'll 0:02:30.520 --> 0:02:35.000 discuss upcoming appeal oral arguments. On March thirteenth, in a 0:02:35.120 --> 0:02:39.520 terror finance case by US service members against three banks 0:02:39.600 --> 0:02:44.160 Donska Bank, Deutsche Bank and Standard Chartered. All of this research, 0:02:44.200 --> 0:02:47.600 of course, is available on the Bloomberg terminal at big 0:02:48.520 --> 0:02:51.079 and just a quick word about Bloomberg Intelligence for those 0:02:51.080 --> 0:02:54.560 who are unfamiliar. We are the investment research platform on 0:02:54.639 --> 0:02:58.679 the Bloomberg terminal, providing in depth research on industries, companies, 0:02:58.680 --> 0:03:02.239 and markets and over and key data from bi analysts 0:03:02.280 --> 0:03:06.440 in their given industries. All right, So with all that 0:03:06.639 --> 0:03:09.440 out of the way, let's get started with the content. Jen, 0:03:09.960 --> 0:03:14.480 Let's bring you in and talk about anticipated antitrust scrutiny 0:03:14.560 --> 0:03:17.480 of a pair of thirty five billion dollar deals. The 0:03:17.560 --> 0:03:21.639 first is the Synopsis app Ancest deal in the semiconductor 0:03:21.720 --> 0:03:26.200 design software space, and the second is Capital One Discover. 0:03:26.880 --> 0:03:29.680 So on Synopsis and the answers, you've said the deal 0:03:30.200 --> 0:03:34.200 may be subject to an in depth antitrust investigation this 0:03:34.400 --> 0:03:38.160 month in March, but you aren't sure entirely about the timing. 0:03:38.400 --> 0:03:39.640 Do you want to come in and tell us where 0:03:39.640 --> 0:03:40.200 that stands? 0:03:40.800 --> 0:03:43.680 Sure? Absolutely so, you know, I think it's important. I 0:03:43.760 --> 0:03:45.760 kind of think about these deals in two phases. Will 0:03:45.760 --> 0:03:47.720 they get in depth scrutiny? And then at the end, 0:03:47.760 --> 0:03:49.960 what is going to happen. Will they get challenged? And 0:03:50.000 --> 0:03:52.520 the reason that in depth scrutiny is important is because 0:03:52.520 --> 0:03:55.480 deals either get cleared in thirty days or they get 0:03:55.520 --> 0:03:57.920 cleared in a year, and there's really no in between. 0:03:58.360 --> 0:04:01.040 So the in depth scrutiny basically triggers you into that 0:04:01.160 --> 0:04:04.560 year timing, which has implications for the deal. 0:04:04.720 --> 0:04:05.160 You know, it. 0:04:05.200 --> 0:04:07.840 Increases risk that the deal will get done and it 0:04:07.920 --> 0:04:10.680 has some implications for the seller. So this one, we 0:04:10.800 --> 0:04:13.920 do think probably has already gotten into in depth scrutiny. 0:04:14.560 --> 0:04:18.159 They signed on January fifteenth, and they agreed to notify 0:04:18.240 --> 0:04:21.560 the regulators or anti trust enforcers i should say, of 0:04:21.600 --> 0:04:25.039 their deal on January twenty ninth. Now they haven't notified 0:04:25.080 --> 0:04:26.920 the public as to whether they did that or not. 0:04:27.040 --> 0:04:32.080 That that's confidential information, they have no obligation to do so. 0:04:32.200 --> 0:04:34.680 But at this point I think they probably have filed 0:04:34.720 --> 0:04:38.280 even if that January twenty ninth date slipped, And once 0:04:38.320 --> 0:04:41.040 they do file, then the FTC has thirty days which 0:04:41.120 --> 0:04:43.880 is probably expired or is about to expire, and that 0:04:43.960 --> 0:04:47.320 would be when the in depth investigation gets launched. And 0:04:47.360 --> 0:04:49.520 we think this will be the Federal Trade Commission because 0:04:49.520 --> 0:04:51.760 it is in the semiconductor area, and that's an area 0:04:51.760 --> 0:04:54.800 where the FTC has some expertise and experience. 0:04:55.440 --> 0:04:57.120 And can you give us a summary of the deal 0:04:57.200 --> 0:05:00.000 and why you think it'll be reviewed so carefully by 0:05:00.080 --> 0:05:00.560 the STC? 0:05:01.240 --> 0:05:01.560 Sure? 0:05:01.640 --> 0:05:04.120 I mean, these companies are not the kind of companies 0:05:04.160 --> 0:05:06.080 you hear about every day in the news, so I 0:05:06.120 --> 0:05:08.160 think for sure, let me talk a little bit about 0:05:08.160 --> 0:05:11.120 what they do. Synopsis is actually one of the largest 0:05:11.120 --> 0:05:15.039 competitors in an area that's called electronic design automation tools. 0:05:15.360 --> 0:05:18.279 These are for semiconductor makers, and these are tools that 0:05:18.360 --> 0:05:21.880 the semiconductor makers use to design the chips themselves. So 0:05:21.920 --> 0:05:24.919 the customers here are really big companies like Intel and 0:05:24.960 --> 0:05:29.080 Taiwan Semiconductor, and Synopsis has really only two main competitors, 0:05:29.360 --> 0:05:33.000 which are Siemens and Cadence. Now antsis competes in a 0:05:33.000 --> 0:05:35.279 little bit of a different space. I should say. It 0:05:35.320 --> 0:05:38.200 does overlap very very slightly on the tool side of 0:05:38.279 --> 0:05:42.080 the design side, but not very much. Its main product 0:05:42.120 --> 0:05:45.720 is software for evaluating the larger electronic systems where the 0:05:45.800 --> 0:05:48.680 chips are going to end up. So it's basically simulation 0:05:48.880 --> 0:05:51.279 software that the companies, the chip makers can use to 0:05:51.360 --> 0:05:55.800 evaluate how the chips are going to perform under different environments. So, 0:05:56.160 --> 0:05:58.400 as you can understand here, they have a lot of 0:05:58.480 --> 0:06:02.480 the same customers and so ansis just sort of sits 0:06:02.520 --> 0:06:05.240 a bit downstream in the supply chain in a manner 0:06:05.279 --> 0:06:08.200 of speaking from where Synopsis is, and so they relate 0:06:08.240 --> 0:06:11.120 to each other in that sense, even though they're not 0:06:11.600 --> 0:06:14.880 They really only compete slightly on the more upstream piece, 0:06:14.920 --> 0:06:17.480 in the design piece, And I think that that's an 0:06:17.520 --> 0:06:22.200 intricate relationship. And whenever there's an intricate relationship like that, 0:06:22.720 --> 0:06:24.800 the FTC is going to want to look into it, 0:06:24.839 --> 0:06:27.680 because what they're going to worry about here is the 0:06:27.680 --> 0:06:30.679 fact that this is a highly technical market, a highly 0:06:30.720 --> 0:06:34.160 technical industry in which there has always been open standards 0:06:34.360 --> 0:06:37.479 because these technologies have to work together. The chip makers 0:06:37.520 --> 0:06:41.240 need the design tool and the simulation tool that work together, 0:06:41.760 --> 0:06:44.800 and the industry has always worked that way. But once 0:06:44.960 --> 0:06:48.160 Synopsis owns answers, the question would be, will it now 0:06:48.200 --> 0:06:51.480 have the incentive to try to block out other competitors 0:06:51.560 --> 0:06:55.560 in both areas because they could make more money that way, obviously, 0:06:56.080 --> 0:06:58.360 and they could do it by tying the products together 0:06:58.440 --> 0:07:01.839 either contractually or even and technically so that the chip 0:07:01.880 --> 0:07:04.919 customers can't really mix and match anymore. It's a vertical 0:07:04.960 --> 0:07:08.960 issue essentially of foreclosure. And I think that the FTC 0:07:09.120 --> 0:07:11.080 is going to want to dig into this to understand 0:07:11.080 --> 0:07:14.720 this technology to begin with, and then understand what how 0:07:14.800 --> 0:07:20.720 Synopsis incentives may change once they own this further downstream entity. 0:07:20.840 --> 0:07:23.000 And what do you think the STC does at the 0:07:23.080 --> 0:07:23.760 end of this review. 0:07:23.800 --> 0:07:26.560 Do you think they'll challenge the deal and if. 0:07:26.400 --> 0:07:28.240 So, what does the timing look like for that? 0:07:29.400 --> 0:07:30.560 You know, I think there are a lot of really 0:07:30.600 --> 0:07:33.160 good arguments here, and I see this deal getting done 0:07:33.560 --> 0:07:36.400 because I think on the horizontal overlap side, it's a 0:07:36.480 --> 0:07:38.600 very tiny overlap that can be fixed with a very 0:07:38.600 --> 0:07:43.400 small divestiture, well within the extent to which Synopsis agreed 0:07:43.520 --> 0:07:46.400 within the purchase agreement to sell off assets. But I 0:07:46.400 --> 0:07:48.560 think what helps here is that the companies have been 0:07:48.560 --> 0:07:52.760 partnering for years, presumably without any anti competitive impact, so 0:07:52.840 --> 0:07:56.160 that helps. And we also view the buyers as the 0:07:56.160 --> 0:07:59.120 customers as power buyers, and that means they have some 0:07:59.240 --> 0:08:02.120 ability to supplin any efforts to limit them. They can 0:08:02.160 --> 0:08:04.360 threaten to switch to other companies, they can threaten to 0:08:04.400 --> 0:08:06.320 take the work in house, which some of them actually 0:08:06.400 --> 0:08:08.880 have the capability to do that. And I think the 0:08:08.960 --> 0:08:11.320 really big thing here is that innovation is really needed 0:08:11.320 --> 0:08:13.760 in the chip area to support the AI trend. That's 0:08:13.800 --> 0:08:16.480 a big deal, and chips have to be more sophisticated 0:08:16.480 --> 0:08:19.520 to support it. And these companies say together they'll be 0:08:19.520 --> 0:08:22.160 able to conduct the research and innovate in a manner 0:08:22.360 --> 0:08:26.000 that'll support these more sophisticated chips in a way that 0:08:26.040 --> 0:08:27.880 neither one of them could do on their own. And 0:08:27.920 --> 0:08:30.600 that's pretty pro competitive. So I do think this deal 0:08:30.680 --> 0:08:33.120 will make it through one way or another. They would 0:08:33.120 --> 0:08:36.160 have to sue to try to block the companies from closing, 0:08:36.440 --> 0:08:39.000 and that would hit in about a year from now 0:08:39.240 --> 0:08:42.280 and probably take about five months before there was some 0:08:42.320 --> 0:08:43.160 sort of an outcome. 0:08:44.520 --> 0:08:48.000 And so that just suddresses the US. What about other 0:08:48.120 --> 0:08:51.200 jurisdictions around the world. Where else might the deal be 0:08:51.280 --> 0:08:53.760 subject to review and where might it run into trouble. 0:08:54.200 --> 0:08:56.000 We think it may be subject to review in the 0:08:56.040 --> 0:08:59.440 EU and UK and China. It's not entirely clear. We're 0:08:59.480 --> 0:09:03.160 not learned about China or the EU. We are a 0:09:03.200 --> 0:09:05.959 little concerned about the UK. I know it's unusual to 0:09:06.000 --> 0:09:08.440 say we're not concerned about China, because China has had 0:09:08.480 --> 0:09:13.040 a history of holding up deals involving American companies in 0:09:13.120 --> 0:09:17.360 this industry. But here we think China is actually lacking 0:09:17.400 --> 0:09:21.120 an infrastructure in this kind of software that's needed for 0:09:21.160 --> 0:09:23.199 the design of chips, and they need these companies more 0:09:23.240 --> 0:09:26.880 than these companies need China, And in that case, it's 0:09:27.040 --> 0:09:29.720 much more likely that the regulator there would clear the 0:09:29.760 --> 0:09:33.120 deal with some behavioral concessions that are good for Chinese 0:09:33.200 --> 0:09:36.560 companies rather than blocking it out right now. The UK 0:09:36.679 --> 0:09:38.800 is just really a wildcard, and they were really tough 0:09:38.840 --> 0:09:42.400 on Microsoft Activision. They didn't mind standing out from the 0:09:42.440 --> 0:09:45.760 rest of the global regulators that cleared it all except 0:09:45.760 --> 0:09:51.559 for the US, and also aren't very happy about the 0:09:51.880 --> 0:09:54.719 idea of a behavioral remedy, which obviously is something that 0:09:54.760 --> 0:09:56.960 could work here because the companies could just promise to 0:09:57.000 --> 0:09:59.640 maintain open standards. So I think that the UK is 0:09:59.640 --> 0:10:02.040 a while card, and if they have to review, which 0:10:02.080 --> 0:10:04.160 is unclear yet, that would be the one area where 0:10:04.160 --> 0:10:05.080 I would worry a little bit. 0:10:06.400 --> 0:10:10.360 Super interesting, Okay, let let's turn to another big deal 0:10:10.400 --> 0:10:14.040 that was recently announced, Capital One, and discover what are 0:10:14.040 --> 0:10:16.680 your thoughts about antitrust scrutiny of that deal? 0:10:17.160 --> 0:10:18.920 You know, this is really tough. It's one of the 0:10:18.920 --> 0:10:21.760 first deals that's come along that sits exactly in an 0:10:21.760 --> 0:10:26.520 industry that the agencies are, you know, really unhappy about 0:10:26.520 --> 0:10:29.360 the level of consolidation that's already taken place, and unhappy 0:10:29.400 --> 0:10:32.360 about the way merger enforcement has taken place in the 0:10:32.440 --> 0:10:34.640 last several years. So they're trying to tighten it up. 0:10:34.840 --> 0:10:38.000 They're trying to look at many more implications of banking 0:10:38.040 --> 0:10:40.400 deals than they have in the past, but they're also 0:10:40.480 --> 0:10:42.640 have a deal in front of them. So basically there's 0:10:42.640 --> 0:10:46.400 an anti consolidation sentiment in financial markets and banking, and 0:10:47.040 --> 0:10:49.439 particularly by the Department of Justice. I know Nathan will 0:10:49.480 --> 0:10:52.360 talk about the banking regulators. So you have a deal 0:10:52.360 --> 0:10:56.400 that sits right in that in that juncture, and you'd 0:10:56.440 --> 0:10:58.840 think knee jerk reaction would be that they're just going 0:10:58.920 --> 0:11:00.240 to want to block it. They're going to want to 0:11:00.240 --> 0:11:03.480 stop the consolidation of two huge credit card issuers. But 0:11:03.600 --> 0:11:08.760 it also has massive pro competitive efficiencies potentially, And that's 0:11:08.800 --> 0:11:12.800 an interesting situation because there has been unhappiness in the 0:11:12.840 --> 0:11:17.400 antitrust world with the Visa, MasterCard, credit card Network doopoly 0:11:17.480 --> 0:11:20.120 for many, many, many many years. I mean as long 0:11:20.160 --> 0:11:22.680 as I can remember, those two companies have either face 0:11:22.760 --> 0:11:26.080 litigations or allegations at least that they violate the antitrust laws, 0:11:26.080 --> 0:11:28.920 and not very much can be done about it. So 0:11:30.320 --> 0:11:34.240 the regulator here I should say enforcer, because the DOJ 0:11:34.360 --> 0:11:37.160 is not a regulator. It's an enforcer. But we'll have 0:11:37.200 --> 0:11:40.000 the last say, Nathan will talk about the banking regulators 0:11:40.320 --> 0:11:42.160 that will also have to approve this deal. There are 0:11:42.200 --> 0:11:45.040 many levels of approval it's going to need. But even 0:11:45.080 --> 0:11:48.040 if the banking regulators approve, the Department of Justice can 0:11:48.120 --> 0:11:50.640 still sue to block it. And I think it's really 0:11:50.679 --> 0:11:52.200 going to come down to how they look at the 0:11:52.200 --> 0:11:54.920 credit card issuing markets and how they weigh the pro 0:11:54.960 --> 0:11:58.240 competitive aspects of the deal against potential for harm. And 0:11:58.280 --> 0:12:00.560 I think where the deal could run into trouble is 0:12:00.600 --> 0:12:03.800 if the Department of Justice defines very narrow markets and 0:12:03.840 --> 0:12:06.240 credit card issuing. Rather than looking at all the credit 0:12:06.280 --> 0:12:09.240 card issuers out there that exist, which is a pretty 0:12:09.280 --> 0:12:12.280 competitive market, they could look at a smaller segment and 0:12:12.360 --> 0:12:15.200 they could say, look Capital One and discover tend to 0:12:15.280 --> 0:12:19.280 issue more credit to underserved populations, new credit card owners, 0:12:19.320 --> 0:12:23.559 subprime customers, and those that keep a revolving balance, and 0:12:23.800 --> 0:12:26.040 those are the customers that'll be harmed because they'll have 0:12:26.080 --> 0:12:30.280 fewer options, and with fewer options come increase costs, and 0:12:30.320 --> 0:12:32.280 if they look at the market that way, it may 0:12:32.320 --> 0:12:36.160 be hard to argue that the prove pro competitive benefits 0:12:36.160 --> 0:12:39.600 outweigh that harm. So I think this is going to 0:12:39.600 --> 0:12:42.280 get in depth review. It's going to take again, probably 0:12:42.320 --> 0:12:44.560 about a year. And the other wrench that you have 0:12:44.640 --> 0:12:46.199 to throw in there is that by the time a 0:12:46.240 --> 0:12:49.320 decision is made, we could have an entirely different administration 0:12:49.760 --> 0:12:51.920 and we could have different decision makers at the DOJ, 0:12:52.320 --> 0:12:54.480 and obviously that can have an impact here too. 0:12:56.720 --> 0:12:59.560 Super interesting and a lot of moving parts for sure. 0:13:00.040 --> 0:13:02.960 All right, thanks Jen, Nathan, let's bring you in. Let's 0:13:03.000 --> 0:13:08.120 stay on Capital one Discover. You know, Jen talked about 0:13:08.240 --> 0:13:11.400 antitrust review of the deal, but as she said, since 0:13:11.400 --> 0:13:13.840 this is a merger of you know, two banks, we 0:13:13.880 --> 0:13:17.800 also have to consider the potential bank regulators as well. 0:13:18.520 --> 0:13:22.840 So Nathan, come in. How should we think about you know, 0:13:22.880 --> 0:13:25.800 the bank regulatory review and do you think the FED 0:13:25.840 --> 0:13:27.800 and the OCC will approve this merger or not. 0:13:28.400 --> 0:13:31.040 So I think that what will happen is is that 0:13:31.080 --> 0:13:34.360 we're cautiously optimistic that the FED and the OCC will 0:13:34.360 --> 0:13:37.959 approve this merger. But along the timeline that Jen just mentioned, 0:13:38.000 --> 0:13:40.160 this will certainly take a year, you know. I know 0:13:40.240 --> 0:13:43.559 Capital One said that they were hoping for approval and 0:13:43.679 --> 0:13:45.920 closing at the end of twenty twenty four. I don't 0:13:45.920 --> 0:13:48.000 think that's feasible one way or the other. It's going 0:13:48.040 --> 0:13:51.320 to be twenty twenty five at the earliest. But the 0:13:51.320 --> 0:13:53.680 way that we're looking at this is that the OCC 0:13:53.880 --> 0:13:57.160 in particular has five reasons why they should be looking 0:13:57.200 --> 0:13:59.959 at bank mergers under the Bank Merger Act, and that's 0:14:00.080 --> 0:14:04.320 the impact of the community, systemic risk concerns, competition and 0:14:04.360 --> 0:14:08.960 competitive concerns, Can this new antity combat anti money laundering? 0:14:09.360 --> 0:14:13.400 And what are the managerial resources of this combined entity. Now, 0:14:13.400 --> 0:14:15.680 if you look at all those five factors, the last 0:14:15.720 --> 0:14:19.160 two the AML and the managerial resources, I think you 0:14:19.200 --> 0:14:22.000 can set those aside. So let's focus on the community, 0:14:22.040 --> 0:14:25.280 the systemic risk, and the competition. Now, when it comes 0:14:25.280 --> 0:14:28.280 to systemic risk, the OCC will even see in their principles, 0:14:28.280 --> 0:14:30.440 and we have additional research out on the terminal about 0:14:30.440 --> 0:14:32.920 this that the occ will even say that if you 0:14:32.920 --> 0:14:35.920 are known as a globally systemic Important Bank ADJESIP, so 0:14:36.000 --> 0:14:38.440 you are a Bank of America at JP Morgan or 0:14:38.480 --> 0:14:40.480 a city group, they are not going to approve a 0:14:40.520 --> 0:14:43.360 merger unless it's an emergency situation like we saw at 0:14:43.360 --> 0:14:47.760 the beginning of twenty twenty three. So in this case, though, 0:14:47.840 --> 0:14:49.640 if you take the assets of Capital One and you 0:14:49.720 --> 0:14:52.280 combine it with the assets of Discover, you get around 0:14:52.320 --> 0:14:54.880 six hundred and sixty billion, which puts it on par 0:14:55.160 --> 0:14:59.880 with US Bank and just up just north of PNC Financial. 0:15:00.280 --> 0:15:03.600 But you certainly aren't approaching that threshold of seven hundred 0:15:03.600 --> 0:15:06.680 and fifty billion dollars where the regulators would begin to 0:15:06.680 --> 0:15:09.320 get a little concern. So I don't think the systemic 0:15:09.400 --> 0:15:12.120 risk concern is all that valid, and so we can 0:15:12.160 --> 0:15:14.040 take that factor and put it into the column of 0:15:14.080 --> 0:15:19.080 being cautiously optimistic. Let's talk about competition. Jen mentioned how 0:15:19.160 --> 0:15:22.120 these are two credit card issuers coming together and it's 0:15:22.160 --> 0:15:26.520 going to increase competition against the Visa and MasterCard. For example, 0:15:26.600 --> 0:15:28.640 Senator Durbin has a bill out there called the Credit 0:15:28.640 --> 0:15:32.200 Card Competition Act, in which he is trying to increase 0:15:32.240 --> 0:15:35.560 competition for Visa MasterCard with the idea that it would 0:15:35.560 --> 0:15:39.880 lower fees. Now if Capital One were to utilize discovers network, 0:15:39.920 --> 0:15:42.360 and as of right now, we think based off of 0:15:42.400 --> 0:15:45.720 their plans and statements, they'll utilize Discover's network for debit cards. 0:15:46.360 --> 0:15:48.440 Their credit cards will probably remain on a Visa and 0:15:48.480 --> 0:15:51.880 MasterCard network for now, but over the long term, if 0:15:51.880 --> 0:15:55.520 that Discovered network has utilized more, theoretically Visa and MasterCard 0:15:55.560 --> 0:15:58.760 could see more competition. But also remember the OCC is 0:15:58.800 --> 0:16:01.680 a bank regulator, They're not really focused on credit card 0:16:01.760 --> 0:16:05.640 competition per se. So again I think cautiously optimistic the 0:16:06.120 --> 0:16:08.760 competitive nature could be put in the factor of the approval. 0:16:09.200 --> 0:16:11.880 And finally, it comes down to community impact and this 0:16:11.960 --> 0:16:14.360 has probably been the number one, if not number two, 0:16:14.480 --> 0:16:16.880 factor that the OCC and FED have been looking at 0:16:16.920 --> 0:16:19.000 over the last few years when it comes to bank 0:16:19.080 --> 0:16:23.360 mergers is what's the impact on the community. And specifically 0:16:23.440 --> 0:16:26.360 here they're looking at things called Camel's ratings. They're looking 0:16:26.360 --> 0:16:29.600 at Community Reinvestment Act ratings. These are all ratings that 0:16:29.640 --> 0:16:32.000 are behind closed doors. We never see these in the 0:16:32.000 --> 0:16:36.320 public arena, but you know, the OCC will in particular 0:16:36.520 --> 0:16:39.240 be looking at Capital One and saying, Okay, we see 0:16:39.240 --> 0:16:41.680 that you want to do this. What does this mean 0:16:41.800 --> 0:16:44.560 for individuals on the South side of Chicago? What does 0:16:44.640 --> 0:16:47.760 this mean for individuals in California? And they will go 0:16:48.160 --> 0:16:51.200 sometimes they go neighborhood by neighborhood and they say, what 0:16:51.240 --> 0:16:54.200 does this mean for those individuals here? Will they be 0:16:54.320 --> 0:16:57.320 harmed by this merger? And so you know, I have 0:16:57.360 --> 0:17:00.200 to give Capital One the benefit of the doubt here. 0:17:00.280 --> 0:17:03.000 The Capital One when they were announcing this has done 0:17:03.000 --> 0:17:06.439 a lot of that due diligence. So that, in a nutshell, 0:17:06.560 --> 0:17:10.359 is why we are very conscious, are cautiously optimistic that 0:17:10.400 --> 0:17:12.680 this approval will go forward. In twenty twenty five. 0:17:13.880 --> 0:17:19.399 You mentioned Senator Durbin's Credit Card Competition Act, which you know, 0:17:19.560 --> 0:17:23.920 I think aims to bring more competition to Visa MasterCard. 0:17:25.400 --> 0:17:27.600 What impact do you think this deal will have on 0:17:27.720 --> 0:17:31.560 that proposed legislation? So, yeah, go ahead. 0:17:31.680 --> 0:17:34.080 Oh no, it's a great question because you know, Senator 0:17:34.119 --> 0:17:35.960 Durman has already come out and said, look, this isn't 0:17:36.000 --> 0:17:39.880 gonna this isn't changing my thinking. You know, Senator Elizabeth 0:17:39.920 --> 0:17:42.320 Warren has made statements that this merger should not go ahead, 0:17:42.359 --> 0:17:45.800 and the regulator should block that. So we anticipate Senator 0:17:45.880 --> 0:17:49.200 Durbin to continue to pursue his path with this bill. 0:17:49.600 --> 0:17:51.760 And in fact, on April ninth, there's going to be 0:17:51.840 --> 0:17:56.320 hearing with the CEOs of Visa, MasterCard and American Airlines. 0:17:56.320 --> 0:17:59.320 In United Airlines, they're drawn into this because they have 0:17:59.400 --> 0:18:02.160 said that if this bill were to go forward, mileage 0:18:02.240 --> 0:18:05.359 programs with the credit cards would essentially cease to exist. 0:18:05.560 --> 0:18:07.680 And so Senator durban is saying, come to the hill 0:18:07.680 --> 0:18:10.520 and tell me that in person. But we have always 0:18:10.560 --> 0:18:14.600 had a thirty to forty percent chance that this bill 0:18:14.640 --> 0:18:17.919 would succeed, despite the fact it does have some bipartisan support. 0:18:18.320 --> 0:18:22.800 But ultimately you're pitting the financial services industry versus the 0:18:22.840 --> 0:18:27.360 credit card industry, versus the consumer advocates versus the airlines. 0:18:27.760 --> 0:18:30.520 And there are just so many different bits and pieces here. 0:18:30.840 --> 0:18:33.359 And I think that the threat that those credit card 0:18:33.720 --> 0:18:38.560 airline programs could get cut is enough that will keep 0:18:38.680 --> 0:18:41.080 enough policy makers on the sidelines for the rest of 0:18:41.119 --> 0:18:43.320 the year. But certainly it's going to bring a lot 0:18:43.359 --> 0:18:44.159 more attention to it. 0:18:46.240 --> 0:18:50.000 Great, all right, let's shift gears just a little bit. 0:18:50.080 --> 0:18:54.320 It sounds like the SCC is finally after two years, 0:18:54.640 --> 0:18:59.800 going to finalize its climate disclosure rule looks like March sixth. 0:19:00.920 --> 0:19:01.800 What are your thoughts on that? 0:19:02.200 --> 0:19:04.760 Yeah, so you know, this rule has been one of 0:19:04.840 --> 0:19:08.520 I think the highest certainly one of the more controversial 0:19:08.600 --> 0:19:10.800 rules that the SEC has put out. And what this 0:19:10.960 --> 0:19:13.760 rule requires is if you are one of sixty nine 0:19:13.840 --> 0:19:16.400 hundred public filers in the United States plus some non 0:19:16.480 --> 0:19:18.600 US filers that are here, then you would have to 0:19:18.640 --> 0:19:22.359 disclose your emissions and climate change risk. This wouldn't go 0:19:22.440 --> 0:19:24.840 from scope one, scope to and what are known as 0:19:24.840 --> 0:19:28.159 Scope three all types of emissions data. Scope three is 0:19:28.160 --> 0:19:31.520 emissions data for your supply chain and your customers. So 0:19:31.600 --> 0:19:34.320 if you're a bank and you have customers that you're financing, 0:19:34.520 --> 0:19:36.359 you would have to get their emissions data to go 0:19:36.480 --> 0:19:40.520 along with this. You know, we've heard anecdotally some conglomerates saying, look, 0:19:40.520 --> 0:19:42.879 I have fifteen thousand suppliers. Are you telling me that 0:19:42.960 --> 0:19:46.280 I have to get all the emissions data for that? 0:19:46.320 --> 0:19:50.400 And under Scope three the answer would be yes. So, however, 0:19:50.560 --> 0:19:53.439 the SEC is going to finalize sm March sixth, and 0:19:53.480 --> 0:19:55.920 according to the Bloomberg Law and some of the news reports, 0:19:55.960 --> 0:19:59.520 we've seen Scope three has been pulled out. This was 0:19:59.560 --> 0:20:04.320 actually challenge for Chairman Genzler to get approved because on 0:20:04.320 --> 0:20:07.200 one hand, and I think Elliott's going to talk about 0:20:07.200 --> 0:20:09.879 this after this, whatever they decide, there's going to be 0:20:09.920 --> 0:20:13.280 a court reaction to this. Somebody potentially could sue on this, 0:20:13.720 --> 0:20:16.000 and so you have to create a rule that potentially 0:20:16.119 --> 0:20:20.119 could be somewhat more advisable to the industry and advisable 0:20:20.160 --> 0:20:22.040 to the courts. But on the other hand, you have 0:20:22.119 --> 0:20:24.960 Senator Elizabeth Warren and some of the progressives on Capitol 0:20:25.040 --> 0:20:28.560 Hill concerned that this rule won't go far enough. All 0:20:28.600 --> 0:20:30.400 you have to do is look at the SEC meeting 0:20:30.520 --> 0:20:33.560 log from this week and there have been individuals from 0:20:33.560 --> 0:20:37.120 Senator Warren, Senator Van Hollands, Senator Tina Smith, I mean 0:20:37.560 --> 0:20:40.440 Maxine Waters from the House of Representatives. They've all been 0:20:40.440 --> 0:20:43.160 over at the SEC, probably concerned that the Scope three 0:20:43.200 --> 0:20:46.280 measure is going to be cut. Now, other provisions that 0:20:46.320 --> 0:20:48.440 we've heard that potentially could be on the chopping block 0:20:48.600 --> 0:20:51.960 is the mandatory reporting for Scope one at Scope two. Now, look, 0:20:52.000 --> 0:20:54.840 you already have to report if your climate change risk 0:20:54.960 --> 0:20:58.200 is material, but if this becomes more of a disclosure rule. 0:20:58.520 --> 0:21:02.399 We had originally anticipate or estimated eighteen point four billion 0:21:02.400 --> 0:21:05.919 dollars in costs over six years, if that is the 0:21:06.000 --> 0:21:08.640 key scope three comes out, this mandatory reporting comes out, 0:21:08.640 --> 0:21:10.920 and so forth, the rule is going to be substantially 0:21:10.960 --> 0:21:13.320 weaker than what it was proposed, and those cost estimates 0:21:13.359 --> 0:21:14.600 will certainly come down as well. 0:21:16.280 --> 0:21:19.439 That's great, And yeah, I mean you alluded to, you know, 0:21:19.480 --> 0:21:23.919 anticipate anticipated litigation, and you know, certainly my view that 0:21:23.960 --> 0:21:27.840 once the SEC finalizes this rule, we'll see in industry 0:21:27.840 --> 0:21:31.639 groups come in and to challenge it. You know, the 0:21:31.760 --> 0:21:33.920 question I get a lot is what type of arguments 0:21:34.040 --> 0:21:37.679 might we see challenging the rule? And I think, you know, 0:21:37.720 --> 0:21:43.480