Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
Speaker 2: The headline is that Musk has your data, that Musk
Speaker 2: has control of the systems as a Treasury appointee.
Speaker 3: That is unfathomable.
Speaker 2: The extraordinary empowerment of Elon Musk by Donald Trump is
Speaker 2: a headline that keeps repeating. Alarm bells rang after Musk
Speaker 2: and his young deputies gained access to the Treasury Department's
Speaker 2: computer network, where the private financial data of nearly every
Speaker 2: American is stored. That means names, phone numbers, social security information,
Speaker 2: and bank information. Many Democratic members of Congress, like Senator
Speaker 2: Mark Warner of Virginia and Representative Ayanna Presley of Massachusetts,
Speaker 2: joined protests this week in d c against the world's
Speaker 2: richest man and his Department of Government efficiency.
Speaker 4: You've got we don't know anything about, looking at potentially
Speaker 4: all of our personal information, all of the money flows
Speaker 4: that go out of Treasury. The Banking Committee needs to
Speaker 4: bring up the dose folks who are illegally in Treasury
Speaker 4: and have them testify. I am so tired of these
Speaker 4: billionaire boys in their grubby.
Speaker 2: Little hands, Treasury Secretary Scott Bessen told Bloomberg it was
Speaker 2: a lot of misinformation.
Speaker 5: There is no tinkering with the system. They are on
Speaker 5: read only. They are looking. They can make no changes.
Speaker 5: It is an operational program to suggest improvement.
Speaker 2: Nevertheless, a DC federal judge placed temporary limits on Doze's
Speaker 2: access after a group of unions sued. So far, the
Speaker 2: courts have been the only restraint on the Trump administration,
Speaker 2: with judges issuing a mere of court orders this week, delaying, limiting,
Speaker 2: or outright blocking Trump's actions. My guest is an expert
Speaker 2: in constitutional law, Harold Krent, a professor at the Chicago
Speaker 2: Kent College of Law. How at this point does it
Speaker 2: seem as if Trump is issuing these executive orders without
Speaker 2: any consideration of their legality?
Speaker 6: In my mind, he's acting with respects of the law,
Speaker 6: sort of the way he is with respect to foreign policy,
Speaker 6: and the way he did with business or which was
Speaker 6: to start out dramatically asking for the moon, frightening everybody,
Speaker 6: and then slowly chipping away at demands. And it's proved
Speaker 6: effective in business to a large extent. I don't know
Speaker 6: how effective it'll be with tariffs and other kinds of
Speaker 6: international relations, and I think it'll be slightly effective with
Speaker 6: respect to legal challenges as well.
Speaker 2: Let's turn to musk sweeping moves to downsize the federal government.
Speaker 2: He orchestrated a physical takeover of the US US Agency
Speaker 2: for International Development, which he's trying to shudder. His people
Speaker 2: are doing who knows what, not only a treasury, but
Speaker 2: at the Department of Education, the Department of Labor, et cetera.
Speaker 2: Trump did sign an executive order giving Musk's workers unfettered
Speaker 2: access to government agencies. But as a professor once told me,
Speaker 2: executive orders are just pieces of paper.
Speaker 6: Yeah, in so many areas, there's a level of violations
Speaker 6: of congressional enactments. Some are more egregious than others, some
Speaker 6: are subtle. I mean, the role of Musk as a
Speaker 6: special governmental employee at this time is one of those
Speaker 6: gray areas, because there is a role for special governmental
Speaker 6: employee that can assume powers for a limited period of time,
Speaker 6: and so far obviously Musk has not exceeded that. But
Speaker 6: in terms of what he's actually done, there appears to
Speaker 6: be violation differences of the privacy actedturas are getting access
Speaker 6: of all those Social Security numbers. That's a pretty good indication.
Speaker 6: And of course the USAID was set up by Congress,
Speaker 6: So a presidential order cannot dismantle an agency that's been
Speaker 6: chartered by Congress. So I think there's a spectrum of action.
Speaker 6: Some appear to be clearly unconstitutional, like the birthrate Citizenship Order.
Speaker 6: Some are closer in question. There's another lawsuit that was
Speaker 6: stiled gave against Chicago or its sanctuaries city policies. I
Speaker 6: think it's a closer call in terms of where you
Speaker 6: draw the line. So there's just a lot that's being
Speaker 6: thrown up against the wall, but some have some merit,
Speaker 6: and it's going to take a while for the courts
Speaker 6: to unravel. That we haven't mentioned yet, the whole challenge
Speaker 6: to the independent agencies, since he's fired a member of
Speaker 6: the National Labor Relations Board, which is an independent agency
Speaker 6: that I think has a chance of success ultimately a
Speaker 6: Supreme Court, given what the Supreme Court has said previously.
Speaker 6: But whether Trump then can take the next step and
Speaker 6: try to get rid of civil service, I'm far more
Speaker 6: dubious about that.
Speaker 2: Also, it seems like there's absolutely no oversight. In a
Speaker 2: sort of Friday night massacre, he fired the inspectors general
Speaker 2: for at least seventeen agencies.
Speaker 6: Well, Congress has a structure in place that allows for
Speaker 6: dismissal of the spector generals, but Trump didn't follow it,
Speaker 6: So in that sense, obviously the resort is to court.
Speaker 4: Again.
Speaker 6: We'll have to wait see things play out. But I
Speaker 6: think what's really frightening is not just that the Doge
Speaker 6: got the private information. The question is what do they
Speaker 6: really want to do with it? Do they really want
Speaker 6: to just make the government more efficient and make sure
Speaker 6: payments aren't going to the wrong people. That's one thing.
Speaker 6: It's another thing to have kind of a deep state
Speaker 6: and have big Brother watching everything we do because we
Speaker 6: all have personal identifiers, and that must people may be
Speaker 6: sort of tacking on to these personal identifiers other kinds
Speaker 6: of individual indications for statistics, which gives rise to kind
Speaker 6: of Chinese type of big government watching all of us.
Speaker 6: We're not there yet, but that is at least one step.
Speaker 3: Of the way.
Speaker 2: By the way, I do want to mention that one
Speaker 2: of those two Musk employees at Treasury resigned on Thursday
Speaker 2: after some of his social media posts were described as racist.
Speaker 2: There's also a lot of controversy and a lawsuit over
Speaker 2: what's been called buyout offers for some two million federal employees.
Speaker 2: They're not really buyout offers. They're more like deferred resignation offers.
Speaker 2: So dose emailed federal employees to resign and be paid
Speaker 2: until the end of September or risk losing their jobs.
Speaker 2: There are problems with this offer because a there's a
Speaker 2: federal rule that administrative leave can only be used for
Speaker 2: ten working days a year, and b the government hasn't
Speaker 2: been funded past March fourteenth.
Speaker 6: On this level, I think that's the action. Amisation is
Speaker 6: probably legal, just like any other kind of buyouts. And yes,
Speaker 6: there are issues about what happens if funding drives out
Speaker 6: in terms of paying these settlements, and maybe they'll be
Speaker 6: able to use some of the money from somewhere else
Speaker 6: to pay the settlements going forward, if that part is
Speaker 6: obviously unclear, that the idea in basic of saying to
Speaker 6: a federal employee, you have a right under civil service
Speaker 6: to continue your job, but we will give you an
Speaker 6: incentive to leave early, and when some of them were
Speaker 6: planning to leave anyway, I think that probably is closer
Speaker 6: to the legal line in comparison to some of the
Speaker 6: other moves the administration has been making. I mean, maybe
Speaker 6: there are some procedural issues that I'm not aware of
Speaker 6: that the SPORT will look to to try to stop
Speaker 6: the buyout, you know, questions of again, can you bind
Speaker 6: the federal government to make these payments when there is
Speaker 6: not continuing funding? You know, I think that lots of
Speaker 6: issues are contingent upon continual funding by the government and
Speaker 6: not hitting the debt fealing, et cetera. But again, in
Speaker 6: comparison to the other moves that we've been seeing in
Speaker 6: terms of discharge of general, the discharge of the pediven LRB,
Speaker 6: that's dismantling of AID, I think this is far less
Speaker 6: concerning than some of the other moves the Trump administration
Speaker 6: is making.
Speaker 2: We should find out more about this on Monday, because
Speaker 2: a Massachusetts judge has temporarily paused the buyout offer until
Speaker 2: a hearing on Monday. The court seemed to be the
Speaker 2: only impediment to Trump's executive orders, some of which are
Speaker 2: clearly beyond his presidential power, like the funding freeze and
Speaker 2: the ending of birthright citizenship. This week, two federal judges,
Speaker 2: one in Seattle and one in Maryland, block Trump's birthright
Speaker 2: citizenship order, and Seattle judge John Kunauer accused Trump of
Speaker 2: trying to change the constitution.
Speaker 1: There are moments in the world's history when people look
Speaker 1: back and ask where were the lawyers? Where were the judges?
Speaker 1: In these moments, the rule of law becomes a specially
Speaker 1: vulnerable I refuse to let that be can go dark today.
Speaker 6: Yeah, and the big picture is are the guard RILs
Speaker 6: going to come from nowhere? Or are they going to
Speaker 6: come from the court or from Congress? Ultimately, and members
Speaker 6: of the Republican Congress idly going to say, you know,
Speaker 6: we were elected to do an independent job, and the
Speaker 6: president has taken away our legislative authority. We don't know
Speaker 6: where the guardils are going to come, and we just
Speaker 6: have to hope that one of those two branches will
Speaker 6: be able to step up and limit some of the
Speaker 6: cruiter moves that the administration is already taken.
Speaker 2: Speaking of courts, let's talk about the Supreme Court. On
Speaker 2: the last day of the last term, the court issued
Speaker 2: that controversial decision giving presidents immunity from prosecution for official acts.
Speaker 2: A lot of the conservative Supreme Court justices also ascribed
Speaker 2: to the unitary executive theory, under which the president has
Speaker 2: sole authority over the executsative branch, and then of course,
Speaker 2: the Court has been sort of taking a sledgehammer to
Speaker 2: agency power. So what do you think will the Supreme
Speaker 2: Court be supportive of Trump? They were not in his
Speaker 2: last term, but they were this last year.
Speaker 6: Absolutely. I mean, I think that community decision is a
Speaker 6: one off. It's a terrible decision for what the Court
Speaker 6: will do in the future. But the Court has adopted,
Speaker 6: as you mentioned, the form of the unitary executive Authority,
Speaker 6: which means the president should be able to fire any
Speaker 6: policy maker at will in order to make sure that
Speaker 6: all actions that are final of the government can be
Speaker 6: traced to the president. So I would not be surprised
Speaker 6: if the Court is sympathetic with respect to giving the
Speaker 6: power to the president to fire agency head officials, including
Speaker 6: most fighting We need the head of the FED, because
Speaker 6: that's just another type of policy that's being administered by
Speaker 6: right now, an independent agency head. But I don't think
Speaker 6: that even if the Supreme Court takes that step, they
Speaker 6: will expand the unitary to say that the civil service
Speaker 6: is an unconstitutional Many unions right now public employee beings
Speaker 6: are very concerned that the next objective of the Trump
Speaker 6: administration will put the civil service in the cross hears,
Speaker 6: and I think the court will be sympathetic to the
Speaker 6: principles under civil service.
Speaker 2: Of course, Trump is going to keep appealing to the
Speaker 2: Supreme Court. That's been his pattern. But it'll be interesting
Speaker 2: to see how many of these cases the justices actually
Speaker 2: decide to take. Thanks so much. How that's Professor Harold
Speaker 2: Krent of the Chicago Kent College of Law coming up
Speaker 2: next on the Bloomberg Law Show. Why FBI agents are
Speaker 2: suing the Justice Department. I'm June Grosso and you're listening
Speaker 2: to Bloomberg time and time again. Donald Trump has promised
Speaker 2: to exact revenge against those involved in the cases against him.
Speaker 7: Look, when this election is over, based on what they've done,
Speaker 7: I would have every right to go after them. And
Speaker 7: it's easy and sometimes revenge can be justified, though, I
Speaker 7: have to be honest, you know, sometimes it can.
Speaker 2: And the President seems to be keeping those promises with
Speaker 2: purges at the FBI and Justice Department, where dozens of
Speaker 2: senior career officials have been pushed out and thousands more
Speaker 2: FBI agents may follow them out the door. Because the
Speaker 2: Justice Department has had a list compiled of all bureau
Speaker 2: employees who worked on the criminal investigations into Trump or
Speaker 2: the January sixth riots, to quote determine whether any additional
Speaker 2: personnel actions are necessary. So two groups of FBI agents
Speaker 2: went to federal court to prevent the government from disclosing
Speaker 2: the names on that list, fearing it could lead to
Speaker 2: retaliation against them. After all, January sixth rioters who were
Speaker 2: pardoned by Trump have already taken to social media, identifying
Speaker 2: prosecutors and agents who worked on their cases and making threats.
Speaker 6: But I will tell you now, it's our church.
Speaker 2: One of the lawsuits cites these comments by Enrique Tario,
Speaker 2: the former leader of the Proud Boys, who was serving
Speaker 2: a twenty two year sentence before his pardon.
Speaker 6: The people who did this, they need to feel the heat.
Speaker 6: They need to be put behind bars.
Speaker 2: At a hearing before DC Federal Judge Giacab on Friday,
Speaker 2: the US government agreed not to make that list of
Speaker 2: FBI employees public, either directly or indirectly, until the judge
Speaker 2: rules on the merits of the lawsuits, so a temporary solution.
Speaker 2: My guest is national security law expert Brad Moss, a
Speaker 2: partner at Mark Zaid. He represents the seven FBI agents
Speaker 2: and the FBI Agents Association in their lawsuit against the
Speaker 2: Justice Department, rad tell us what's been happening at the FBI.
Speaker 3: So what's been transpiring at the moment with the FBI
Speaker 3: and the Justice Department is that a set of instructions
Speaker 3: came down from the White House pretty much starting from
Speaker 3: day one, to identify everyone involved and associated with the
Speaker 3: prosecutions and investigations not only into Donald Trump, but also
Speaker 3: everyone who was prosecuted for the January sixth riots and
Speaker 3: the seditious attempts. The set of prosecutors from the January
Speaker 3: six cases that specifically were on Jack Smith's team that
Speaker 3: went after Donald Trump. Those individuals apparently were already fired
Speaker 3: without cause, which is something that will likely be subject
Speaker 3: to litigation. But the more immediate and more widespread concern
Speaker 3: is that the Just Department ordered the FBI to compile
Speaker 3: a list identify everyone within the FBI. Special Agents Technical
Speaker 3: Assistance supports that Fredericks xameters everything to pile list and
Speaker 3: send it to the Justice Department to identify everyone involved
Speaker 3: in any of the January sixth investigations and prosecutions. With
Speaker 3: the obvious concern being not only this, it is going
Speaker 3: to be shared with the Just Department, but also with
Speaker 3: the White House, and that these names will be made public.
Speaker 3: The lawsuits that were filed, there's two different lawsuits, one
Speaker 3: of which I'm a list of attorney on are designed
Speaker 3: to keep those names of those FBI personnel private and anonymous,
Speaker 3: just like it's always done for government officials who are
Speaker 3: not otherwise public facing individuals.
Speaker 2: And the FBI has already turned over to the Justice
Speaker 2: Department that list of some five thousand FBI employees who
Speaker 2: worked on the criminal investigations into Trump or January sixth.
Speaker 3: This remains the concern is what is the purpose of this,
Speaker 3: where are they going with this, and what is the
Speaker 3: White House plan to do with this information, because remember
Speaker 3: one of the first things Donald Trump did was pardon
Speaker 3: everyone convicted further actions tied to January sixth, including the
Speaker 3: Proud Boys, including the Healthkeepers, all these violent militants who
Speaker 3: had gone in with a plan to take down the
Speaker 3: government to install Donald Trump after he lost in twenty twenty.
Speaker 3: Those individuals are now publicly threatening the FBI officials who
Speaker 3: went after them and who investigated them as part of
Speaker 3: those prosecutions, and there's a real threat to those FBI officials'
Speaker 3: lives and their safety to see their family members if
Speaker 3: their names get released in.
Speaker 2: Your lawsuit, are you concerned about dismissals or are you
Speaker 2: only concerned about retaliation?
Speaker 3: Right now, this is strictly about keeping the anonymity of
Speaker 3: the names of these various officials because no other action
Speaker 3: has been taken to actually fire these personnel. We're not
Speaker 3: there yet on bringing a challenge to it. It's premature.
Speaker 3: If DOJ does go through that, if there is a
Speaker 3: mass purge of personnel, our lawsuit could obviously be amended
Speaker 3: and updated to address that as well.
Speaker 2: Let's talk about the grounds for your suit. Are you
Speaker 2: suing under the First Amendment and the Federal Privacy Act?
Speaker 8: So?
Speaker 3: Yeah, the First and Fifth Amendment constitutional protections due process
Speaker 3: for these individuals, particularly the stigma of being defamed essentially
Speaker 3: an accused of miscarriage of justice by the White House
Speaker 3: if their names are publicly released. First Amendment retaliation in
Speaker 3: the sense that this is all about the fact that
Speaker 3: they are not politically aligned and ideologically aligned with the
Speaker 3: White House, which for civil servants is not something they're
Speaker 3: supposed to be doing. They're not supposed to be political.
Speaker 3: But also the Privacy Act, which puts strict limits on
Speaker 3: what agencies can do with the personal identifying information of
Speaker 3: personnel and where it can and cannot be disseminated absent
Speaker 3: employee consent, which, to be clear, these personnel are not
Speaker 3: giving their consent for this personal identifying information to be
Speaker 3: disseminated outside of the FBI, let alone to the public.
Speaker 2: I'm curious about whether a lot of people from the
Speaker 2: FBI have approached you with their concerns about this.
Speaker 3: So we've been approached by a myriad an untold number
Speaker 3: of personnel across the FBI, not just in DC, but
Speaker 3: across the country who we are representing as a part
Speaker 3: of this collective group. There is a select number of
Speaker 3: individuals who have agreed to be the plaintiffs in this action.
Speaker 3: We're keeping their identities protected at the moment that the
Speaker 3: court agreed to allow them to proceed as John Doe's
Speaker 3: and Jane does for now. We're also working to make
Speaker 3: sure to try to keep their identities secret from the
Speaker 3: government itself, sadly to try to prevent and avoid retaliation
Speaker 3: for having engaged in this section. But also the Agent
Speaker 3: Association is also a listed plaintiff, which represents agents across
Speaker 3: the country and has an obvious organizational interest in protecting
Speaker 3: it's personnel from this political retribution. We want this addressed immediately.
Speaker 3: We cannot wait with the way this administration is moving
Speaker 3: and just this reckless, you know, move fast and break
Speaker 3: things attitude that Elon Musk and Donald Trump have. Time
Speaker 3: is of the essence, and every day that passes is
Speaker 3: another day that these names could be disseminated to the public.
Speaker 3: So everything is about moving quickly right now to halt
Speaker 3: any dissemination until these legal issues can be resolved through
Speaker 3: standard briefing.
Speaker 2: There have been accusations from former Trump officials that FBI
Speaker 2: agents went beyond their authority when they executed the search
Speaker 2: warrants at Mara Lago. Was there any litigation or court
Speaker 2: decisions about those accusations.
Speaker 3: There is no merit to that. Every challenge regarding the
Speaker 3: lawfulness of the effidavits, the lawfulness of the searches do
Speaker 3: not even fly in motions before Judge Cannon. There has
Speaker 3: been zero valid claim that these officials went beyond the
Speaker 3: scope of their authority or otherwise violated Donald Trump's Fourth
Speaker 3: Amendment rights with respect to his actual property that was
Speaker 3: at mar Lago. This is political hatchet jobs, smearing by
Speaker 3: individuals trying to color it as being an issue of misconduct.
Speaker 3: If they had actual, verified claims of misconduct against any
Speaker 3: of these officials, they could bring it through the normal
Speaker 3: administrative process. They don't want to do that because they
Speaker 3: know those claims won't hold up to scrutiny.
Speaker 2: And so big picture, what you're saying is these are
Speaker 2: FBI agents who were doing their jobs, who were doing
Speaker 2: what they were assigned to do.
Speaker 3: Correct and not just I don't ever want to go
Speaker 3: with thee We're just doing our jobs lined because that
Speaker 3: harkens back to World War Two. These were people following
Speaker 3: lawful orders to investigate potential crime in the sense of
Speaker 3: the attack on the capital of January sixth, as well
Speaker 3: as the unauthorized retention of classified documents at Mara a Lago.
Speaker 3: Those are existing crimes. There was a standard investigation. The
Speaker 3: only quote unquote misconduct they did was they dared to
Speaker 3: be part of an investigation into Donald Trump. And the
Speaker 3: point that this White House is trying to push is
Speaker 3: that people like Donald Trump and his friends and allies
Speaker 3: are above the law and can never be investigated.
Speaker 2: There have been many controversies in the history of the FBI,
Speaker 2: But have you ever heard of anything like this with
Speaker 2: possible retaliation against thousands of agents.
Speaker 3: This makes you think of, you know, the Hoover days
Speaker 3: in terms of the idea of such blanket politicization of
Speaker 3: the just Department of the FBI. We moved beyond that
Speaker 3: after Hoover for a reason. The civil service that its
Speaker 3: protections exist for a reason. We're trying to move beyond
Speaker 3: the flaws and the states of the part of our
Speaker 3: past in this country, not just in the FBI, but
Speaker 3: in the political system itself. To allow Donald Trump to
Speaker 3: do what he's trying to do would cripple the existing
Speaker 3: system and bring us back to the days of Tammany
Speaker 3: hall and blanket abuses of power. We cannot go back
Speaker 3: to that. That is why these losses are beinging brought.
Speaker 3: That is why lawyers like us are standing up to
Speaker 3: protect these individuals.
Speaker 2: During her confirmation hearings, Pambondi, who's now the Attorney General,
Speaker 2: assured senators that she wouldn't retaliate against Justice Departments staff
Speaker 2: simply because they'd been assigned to cases involving Trump, and
Speaker 2: that the weaponization of the Justice Department was over.
Speaker 9: I will not politicize that office. I will not target
Speaker 9: people simply because of their political affiliation.
Speaker 10: Finally, during her confirmation hearing, Pambondy, who's now the Attorney General,
Speaker 10: assured senators that she wouldn't retaliate against Else's department staff
Speaker 10: simply because they've been assigned to cases involving Trump.
Speaker 9: I will not politicize that office. I will not target
Speaker 9: people simply because of their political affiliation.
Speaker 2: Trump's pick for FBI Director, Cash Patel, also testified that
Speaker 2: he wouldn't seek retribution against the President's adversaries.
Speaker 8: The only thing that will matter if I'm confirmed as
Speaker 8: a director of the FBI is a de weaponized, depoliticized
Speaker 8: system of law enforcement, completely devoted to rigorous obedience of
Speaker 8: the Constitution.
Speaker 2: Do their statements give you any reassurance that retribution at
Speaker 2: the Justice Department will be stopped?
Speaker 3: None? Those promises, those reassurances mean nothing more than the
Speaker 3: reassurances given by certain Supreme Court nominees about the sanctity
Speaker 3: of Roe v. Wade. Their politicized you know, cover your
Speaker 3: your end statements that were made to get appointed, to
Speaker 3: get confirmed, that they will happily circumvent and throw out
Speaker 3: the window once they're in power, knowing that there's no
Speaker 3: one who's going to do anything to stop them, certainly
Speaker 3: not the existing majority in the House or Senate. They
Speaker 3: have no interest in going after these officials if they
Speaker 3: end up doing what they promised they would not do.
Speaker 3: And those officials like Pam Bonding know that.
Speaker 2: Thanks so much for being on the show, Brad. That's
Speaker 2: Brad Moss of Mark Zaid. Coming up next. The Trump
Speaker 2: administration's first anti trust suit. I'm June Gross. When you're
Speaker 2: listening to Bloomberg. It didn't take very long for the
Speaker 2: Trump Justice Department to file its first anti trust lawsuit.
Speaker 2: The government sued to block Hewlett Packard Enterprises fourteen billion
Speaker 2: dollar acquisition of Juniper Networks, arguing to tie up with
Speaker 2: harm competition in the market for enterprise wireless equipment used
Speaker 2: by large companies, diversities, and hospitals. The government says the
Speaker 2: deal would consolidate the sector from three major players HPE, Juniper,
Speaker 2: and Cisco Systems down to two that would control seventy
Speaker 2: percent of the market. But Antonio'neary, the CEO of HPE,
Speaker 2: told Bloomberg that the DOJ's reasoning is flawed.
Speaker 11: We believe there is no case here. This is pro competitive.
Speaker 11: We will bring it two complementary technologies together, which also
Speaker 11: will enable us to compete outside the United States in
Speaker 11: the context of the previous competition we have with Josh
Speaker 11: against the Chinese vendors in the context of national security,
Speaker 11: particularly in cloud and the service provider space.
Speaker 2: Joining me is anti trust expert Harry First, a professor
Speaker 2: at NYU Law School. Harry Many expected the Trump administration
Speaker 2: to sort of ease up on the aggressive anti trust
Speaker 2: enforcement by the Biden administration. Is it a surprise that
Speaker 2: they brought an anti trust lawsuit so soon.
Speaker 12: It's a surprise, yes, that they didn't wait for the
Speaker 12: new team really to be in place. And the complaint
Speaker 12: is very much a Biden administration type complaint. It's written
Speaker 12: like and refers to the merger guidelines that were adopted
Speaker 12: during the Biden administration. So it's curious. I don't know.
Speaker 12: Maybe they're acting Assistant Attorney General just never got the memo,
Speaker 12: doesn't read his emails. I can't quite explain why they
Speaker 12: decided to go ahead with this, unless there was some
Speaker 12: time pressure on the deal, I'm not certain about that.
Speaker 2: Is the acting Assistant Attorney General, a Trump appointee, does
Speaker 2: he have experience in the anti trust division.
Speaker 12: So the complaint is signed by the acting Assistant Attorney General,
Speaker 12: who was put in place over the person who would
Speaker 12: normally have been put in place for this position. So
Speaker 12: the way it's gone, particularly recent times, is the most
Speaker 12: apolitical person in the division is appointed as acting It's
Speaker 12: usually it's the head of criminal enforcement, which is really
Speaker 12: a political is no one who says, oh, no, we
Speaker 12: like cartels and we think they should flourish, so enforcement
Speaker 12: against cartels. No one objects to that that I know of.
Speaker 12: So the person who was head of criminal enforcement was
Speaker 12: instead reassigned to an immigration unit, which of course is
Speaker 12: presumably something they reassigned them to so that he would
Speaker 12: then leave the same as Manish Kumar. Fine guy, I mean,
Speaker 12: you know, he couldn't have been on anybody's enemies list
Speaker 12: that I can imagine. So they reassigned him to it's
Speaker 12: a sanctuary city's task force. It's ridiculous to a waste
Speaker 12: of his talent. And then they brought in this person
Speaker 12: who has just been in the any trust divisions, just
Speaker 12: joined last year. He's been in the White House Counsel's Office,
Speaker 12: in the prior Trump administration, so they appointed him as
Speaker 12: acting head. But why he decided to go ahead and
Speaker 12: sign this complaint, I honestly do not know. And why
Speaker 12: he couldn't wait for Gail Slater to be confirmed, which
Speaker 12: I assume she will be to review it. So I
Speaker 12: don't know the answer to that.
Speaker 2: So, I mean, they're assigning environmental lawyers to that sanctuary
Speaker 2: Cities unit, whatever it is. But these people have expertise,
Speaker 2: this guy, for example, in anti trust or environment and
Speaker 2: they're setting them to a totally different.
Speaker 12: Well, it's a political I mean, just the name of it.
Speaker 12: I don't know for sure, but just the name of it.
Speaker 12: It's something designed too, I don't know, rub their noses
Speaker 12: in it. It's a perversion of any good use of
Speaker 12: talent and designed to humiliate them. I don't know. But
Speaker 12: I was sort of shocked that they did that to Kumar.
Speaker 12: It doesn't make sense, you know, in anybody's world. And
Speaker 12: for all I know, he might have been more moderate
Speaker 12: and said, you know, we should hold up and for
Speaker 12: the new head of the division to be approved by
Speaker 12: the Senate. So it's sort of a curious turn of
Speaker 12: events that, you know, this complaint is the result.
Speaker 2: So tell us about the deal.
Speaker 12: Okay, So this is a deal that was announced in
Speaker 12: January of twenty twenty four, so it's been sitting there
Speaker 12: for a little while under investigation. And it involves the
Speaker 12: w land industry, wireless local area network industry, but on
Speaker 12: the commercial scale, not the routers that you and I
Speaker 12: have in our houses that create this little local area
Speaker 12: network that we can connect to wherever we are in
Speaker 12: the house. But you know, for enterprises, universities, offices, big
Speaker 12: companies that need to connect all their employees wirelessly wherever
Speaker 12: they're working to some access point. So it's all the
Speaker 12: equipment necessary for putting those wireless local area networks together.
Speaker 12: And Cisco is the leader worldwide and in the United
Speaker 12: States apparently, and according to the complaint, it's market share
Speaker 12: is more than twice what HPE Hewlett Packard Enterprises market
Speaker 12: share is. HP is second in the US market. And Juniper,
Speaker 12: the company being acquired by HPE, it's not clear where
Speaker 12: they sit in the market. The complaint doesn't say they're third,
Speaker 12: so maybe they're not quite third in the market. Maybe
Speaker 12: they're fourth or fifth, but I don't know. Their market
Speaker 12: shares vary around the world. In different markets, but they're
Speaker 12: smaller than HPE, so Cisco's market share is more than
Speaker 12: twice what HPEES is, so they really dominate the market.
Speaker 12: And the combined market share of the three firms now,
Speaker 12: the Justice Department complaints says, will be more than seventy percent,
Speaker 12: so a very concentrated market. And the increase in concentration,
Speaker 12: which is a key figure for merger enforcement, is over
Speaker 12: the thresholds for highly concentrated market where there's a presumption
Speaker 12: that competition may be substantially lessened in the future. So
Speaker 12: the market's highly concentrated at the increases over the thresholds.
Speaker 12: And again according to the twenty twenty three guidelines which
Speaker 12: the complaint sites, that's presume to violate the law, and
Speaker 12: that's sort of the core of the case.
Speaker 2: Will there be questions about market definition or anything like that,
Speaker 2: or is it pretty clear.
Speaker 12: There are always questions about our definition because as we know,
Speaker 12: this is what any trust lawyers love, And yes, there
Speaker 12: will probably be some, but I'm not sure in the
Speaker 12: end that that's going to be the thing that matters,
Speaker 12: even though the parties will fight over it. What makes
Speaker 12: the case more interesting is that this merger was cleared
Speaker 12: by the European Commission and by the UK Competition Markets Authority,
Speaker 12: the CMA. So both of them cleared this merger in
Speaker 12: August finding really no problems, and what had been the
Speaker 12: pattern during the Biden administration had generally been all three
Speaker 12: of those agencies were in agreement on most of the
Speaker 12: controversial mergers. They were not out of step. They all
Speaker 12: agreed that they violated European law or law in the
Speaker 12: United Kingdom or the United States. So this is unusual
Speaker 12: in the sense that the US is trying to block
Speaker 12: a merger that the other two just didn't go any
Speaker 12: further with. They both issued reports saying, hey, no problem.
Speaker 2: What's gotten a lot of attention is a memo in
Speaker 2: twenty twenty one from an HPE sales leader encouraging his
Speaker 2: team to quote kill missed, exclamation point, exclamation point, exclamation point,
Speaker 2: and on and on. There were like forty exclamation points,
Speaker 2: and missed was the name of Juniper's competing product.
Speaker 12: We love those memos. Yeah, that's the kind of thing.
Speaker 12: When NHS lawyers do that, they go, oh my god,
Speaker 12: we cannot suppress those else people. You know, they keep
Speaker 12: using language that get us into trouble, and yes, that's
Speaker 12: featured prominently in the complaint. Who wouldn't feature that prominently
Speaker 12: in the complaint? But in a number of these cases,
Speaker 12: those sorts of kill memos are often used where the
Speaker 12: conduct is exclusionary. In other words, the idea it was,
Speaker 12: you know, will cut off their air supply. This is
Speaker 12: back in the old Microsoft case. They were in a
Speaker 12: browser war, and that was the colorful language, but it
Speaker 12: was to exclude them from the market. These memos are
Speaker 12: a little different in the sense that he's telling his
Speaker 12: group to really compete hard and win these contracts. So
Speaker 12: the more specific parts, beyond the concentration in the market,
Speaker 12: is that these are head to head competitors that often
Speaker 12: competed for contracts with the same parties, the same buyers,
Speaker 12: and this merger will eliminate that head to head competition
Speaker 12: that had produced lower prices. So it's kill was not
Speaker 12: so much exclusionary, you know, as in kill, but quite hard.
Speaker 12: However you want to look at it, and that's what
Speaker 12: I think the defense will say. So what you're witnessing
Speaker 12: is competition. So every time we have competition, you can't say,
Speaker 12: oh my god, let's cry foul. This is what we want.
Speaker 2: I mean, is there any doubt that consumers benefit from
Speaker 2: having three players in the market rather than two.
Speaker 12: Well, I'd be a little cautious about three rather than two.
Speaker 12: The complaint doesn't say there aren't others, and in fact,
Speaker 12: at one point the complaint says, there are many suppliers,
Speaker 12: and if you look at the markets described both in
Speaker 12: the UK and in Europe, there are obviously more players,
Speaker 12: and so there are other sources of supply, and so
Speaker 12: presumably they will argue, well, we are head to head competitors,
Speaker 12: but we're also head to head competitors with other suppliers.
Speaker 12: And if now after the merger, the new HPE Juniper
Speaker 12: decides to try to raise its price, customers will just
Speaker 12: switch to the other suppliers like Hey, Cisco which has
Speaker 12: seventy percent of the market, or other small suppliers.
Speaker 2: Does the government have a strong case here, you think so?
Speaker 12: In one sense, yes, if they get a court that's
Speaker 12: willing to stick with the twenty twenty three guidelines that
Speaker 12: emphasize the highly concentrated market, increase in concentration creating a
Speaker 12: presumption and says okay, it's up to you HPE and
Speaker 12: Juniper to justify this merger, to show why it will
Speaker 12: increase competition, what the pro competitive effects are. So if
Speaker 12: they can convince a judge to shift the burden over
Speaker 12: to the defendants to justify the deal, then I think that's,
Speaker 12: you know, they have a shot at it. They obviously
Speaker 12: have some business documents that show this head to head competition.
Speaker 12: I don't know whether they have testimony from buyers of
Speaker 12: this equipment saying we're afraid that prices are going to
Speaker 12: go up if the deal goes through, So it would
Speaker 12: be helpful to them if they have testimony like this.
Speaker 12: But it's possible that they'll be able to convince the
Speaker 12: district court judge to go ahead and stop the merger.
Speaker 12: But the reason why I'm hesitant is that fictions and
Speaker 12: you know, the theory that's being advanced, the head to
Speaker 12: head competition theory was pretty much sloughed off in both
Speaker 12: of those jurisdictions.
Speaker 2: Business leaders thought that this administration would be more amenable
Speaker 2: to deals involving tech companies, just more amenable to M
Speaker 2: and A. Is it too soon to tell whether it
Speaker 2: will be with this one lawsuit, I.
Speaker 12: Would be hesitant to draw much, if anything, from this
Speaker 12: one case. Because the person who's going to make these
Speaker 12: decisions is just not in place. Unless I had some
Speaker 12: intelligence indicating that the acting head really was acting in
Speaker 12: a way that he knew was consistent with what the
Speaker 12: incoming had wanted, I would view this as a one
Speaker 12: off and not make predictions what the future might hold
Speaker 12: until we really see what new heads of the two
Speaker 12: agencies do with the twenty twenty three merger guidelines.
Speaker 2: Always a pleasure, Harry, Thank you. That's Professor Harry First
Speaker 2: of NYU Law School, and that's it for this edition
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