Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: On Tuesday, the Supreme Court justices took up the divisive
Speaker 2: issue of abortion for the first time since overturning the
Speaker 2: constitutional right to an abortion in twenty twenty two, but
Speaker 2: even some of the conservative justices who voted to overturn
Speaker 2: Roe v. Wade appeared wary of the legal attack on
Speaker 2: mifa pristone, a drug now used in more than half
Speaker 2: of the nation's abortions. Justices from across the ideological spectrum
Speaker 2: expressed skepticism that the anti abortion doctors challenging the FDA's
Speaker 2: loosening of regulations for mifa pristone have standing or the
Speaker 2: type of direct harm that gives them legal grounds to
Speaker 2: bring the suit. Here are Justices Katanji, Brown Jackson, and
Speaker 2: Neil Gorsich.
Speaker 3: I mean, it makes perfect sense for the individual doctors
Speaker 3: to seek an exemption, but as I understand that they
Speaker 3: already had that, and so what they're asking for here
Speaker 3: is that in order to prevent them from possibly ever
Speaker 3: having to do these kinds of procedures, everyone else should
Speaker 3: be prevented from getting access to this medication.
Speaker 2: So why isn't that plainly overbroad.
Speaker 4: We've had. One might call it a rash of universal
Speaker 4: injunctions or vacatures, and this case seems like a prime
Speaker 4: example of turning what could be a small lawsuit into
Speaker 4: a nationwide legislative assembly on an FDA rule or any
Speaker 4: other federal government action.
Speaker 2: Joining me is an expert in reproductive rights, Mary Ziegler,
Speaker 2: a professor at UC Davis Law School. Mary, just about
Speaker 2: everyone who listened to the oral arguments is of the
Speaker 2: opinion that a majority of the justices will turn away
Speaker 2: this challenge to mif A pristone. Is that your opinion
Speaker 2: as well?
Speaker 1: Yeah, it is. I think that it seemed that most
Speaker 1: of the justices were convinced that the plaintiffs in the
Speaker 1: case didn't outstanding.
Speaker 2: So the main issue, I mean, the real issue before
Speaker 2: we get to standing, was whether the FDA acted unlawfully
Speaker 2: when it relaxed the rules and expanded access to MiFi
Speaker 2: pristone back in twenty sixteen. Where did the justices stand
Speaker 2: on that issue?
Speaker 1: The argument, at least that the alliance for hippocratic medicine
Speaker 1: the plaintiffs wanted to make was twofold right one, that
Speaker 1: the FDA didn't have the authority either to approve mif
Speaker 1: pristone back in two thousand, or to lift subsequent restrictions
Speaker 1: on the drug in twenty sixteen or twenty twenty one,
Speaker 1: the argument being that the FDA hadn't been careful enough
Speaker 1: with the science to make all of those decisions, And
Speaker 1: there was a related argument on the twenty twenty one changes,
Speaker 1: which are what permitted abortion for reasons of telehealth. Their
Speaker 1: activists argued that the federal Comstock Act, which is in
Speaker 1: nineteenth century obscenity statute, prohibited the mailing of abortion related items,
Speaker 1: So the FDA couldn't have had the authority to approve
Speaker 1: telehealth because doing sowhat of violated federal law. So those
Speaker 1: were a lot of the arguments that in herey the
Speaker 1: court could consider. We don't imagine they'll be in a
Speaker 1: majority opinion because we think the plaintiffs will likely be
Speaker 1: held not to have standing, but some of those arguments
Speaker 1: seem to capture the interests of some of the conservative
Speaker 1: justices for down the road.
Speaker 2: Abortion opponents have looked at the Comstocked Act as a
Speaker 2: possible way to stop medication abortions. Do you think that
Speaker 2: that is a fight that will happen down the road
Speaker 2: in night.
Speaker 1: I mean, so in this case, you know, if these
Speaker 1: plaintiffs don't have standing, other plaintiffs could we know that,
Speaker 1: at least on the Comstock Act front, that both Justices
Speaker 1: Thomas and Alito signaled some interest in the idea that
Speaker 1: the Comstock Act bans mailing abortion pills and maybe other
Speaker 1: abortion related items as well. So I think, you know,
Speaker 1: whatever comes out of this case may not be a
Speaker 1: final resolution.
Speaker 2: So, as you said, the justice is from across the
Speaker 2: eyedelogical spectrum expressed doubt that the doctors and the organizations
Speaker 2: had standing to try to overturn the FDA changes. What
Speaker 2: do you think was the heart of that argument.
Speaker 1: The plaintiff's argument essentially was a speculative argument, right, So
Speaker 1: they said, there are complications that inevitably ensue when people
Speaker 1: take mitha pristone, and some percentage of those people with
Speaker 1: complications will end up in the emergency room. And then
Speaker 1: they said, it's reasonable to assume that some of those
Speaker 1: patients might end up in our emergency rooms and it
Speaker 1: may be the case that we have to treat them,
Speaker 1: and then that may cause us a conscience based injury.
Speaker 1: The problem with that, according to many of the justices
Speaker 1: was one, none of that may happen. This is all
Speaker 1: just possibilities, and two that it seemed that there was
Speaker 1: a mismatch. Is Justice Katanji Brown Jackson put it between
Speaker 1: the remedy the plaintiffs were seeking and the harm they suffered.
Speaker 1: She and Justice Scorsich asked, you know, if the problem
Speaker 1: here is that doctors may have to act against their conscience,
Speaker 1: why can't those doctors just get a conscience based objection.
Speaker 1: Why do they have to go all the way to
Speaker 1: taking a drug potentially off the market for all Americans.
Speaker 1: So there were clearly problems withithstanding from the beginning, and
Speaker 1: that's why we saw it being such a focal point
Speaker 1: at the argument.
Speaker 2: So just as Brett Kavanaugh asked only one question in
Speaker 2: the ninety minute argument, and he said, just to confirm
Speaker 2: on the standing issue, under federal law, no doctors can
Speaker 2: be forced against their consciences to perform or assist in
Speaker 2: an abortion. Correct. He asked this listener, general, it's unusual
Speaker 2: to have any justice just ask one question. Do you
Speaker 2: think he was trying to, you know, not give ammunition
Speaker 2: to opponents who've been focusing on him.
Speaker 1: I think Kavanaugh just thought this was an easy case.
Speaker 1: I mean, I think there was a signal that, you know,
Speaker 1: these doctors, if they had conscience based harms, they weren't
Speaker 1: going to be forced to do anything they didn't want
Speaker 1: to do because they already had protect actions under federal law,
Speaker 1: and that that made the kinds of injury they were
Speaker 1: talking about even more speculative. I don't think, you know,
Speaker 1: a lot of the justices seemed to think this was
Speaker 1: an easy case, and I think Kavanaugh may have been
Speaker 1: more unplugged from the argument for that reason.
Speaker 2: Now, there was also a claim we talked about the
Speaker 2: claims of the doctors, the for organizational standing, and Justice
Speaker 2: Elena Kagan said, you need a person who's your person?
Speaker 2: I thought it was sort of amusing when you know,
Speaker 2: he said, refer to the district court, and she said,
Speaker 2: I don't really care. I'm not sure I care all
Speaker 2: that much about the district court, sort of dismissing Judge
Speaker 2: kes Merrick. Did the organizational standing claim fall even worse
Speaker 2: than the claim of the doctors?
Speaker 1: I think so. I mean, I think even Justice Thomas
Speaker 1: seemed doubtful about the organizational standing claim, suggesting that it
Speaker 1: just proved way too much. So the argument that the
Speaker 1: organization had made was that it was expanding resources and
Speaker 1: time to fight for Christine that it would have liked
Speaker 1: to use on other pro life work. And several of
Speaker 1: the justices, again including Justice Thomas, who you would think
Speaker 1: would have been one of the most sympathetic to the point,
Speaker 1: has said, well, if that's true, then put in any
Speaker 1: social movement group, bring any lawsuit and say simply the
Speaker 1: fact that the lawsuit was an expensive resources they wouldn't
Speaker 1: otherwise need to bring, and that gives them standing. So
Speaker 1: there was arguably even more skepticism of that claim than
Speaker 1: the ones involving the doctors.
Speaker 2: The Conservatives sort of tore into the nationwide injunction, and
Speaker 2: we've heard this so many times about so just as
Speaker 2: Gorsig question whether a suit by a handful of individuals
Speaker 2: who've asserted a conscious objection was grounds for a federal
Speaker 2: court to topple the FDA changes nationwide, and he talked
Speaker 2: about the spike and universal injunctions. They've done this before.
Speaker 2: The justices have talked about the harm of universal injunctions,
Speaker 2: but yet they don't ever do anything about it. Do
Speaker 2: you think they might do something about it?
Speaker 1: In this case, it's possible. I mean, clearly Justice Gorsuch
Speaker 1: would like you know, I think there was sort of
Speaker 1: a soapbox moment where this is been a pet peeve
Speaker 1: of his, and he took an opportunity to hold this
Speaker 1: case up as an example of what's wrong with universal injunctions.
Speaker 1: I don't know if that's going to be too far
Speaker 1: afield from the issues at hand. Given that this ruling
Speaker 1: is likely to center on standing, Justice Corsich may write
Speaker 1: separately to complain about universal injunctions. I don't know if
Speaker 1: the majority is going to do anything in this case.
Speaker 1: I'd be sort of surprised if they did so.
Speaker 2: Mary. If, as everyone thinks, they take the off ramp
Speaker 2: and rule there's no standing here, I mean, does that
Speaker 2: leave the question open for other groups to try to
Speaker 2: challenge if a pristone.
Speaker 1: It potentially does.
Speaker 5: So.
Speaker 1: We know that in the trial court several conservative states
Speaker 1: have sought to intervene. The US Supreme Court allowed this
Speaker 1: case to proceed without joining those cases or those parties
Speaker 1: to the present matter. But they are before Judge Tasmeerk.
Speaker 1: If they don't end up having standing, it's not hard
Speaker 1: to manage that Other Conservatives will try to assert it.
Speaker 1: General Prelogger yesterday alluded to the possibility that, you know,
Speaker 1: she thought those other parties don't have standing either, and
Speaker 1: that was a point Justice Alito wanted to make a
Speaker 1: big deal about, essentially to say, well, if these people
Speaker 1: don't have standing and nobody has standing, isn't that a problem.
Speaker 1: But I don't think we know at this point that
Speaker 1: support would rule out other people potentially having standing.
Speaker 2: So this challenge to mitha pristone reached the Supreme Court
Speaker 2: so quickly, and it was a result of judge shopping.
Speaker 2: Do you think that with the judicial conference changes that
Speaker 2: this kind of a case would not be able to
Speaker 2: be judge shopped?
Speaker 1: It's interesting. I don't know. I mean, I would hope
Speaker 1: we have to see. I think how those changes play
Speaker 1: out in practice. That's certainly the outcome they're designed to achieve.
Speaker 1: But I guess I would say, we'll have to wait
Speaker 1: and see how they work in practice.
Speaker 2: And states have been stockpiling MiFi pristone in the event
Speaker 2: that the Supreme Court ruled against it.
Speaker 6: Yeah, they have.
Speaker 1: And they've been also stout filing missuprostal, another drug that
Speaker 1: would be used as an alternative you know, so methroprostone
Speaker 1: and mister prostal are used together now in medication abortions.
Speaker 1: Misuprostal on its own can also be used to produce
Speaker 1: a medication abortion, so there's a possibility that that would
Speaker 1: also occur.
Speaker 2: The Supreme Court is also going to hear a case
Speaker 2: from Idaho, where there's a total ban on all abortions
Speaker 2: except when necessary to save the mother's life. Why do
Speaker 2: you think they took that case.
Speaker 1: I don't know. I mean, I think it's likely they
Speaker 1: don't agree with the Biden administration's interpretation of the law.
Speaker 1: They've let Idaho's ban, which has some of the narrowest
Speaker 1: exceptions in the nation's stand while the litigation continues. I
Speaker 1: think they clearly think that there's something wrong with what
Speaker 1: the Biden administration is doing. The interesting question is what
Speaker 1: they think that this statute simply has nothing to do
Speaker 1: with abortion, or that they think it's likely that the
Speaker 1: language of the statute, which refer to an unborn child,
Speaker 1: actually limits in some ways what doctors, potentially even in
Speaker 1: blue states, could do. So I'm not sure which of
Speaker 1: those possibilities we'll see.
Speaker 2: Will that case be more of a test of the
Speaker 2: Dobbs decision than the Mifipress Stone cases.
Speaker 1: Yeah, it definitely will, in the sense that we're much
Speaker 1: more likely to see a ruin on the actual merits
Speaker 1: of the question rather than a decision on standing, which
Speaker 1: I mean, obviously, it's important that the court still recognizes
Speaker 1: guardrails on who can sue, but it doesn't give us
Speaker 1: much of a sense of the substance of abortion law
Speaker 1: post Dobbs in the same way that this other case could.
Speaker 2: Thanks for being on the show, Mary, that's Professor Mary
Speaker 2: Ziegler of UC Davis Law School. Coming up next on
Speaker 2: the Bloomberg Law Show, Can the Government beat Apple in
Speaker 2: its antitrust lawsuit? And later in the show, Sam Bankman
Speaker 2: Freed is facing decades in prison when he's sentenced tomorrow.
Speaker 2: I'm June Grosso and you're listening to Bloomberg. The Justice
Speaker 2: Department has filed a sweeping anti trust lawsuit against Apple,
Speaker 2: accusing the tech giant of engineering an illegal monopoly and
Speaker 2: smartphones that boxes out competitors, stifles innovation, and keeps prices
Speaker 2: artificially high. Attorney General Merrick Garland said the company's strict
Speaker 2: restrictions against third party technology forces consumers and developers to
Speaker 2: only use items under Apple's umbrella, including Apple Watches and
Speaker 2: Apple Pay. Apple says, we'll see you in court. Joining
Speaker 2: me is Jennifer Ree, Bloomberg Intelligence senior litigation analyst. Jen
Speaker 2: tell us a little about the lawsuit.
Speaker 6: Well, what the DOJ's alleging is generally that Apple is
Speaker 6: maintaining its monopoly position, or at least attempting to monopolize
Speaker 6: a couple different markets. They say, either a smartphone market
Speaker 6: in the US or a smaller market that they call
Speaker 6: premium smartphones in the US, which I guess are the
Speaker 6: more expensive smartphones essentially. And what the DOJ says is
Speaker 6: that Apple has monopoly power in these markets and that
Speaker 6: it uses its control in this power over the technologies
Speaker 6: that are needed for functionality with the iPhone, in other words,
Speaker 6: for other software or hardware to interoperate with it in
Speaker 6: a way that blocks out competitors but also locks in users.
Speaker 6: So the goal the DOJ says here is that Apple's
Speaker 6: trying to make it harder for people to switch to
Speaker 6: a non Apple smartphone in that way it can protect
Speaker 6: its monopolies. And they do lay out a few specific examples.
Speaker 6: Now they say it's really a course of conduct. But
Speaker 6: they lay out some very specific examples that they say
Speaker 6: achieve this for Apple. And one thing is prohibiting super apps. Now,
Speaker 6: these are apps that have broad functionality in a single app.
Speaker 6: Apparently they're very popular in Asia, and Apple prohibits these apps,
Speaker 6: and the Department of Justice says, well, it's because it
Speaker 6: would reduce the dependence on the iOS on the operating
Speaker 6: system that Apple runs. It also bans cloud streaming gay apps,
Speaker 6: and these kinds of cloud streaming game apps make it
Speaker 6: easier to switch because you don't really need sophisticated hardware
Speaker 6: to play the games if they're being streamed from the cloud.
Speaker 6: So it's kind of like examples like that. There are
Speaker 6: several others, and they align the suit with a very
Speaker 6: old suit in the nineteen nineties that was against Microsoft,
Speaker 6: where the company blocked middleware and its operating system that
Speaker 6: it thought would threaten its operating system monopoly. They're basically
Speaker 6: saying it's the same kind of conduct here.
Speaker 2: So Jen, what's surprising is there are people who are
Speaker 2: devoted Apple users and wouldn't use anything else and the iPhone.
Speaker 2: I have to say, I'm one, you know, I've had
Speaker 2: the iPhone forever. Aren't there those kinds of people too.
Speaker 2: There are so many people who just love.
Speaker 6: The iPhone listen absolutely, And this will be Apple's defense
Speaker 6: that what the Department of Justice is basically trying to
Speaker 6: do is make it just like Android, and right now
Speaker 6: people have a choice. You have an Android, which is
Speaker 6: a more open system phone, and then you have Apple,
Speaker 6: which is a closed ecosystem technically to give you more
Speaker 6: privacy and to give you more security. This is what
Speaker 6: Apple would say. And there are devotees and people who
Speaker 6: prefer Apple for that reason, and Apple saying, look, you're
Speaker 6: going to take away a choice if you make us
Speaker 6: open up the way Android is open. And this will
Speaker 6: be the basis for Apple's defense because in general, in
Speaker 6: these kinds of monopolization suits, if a company has legitimate
Speaker 6: pro competitive justifications for its decisions and its conduct and
Speaker 6: its contracts, then usually they're not deemed harmful under the
Speaker 6: antitrust laws. And Apple will say, we have these justifications.
Speaker 6: We do what we do because it enhances ease of use,
Speaker 6: it makes it seamless for consumers, it's more private, it's
Speaker 6: more secure, and the consumers that buy the iPhone can
Speaker 6: depend on us because of that, But what the Department
Speaker 6: of Justice has said is that's really just a pretext.
Speaker 6: You know, that's what Apple likes to put out there
Speaker 6: in the world. But in truth, if you look at
Speaker 6: some of their internal documents, some of what they do
Speaker 6: at least is simply meant to make it hard to
Speaker 6: switch and to maintain their monopoly. And so a judge
Speaker 6: is going to have to look at this evidence and
Speaker 6: soft that out. You know, which one is true?
Speaker 2: What would the government have to prove in a lawsuit?
Speaker 6: So in a monopolization lawsuit, it's really important to look
Speaker 6: at the conduct. It's really all about the market definition
Speaker 6: and all about the conduct. And I say that because
Speaker 6: if you are going to try to prove that a
Speaker 6: company's maintaining its monopoly, you have to first prove it
Speaker 6: has a monopoly. And there are a number of ways
Speaker 6: you can prove that. One of the easiest or most
Speaker 6: obvious ways is to show what market share they have
Speaker 6: in the market. And to do that, the market has
Speaker 6: to be defined. And so here the government has said
Speaker 6: it's a US market for smartphones or US market for
Speaker 6: premium smartphones, where they say Apple has shares it reach
Speaker 6: up to about seventy five percent. Now they're going to
Speaker 6: have to prove all that. They're going to have to demonstrate,
Speaker 6: probably through economic analysis, that these are proper markets, because
Speaker 6: Apple will say no, they are not. There isn't a
Speaker 6: separate market for premium smartphones, or it shouldn't be limited
Speaker 6: to just the US because June, when you change the
Speaker 6: market definition, you change the market shares, and if those
Speaker 6: market shares were to come down, Apple no longer has
Speaker 6: a monopoly, and the DJ has to prove that it does. Second,
Speaker 6: the second most important thing is to conduct, because under
Speaker 6: US laws, it is not illegal to have a monopoly.
Speaker 6: What is illegal is to engage in conduct that has
Speaker 6: really no legitimit business purpose other than to exclude your
Speaker 6: rivals in order to get to that monopoly or to
Speaker 6: keep that monopoly. So the main thing that's looked at
Speaker 6: in these lawsuits is the conduct. What is the conduct,
Speaker 6: what does it do, and what is its purpose. So
Speaker 6: here the DOJ is going to have to prove that
Speaker 6: Apple's decisions about the apps that it prevents about let's
Speaker 6: say it's smart watch not working well with non Apple smartphones,
Speaker 6: with respect to putting up some obstacles to the messaging
Speaker 6: in an I message between an Android phone and an
Speaker 6: Apple phone, some of the things that the DOJ has
Speaker 6: complained about here, they're going to have to show that
Speaker 6: these are anti competitive, that they're intended only to block
Speaker 6: out rivals and have no pro competitive legitimate business justifications,
Speaker 6: and that they actually harmed consumers if they can show that.
Speaker 6: But then Apple can show we have some legitimate business justifications.
Speaker 6: What the judge is asked to do is weigh the
Speaker 6: two against each other, not an easy task at all.
Speaker 2: Apple is expected to move to dismiss the lawsit I
Speaker 2: think with it in sixty days. Could it get some
Speaker 2: of the lawsuit dismissed, do you think? Or all of it?
Speaker 6: You know, it's really hard to get anti trust suits,
Speaker 6: especially monopolization suits dismissed, generally, because they're so fact based. Right,
Speaker 6: it's about the evidence and it's about the fact, and
Speaker 6: usually you can't do that in emotion. To dismiss an
Speaker 6: emotion to dismiss, depleting itself has to be insufficient. So
Speaker 6: I really doubt here. I don't even think the suit
Speaker 6: would be narrowed in emotion dismissed. It's possible that it would.
Speaker 6: I believe Apple would probably argue that it is under
Speaker 6: no duty under the anti trust laws to deal with
Speaker 6: its competitors or to make its products in a way
Speaker 6: that makes it easier for competitors to work with those products.
Speaker 6: But again, I think because it's such a fact based determination,
Speaker 6: the judge is going to say, look, we're going to
Speaker 6: have to collect some evidence and dig in, and that's
Speaker 6: basically how you get past that motion to dismiss as
Speaker 6: a plaintiff.
Speaker 2: You know, Apple seems to have unlimited resources to fight
Speaker 2: these legal challenges, But at what point does a challenge
Speaker 2: like this take its toll on Apple.
Speaker 6: I think Apple will fight, and they do have resources,
Speaker 6: and I think this is going to go for a
Speaker 6: long time. But the interesting thing about the toll that
Speaker 6: it takes, especially because Apple's facing so many other anti
Speaker 6: trust challenges around the world right now and also from
Speaker 6: private parties in the US, is that it does take resources.
Speaker 6: You know, as you fight the litigation the two three
Speaker 6: four years that it takes, it takes resources. It can
Speaker 6: take your eye off the ball in a sense in
Speaker 6: your own business that you do from day to day,
Speaker 6: and sometimes it can actually cause companies to become a
Speaker 6: little more cautious. Generally, in the decisions they're making in
Speaker 6: their business as they go forward to pull their competitive
Speaker 6: punches a little bit, you know, not sort of toe
Speaker 6: the line which can make them fall back in the
Speaker 6: market a bit. I mean, this is kind of what
Speaker 6: happened to Microsoft as it was fighting the Department of
Speaker 6: Justice in the nineteen nineties.
Speaker 2: But Apple has been effective in fighting off other antitrust challenges.
Speaker 6: They have been real effective over the years. And you know,
Speaker 6: the reason, I think is because, as I said, it's
Speaker 6: very hard for a plaintiff to win a monopolization suit
Speaker 6: when the defendants have legitimate and when I say legitimate,
Speaker 6: I mean something that's not just made up for the litigation,
Speaker 6: that's not a pretext, but a legitimate, pro competitive business
Speaker 6: justification for the conduct. We did this conduct because it
Speaker 6: made our business more efficient, because it made our product
Speaker 6: better for consumers. When you have reasons like that and
Speaker 6: they're backed up by the evidence, by your ordinary course,
Speaker 6: normal business documents, even if that conduct has excluded your
Speaker 6: rivals and caused some harm, usually it's considered legitimate and
Speaker 6: legal under the antitrust laws, and a plaintiff's going to lose.
Speaker 6: And I think it's been really for those reasons that
Speaker 6: Apple generally over the years has most of its cases,
Speaker 6: certainly in the Epic Games litigation against Apple, where Apple
Speaker 6: largely won most of it, they won all the federal
Speaker 6: law claims. Part of the reason for that win is
Speaker 6: because the judge did determine that some of its business
Speaker 6: most of it's actually business justifications, were legitimate and we're
Speaker 6: good for consumers.
Speaker 3: Jed.
Speaker 2: What does the Justice Department want? Let's say it wins
Speaker 2: this lawsuit, what does it want? You know?
Speaker 6: I think when it comes to remedies, when the complaints
Speaker 6: are filed, the government tends to be really vague. You know,
Speaker 6: they're going to get into that later after the liability
Speaker 6: and be much more precise about what they want. The
Speaker 6: one thing I'll say here that's different from all the
Speaker 6: other government cases against the big tech platforms is that
Speaker 6: they have not specifically specified that they want some structural remedy.
Speaker 6: So in all the other cases against Meta, against Google,
Speaker 6: against Amazon, there has been a suggestion that they are
Speaker 6: looking for some sort of a breakup or separation of business.
Speaker 6: They have not done that here, but they've asted for
Speaker 6: an injunction. I think what they're simply trying to do
Speaker 6: is break open Apple's closed ecosystem. I don't really think
Speaker 6: that they're going to get that, even if they win here.
Speaker 6: I would think it's much more likely that a remedy
Speaker 6: would be very narrowly tailored and probably wouldn't as a
Speaker 6: whole in that way impact Apple's business model. I think
Speaker 6: it would be more piecemeal, like allow super apps on
Speaker 6: the phone, you know, something like that, June, rather than
Speaker 6: really kind of drastically changing their business model.
Speaker 2: And Apple in the years it takes to go to trial,
Speaker 2: could make some adjustments on its own, you.
Speaker 6: Know what, absolutely, And you know from people who know
Speaker 6: the business far better than I do that study Apple
Speaker 6: know Apple really well. I've already seen quite a few
Speaker 6: news reports and articles and analyzes that say that actually
Speaker 6: some of what's in the complaint is stale, that they
Speaker 6: have made changes already that make some of the complaint stale,
Speaker 6: or that they're actually about to implement changes that make
Speaker 6: some of these things that thej is complaining about go away.
Speaker 6: So yes, absolutely, so.
Speaker 2: We've talked many times about how the Biden administration has
Speaker 2: tried to rein in the big tech companies with Andy
Speaker 2: Druss lawsuits. If the administration changes could this just go away?
Speaker 6: You know, maybe I would say ten years ago, I
Speaker 6: would have said likely. I think I would it have
Speaker 6: said ten years ago, there's a good chance that the
Speaker 6: case could settle, and in fact, the Microsoft suit settled
Speaker 6: after administration changed from Democrat to Republican. But I think
Speaker 6: in this day and age, no, it's less likely. It's
Speaker 6: only a maybe. It's kind of a wild card because
Speaker 6: right now you do have a wing of the Republican
Speaker 6: Party that really actually are happy about very aggressive anti
Speaker 6: trust enforcement, that agree that anti trust enforcements to lax,
Speaker 6: and wants to go after these big tech platforms. So
Speaker 6: what this will depend on, let's just say Donald Trump
Speaker 6: wins the next election, is who is appointed leadership at
Speaker 6: the Department of Justice, because that would ultimately be the
Speaker 6: decision maker.
Speaker 2: So how long do you think before this gets to trial?
Speaker 2: Just ballpark?
Speaker 6: Oh, I think a couple of years.
Speaker 2: A lot can happen in that time. Thanks so much, Jen.
Speaker 2: That's Bloomberg Intelligence Senior litigation analyst Jennifer Reed. For more
Speaker 2: of Jens analysis, you can go to Bigo on the
Speaker 2: Bloomberg Terminal. Coming up next on the Bloomberg Law Show,
Speaker 2: Sam Bankman Freed will be sentenced to and he's facing
Speaker 2: decades in prison. Four of the charges he was convicted
Speaker 2: of involved wire fraud. Even though overall white collar crime
Speaker 2: cases have dropped, prosecutions built around wire fraud have reached
Speaker 2: an all time high. Last year, prosecutors used wire fraud
Speaker 2: in more than thirteen hundred instances, up from about nine
Speaker 2: hundred and twenty sixteen. I'll give you a hint why
Speaker 2: it corresponds with a flurry of crypto cases. Remember, you
Speaker 2: can always get the latest legal news by listening to
Speaker 2: our Bloomberg Lawn podcasts. You can find them wherever get
Speaker 2: your favorite podcasts. I'm June Grosso and you're listening to Bloomberg.
Speaker 2: Sam Bankman Freed faces decades in prison when he sentence
Speaker 2: tomorrow for his role in the collapse of the FTX
Speaker 2: cryptocurrency exchange. Prosecutors have recommended the thirty two year old
Speaker 2: get forty to fifty years in prison, while his attorneys
Speaker 2: have asked for six and a half years or less.
Speaker 2: Federal Judge Lewis Kaplan, who oversaw on SBF's trial, will
Speaker 2: decide his sentence. Four of the eight charges against SBF
Speaker 2: involved wire fraud. It's become prosecutor's weapon of choice to
Speaker 2: hone in on crypto crime as the debate plays out
Speaker 2: over whether cryptocurrencies are securities. Joining me is Bloomberg Legal
Speaker 2: reporter Crystal Mesh. We hear that people are charged with
Speaker 2: wire fraud all the time, and I'm not sure that
Speaker 2: most people know what that really means. What is wirefraud?
Speaker 2: What is an encompass?
Speaker 5: So it's a pretty basic charge. It just means that,
Speaker 5: you know, it stems from the old mail fraud statute,
Speaker 5: but obviously people don't use the mail as often nowadays,
Speaker 5: so wirefraud has kind of overtaken that in importance. But basically,
Speaker 5: all it requires is that somebody uses a wire, you know,
Speaker 5: an electronic form of money transfer to further a scheme,
Speaker 5: you know, whether it be a you know, any kind
Speaker 5: of fraudgilant scheme. You know. That could be for commodities,
Speaker 5: it could be for pretty much anything. It encompasses all
Speaker 5: kinds of different transactions, and in the modern world where
Speaker 5: nearly everything goes through an electronic payment, it can really
Speaker 5: encompass the whole universe of transactions and commerce. And across
Speaker 5: the globe, white.
Speaker 2: Collar crime cases have dropped but prosecutions around wire fraud
Speaker 2: have reached an all time high.
Speaker 5: Yeah, so this is based Those statistics come from Syracuse
Speaker 5: University's Transactional Records Access clearing House, which gathers data on
Speaker 5: all kinds of things statistics by the federal government, but
Speaker 5: more specifically tracks the DOJ's how they charge cases. You know,
Speaker 5: what charge they use is the lead charge, which is
Speaker 5: usually the mosterious charge or the charge that led to
Speaker 5: the referrals to the Justice Department for prosecution. They started
Speaker 5: tracking this data in the nineteen eighties, so you know,
Speaker 5: just to be to be clear, this is when we
Speaker 5: talk about all time high. We talked about going back
Speaker 5: to say nineteen eighty six or so. But white collar
Speaker 5: crime prosecutions and that encompasses all kinds of different kind
Speaker 5: of violations in securities, fraud, anti trust violations. It's not
Speaker 5: everything that you might it's not all Wall Street related.
Speaker 5: It could be you know, as simple as kind of
Speaker 5: defrauding a program or something like that. Some of the
Speaker 5: COVID related fraud cases fall under that canon, but they've
Speaker 5: been dropping consistently over the past say twenty years or so.
Speaker 5: They peaked in twenty eleven, which makes sense given you know,
Speaker 5: the financial crisis was just a few years before that,
Speaker 5: but it's kind of every pretty much every year since then,
Speaker 5: say for a couple of small upticks in twenty eighteen
Speaker 5: and in twenty twenty one, which is probably also attributable
Speaker 5: to some of the COVID stuff. They've been dropping consistently,
Speaker 5: and there's lots and lots of reasons for that. Just
Speaker 5: Number one, in terms of you know, securities fraud, as
Speaker 5: we've talked about, has become used less and less just
Speaker 5: because it can be hard with cryptocurrencies to prove that
Speaker 5: a cryptocurrency is security, and what that means is that
Speaker 5: it's a complicated test, but basically would mean that the
Speaker 5: person who is purchasing the instrument believes that they are
Speaker 5: sharing in the common profits of the enterprise by no
Speaker 5: activity of their own. Just basically means that they are
Speaker 5: expecting to get some potential return on their investment from
Speaker 5: the activities of the people who are promoting, say the cryptocurrency.
Speaker 5: And in a lot of these cryptocurrencies, the main question
Speaker 5: is whether or not they're security or not, so using
Speaker 5: wire fraud basically allows them to get around that question
Speaker 5: and just kind of charge it as a straight fraud case,
Speaker 5: and I.
Speaker 2: Charged wire fraud in Sam Beckmann Freed's case and Elizabeth
Speaker 2: Holmes case.
Speaker 5: You know, I can't tell you exactly, you know what
Speaker 5: the reasoning is. Is there a nose case, But certainly
Speaker 5: in Sam's case, it didn't really matter to them whether
Speaker 5: and to his case, whether he was selling securities or not.
Speaker 5: It was more of a straight up fraud. And that's
Speaker 5: kind of the overarching reason why they're going to it.
Speaker 5: It's an old, old statute. Prosecutors know it very well.
Speaker 5: It simplifies the arguments they can make to the jury.
Speaker 5: They don't have to go into this kind of complicated
Speaker 5: past as to whether something is a security or not,
Speaker 5: and just kind of it's just kind of a straight
Speaker 5: up fraud claim.
Speaker 2: Federal Judge Jed Rakoff, who is one of the most
Speaker 2: well known and respected judges on the federal bench, wrote
Speaker 2: a paperback in nineteen eighty calling it the true love
Speaker 2: of prosecutors. Quote to federal prosecutors of white collar crime,
Speaker 2: the male fraud statue is our strativarius, our cold forty five,
Speaker 2: our Louisville slugger, our couason art, and our true love
Speaker 2: that remains I suspect.
Speaker 5: Yeah, that's I mean that nearly everyone I talked to
Speaker 5: brought up that quote. And it's kind of funny because
Speaker 5: as I sit here in the courthouse, we have Judge
Speaker 5: Raycoff is presiding over a civil trial in the SEC's
Speaker 5: case against terror Form, which is No Kwan's company, at
Speaker 5: which he's not even present because he's fighting he's fighting
Speaker 5: an extradition fight. And Judge Racoff is actually already ruled
Speaker 5: in this case that they were selling securities, so it
Speaker 5: isn't even in that case. So it's very unusual that,
Speaker 5: you know, at the same time we see this uptick
Speaker 5: in wire fraud prosecutions, that we see Judge Racoff kind
Speaker 5: of making similar decisions, especially given his famous quote.
Speaker 2: Yeah, and other judges have ruled in different ways, but
Speaker 2: it hasn't reached an appellet court yet.
Speaker 5: No, it has. There have been mixed rulings, you know.
Speaker 5: There's Ripple Labs famously kind of one a big porsche
Speaker 5: of its fight against the SEC. When a judge in
Speaker 5: the same courthouse, well I shouldn't say, it's been a
Speaker 5: different courthouse across the street, but she found that they
Speaker 5: weren't selling securities when they were selling their XRP token
Speaker 5: on exchanges, but that they were when they were selling
Speaker 5: them to institutional investors because those people had kind of
Speaker 5: a greater expectation that they were going to share in
Speaker 5: profits and were more sophisticated investors. But we've had others
Speaker 5: that have found, you know, the opposite thing, but some
Speaker 5: of the other things they've you know, federal prosecutors here
Speaker 5: in New York who prosecuted Sam Bankman Free to have used
Speaker 5: it in is a couple of things that are not
Speaker 5: really what we would consider traditional white collar fraud kind
Speaker 5: of things, which are you know, fraud associated with trading NFTs,
Speaker 5: which is really kind of your best example for the
Speaker 5: use of this wire fraud statute. Because NFTs are a
Speaker 5: new product, they're not really well known, or they at
Speaker 5: least they weren't when they were surging their use and
Speaker 5: their sale was surging a few years ago. They weren't
Speaker 5: really well known to the courts. And in the end
Speaker 5: it didn't matter because they just charged They charged a
Speaker 5: former open See employee, which is the exchange that they
Speaker 5: trade NFPs on. They charged him with wire fraud for
Speaker 5: insider trading based on knowledge that he got about which
Speaker 5: tokens would be featured on the website before they were.
Speaker 5: So it allows the prosecutors, like I said earlier, to
Speaker 5: kind of just use, you know, a more broad statue,
Speaker 5: to kind of address fraud as a whole at a
Speaker 5: most basic form, regardless of the trappings of that scheme,
Speaker 5: whether it's NFPs or cryptocurrency or anything else.
Speaker 2: So let's talk about Sam Bankman free sentencing tomorrow. Tell
Speaker 2: us what the various recommendations are from prosecutors, the Probation Department,
Speaker 2: and the defense.
Speaker 5: So prosecutors so US criminal sentencing guidelines, which are a
Speaker 5: complicated set of factors that are determined by the parties,
Speaker 5: the prosecutors and the defense, and then eventually the judge.
Speaker 5: They determined that he was recommended one hundred years, which
Speaker 5: is outside of Bernie Madoff and some others, would be
Speaker 5: one of the highest white collar crime sentences ever. His
Speaker 5: lawyers are seeking six and a half years. They're arguing that,
Speaker 5: you know, obviously one hundred years is way too much,
Speaker 5: and that the prosecutors who are seeking forty to fifty years,
Speaker 5: they argue that's tra codian as well. So there will
Speaker 5: likely be a rather vigorous debate at the beginning of
Speaker 5: the sentencing hearing over the individual factors that go into
Speaker 5: those guideline calculations. They probably in the end that the
Speaker 5: guidelines may that the judge decides on maybe a little
Speaker 5: more or a little less, but that probably won't really
Speaker 5: inform his sentence as much. He's gonna he's gonna weigh
Speaker 5: all kinds of different factors here, including his age, you know,
Speaker 5: his lack of any criminal history before this, and of
Speaker 5: course the eyes of the multi billion dollar size of
Speaker 5: his fraud. So there's a lot of things that go
Speaker 5: into it. It's going to be probably take a few
Speaker 5: hours to take place and for the judge pronounced sentence,
Speaker 5: but it will be a very vigorous debate between the
Speaker 5: two sides, and we would expect to hear from Sam himself,
Speaker 5: and it's going to be very interesting.
Speaker 2: Chris, So, I've been reading that the victims of the
Speaker 2: collapse of FTX, a lot of most are going to
Speaker 2: get their money back. Does that play into the judge's sentence?
Speaker 5: That is an argument that his lawyers are making. It
Speaker 5: may go into more that may not matter in the
Speaker 5: grand scheme of things. The judge may find that whether
Speaker 5: or not people are made whole by It doesn't mean
Speaker 5: that he didn't, you know, try to defraud them. That
Speaker 5: is more likely to inform whatever kind of you know,
Speaker 5: restitution or forfeiture he might have to pay after the
Speaker 5: fact because his lawyers of our gu there was no
Speaker 5: loss in this case because of what you just said,
Speaker 5: because that it's likely that there will be enough money
Speaker 5: to repay the victims. But of course the government disagrees
Speaker 5: with that convention, and it's likely going to argue that
Speaker 5: he should pay back billions of dollars.
Speaker 2: And Judge Caplan, you know, we've talked before about he
Speaker 2: was very tough with sbfs. But how is he at sentencing?
Speaker 5: He's not from the cases we look he is, he doesn't.
Speaker 5: He doesn't. Really. He's definitely going to impose a serious
Speaker 5: sentence and a sentence that sends a message to deter others.
Speaker 5: But he does not appear to be as heavy handed
Speaker 5: in at white collar sentencings as his demeanor during the
Speaker 5: trial would suggest. He seems to understand the individual arguments
Speaker 5: for defendants. And let's be clear, this is not a
Speaker 5: violent crime. That usually is a big factor in whether
Speaker 5: or not a judge decides that somebody should you know,
Speaker 5: get out while they still have a life ahead of
Speaker 5: them or not. And people have varying views obviously of
Speaker 5: Sam Bankmin Freed and the conduct that he employed. But
Speaker 5: nobody can argue that there was a violence crime employee
Speaker 5: here that anyone was physically injured, So that may play
Speaker 5: greatly into his decision. And the big question is whether
Speaker 5: he's going to kind of give him a penalty for
Speaker 5: determining if he lied on the stand. That's really that
Speaker 5: could be one of the main factors that could drive
Speaker 5: his sentence higher. And we really don't know what his
Speaker 5: thinking is on that. That's entirely up to Judge Kaplan.
Speaker 2: I know you'll be watching the sentencing. Chris, thanks so
Speaker 2: much for joining us on the show. That's Bloomberg Legal
Speaker 2: Reporter Chris dol Mesh. Of course, we'll have full coverage
Speaker 2: of the sentencing of Sam Bankman Freed on tomorrow's show.
Speaker 2: And that's it for this edition of The Bloomberg Law Show.
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