WEBVTT - Did Amazon Trick Customers & Kimmel Returns 0:00:02.759 --> 0:00:07.000 This is Bloomberg Law with June Grossel from Bloomberg Radio. 0:00:08.800 --> 0:00:12.680 A federal trial is beginning this week in Amazon's hometown 0:00:13.240 --> 0:00:17.480 to decide whether the world's largest online retailer tricked its 0:00:17.520 --> 0:00:21.440 customers into Joining Prime and then made it difficult to 0:00:21.600 --> 0:00:26.000 cancel the membership. Prime provides subscribers with perks that include 0:00:26.000 --> 0:00:30.200 faster shipping, video streaming, and discounts at whole Foods for 0:00:30.240 --> 0:00:32.760 a fee of one hundred and thirty nine dollars annually. 0:00:33.280 --> 0:00:36.760 It's a key and growing part of Amazon's business, with 0:00:36.920 --> 0:00:40.000 more than two hundred million members, bringing in more than 0:00:40.080 --> 0:00:43.560 twelve billion dollars in net revenue in the last quarter, 0:00:43.960 --> 0:00:47.600 a twelve percent increase from the same period last year. 0:00:48.280 --> 0:00:52.800 But the Federal Trade Commission says Amazon misled customers into 0:00:52.840 --> 0:00:56.560 signing up for Prime and then made it very difficult 0:00:56.600 --> 0:01:01.040 to cancel. Joining me is Matthew Shettenhelm Blue Umberg Intelligence 0:01:01.160 --> 0:01:06.319 litigation and government analyst. Matt explain why the FTC is 0:01:06.400 --> 0:01:07.480 suing Amazon. 0:01:08.040 --> 0:01:10.080 Yeah, so this is a lawsuit, but that the FTC 0:01:10.240 --> 0:01:17.600 filed two years ago alleging that Amazon Prime cancelation and 0:01:17.800 --> 0:01:22.600 its subscription process doesn't comply with federal law. There's a 0:01:22.800 --> 0:01:28.120 twenty ten federal law called the Restoring Online Shoppers Confidence 0:01:28.319 --> 0:01:32.720 Act that addresses those membership programs that you can kind 0:01:32.720 --> 0:01:36.919 of sign up for and they can automatically renew, and 0:01:36.480 --> 0:01:39.720 there are some terms that the federal law requires that 0:01:39.800 --> 0:01:42.679 the company be very clear about what those terms are, 0:01:43.160 --> 0:01:46.920 that the customer make informed consent to those terms, and 0:01:47.000 --> 0:01:51.160 that any ability to cancel that sign up is simple, 0:01:51.440 --> 0:01:55.800 uses simple mechanisms. And the FTC says that Amazon falls 0:01:55.800 --> 0:01:58.960 short on all three of those claims, and it's trying 0:01:59.000 --> 0:02:04.280 to consumer redress and impose civil penalties on the company. 0:02:04.880 --> 0:02:09.840 Let's start with the FTC's contention that Amazon makes it 0:02:09.880 --> 0:02:15.079 difficult for consumers to purchase an item without also subscribing 0:02:15.320 --> 0:02:18.880 to Prime, so it sort of tricks them into subscribing 0:02:18.919 --> 0:02:19.440 for Prime. 0:02:19.720 --> 0:02:22.079 Yeah, that's right. This goes back to when Lena Kon 0:02:22.280 --> 0:02:25.200 was chair of the FTC, and there's a big focus 0:02:25.200 --> 0:02:29.120 on sort of dark patterns and pushing, nudging consumers to 0:02:29.200 --> 0:02:32.280 do things that maybe are against their will. And that's 0:02:32.320 --> 0:02:36.560 the allegation here that as consumers went to maybe buy 0:02:36.639 --> 0:02:41.320 a product on Amazon, Amazon sort of forced them into 0:02:41.480 --> 0:02:45.880 this process of also signing up for Prime basically tricked them, 0:02:46.120 --> 0:02:50.359 is the allegation, and so Amazon says, no, our process 0:02:50.520 --> 0:02:53.600 was very clear. They tried to move motion to dismiss 0:02:53.600 --> 0:02:55.600 on this and tried to move for summary judgment, but 0:02:55.639 --> 0:02:58.560 the judge wouldn't allow it. He said, look, reasonable people 0:02:58.560 --> 0:03:01.080 could disagree about this. This need to go to a jury. 0:03:01.560 --> 0:03:04.560 So on that issue and all the others, the jury 0:03:04.600 --> 0:03:05.880 is about to take that question up. 0:03:06.880 --> 0:03:11.040 The FTC also claims that getting out of a Prime 0:03:11.120 --> 0:03:16.280 subscription was too complicated. It required the customer to affirm 0:03:16.440 --> 0:03:21.320 their desire to cancel membership on three pages, and internally 0:03:21.919 --> 0:03:25.120 Amazon employees call the process the iliad. 0:03:25.639 --> 0:03:30.120 Yeah, so the law requires a simple mechanism to cancel 0:03:30.360 --> 0:03:32.919 these sign ups, and yes, I think it's it's going 0:03:32.960 --> 0:03:36.080 to be harmful evidence that the FTC will present to 0:03:36.160 --> 0:03:39.680 the jury that there were some comments made by Amazon 0:03:39.760 --> 0:03:43.880 employees that describe this process as very difficult, and as 0:03:43.880 --> 0:03:46.600 you said, even characterizing it as the iliad, I think 0:03:46.640 --> 0:03:49.880 in a reference to the odyssey and how difficult this 0:03:50.000 --> 0:03:53.800 can be to get through for consumers. Now, Amazon pushes 0:03:53.880 --> 0:03:56.920 back on that and says, no, actually, you know, we 0:03:56.960 --> 0:04:00.640 have data showing that people figure it out, always going 0:04:00.680 --> 0:04:03.840 to be a couple of exceptions, and these stray comments 0:04:03.840 --> 0:04:07.960 by employees don't really characterize how the process works. So 0:04:08.280 --> 0:04:11.480 again here the judge looked at both sides and said, 0:04:11.520 --> 0:04:13.400 you know what, I can't decide this is a fair 0:04:13.480 --> 0:04:16.160 question to toss to a jury, and so that's going 0:04:16.200 --> 0:04:18.799 to be presented to jurors this week and next. 0:04:19.160 --> 0:04:22.719 I have to say that a lot of companies seem 0:04:22.800 --> 0:04:26.360 to make it difficult to get out of subscriptions. I mean, 0:04:26.400 --> 0:04:28.960 sometimes you sign up online, but you have to call 0:04:29.320 --> 0:04:32.360 in order to get out of the subscription. Does Amazon 0:04:32.520 --> 0:04:36.880 really stand out from these other companies that seem to 0:04:36.880 --> 0:04:37.720 do the same thing. 0:04:38.040 --> 0:04:40.880 Yeah, I mean I think that's a point that Amazon's 0:04:40.920 --> 0:04:43.440 going to push that. Look, there isn't a lot of 0:04:43.480 --> 0:04:47.800 clarity about what is a simple cancelation method, and the 0:04:47.920 --> 0:04:52.320 industry follows pretty similar practices on this sort of thing. 0:04:52.400 --> 0:04:56.479 This is pretty industry standard, and to me, like one 0:04:56.480 --> 0:04:59.279 point that Amazon's going to raise, the FTC tried to 0:04:59.320 --> 0:05:02.760 do a rule mad on this statute to add more 0:05:02.800 --> 0:05:05.159 clarity to it, and that was over the past couple 0:05:05.200 --> 0:05:07.040 of years. And when they did that, when they first 0:05:07.040 --> 0:05:10.640 announced that rulemaking, they said this federal law that requires 0:05:10.640 --> 0:05:15.280 a simple cancelation process. It isn't very clear. So the industry, 0:05:15.320 --> 0:05:19.440 I think, is struggling with Okay, what exactly is too much? 0:05:19.520 --> 0:05:22.119 And Amazon had to make a calculation on that point. 0:05:22.160 --> 0:05:26.400 It had to look to other industry practices, and Amazon says, 0:05:26.440 --> 0:05:29.320 look what we have in place. You know, maybe it's 0:05:29.320 --> 0:05:32.560 not the simplest that you could possibly imagine, but that's 0:05:32.560 --> 0:05:35.560 not what the law requires. It's pretty simple. You do 0:05:35.640 --> 0:05:38.240 have to click through a couple things, but that's sufficient 0:05:38.279 --> 0:05:41.599 to qualify as simple when you consider the industry standard 0:05:41.600 --> 0:05:45.000 practice in Amazon's view, And did FTC. 0:05:44.760 --> 0:05:48.520 Give Amazon a chance to correct this before they brought suit. 0:05:48.880 --> 0:05:53.839 My understanding is that Amazon's already changed its processes in 0:05:54.080 --> 0:05:57.800 material respects, and so I think at this point the 0:05:57.839 --> 0:06:02.599 fight is mostly about going after the company for practices 0:06:02.880 --> 0:06:07.400 in the past that have changed already and potentially seeking 0:06:07.480 --> 0:06:11.240 what could be significant financial penalties against the company for 0:06:11.680 --> 0:06:14.320 its past practices. So I don't see it as much 0:06:14.400 --> 0:06:18.720 about injunctive relief or trying to change Amazon's practices going forward, 0:06:19.279 --> 0:06:22.839 as much it is trying to penalize Amazon allegedly for 0:06:22.920 --> 0:06:26.880 not following the law since around twenty fifteen. And going forward. 0:06:27.080 --> 0:06:29.640 I wondered because I thought, you know, the jurors will 0:06:29.640 --> 0:06:32.520 probably go online and try to cancel and see what happens. 0:06:32.600 --> 0:06:36.400 But you're saying, that's not the cancelation process that's there. Now. 0:06:36.640 --> 0:06:39.919 My understanding is this is focused on a previous version 0:06:40.120 --> 0:06:44.200 of the cancelation process, and I suspect the judge will 0:06:44.440 --> 0:06:47.880 discourage the jurors from investigating on their own. 0:06:48.160 --> 0:06:51.800 I know the judge will, but you know, jurors sometimes 0:06:52.120 --> 0:06:55.320 he right listen to those things. And the judge has 0:06:55.440 --> 0:07:00.160 already ruled against Amazon on a few issues pre try well, 0:07:00.640 --> 0:07:04.840 including limiting the legal defense that Amazon can raise at trial. 0:07:05.200 --> 0:07:08.240 Yeah, that's right. You know, Amazon has repeatedly had a 0:07:08.240 --> 0:07:11.480 difficult time with the judge, Judge John Chune. You know, 0:07:11.640 --> 0:07:14.559 he refused to dismiss the case in May of twenty 0:07:14.600 --> 0:07:17.240 twenty four when Amazon asked for that. He refused to 0:07:17.280 --> 0:07:21.040 grant an early appeal of the case in July of 0:07:21.160 --> 0:07:25.160 this year, and then last week he granted summary judgment 0:07:25.280 --> 0:07:27.880 in parts to the Federal Trade Commission to sort of 0:07:28.000 --> 0:07:30.720 narrow a couple of the issues that would go to 0:07:30.760 --> 0:07:34.560 the jury. He refused to grant summary judgment for Amazon, 0:07:34.720 --> 0:07:37.000 but He sort of very narrowly said, you know a 0:07:37.000 --> 0:07:39.800 couple of these issues. Look, there's no way Amazon you're 0:07:39.840 --> 0:07:42.679 going to win on this point or that point. Still, 0:07:42.680 --> 0:07:46.120 I think the core of question is going to these jurors, 0:07:46.160 --> 0:07:48.240 but he did narrow it a little bit. He also 0:07:48.280 --> 0:07:52.160 said that a couple Amazon officers who worked on these 0:07:52.200 --> 0:07:57.400 processes could be held personally liable if the jury concludes 0:07:57.440 --> 0:07:59.920 that Amazon violated the law knowingly. 0:08:00.640 --> 0:08:03.480 Yeah, and he ruled that the FTC doesn't have to 0:08:03.560 --> 0:08:07.720 prove every single example of Amazon's sign up and cancellation 0:08:07.920 --> 0:08:12.239 procedures are deceptive and can focus on a representative sample. 0:08:13.000 --> 0:08:15.960 Yeah. I think that's right. So sort of narrowed the 0:08:16.040 --> 0:08:19.240 issues a little bit, narrowed the evidence that will go 0:08:19.360 --> 0:08:22.680 before the jury. As I said, Amazon's really had a 0:08:22.720 --> 0:08:25.400 tough time with Judge John June here. And I think 0:08:25.640 --> 0:08:29.560 the question is if Amazon lets the jury rule on 0:08:30.240 --> 0:08:33.880 liability on whether Amazon violated the law or not, and 0:08:33.880 --> 0:08:36.520 whether it did it knowingly, it goes back to the 0:08:36.679 --> 0:08:40.439 judge then to set the financial penalties. And when Amazon's 0:08:40.440 --> 0:08:43.640 had such a difficult time with this judge, is that 0:08:43.720 --> 0:08:45.720 really something that it's going to want to do. That's 0:08:45.760 --> 0:08:48.600 going to be a real consideration for the company as 0:08:48.640 --> 0:08:50.880 it thinks about potentially settling this case. 0:08:51.200 --> 0:08:56.040 Yeah, So in July, the judge admonished Amazon for withholding 0:08:56.240 --> 0:09:00.800 seventy thousand documents, saying the conduct was tantamount to bad faith. 0:09:01.280 --> 0:09:05.000 So it doesn't appear that Amazon has earned the judges trust. 0:09:06.200 --> 0:09:09.600 Right, It's been a tough go throughout this case. And 0:09:09.800 --> 0:09:12.360 you know, I thought Amazon might have a decent chance 0:09:12.400 --> 0:09:14.800 at getting some of this case narrowed on its motion 0:09:14.880 --> 0:09:18.520 to dismiss that a request for early appeal on this 0:09:18.559 --> 0:09:21.480 stuff might have a small chance. But time after time, 0:09:21.559 --> 0:09:24.720 this judge has let this case advance, as you said, 0:09:24.760 --> 0:09:28.480 criticize the company for some of its practices as it's 0:09:28.600 --> 0:09:32.200 defended this. So I'm not sure that Amazon's going to 0:09:32.200 --> 0:09:36.160 feel very comfortable letting the judge decide how much it 0:09:36.160 --> 0:09:38.240 should pay to resolve this. 0:09:38.720 --> 0:09:42.319 Let's talk about the exposure of the company, because each 0:09:42.720 --> 0:09:47.480 violation of that Restore Online Shopper's Confidence Act allows for 0:09:47.520 --> 0:09:51.400 penalties of more than fifty three thousand dollars per violation. 0:09:51.640 --> 0:09:53.480 So how much money are we talking about it? 0:09:53.600 --> 0:09:53.720 All? 0:09:53.760 --> 0:09:56.640 Right? So you get to absurd math really quickly when 0:09:56.640 --> 0:09:58.960 you deal with numbers like that. If you're talking about 0:09:59.360 --> 0:10:02.600 tens of million millions of Amazon Prime subscribers, and I 0:10:02.640 --> 0:10:05.520 think Amazon's expert was talking somewhere in the ballpark of 0:10:05.600 --> 0:10:09.560 thirty to forty million Amazon users, and you multiply that 0:10:09.720 --> 0:10:13.120 times fifty thousand, it breaks my calculator. And so the 0:10:13.240 --> 0:10:16.600 judge ultimately using that number would have to settle on 0:10:16.800 --> 0:10:20.360 a civil penalty that is meaningful to the company, but 0:10:20.520 --> 0:10:23.720 not a violation of due process, not so unreasonable. There's 0:10:23.760 --> 0:10:26.960 also a push from the FTC for consumer redress, not 0:10:27.040 --> 0:10:30.600 just civil penalties, but the FDC's expert says that when 0:10:30.600 --> 0:10:33.640 you look at how much consumers paid that they shouldn't 0:10:33.679 --> 0:10:37.720 have here, he calculates the damages close to one billion 0:10:37.800 --> 0:10:41.480 dollars just for that, So one billion for consumer redress 0:10:41.559 --> 0:10:45.400 or nearly that, and then civil penalties that, as we said, 0:10:45.400 --> 0:10:48.760 could easily reach absurd billions of dollars, but likely would 0:10:48.760 --> 0:10:51.600 get into the billion dollar range as well. And so 0:10:51.840 --> 0:10:54.560 even with the company, you know, with the resources like Amazon, 0:10:54.640 --> 0:10:58.080 it's really hard for any judgment to be disruptive to 0:10:58.120 --> 0:11:01.400 a company like Amazon that has you know, annual profits 0:11:01.440 --> 0:11:04.280 in the you know, sixty seventy billion dollar range. It's 0:11:04.280 --> 0:11:07.040 hard to be material, but this might might get their 0:11:07.040 --> 0:11:09.199 attention when numbers like that are in place. So I 0:11:09.240 --> 0:11:11.760 think when you add all of that up, there's going 0:11:11.800 --> 0:11:14.640 to be considerable pressure for the company to settle this 0:11:14.840 --> 0:11:18.120 before the judge gets to decide on what is the 0:11:18.160 --> 0:11:19.080 reasonable penalty. 0:11:19.320 --> 0:11:24.040 But that's a really difficult calculation for Amazon to make, 0:11:24.160 --> 0:11:27.800 isn't it So what they'll watch the jurors through the 0:11:27.880 --> 0:11:31.840 trial and see whether any of them are reacting favorably 0:11:31.920 --> 0:11:35.520 to their arguments. I mean, it's really hard to read 0:11:35.559 --> 0:11:37.040 a jury. 0:11:37.080 --> 0:11:40.920 It's very difficult to predict exactly when these companies will 0:11:41.040 --> 0:11:43.440 will settle in trial. I've seen cases settle at the 0:11:43.480 --> 0:11:46.600 beginning of trial. I've seen cases settle at the very end, 0:11:46.760 --> 0:11:49.360 right before we're about to get a verdict. I think, 0:11:49.720 --> 0:11:52.880 you know, it's reasonable to see how it's going, you know, 0:11:52.960 --> 0:11:55.400 get a read on the on the jurors. It's possible 0:11:55.440 --> 0:11:57.840 they take their chances because one of the things that 0:11:57.880 --> 0:12:01.080 Amazon has going for it is that for the judge 0:12:01.120 --> 0:12:05.199 to impose civil penalties here, it's not enough that Amazon 0:12:05.480 --> 0:12:09.480 violated this federal law we've talked about, but also the 0:12:09.559 --> 0:12:13.959 FDC has to prove that Amazon did so knowingly, and 0:12:14.000 --> 0:12:18.200 so I think Amazon's going to have an argument that, Okay, look, 0:12:18.280 --> 0:12:22.960 even if we did technically not give consumers a simple 0:12:23.200 --> 0:12:26.599 method to cancel, if if this number of clicks is 0:12:26.960 --> 0:12:29.960 a couple too many, did we really know that knowingly 0:12:30.600 --> 0:12:34.880 given the limited FTC guidance that's out there, Given that 0:12:34.920 --> 0:12:38.120 the FTC itself has said that this isn't simple, So 0:12:38.160 --> 0:12:41.800 there's actually a chance for the company to be found 0:12:41.840 --> 0:12:44.200 liable in the sense that it violated the law, but 0:12:44.480 --> 0:12:49.640 not subject to these serious financial penalties. And so if 0:12:49.679 --> 0:12:51.720 I'm Amazon, that's the kind of thing I'd be watching 0:12:51.720 --> 0:12:54.480 out for. But I think, you know, you might want 0:12:54.520 --> 0:12:56.720 to think about settling. If I'm Amazon, you might want 0:12:56.760 --> 0:13:01.280 to think about settling, you know, before the returns its verdict, 0:13:01.320 --> 0:13:05.040 because you have the prospects to win with the jurors, 0:13:05.520 --> 0:13:08.520 and so that should help your negotiation posture with the 0:13:08.600 --> 0:13:11.120 FDC in reaching sort of a reasonable settlement. If you 0:13:11.240 --> 0:13:15.040 lose with the jurors, that argument falls away. You've already lost, 0:13:15.080 --> 0:13:17.920 and it's all a question of how bad it's going 0:13:17.960 --> 0:13:18.160 to be. 0:13:18.480 --> 0:13:21.199 Are there internal documents that talk about that? 0:13:21.360 --> 0:13:24.680 Ili I like process, I mean, I think there is 0:13:24.960 --> 0:13:29.000 some internal evidence that won't look great here, and you 0:13:29.080 --> 0:13:32.000 think about how is a reasonable jur going to think about, 0:13:32.160 --> 0:13:36.520 you know, Amazon employees talking about their process like you know, 0:13:36.600 --> 0:13:39.680 some of these allegations claim it might not be a 0:13:39.679 --> 0:13:42.360 great look to a jur and a jur looking at 0:13:42.360 --> 0:13:46.080 a company with significant resources like Amazon and thinking maybe 0:13:46.120 --> 0:13:49.640 about how much they've spent on their own Amazon account, 0:13:49.760 --> 0:13:52.400 and you know, you can see why why a company 0:13:52.400 --> 0:13:54.920 could be nervous. Anytime a case like this goes to 0:13:54.960 --> 0:13:57.559 a jury, it's going to be unpredictable. It's going to 0:13:57.600 --> 0:13:59.719 be risky for a company. So you know a lot 0:13:59.720 --> 0:14:02.360 of sure to settle to just make the thing go 0:14:02.440 --> 0:14:05.400 away for a sum that won't be material for a 0:14:05.440 --> 0:14:06.400 company like Amazon. 0:14:07.200 --> 0:14:12.920 Like other companies, Amazon has been attempting to forge friendlier 0:14:13.000 --> 0:14:16.080 ties with President Trump. Can you tell us a little 0:14:16.120 --> 0:14:16.560 about that? 0:14:17.160 --> 0:14:19.800 Yeah, I mean we're seeing that across a number of 0:14:19.840 --> 0:14:24.520 companies right now. There's often a question, you know, where 0:14:24.560 --> 0:14:29.960 companies can can fight aggressively against this administration or they 0:14:29.960 --> 0:14:33.840 can choose to not rock the boat. And I don't 0:14:33.840 --> 0:14:38.120 know how much this case will will fit into that paradigm. 0:14:38.440 --> 0:14:41.840 Is a case that came during the Biden administration and 0:14:41.880 --> 0:14:45.280 it was continued under the Trump administration. But you know, 0:14:45.360 --> 0:14:48.040 I think that that probably does play into part of 0:14:48.040 --> 0:14:50.920 the calculation as well, like how aggressive do we really 0:14:50.960 --> 0:14:54.280 want to be here in fighting and a settlement that 0:14:54.280 --> 0:14:57.160 that isn't material might be better to make the whole 0:14:57.160 --> 0:14:57.840 thing go away. 0:14:58.280 --> 0:15:02.240 The FTC has another antitrust case against Amazon that's going 0:15:02.280 --> 0:15:03.840 to trial in twenty twenty seven. 0:15:04.160 --> 0:15:06.840 Yes, that's right. So my colleague Jenrie covers the anti 0:15:06.880 --> 0:15:10.000 trust side for us on that, and so yeah, that's 0:15:10.240 --> 0:15:14.160 in many ways a much more significant threat for the 0:15:14.240 --> 0:15:17.480 company than this which is really focused on, you know, 0:15:17.720 --> 0:15:20.600 sort of a discrete issue, as we said, a past practice. 0:15:20.880 --> 0:15:24.880 But Amazon faces you know, much more significant threats on 0:15:24.920 --> 0:15:27.120 the anti trust front. And I think so that's a 0:15:27.120 --> 0:15:29.600 good point as well. You look at this stuff in 0:15:29.640 --> 0:15:32.040 the big picture and do you want to really be 0:15:32.160 --> 0:15:35.920 resisting this administration? Maybe the anti trust case plays into 0:15:35.960 --> 0:15:36.680 that calculation. 0:15:37.080 --> 0:15:39.440 Coming up next on the Bloomberg Lawn Show, I'll continue 0:15:39.480 --> 0:15:44.160 this conversation with Matthew Shettenhelm of Bloomberg Intelligence. Jimmy Kimmel 0:15:44.240 --> 0:15:48.120 is returning to the air tonight, but not everywhere. I'm 0:15:48.200 --> 0:15:52.080 June Grosso and you're listening to Bloomberg. Jimmy Kimmel Live 0:15:52.280 --> 0:15:55.880 will return to the air tonight, ending a suspension Walt 0:15:55.920 --> 0:16:01.080 Disney imposed following controversial remarks the late host made about 0:16:01.080 --> 0:16:06.960 the shooting death of conservative activists Charlie Kirk. Disney's decision 0:16:07.040 --> 0:16:10.320 to suspend the show followed pressure from both the federal 0:16:10.400 --> 0:16:16.200 government and independent operators of ABC stations. Brendan Carr, the 0:16:16.240 --> 0:16:21.440 Republican chairman of the Federal Communications Commission, criticized Kimmel's remarks 0:16:21.440 --> 0:16:25.080 on a podcast and suggested the company could lose its 0:16:25.160 --> 0:16:26.640 broadcast licenses. 0:16:27.360 --> 0:16:30.120 But frankly, when you see stuff like this, I mean, look, 0:16:30.160 --> 0:16:32.000 we can do this the easy way or the hard way. 0:16:32.520 --> 0:16:36.160 These companies can find ways to change conduct, to take 0:16:36.240 --> 0:16:40.440 action frankly on Kimmel, or you know, there's gonna be 0:16:40.440 --> 0:16:42.800 additional work for the FCC ahead. 0:16:43.000 --> 0:16:46.960 But two Republican senators Ted Cruz of Texas and Ran 0:16:47.120 --> 0:16:52.600 Paul of Kentucky attacked the FCC chairman's actions, with Cruz 0:16:52.680 --> 0:16:55.760 accusing Carr of mafioso tactics. 0:16:57.040 --> 0:16:59.280 Look look, I like Brendan Carr. He's a good guy. 0:16:59.320 --> 0:17:01.640 He's the chairman of the FCC. I work closely with it. 0:17:02.360 --> 0:17:07.200 But what he said there is dangerous as hell. He says, 0:17:08.400 --> 0:17:10.720 we can do this the easy way, but we can 0:17:10.840 --> 0:17:13.840 do this the hard way. Yeah, And I got to say, 0:17:13.880 --> 0:17:15.520 that's right out of good fellows. That that that that 0:17:15.680 --> 0:17:18.600 that's right out of a mafioso coming into a bar, 0:17:18.680 --> 0:17:21.879 going nice bar you have here, It'd be a shame 0:17:21.920 --> 0:17:23.160 of something happened to it. 0:17:23.600 --> 0:17:26.240 So, Matt Kimmel's coming back on the air tonight, but 0:17:27.000 --> 0:17:28.879 some stations are not carrying the show. 0:17:29.400 --> 0:17:29.600 Right. 0:17:29.920 --> 0:17:35.720 So the FCC rules say that local stations have the 0:17:35.840 --> 0:17:41.480 right to preempt national network content. And what we're seeing 0:17:41.560 --> 0:17:45.800 now is that two of those bigger local station owners, 0:17:45.840 --> 0:17:50.360 next Star and Sinclair, are exercising their right to preempt 0:17:50.600 --> 0:17:54.479 that network programming. And so I think this is, you know, 0:17:55.359 --> 0:17:59.680 directly tied to FCC Chair Brendan Carr's push the other 0:17:59.720 --> 0:18:02.800 day the podcast. He told those companies, Look, you can 0:18:02.880 --> 0:18:05.840 do this if you don't like, you don't believe that 0:18:05.920 --> 0:18:10.640 Jimmy Kimmel's content is in the public interest, you, as 0:18:10.640 --> 0:18:14.919 a local station owner, have this right to preempt it. 0:18:15.440 --> 0:18:20.920 All these local stations negotiate contracts with the networks that 0:18:21.040 --> 0:18:24.280 protect this right, and so this is just an exercise 0:18:24.520 --> 0:18:28.080 under those FCC rules, But maybe because the FCC chairman 0:18:28.359 --> 0:18:30.840 told them to do this directly, and they have an 0:18:30.840 --> 0:18:34.960 incentive to follow what the FCC chairman asked them to do. 0:18:35.440 --> 0:18:38.800 The stations that aren't taking the show tonight, are they 0:18:39.160 --> 0:18:41.440 ones that are looking to. 0:18:41.359 --> 0:18:46.760 Merge Next Star. Yes. Nextstar has recently announced a six 0:18:46.840 --> 0:18:52.800 billion dollar deal to acquire Tegna, another owner of TV stations, 0:18:53.400 --> 0:18:57.520 and it's really important that the FCC be supportive of 0:18:57.600 --> 0:19:00.840 that for two reasons. One, the FCC has to approve 0:19:01.080 --> 0:19:06.120 the transaction because it involves swapping licenses from Tegna to Nextstar. 0:19:06.320 --> 0:19:09.639 The FCC has to sign off on that. And even 0:19:09.720 --> 0:19:13.639 more importantly, there's an FCC rule right now that says 0:19:13.960 --> 0:19:18.080 no broadcast station can reach more than thirty nine percent 0:19:18.240 --> 0:19:23.119 of US households. This deal would let Nextstar reach something 0:19:23.200 --> 0:19:26.440 like seventy eighty percent of US households, So they need 0:19:26.480 --> 0:19:30.760 the SCC to scrap that rule first. And so there's 0:19:30.800 --> 0:19:34.159 a real incentive when the FCC chairman asks you to 0:19:34.240 --> 0:19:37.600 do something, or at least strongly encourages you to do 0:19:37.680 --> 0:19:41.240 something when you need all these steps for a major 0:19:41.240 --> 0:19:44.119 deal to happen, you have a strong incentive to go 0:19:44.160 --> 0:19:47.840 along with that. Sinclair doesn't have a pending deal in 0:19:47.920 --> 0:19:51.120 the same at least not of the same scale right now, 0:19:51.119 --> 0:19:54.439 but it also is a big supporter of this deregulation 0:19:54.760 --> 0:19:57.720 that the FCC is working on, the thirty nine percent 0:19:57.880 --> 0:20:00.359 cap and a couple other rules that the sc is 0:20:00.400 --> 0:20:01.000 looking at. Easy. 0:20:01.600 --> 0:20:04.159 Why do you think Disney brought Kimmel back. 0:20:04.440 --> 0:20:08.119 Well, there was you know, significant pressure, I think public 0:20:08.160 --> 0:20:12.880 pressure on the company, raising concerns about whether the company 0:20:13.040 --> 0:20:18.000 was folding to government pressure here. When it was initially announced, 0:20:18.000 --> 0:20:21.720 they were deliberately I think cautious about not saying how 0:20:21.800 --> 0:20:26.480 long the suspension of the programming would last. And so 0:20:26.960 --> 0:20:29.840 I think it's possible that this is a response to 0:20:29.920 --> 0:20:33.000 that public pressure to bring him back pretty quickly. 0:20:33.320 --> 0:20:36.840 There was a lot of negative reaction from conservatives about 0:20:37.359 --> 0:20:40.360 taking Kimmel off the YEIR and the threat to free speech. 0:20:41.119 --> 0:20:44.120 But is car still standing by his words. 0:20:44.760 --> 0:20:47.399 Yeah, I think Brendan Carr is saying, look, I wasn't 0:20:47.440 --> 0:20:51.119 threatening the companies on this. I I was pointing out 0:20:51.560 --> 0:20:54.639 how the law works. But yeah, it was sort of 0:20:54.680 --> 0:21:00.199 surprising to see Senator Ted Cruz in particular, haul out 0:21:00.280 --> 0:21:03.600 Brendan Carr for those comments. And that's when you saw 0:21:03.680 --> 0:21:07.280 Brendan Carr sort of pulling back a little bit and 0:21:07.359 --> 0:21:11.679 maybe not using quite the same tone, but still saying, look, 0:21:11.720 --> 0:21:15.360 here's how FCC processes work. I was just talking about that. 0:21:15.800 --> 0:21:18.359 It seems like a little bit of a softening in 0:21:18.400 --> 0:21:21.520 the tone at least from Brendon Carr after a pretty 0:21:21.520 --> 0:21:25.679 important Senator, Ted Cruz, who runs the Commerce Committee, the 0:21:25.680 --> 0:21:29.920 Senate Commerce Committee that oversees the SEC, spoke out pretty strongly, 0:21:30.359 --> 0:21:33.080 and so I think it's possible that his sort of pullback, 0:21:33.280 --> 0:21:35.960 at least a softening on his comments was in response 0:21:36.000 --> 0:21:37.480 to that always good. 0:21:37.280 --> 0:21:40.359 To talk to you, Matt, thanks so much. That's Matthew Schettenheim, 0:21:40.440 --> 0:21:45.880 Bloomberg Intelligence litigation and government analyst. Coming up next. Google 0:21:45.960 --> 0:21:50.440 is facing another breakup possibility in court. I'm June Grosso 0:21:50.560 --> 0:21:55.920 and this is Bloomberg. The Justice Department has opened its 0:21:55.920 --> 0:21:59.679 offensive in court to force a breakup of Google before 0:21:59.720 --> 0:22:03.640 the junior federal judge who's already ruled the search giant 0:22:03.800 --> 0:22:09.480 illegally monopolized advertising technology markets, Judge Leoni Brinkhema is hearing 0:22:09.560 --> 0:22:15.440 testimony over two weeks from website publishers, advertisers, tech experts, 0:22:15.640 --> 0:22:19.320 and Google's own employees about whether the company should be 0:22:19.440 --> 0:22:22.840 forced to divest a key piece of its business the 0:22:23.040 --> 0:22:27.480 Advertise against Change Addicts Joining me is Bloomberg Intelligence Senior 0:22:27.520 --> 0:22:31.800 litigation analyst Jenniferree. Jen, can you tell us about the 0:22:31.960 --> 0:22:37.119 judge's decision that Google illegally monopolized ad tech markets? 0:22:38.400 --> 0:22:41.919 Well, the viability decision has already been made that at 0:22:42.000 --> 0:22:45.680 least for some tools that Google has in what's called 0:22:45.680 --> 0:22:48.800 the ad tech stack, it has a monopoly position and 0:22:48.840 --> 0:22:53.000 it has undertaken illegal conduct to maintain those monopolies. You know, 0:22:53.280 --> 0:22:56.120 under the US law, it isn't illegal to have a monopoly, 0:22:56.160 --> 0:22:58.399 but once you have one, you can't do things that 0:22:58.480 --> 0:23:02.160 exclude competitions to stay in that monopoly position. There were 0:23:02.200 --> 0:23:05.480 three products that Google has that the DOJ alleged to 0:23:05.560 --> 0:23:08.880 be monopolized, and one of those was called a publisher 0:23:08.920 --> 0:23:11.960 ad server, one was called an ad exchange, and one 0:23:12.080 --> 0:23:15.560 worked a series of tools on the advertiser side. So 0:23:15.640 --> 0:23:18.920 if you think about you know, advertisers and digital advertisers 0:23:18.920 --> 0:23:22.240 and publishers coming together to place an advertisement on a website. 0:23:22.359 --> 0:23:24.920 The publishers have a tool, the advertisers have a tool, 0:23:24.960 --> 0:23:27.800 and then there's an exchange in between them to conduct 0:23:27.840 --> 0:23:31.159 an auction for an advertiser to actually bid on space 0:23:31.400 --> 0:23:33.600 and win that space and pay for that space and 0:23:33.680 --> 0:23:37.320 run their ad. The court decided on the advertiser side, 0:23:37.400 --> 0:23:40.800 Google didn't have a monopoly and that the Department of 0:23:40.920 --> 0:23:43.679 Justice didn't define the market in a proper way that 0:23:43.800 --> 0:23:48.320 sort of outlined a specific competitive product and failing to 0:23:49.000 --> 0:23:52.800 properly identify the exact market they're talking about this monopolized 0:23:52.840 --> 0:23:55.400