1
00:00:00,120 --> 00:00:03,519
Speaker 1: We have some breaking news just came out. Bloomberg story

2
00:00:03,560 --> 00:00:05,920
Speaker 1: is saying that usn A Trust officials are poised to

3
00:00:05,960 --> 00:00:10,040
Speaker 1: sue Qualcom for allegedly using unfair practices in the way

4
00:00:10,039 --> 00:00:13,480
Speaker 1: it licenses its technology. As it happens, we have with

5
00:00:13,600 --> 00:00:19,840
Speaker 1: us UH. Jennifer Re Bloomberg Intelligence Senior Litigation analyst, Jennifer Um.

6
00:00:20,239 --> 00:00:22,040
Speaker 1: I know this news just came out, But what's what's

7
00:00:22,079 --> 00:00:23,160
Speaker 1: your reaction to it and what do you think the

8
00:00:23,239 --> 00:00:26,520
Speaker 1: significance might be. Well, you know, yes, it did just

9
00:00:26,600 --> 00:00:28,240
Speaker 1: come out, and and part of the reason these things

10
00:00:28,320 --> 00:00:29,640
Speaker 1: kind of seem like they come from out of the

11
00:00:29,680 --> 00:00:33,240
Speaker 1: blue is that the FTC has been investigating Qualcomm since

12
00:00:33,320 --> 00:00:37,320
Speaker 1: I think even early two thousand fourteen, and it's completely confidential,

13
00:00:37,600 --> 00:00:40,519
Speaker 1: and sometimes these investigations can last a year, sometimes they

14
00:00:40,520 --> 00:00:43,920
Speaker 1: can last three years, you know, until they decide whether

15
00:00:44,000 --> 00:00:46,000
Speaker 1: it should just fade away or whether they should take

16
00:00:46,000 --> 00:00:48,640
Speaker 1: steps UM. And so you never really know that what

17
00:00:48,720 --> 00:00:50,839
Speaker 1: that's going to happen. And I imagine that this probably

18
00:00:50,880 --> 00:00:54,279
Speaker 1: comes out of that investigation. UM. And what we at

19
00:00:54,320 --> 00:00:57,600
Speaker 1: least had understood about that UM from disclosures by the

20
00:00:57,600 --> 00:01:01,440
Speaker 1: company and other leaks, was that the FTC was looking

21
00:01:01,480 --> 00:01:06,920
Speaker 1: at whether or not Qualcom was fairly and in a nondiscriminate,

22
00:01:07,120 --> 00:01:12,040
Speaker 1: nondiscriminate manner licensing its patents that are needed for standard,

23
00:01:12,120 --> 00:01:15,240
Speaker 1: its patents that are needed for essential technologies. So so,

24
00:01:15,280 --> 00:01:17,520
Speaker 1: if there's a standard and a company must have the

25
00:01:17,520 --> 00:01:21,320
Speaker 1: patent to you know, manufacture as along the lines of

26
00:01:21,360 --> 00:01:24,600
Speaker 1: that standard, and and they must license the qualcom I peak,

27
00:01:24,640 --> 00:01:27,400
Speaker 1: Qualcom has agreed at some point that they'll do that

28
00:01:27,440 --> 00:01:29,319
Speaker 1: in a fair manner. And and that's what we understand

29
00:01:29,319 --> 00:01:32,640
Speaker 1: the FTC has been looking at. Thanks Jennifer uh It

30
00:01:32,760 --> 00:01:35,160
Speaker 1: is a big new, big day for antitrust news. The

31
00:01:35,240 --> 00:01:38,559
Speaker 1: Supreme Court today dashed the hopes of JP Morgan City

32
00:01:38,560 --> 00:01:41,280
Speaker 1: Group in Bank of America by refusing to shield them

33
00:01:41,280 --> 00:01:44,240
Speaker 1: from what could be billions of dollars and liability. The

34
00:01:44,280 --> 00:01:47,280
Speaker 1: companies are among the banks being sued being accused of

35
00:01:47,400 --> 00:01:50,600
Speaker 1: rigging libor, that's the interest rate benchmark used to value

36
00:01:50,640 --> 00:01:54,600
Speaker 1: more than three trillion dollars of securities worldwide. A federal

37
00:01:54,600 --> 00:01:56,880
Speaker 1: appeals court refused to throw out the claims, and the

38
00:01:56,920 --> 00:01:59,920
Speaker 1: Supreme Court today said it would not hear the bank

39
00:02:00,080 --> 00:02:02,480
Speaker 1: appeal of that ruling. The focus of the case now

40
00:02:02,520 --> 00:02:05,080
Speaker 1: returns to a federal District court in Manhattan, which is

41
00:02:05,120 --> 00:02:09,280
Speaker 1: where sixteen banks are defending themselves in the antitrust case

42
00:02:10,440 --> 00:02:13,320
Speaker 1: with us to discuss what the Supreme Court rebuff means

43
00:02:13,320 --> 00:02:16,640
Speaker 1: and what's next in the litigation? Uh is Robert Hockett,

44
00:02:16,840 --> 00:02:20,840
Speaker 1: professor at Cornell University Law School, and Jennifer Ree Bloomberg

45
00:02:20,840 --> 00:02:26,280
Speaker 1: Intelligence Senior litigation analyst, Bob, what what were the banks

46
00:02:26,600 --> 00:02:30,120
Speaker 1: arguing in the Supreme Court appeal? And they actually have

47
00:02:30,200 --> 00:02:33,240
Speaker 1: a realistic shot at in your view, at getting the

48
00:02:33,320 --> 00:02:36,760
Speaker 1: Supreme Court to take up the case. Yeah, so I

49
00:02:36,840 --> 00:02:38,600
Speaker 1: think it's sort of a hail mary play from the

50
00:02:38,760 --> 00:02:41,760
Speaker 1: front from the very beginning. UM. And the reason is this, Um,

51
00:02:41,800 --> 00:02:45,120
Speaker 1: there's certain very important, as you know, benchmarks and indusseries

52
00:02:45,120 --> 00:02:47,760
Speaker 1: that are used by the broader markets on a daily

53
00:02:47,800 --> 00:02:51,120
Speaker 1: basis right to determine how to price various transactions that

54
00:02:51,160 --> 00:02:54,399
Speaker 1: they engage and UH, And unfortunately, or maybe for better

55
00:02:54,440 --> 00:02:56,720
Speaker 1: or worse, it is inevitably the case that a lot

56
00:02:56,720 --> 00:02:59,960
Speaker 1: of these important benchmarks and the indusseries are essentially deter

57
00:03:00,160 --> 00:03:03,440
Speaker 1: too the trading activities of a few relatively few very

58
00:03:03,560 --> 00:03:06,919
Speaker 1: large players live or which of course is as an

59
00:03:06,960 --> 00:03:11,000
Speaker 1: interest rate benchmark is one of those. It's essentially determined

60
00:03:11,000 --> 00:03:13,359
Speaker 1: by the transactions of a relatively small number of banks.

61
00:03:13,360 --> 00:03:16,320
Speaker 1: Now what that means is that it is inherently subject

62
00:03:16,440 --> 00:03:20,560
Speaker 1: to the possibility of anti trust abuse, and if the

63
00:03:20,600 --> 00:03:23,560
Speaker 1: banks that do set that rate engage in any kind

64
00:03:23,560 --> 00:03:26,560
Speaker 1: of practice that looks to be manipulative, it will be

65
00:03:26,680 --> 00:03:30,240
Speaker 1: virtually per se and an anti trust violation. So what

66
00:03:30,320 --> 00:03:32,359
Speaker 1: the bank did is they were trying to argue that, look,

67
00:03:32,400 --> 00:03:34,800
Speaker 1: we're not really subject to the antitrust laws at least

68
00:03:34,800 --> 00:03:37,760
Speaker 1: where this is concerned. But that was almost that was

69
00:03:37,800 --> 00:03:40,000
Speaker 1: bound to be a losing our argument if indeed it

70
00:03:40,080 --> 00:03:43,520
Speaker 1: was found um that there might be actual manipulative activity

71
00:03:43,560 --> 00:03:45,400
Speaker 1: going on, and then, of course, as the predict of

72
00:03:45,480 --> 00:03:47,280
Speaker 1: the case in the first place, so I think it

73
00:03:47,320 --> 00:03:50,360
Speaker 1: was a definite. It was a really unlikely to succeed

74
00:03:50,440 --> 00:03:52,600
Speaker 1: sort of play. The argument now is going to have

75
00:03:52,680 --> 00:03:56,680
Speaker 1: to focus on the particulars. Was there actually manipulative activity

76
00:03:57,280 --> 00:04:01,600
Speaker 1: jen to the fact that one bank, Barkley's, has agreed

77
00:04:01,640 --> 00:04:05,440
Speaker 1: to pay one million dollars to settle claims against it

78
00:04:05,920 --> 00:04:12,240
Speaker 1: affect the justice's decision? It probably does, I mean it officially,

79
00:04:12,480 --> 00:04:15,720
Speaker 1: it never does. Right, officially, speaking, the Justice Department's going

80
00:04:15,840 --> 00:04:18,040
Speaker 1: to say, look, this is all being considered on merits

81
00:04:18,080 --> 00:04:20,320
Speaker 1: on the one hand, and and then also on the

82
00:04:20,120 --> 00:04:21,640
Speaker 1: you know, the strength of the merits, and thus the

83
00:04:21,680 --> 00:04:24,520
Speaker 1: likelihood of prevailing on the other hand is sort of

84
00:04:24,520 --> 00:04:27,320
Speaker 1: a practical matter. It's just it would be impossible, I think,

85
00:04:27,320 --> 00:04:31,120
Speaker 1: for any prosecutor to ignore the fact that one of

86
00:04:31,240 --> 00:04:34,480
Speaker 1: the possible defendants has decided that well, there's enough risk

87
00:04:34,600 --> 00:04:37,400
Speaker 1: of losing here just to go ahead and settling get

88
00:04:37,440 --> 00:04:38,920
Speaker 1: out of the way. It has to be encouraging to

89
00:04:38,960 --> 00:04:42,120
Speaker 1: the prosecution. Jennifer, Can you tell us a little bit

90
00:04:42,120 --> 00:04:46,520
Speaker 1: more about what the banks are accused of doing here? Oh? Sure.

91
00:04:46,839 --> 00:04:50,000
Speaker 1: So this stems out of the conduct the plaintiffs claim

92
00:04:50,120 --> 00:04:53,800
Speaker 1: started sometime around two thousand seven, and what they're claiming

93
00:04:53,839 --> 00:04:58,120
Speaker 1: is that the banks falsely reported they suppressed the librar rate,

94
00:04:58,160 --> 00:05:00,800
Speaker 1: the ultimate librar rate, because they falsely reported their own

95
00:05:00,839 --> 00:05:04,760
Speaker 1: borrowing rates. Um, you know, I'm sorry, Greg, Before I finished,

96
00:05:04,760 --> 00:05:06,920
Speaker 1: I actually need to disclose because we are talking about

97
00:05:06,960 --> 00:05:09,480
Speaker 1: JP Morgan here, and I do need disclose to disclose

98
00:05:09,520 --> 00:05:11,839
Speaker 1: that I have JP Morgan stock. Now back to my answer,

99
00:05:12,320 --> 00:05:16,120
Speaker 1: So the banks, Um, what the plaintiffs are claiming is

100
00:05:16,160 --> 00:05:20,360
Speaker 1: that they they colluded to falsely report their rate, their

101
00:05:20,400 --> 00:05:22,920
Speaker 1: own borrowing rate, which is, you know, what they're reporting

102
00:05:23,440 --> 00:05:26,520
Speaker 1: as a panel to get libor, and that then suppressed

103
00:05:26,520 --> 00:05:29,680
Speaker 1: the librar rate. And for those plaintiffs that had instruments

104
00:05:29,800 --> 00:05:31,960
Speaker 1: tied to the librar for which they were getting paid

105
00:05:32,960 --> 00:05:35,880
Speaker 1: rather than you know, alone based on library interest rates.

106
00:05:35,880 --> 00:05:38,560
Speaker 1: But let's say a bond holder, they're claiming that those

107
00:05:38,600 --> 00:05:41,360
Speaker 1: suppressed rates hurt them because it hurt their rate of return.

108
00:05:42,520 --> 00:05:46,719
Speaker 1: And is that a good argument? You know? If again,

109
00:05:46,920 --> 00:05:49,440
Speaker 1: we were still even though this case has been around

110
00:05:49,720 --> 00:05:52,120
Speaker 1: like four years now, we're still sort of in the

111
00:05:52,160 --> 00:05:55,800
Speaker 1: beginning stages of the evidence because this all started with

112
00:05:55,839 --> 00:05:59,039
Speaker 1: a motion to dismiss that the district court granted on antitrust,

113
00:05:59,040 --> 00:06:01,840
Speaker 1: and then they went through some procedural loop loops until

114
00:06:01,839 --> 00:06:05,279
Speaker 1: it got to the Supreme Court. Um, if in fact

115
00:06:05,400 --> 00:06:09,240
Speaker 1: there's evidence of this manipulation and colusion, there could be

116
00:06:09,279 --> 00:06:12,479
Speaker 1: an antitrust claim here. It's not a typical price fixing claim,

117
00:06:12,560 --> 00:06:14,919
Speaker 1: but it is. It's a claim that they colluded to

118
00:06:14,920 --> 00:06:20,280
Speaker 1: manipulate a benchmark that went into price bob the banks, Uh,

119
00:06:20,440 --> 00:06:22,400
Speaker 1: not just these what other banks have been facing a

120
00:06:22,480 --> 00:06:26,760
Speaker 1: variety of of antitrust and price fixing claims uh for

121
00:06:26,800 --> 00:06:31,120
Speaker 1: an exchange manipulation, commodities price rigging. Where do you sort

122
00:06:31,160 --> 00:06:35,200
Speaker 1: of put this case on the seriousness scale in terms

123
00:06:35,240 --> 00:06:39,280
Speaker 1: of both what they what they allegedly did wrong in

124
00:06:39,520 --> 00:06:41,440
Speaker 1: and the kind of threat it might pose to the

125
00:06:41,480 --> 00:06:44,520
Speaker 1: banks in terms of liability. Sure, I would say this

126
00:06:44,560 --> 00:06:47,040
Speaker 1: one carries sort of maximum seriousness in the sense that

127
00:06:47,120 --> 00:06:49,159
Speaker 1: this is sort of brightened the core of this sort

128
00:06:49,200 --> 00:06:52,200
Speaker 1: of cluster of cases that you just identified. Again, the

129
00:06:52,279 --> 00:06:54,600
Speaker 1: key point here, I think Jennifer barn quite well as well,

130
00:06:54,839 --> 00:06:58,480
Speaker 1: is that essentially there are certain benchmarks that lots of

131
00:06:58,520 --> 00:07:01,120
Speaker 1: things are priced by rep prints too. That's another way

132
00:07:01,160 --> 00:07:02,840
Speaker 1: of saying that is to say, lots of people are

133
00:07:02,880 --> 00:07:06,719
Speaker 1: in effect betting on particular prices that are especially important

134
00:07:06,800 --> 00:07:08,640
Speaker 1: up in the markets because they service sort of reference

135
00:07:08,720 --> 00:07:12,680
Speaker 1: prices benchmarks for other prices. Now, if a particular institution

136
00:07:12,880 --> 00:07:15,840
Speaker 1: plays a critically important role in setting that benchmark price

137
00:07:15,920 --> 00:07:18,040
Speaker 1: on the one hand, and then at the same time

138
00:07:18,120 --> 00:07:20,119
Speaker 1: can be shown to have been betting on the price

139
00:07:20,200 --> 00:07:22,080
Speaker 1: on the other, well, that would be a bit like

140
00:07:22,280 --> 00:07:24,440
Speaker 1: you know, Alan Green's band going out and buying a

141
00:07:24,480 --> 00:07:27,440
Speaker 1: bunch of stock just before he knows he's plain to

142
00:07:27,480 --> 00:07:29,680
Speaker 1: say something about the company in question, and he knows

143
00:07:29,680 --> 00:07:31,440
Speaker 1: it's going to move the price, right. I mean, it's

144
00:07:31,480 --> 00:07:34,000
Speaker 1: clearly manipulative. It's it's it would be a kind of

145
00:07:34,040 --> 00:07:37,360
Speaker 1: insider trading like thing. The antitrust element comes in when

146
00:07:37,400 --> 00:07:40,080
Speaker 1: you've got essentially a small number of institutions that do

147
00:07:40,120 --> 00:07:42,000
Speaker 1: that setting and so you can sort of say, okay,

148
00:07:42,000 --> 00:07:45,280
Speaker 1: you've got collusive behavior grey as well. So this lib

149
00:07:45,400 --> 00:07:48,040
Speaker 1: or is such an important benchmark rate when it comes

150
00:07:48,040 --> 00:07:49,760
Speaker 1: to setting interest rates and then when it comes to

151
00:07:49,800 --> 00:07:52,680
Speaker 1: determining the prices of various bond instruments and various derivative

152
00:07:52,960 --> 00:07:56,880
Speaker 1: securities that anybody who actually does manipulate live or is

153
00:07:56,880 --> 00:07:59,520
Speaker 1: is manipulating something that it's just central to so many

154
00:07:59,560 --> 00:08:02,720
Speaker 1: markets out there that it's extremely serious. So everything hinges

155
00:08:02,760 --> 00:08:05,360
Speaker 1: on whether in fact there was that manipulation. But there

156
00:08:05,360 --> 00:08:07,680
Speaker 1: seems what the Supreme Court effectively has told us is

157
00:08:07,720 --> 00:08:10,280
Speaker 1: that if there was such manipulation, then there's no question.

158
00:08:10,360 --> 00:08:13,040
Speaker 1: But the nanti trust action can be brought in addition

159
00:08:13,080 --> 00:08:14,840
Speaker 1: to all of the other actions that can be brought.

160
00:08:15,200 --> 00:08:19,880
Speaker 1: Jen The banks argued the wrong results could be economically devastating.

161
00:08:20,400 --> 00:08:24,160
Speaker 1: What could the ultimate liability be well, in fact, even

162
00:08:24,200 --> 00:08:27,080
Speaker 1: the Second circuits at that because when the Second Circuit

163
00:08:27,160 --> 00:08:31,360
Speaker 1: revived antitrust overturned the District court's opinion that um the

164
00:08:31,400 --> 00:08:33,800
Speaker 1: court said, look, you know, if there truly is an

165
00:08:33,800 --> 00:08:35,960
Speaker 1: anti trust, if all the evidence bears this out, and

166
00:08:36,040 --> 00:08:38,679
Speaker 1: we have an antitrust claim here, and all the plaintiffs

167
00:08:38,679 --> 00:08:40,719
Speaker 1: here have an antitrust claim, because maybe not all of

168
00:08:40,760 --> 00:08:42,640
Speaker 1: them do, maybe just some of them do, because there

169
00:08:42,640 --> 00:08:45,120
Speaker 1: are other elements that they need to prove. This could

170
00:08:45,200 --> 00:08:47,360
Speaker 1: bankrupt some of the world's biggest banks. And part of

171
00:08:47,400 --> 00:08:50,880
Speaker 1: the reason for that is because with antitrust comes triple damages.

172
00:08:50,920 --> 00:08:53,920
Speaker 1: It's automatically worked into the law. So if there's a

173
00:08:53,960 --> 00:08:57,679
Speaker 1: finding of you know, forty billion or fifty billion of damages,

174
00:08:57,679 --> 00:09:01,400
Speaker 1: it's automatically tripled, and it's huge. And even we don't

175
00:09:01,480 --> 00:09:04,000
Speaker 1: know yet what the actual claims are by these plaintiffs.

176
00:09:04,040 --> 00:09:06,880
Speaker 1: One one class only and there are many classes, said

177
00:09:06,920 --> 00:09:10,280
Speaker 1: forty five billion just for their class. The Second circer

178
00:09:10,360 --> 00:09:12,600
Speaker 1: did leave open the possibility of the suit ultimately could

179
00:09:12,600 --> 00:09:15,000
Speaker 1: be dismissed on other grounds. I want to thank our

180
00:09:15,040 --> 00:09:19,199
Speaker 1: Guests Jennifer Rea of Bloomberg Intelligence, Robert Hacke of Cornell University,