1 00:00:00,560 --> 00:00:05,360 Speaker 1: This is Bloomberg Law with June Grasso from Bloomberg Radio. 2 00:00:05,920 --> 00:00:10,520 Speaker 1: It's a landmark antitrust case, the most aggressive antitrust action 3 00:00:10,560 --> 00:00:14,600 Speaker 1: against an American company in two decades. The US Justice 4 00:00:14,600 --> 00:00:18,360 Speaker 1: Department suited Google, calling it the monopoly gatekeeper to the 5 00:00:18,400 --> 00:00:22,600 Speaker 1: Internet and accusing it of using exclusive deals costing billions 6 00:00:22,600 --> 00:00:26,920 Speaker 1: of dollars to dominate search and lockout competition from rivals. 7 00:00:27,160 --> 00:00:31,200 Speaker 1: US Deputy Attorney General Jeff Rosen announced the suit on Tuesday. 8 00:00:31,720 --> 00:00:34,560 Speaker 1: Google is the gateway to the Internet and a search 9 00:00:34,640 --> 00:00:38,839 Speaker 1: advertising behemoth. Google achieves some success in its earliers, and 10 00:00:38,840 --> 00:00:42,400 Speaker 1: no one begrudges that. But as the nitrust complaint filed 11 00:00:42,400 --> 00:00:46,760 Speaker 1: today explains, it has maintained its monopoly power through exclusionary 12 00:00:46,840 --> 00:00:51,720 Speaker 1: practices that are harmful to competition. So the Justice Department 13 00:00:51,800 --> 00:00:57,080 Speaker 1: has determined that an antitrust response is necessary to benefit consumers. 14 00:00:58,120 --> 00:01:02,200 Speaker 1: But Google's director of Economic Policy, Adam Cohen, defended his 15 00:01:02,320 --> 00:01:05,760 Speaker 1: company's tactics and, speaking to Bloomberg, we think this case 16 00:01:05,880 --> 00:01:09,720 Speaker 1: is deeply fought and risks harming American consumers. We compete 17 00:01:09,840 --> 00:01:13,240 Speaker 1: vigorously in the marketplace. Our industry, our sector is marked 18 00:01:13,240 --> 00:01:16,600 Speaker 1: by prices that are free or falling and rapid innovation, 19 00:01:16,640 --> 00:01:19,480 Speaker 1: and those are really hard hallmarks of a competitive industry. 20 00:01:19,680 --> 00:01:22,840 Speaker 1: Joining me is antitrust law expert Harry First, a professor 21 00:01:22,880 --> 00:01:26,319 Speaker 1: at m y U Law School. Let's start broadly, Harry, 22 00:01:26,400 --> 00:01:30,240 Speaker 1: how would you characterize this lawsuit in terms of its significance? 23 00:01:30,880 --> 00:01:34,880 Speaker 1: The lawsuit is very significant in this sense. It's been 24 00:01:35,440 --> 00:01:39,319 Speaker 1: more than two decades since the Justice Department has filed 25 00:01:39,360 --> 00:01:43,240 Speaker 1: a monopolization case, more than two decades since the Justice 26 00:01:43,240 --> 00:01:46,920 Speaker 1: Department has taken on high tech, more than two decades 27 00:01:46,959 --> 00:01:50,480 Speaker 1: since they've paid attention to this area. It's really quite extraordinary. 28 00:01:50,520 --> 00:01:53,640 Speaker 1: So seeing them file a case I count as a 29 00:01:53,720 --> 00:01:59,400 Speaker 1: real positive. Explain basically what the government's charges are of 30 00:01:59,400 --> 00:02:03,760 Speaker 1: anti competitive conduct by Google. Well, the basic idea is 31 00:02:03,760 --> 00:02:07,440 Speaker 1: that Google has monopolies. They are alleged three different markets, 32 00:02:07,480 --> 00:02:10,680 Speaker 1: but basically in the market for search and the market 33 00:02:10,800 --> 00:02:16,160 Speaker 1: for some aspects of digital or online advertising. So the 34 00:02:16,200 --> 00:02:18,840 Speaker 1: complain alleges that they have a monopoly in those markets 35 00:02:18,840 --> 00:02:22,240 Speaker 1: that have very high market shares, and that they've maintained 36 00:02:22,480 --> 00:02:29,559 Speaker 1: these monopolies not through legitimate competition, but through exclusionary agreements 37 00:02:29,639 --> 00:02:34,200 Speaker 1: that sends out any potential rivals any upstarts, and that 38 00:02:34,280 --> 00:02:39,280 Speaker 1: they are continuing to do this as the technology evolves. 39 00:02:39,400 --> 00:02:42,000 Speaker 1: And you know, we have the Internet of Things, and 40 00:02:42,040 --> 00:02:45,600 Speaker 1: we have wired cars, and we have these personal assistants. 41 00:02:45,440 --> 00:02:48,680 Speaker 1: That this is an effort just to keep control over 42 00:02:49,120 --> 00:02:52,120 Speaker 1: and in some sense access to the Internet. It's not 43 00:02:52,200 --> 00:02:55,440 Speaker 1: unlawful to be a monopoly in this country. And some 44 00:02:55,520 --> 00:02:57,720 Speaker 1: people would say, well, Google is doing the things you 45 00:02:57,760 --> 00:03:00,440 Speaker 1: can do as a monopolist, so what makes it illegal. 46 00:03:00,880 --> 00:03:06,240 Speaker 1: So the law tries to distinguish between legitimate, even aggressive competition, 47 00:03:06,960 --> 00:03:11,320 Speaker 1: and competition that isn't on the merits that tries to 48 00:03:11,400 --> 00:03:15,280 Speaker 1: succeed by making sure competitors can't get to the market. 49 00:03:15,440 --> 00:03:19,519 Speaker 1: So if you have a great product and consumers love 50 00:03:19,560 --> 00:03:23,639 Speaker 1: it and everyone uses it, let's say that's not a problem, 51 00:03:23,680 --> 00:03:26,600 Speaker 1: and you can continue to innovate and bring out better 52 00:03:26,680 --> 00:03:30,680 Speaker 1: features and lower prices things like that. But if you 53 00:03:30,800 --> 00:03:35,680 Speaker 1: take efforts to squeeze out your competitors by as this 54 00:03:35,840 --> 00:03:42,080 Speaker 1: complain alleges, some kinds of exclusive agreements, which say, okay, Apple, 55 00:03:42,200 --> 00:03:46,120 Speaker 1: for your iPhone, you have to make Google Search the default. 56 00:03:46,200 --> 00:03:50,560 Speaker 1: And we know that consumers don't change their defaults, you know, 57 00:03:50,840 --> 00:03:53,640 Speaker 1: they keep going with it. This means that other search 58 00:03:53,720 --> 00:03:58,280 Speaker 1: engines can't get tractions, can't get enough people using their 59 00:03:58,280 --> 00:04:01,480 Speaker 1: search engines to offer a good product, and that fences 60 00:04:01,520 --> 00:04:04,480 Speaker 1: out competitive is not because you're better, but because you 61 00:04:04,520 --> 00:04:08,680 Speaker 1: have this agreement with Apple. So now Google's response has 62 00:04:08,760 --> 00:04:13,360 Speaker 1: been that its conduct doesn't raise prices for consumers. And 63 00:04:13,400 --> 00:04:17,320 Speaker 1: he also compared its search engine distribution agreements to a 64 00:04:17,440 --> 00:04:20,960 Speaker 1: serial brand paying a grocery store to be in the 65 00:04:21,000 --> 00:04:25,200 Speaker 1: best position on the shelves. Is that a good response, Well, 66 00:04:25,240 --> 00:04:30,000 Speaker 1: it's a response um search two consumers. Of course, is 67 00:04:30,040 --> 00:04:33,920 Speaker 1: not priced in dollars. The complain alleges that it's priced 68 00:04:33,920 --> 00:04:37,000 Speaker 1: in other ways. We'll see how that develops in the litigation. 69 00:04:37,560 --> 00:04:39,960 Speaker 1: They get your data, of course, that's really what they want, 70 00:04:40,520 --> 00:04:43,560 Speaker 1: and it's priced in terms of your attention. You know, 71 00:04:43,720 --> 00:04:46,920 Speaker 1: your eyeballs, you pay attention to it. But in the end, 72 00:04:46,960 --> 00:04:51,919 Speaker 1: it's monetized, as the complaint says, by prices for advertising. 73 00:04:52,320 --> 00:04:55,680 Speaker 1: You know, if they control you and access, when they've 74 00:04:55,680 --> 00:05:00,839 Speaker 1: got all these advertisements, monopoly share, they can charge prices 75 00:05:00,880 --> 00:05:04,640 Speaker 1: for that. So that's one rejoinder to the Oh, but 76 00:05:04,760 --> 00:05:08,520 Speaker 1: it's free, isn't that great for consumers? Maybe not so free? 77 00:05:09,240 --> 00:05:14,040 Speaker 1: And what about Google's analogy to a cereal brand paying 78 00:05:14,040 --> 00:05:17,440 Speaker 1: to get better placement on grocery store shelves. But as 79 00:05:17,480 --> 00:05:19,919 Speaker 1: you were saying it, I was thinking, well, you know, 80 00:05:20,120 --> 00:05:23,839 Speaker 1: usually the cereal maker doesn't own the whole store. Usually 81 00:05:23,920 --> 00:05:27,520 Speaker 1: it's just a placement on a shelf. And if you've 82 00:05:27,560 --> 00:05:30,760 Speaker 1: ever bought cereal, you know there's another brand right next 83 00:05:30,800 --> 00:05:33,200 Speaker 1: to it. So it's true they do pay for that. 84 00:05:33,480 --> 00:05:37,120 Speaker 1: But the argument here is, well, Google owns all the shelves, 85 00:05:37,320 --> 00:05:42,080 Speaker 1: and by paying for the best spot, there aren't other spots. 86 00:05:42,440 --> 00:05:45,880 Speaker 1: Nobody comes into this store for something else. You know, 87 00:05:46,160 --> 00:05:48,880 Speaker 1: if you were going to have the analogy to say, okay, 88 00:05:49,000 --> 00:05:52,360 Speaker 1: consumers can go to a different store, but it's not 89 00:05:52,440 --> 00:05:56,800 Speaker 1: as convenient and they don't bother. So I've heard this analogy, 90 00:05:57,040 --> 00:05:59,960 Speaker 1: I'm not sure how persuasive it's going to be legally. 91 00:06:00,520 --> 00:06:04,360 Speaker 1: In the complaint, the Justice Department lawyers say that Google 92 00:06:04,440 --> 00:06:09,200 Speaker 1: tapped the same playbook as Microsoft. How similar is this 93 00:06:09,279 --> 00:06:15,200 Speaker 1: case to the Justice Department's suit against Microsoft decades ago. Well, 94 00:06:15,520 --> 00:06:18,359 Speaker 1: the complaint itself says, as you say that it's governed 95 00:06:18,360 --> 00:06:21,320 Speaker 1: by the principles for Microsoft, and they're talking about the 96 00:06:21,400 --> 00:06:24,680 Speaker 1: legal principles I think that the Court of Appeals applied 97 00:06:24,960 --> 00:06:27,960 Speaker 1: in that case. So in that sense, the government wants 98 00:06:28,000 --> 00:06:31,920 Speaker 1: to align with Microsoft. But also in a broad sense, 99 00:06:32,080 --> 00:06:35,320 Speaker 1: this is similar to the kinds of complaints that the 100 00:06:35,440 --> 00:06:40,440 Speaker 1: government made. Microsoft had a monopoly on Windows, it was threatened, 101 00:06:40,640 --> 00:06:45,040 Speaker 1: and it made efforts to extinguish the ability of rival 102 00:06:45,160 --> 00:06:49,560 Speaker 1: browsers and an escape browser to reach consumers and get 103 00:06:49,600 --> 00:06:54,080 Speaker 1: its product to consumers by forcing the people who bought browsers, 104 00:06:54,120 --> 00:06:59,960 Speaker 1: which basically were makers of computers, to install Internet explo 105 00:07:00,000 --> 00:07:05,200 Speaker 1: Lore rather than installing Netscape. So actually it's similar. One 106 00:07:05,240 --> 00:07:08,960 Speaker 1: of the interesting issues is that it's not identical. So 107 00:07:09,240 --> 00:07:12,559 Speaker 1: the world of mobile phones is different from the world 108 00:07:12,680 --> 00:07:18,160 Speaker 1: of desktops in consumers may behave differently, the kinds of 109 00:07:18,200 --> 00:07:22,360 Speaker 1: agreements are different. These are defaults, making Google Search the 110 00:07:22,480 --> 00:07:27,080 Speaker 1: default but not the exclusive. So it's possible for consumers 111 00:07:27,080 --> 00:07:30,840 Speaker 1: to have different search engines on their phones, and they'll 112 00:07:30,880 --> 00:07:33,800 Speaker 1: be arguments about, you know, how do consumers behave and 113 00:07:33,960 --> 00:07:36,360 Speaker 1: do they multi home, do they look at different search 114 00:07:36,400 --> 00:07:39,680 Speaker 1: engines or they end up sticking with Google because that's 115 00:07:39,680 --> 00:07:41,680 Speaker 1: what's from their phone and they assume that's what they 116 00:07:41,680 --> 00:07:45,080 Speaker 1: should use. Some Lettle experts say that this is a 117 00:07:45,240 --> 00:07:49,160 Speaker 1: pair down complaint. To make an easier case at trial, 118 00:07:49,520 --> 00:07:53,120 Speaker 1: what would the Justice Department have to prove it trial? Well, 119 00:07:53,280 --> 00:07:55,640 Speaker 1: the Jet Department has to show that Google in fact 120 00:07:55,680 --> 00:07:59,480 Speaker 1: has a monopoly in the markets that the government alleges 121 00:07:59,520 --> 00:08:02,800 Speaker 1: are shoe has to show that these really are markets. 122 00:08:02,960 --> 00:08:06,200 Speaker 1: They talk about advertising, Well, you know, there's a lot 123 00:08:06,240 --> 00:08:09,120 Speaker 1: of advertising in the world, and a lot of different 124 00:08:09,120 --> 00:08:13,080 Speaker 1: ways to reach consumers, even on the Internet. I've heard 125 00:08:13,080 --> 00:08:17,040 Speaker 1: there's something called Facebook. Facebook isn't mentioned in the complaint. 126 00:08:17,400 --> 00:08:21,440 Speaker 1: There's advertising on Amazon, people do searches on Amazon. So 127 00:08:21,760 --> 00:08:24,800 Speaker 1: there will be lots of arguments about whether Google really 128 00:08:24,920 --> 00:08:28,000 Speaker 1: is a monopolis or whether consumers have choices. So that's 129 00:08:28,040 --> 00:08:30,520 Speaker 1: the first part. Are they a monopolis? But as you 130 00:08:30,640 --> 00:08:33,280 Speaker 1: pointed out, that's not the end of it, because it's 131 00:08:33,320 --> 00:08:36,240 Speaker 1: not a violation of US any trust law to be 132 00:08:36,280 --> 00:08:39,839 Speaker 1: a monopolis. So then the second part is, well, how 133 00:08:39,880 --> 00:08:43,360 Speaker 1: do they maintain their monopoly position. Is it through anti 134 00:08:43,400 --> 00:08:47,680 Speaker 1: competitive agreements that exclude competition, you know on some basis 135 00:08:47,760 --> 00:08:50,920 Speaker 1: others and efficiency, or is it because as Google will 136 00:08:50,960 --> 00:08:54,800 Speaker 1: certainly argue, it's got a great product, people like it 137 00:08:54,920 --> 00:08:58,640 Speaker 1: because their search engine is really good. And their search 138 00:08:58,679 --> 00:09:01,200 Speaker 1: engine is really good because there are a lot of 139 00:09:01,200 --> 00:09:04,360 Speaker 1: people who use it and feed that into it. So this, 140 00:09:04,520 --> 00:09:07,320 Speaker 1: if it ever gets the trial, this will be I think, 141 00:09:07,640 --> 00:09:10,199 Speaker 1: also disputed and the government's going to have to show 142 00:09:10,600 --> 00:09:14,320 Speaker 1: it's not competition on the mirth. In this complaint, the 143 00:09:14,440 --> 00:09:18,360 Speaker 1: Justice Department hasn't said what remedies it would like if 144 00:09:18,400 --> 00:09:21,840 Speaker 1: it wins the suit. In Microsoft, they sawt a breakup 145 00:09:21,880 --> 00:09:25,959 Speaker 1: of the company. Is a breakup even on the table here, well, 146 00:09:26,160 --> 00:09:29,800 Speaker 1: the table hasn't been set yet, so in the original 147 00:09:29,840 --> 00:09:33,800 Speaker 1: complaint to the Justice Department file in Microsoft, there wasn't 148 00:09:33,800 --> 00:09:38,120 Speaker 1: a specific remedy set out, and the Lidigans generally are 149 00:09:38,160 --> 00:09:41,120 Speaker 1: pretty vague about what they want because they don't want 150 00:09:41,120 --> 00:09:43,839 Speaker 1: to be confined by the time the trial ends to 151 00:09:44,000 --> 00:09:47,240 Speaker 1: something they thought about before the trial started. So the 152 00:09:47,400 --> 00:09:51,280 Speaker 1: complaint does mention the possibility of structural relief, which is 153 00:09:51,440 --> 00:09:56,000 Speaker 1: somewhat unusual actually for government complaints to do. That's almost 154 00:09:56,000 --> 00:09:59,360 Speaker 1: more specificity than I would have expected. So it is 155 00:09:59,400 --> 00:10:02,559 Speaker 1: on the tab able. It's been reported that one possibility 156 00:10:02,720 --> 00:10:06,360 Speaker 1: is making Google the best itself of the Chrome browser. 157 00:10:06,920 --> 00:10:09,520 Speaker 1: I think that's yet to be seen, and it may 158 00:10:09,720 --> 00:10:12,560 Speaker 1: very well be that the government has an idea but 159 00:10:12,880 --> 00:10:17,760 Speaker 1: not a fully executed plan about the remedy at once, 160 00:10:17,880 --> 00:10:21,600 Speaker 1: because to some extent it still needs to find out 161 00:10:21,600 --> 00:10:25,280 Speaker 1: more information. They'll be discovery and there's an idea of 162 00:10:25,320 --> 00:10:29,160 Speaker 1: what you want, but accomplishing it is another story. The 163 00:10:29,280 --> 00:10:33,240 Speaker 1: state ages have been investigating as well. Is this going 164 00:10:33,320 --> 00:10:37,160 Speaker 1: to set off a wave of other litigation from state 165 00:10:37,200 --> 00:10:44,040 Speaker 1: ages and private complaints? Perhaps? Well, a number of states 166 00:10:44,160 --> 00:10:50,480 Speaker 1: um joined this complaint. So um Uh the states which 167 00:10:50,720 --> 00:10:54,160 Speaker 1: that have not UM lead I gather at this point 168 00:10:54,200 --> 00:10:57,080 Speaker 1: by the Attorney General of Colorado was very good at 169 00:10:57,080 --> 00:11:02,200 Speaker 1: any trust lawyer and former professor serve any trust. UM 170 00:11:02,679 --> 00:11:07,640 Speaker 1: are still investigating and UM trying to decide whether they 171 00:11:07,679 --> 00:11:11,160 Speaker 1: want to file their own case and what that case 172 00:11:11,280 --> 00:11:14,959 Speaker 1: might look like. Though. UM. They did issue as I 173 00:11:15,000 --> 00:11:19,679 Speaker 1: assume you saw press release yesterday, UM commending this litigation 174 00:11:19,920 --> 00:11:24,400 Speaker 1: and the close working relationship they have with the Justice Department. 175 00:11:24,880 --> 00:11:29,280 Speaker 1: But we will see what will happen, UM. The state 176 00:11:29,400 --> 00:11:32,480 Speaker 1: federal partnership in these cases. Well, we haven't had a 177 00:11:32,480 --> 00:11:36,520 Speaker 1: lot of monopoly cases. UM, so it's always a little 178 00:11:36,559 --> 00:11:43,560 Speaker 1: touchy UM and uh this one apparently is as well. UM. 179 00:11:43,720 --> 00:11:47,960 Speaker 1: But uh, yes, so I it will not surprise me 180 00:11:48,000 --> 00:11:51,600 Speaker 1: at the states those other states do file UM their 181 00:11:51,679 --> 00:11:53,960 Speaker 1: own case and then move to have a try together 182 00:11:54,080 --> 00:11:57,640 Speaker 1: with the Justice Department's case. UM. That that gets to 183 00:11:57,640 --> 00:12:01,760 Speaker 1: be seen whether UM that will be the case. As 184 00:12:01,760 --> 00:12:09,240 Speaker 1: for private litigation, UM, I'm not sure taking on Google 185 00:12:09,440 --> 00:12:14,120 Speaker 1: is a big deal. UM that some of the allegations 186 00:12:14,160 --> 00:12:18,880 Speaker 1: are been well known for a while UM, and UM 187 00:12:19,200 --> 00:12:23,480 Speaker 1: private cases have not been filed. So I'm actually not 188 00:12:23,600 --> 00:12:28,640 Speaker 1: looking for private litigation to happen at this point. UM. 189 00:12:28,640 --> 00:12:33,679 Speaker 1: Probably later if the Justice Department continues this suit and 190 00:12:33,679 --> 00:12:37,079 Speaker 1: how it develops, and maybe we will see some private 191 00:12:37,120 --> 00:12:40,800 Speaker 1: litigants jumping in. But UM, uh you know, and that 192 00:12:40,880 --> 00:12:43,200 Speaker 1: did happen in the Microsoft litigation. There was a lot 193 00:12:43,240 --> 00:12:48,720 Speaker 1: of private litigation UM that came about as a result 194 00:12:48,840 --> 00:12:54,640 Speaker 1: of the government suits against Microsoft. Is this a test 195 00:12:54,800 --> 00:12:59,400 Speaker 1: in any way of the current antitrust laws? Well, every 196 00:12:59,440 --> 00:13:04,200 Speaker 1: case when in the a testment, UM, I don't so 197 00:13:04,600 --> 00:13:06,960 Speaker 1: as I read the complaint, the government is not trying 198 00:13:07,000 --> 00:13:13,679 Speaker 1: to push UM and USA any trust law in some 199 00:13:13,760 --> 00:13:17,440 Speaker 1: sort of new direction. There. You know, lawyers are by 200 00:13:17,920 --> 00:13:22,120 Speaker 1: nature and training somewhat conservative. They're trying to bring this 201 00:13:22,200 --> 00:13:27,640 Speaker 1: case within the contours of current law. Um, and as 202 00:13:27,640 --> 00:13:32,920 Speaker 1: they try to do in the Microsoft litigation. So um, 203 00:13:33,000 --> 00:13:37,160 Speaker 1: you know, it may be a test of any trust institutions. 204 00:13:37,200 --> 00:13:39,720 Speaker 1: It may be a test of what you can achieve 205 00:13:39,760 --> 00:13:43,760 Speaker 1: in terms of remedy in any trust laws. But I 206 00:13:43,800 --> 00:13:48,040 Speaker 1: think the basic structure is not um something that the 207 00:13:48,120 --> 00:13:51,160 Speaker 1: government is attacking in in this case. So I don't 208 00:13:51,200 --> 00:13:53,880 Speaker 1: think it's a challenge in that sense. We don't know 209 00:13:53,920 --> 00:13:56,000 Speaker 1: how long this case will go on. But is this 210 00:13:56,080 --> 00:14:01,560 Speaker 1: a case where the government is out matched by the 211 00:14:01,640 --> 00:14:06,280 Speaker 1: resources of the defendant Google. Well, I haven't done the 212 00:14:06,320 --> 00:14:09,680 Speaker 1: mass exactly, but if you if you figure out the 213 00:14:09,720 --> 00:14:12,240 Speaker 1: budget of the any Trust Division and the budget of 214 00:14:12,280 --> 00:14:16,719 Speaker 1: Google for litigation, half match might be you know, it 215 00:14:16,800 --> 00:14:20,360 Speaker 1: might be a good word. Obviously, UM, in terms of 216 00:14:20,360 --> 00:14:23,240 Speaker 1: a comparison of resources, You're not going to match Google. 217 00:14:23,280 --> 00:14:25,360 Speaker 1: You're not going to match any of these tech giants 218 00:14:25,760 --> 00:14:30,640 Speaker 1: the government. You know, historically that's always the case. And 219 00:14:30,760 --> 00:14:33,520 Speaker 1: still the government managed to litigate against a T and C, 220 00:14:33,720 --> 00:14:37,320 Speaker 1: against IBM and Standard Oil to the the beginning of any 221 00:14:37,320 --> 00:14:41,000 Speaker 1: trust law. So I'm less worried about that. Where I 222 00:14:41,040 --> 00:14:44,480 Speaker 1: think this matters is Google knows a lot more about 223 00:14:44,520 --> 00:14:47,960 Speaker 1: its business and its technology than the government does. That's 224 00:14:48,000 --> 00:14:50,720 Speaker 1: sort of the nature of things, and this is always 225 00:14:50,720 --> 00:14:54,080 Speaker 1: a problem, but it's particular problem in the tech area. 226 00:14:54,520 --> 00:14:59,560 Speaker 1: It's a problem for understanding how search engines are put together, 227 00:14:59,760 --> 00:15:04,440 Speaker 1: how the advertising is done, how it's priced, all of 228 00:15:04,440 --> 00:15:07,680 Speaker 1: these things. Google knows what it does. The government has 229 00:15:07,720 --> 00:15:11,720 Speaker 1: to find out. So that's where the problem comes in. 230 00:15:11,720 --> 00:15:15,280 Speaker 1: In terms of human capital. Well, the government here, unlike 231 00:15:15,280 --> 00:15:18,240 Speaker 1: in Microsoft, hasn't hired outside council you know, I don't 232 00:15:18,240 --> 00:15:21,680 Speaker 1: know where that's a plus for the professional staff, you know, 233 00:15:21,880 --> 00:15:25,480 Speaker 1: show of support or some indication that there's a lack 234 00:15:25,520 --> 00:15:28,760 Speaker 1: of seriousness in this litigation. I don't know which it is. 235 00:15:28,880 --> 00:15:33,080 Speaker 1: They'll need outside economics experts, but you know, the government 236 00:15:33,080 --> 00:15:35,880 Speaker 1: has been able to hire those in other cases that 237 00:15:35,920 --> 00:15:38,080 Speaker 1: I'm sure there are plenty of economists who would love 238 00:15:38,120 --> 00:15:40,840 Speaker 1: to help out on the government's side. So I think 239 00:15:40,840 --> 00:15:43,440 Speaker 1: it's knowledge more than anything else. Thanks for being on 240 00:15:43,440 --> 00:15:46,640 Speaker 1: the Bloomberg Law Show, Harry. That's Professor Harry First of 241 00:15:46,840 --> 00:15:49,480 Speaker 1: n y U Law School, and that's for the edition 242 00:15:49,480 --> 00:15:52,040 Speaker 1: of the Bloomberg Law Show. Remember you can always get 243 00:15:52,040 --> 00:15:54,840 Speaker 1: the latest legal news on our Bloomberg Lawn podcast. You 244 00:15:54,880 --> 00:15:59,000 Speaker 1: can find them on Apple Podcast or www dot Bloomberg 245 00:15:59,080 --> 00:16:03,760 Speaker 1: dot com, Slash podcast, Slash Law. I'm June Grosso. Thanks 246 00:16:03,800 --> 00:16:06,040 Speaker 1: so much for listening, and remember to tune to the 247 00:16:06,040 --> 00:16:09,280 Speaker 1: Bloomberg Law Show every weeknight at Champion John right on 248 00:16:09,400 --> 00:16:17,840 Speaker 1: the radio. Would you give the advantage to either side? 249 00:16:18,040 --> 00:16:20,760 Speaker 1: Looking at the complaint? What is this way? The core 250 00:16:20,840 --> 00:16:25,000 Speaker 1: of the government's case is hardly startling. The European Union 251 00:16:25,160 --> 00:16:27,640 Speaker 1: has already done this case, and the government could have 252 00:16:27,640 --> 00:16:31,320 Speaker 1: filed us three years ago. So I think they've pleaded 253 00:16:31,320 --> 00:16:34,520 Speaker 1: a case that's not a laydown case, but it's a 254 00:16:34,680 --> 00:16:39,120 Speaker 1: plausible case, strong case. Hard for Google to say in 255 00:16:39,160 --> 00:16:43,840 Speaker 1: the end, oh, we're not a monopoly in search. Oh search, 256 00:16:43,920 --> 00:16:46,000 Speaker 1: isn't the market. I mean, if that's the core of 257 00:16:46,000 --> 00:16:49,160 Speaker 1: their argument, they don't win that way. Where they might 258 00:16:49,200 --> 00:16:52,360 Speaker 1: win is convincing a judge that they've got a darn 259 00:16:52,440 --> 00:16:55,800 Speaker 1: good product that consumers like And isn't that what the 260 00:16:55,800 --> 00:16:59,840 Speaker 1: any trust laws and marketplace competition is all about? Thanks Harry. 261 00:17:00,080 --> 00:17:02,800 Speaker 1: That's Professor Harry First of n y U Law School. 262 00:17:03,920 --> 00:17:07,280 Speaker 1: The pandemic has affected every area of our life, bringing 263 00:17:07,320 --> 00:17:10,680 Speaker 1: into stark contrast many areas of the law from bankruptcy 264 00:17:10,720 --> 00:17:14,600 Speaker 1: to corporate governance. So how can law, governance and regulation 265 00:17:14,720 --> 00:17:17,439 Speaker 1: be structured to bring about a more just and fair 266 00:17:17,520 --> 00:17:21,880 Speaker 1: legal system. Columbia law professor Eric Talley addresses those questions 267 00:17:21,880 --> 00:17:26,240 Speaker 1: in a new podcast series called Beyond Unprecedented the Post 268 00:17:26,240 --> 00:17:30,520 Speaker 1: Pandemic Economy, and he joins me, now start by telling 269 00:17:30,600 --> 00:17:34,199 Speaker 1: us about this podcast series and what you wanted to 270 00:17:34,240 --> 00:17:37,640 Speaker 1: accomplish with it. Well, the podcast again again as sort 271 00:17:37,680 --> 00:17:40,720 Speaker 1: of a brainchild between the mill Stein Center, which is 272 00:17:40,800 --> 00:17:43,840 Speaker 1: a center that I co directed at Columbia, and our 273 00:17:43,840 --> 00:17:47,320 Speaker 1: communications team and and and part of the idea was that, 274 00:17:47,720 --> 00:17:49,919 Speaker 1: you know, everyone is so caught up in the dynamics 275 00:17:49,960 --> 00:17:52,760 Speaker 1: of the current set of crises, but one of the 276 00:17:52,800 --> 00:17:54,720 Speaker 1: things that seems to all of us that we need 277 00:17:54,760 --> 00:17:57,520 Speaker 1: to be looking out for is how do we reimagine 278 00:17:57,520 --> 00:18:00,240 Speaker 1: and reconfigure the way that you know, we organized laws 279 00:18:00,280 --> 00:18:02,879 Speaker 1: and institutions and regulations as we come out of it. 280 00:18:03,000 --> 00:18:06,560 Speaker 1: And so it was almost sort of an organic process 281 00:18:06,600 --> 00:18:09,040 Speaker 1: by which we we really wanted to go beyond the 282 00:18:09,119 --> 00:18:12,119 Speaker 1: current unprecedented events. And that's how we came up with 283 00:18:12,160 --> 00:18:15,640 Speaker 1: the title Beyond Precedent. Let's start with One of your 284 00:18:15,680 --> 00:18:20,240 Speaker 1: podcast was on income inequality, which certainly is more and 285 00:18:20,280 --> 00:18:24,639 Speaker 1: more in our conversation lately, especially with the elections upcoming. 286 00:18:24,920 --> 00:18:28,919 Speaker 1: How did the law contribute to income inequality? It's a 287 00:18:28,920 --> 00:18:30,880 Speaker 1: great question, and there are a bunch of different ways 288 00:18:30,920 --> 00:18:33,600 Speaker 1: that it has and you are exactly right to note that, 289 00:18:33,840 --> 00:18:35,960 Speaker 1: you know, I think just about everyone would agree that 290 00:18:36,000 --> 00:18:39,720 Speaker 1: wealth and income in equality has become almost one of 291 00:18:39,760 --> 00:18:43,480 Speaker 1: the defining features of our time, whether you're an economist, 292 00:18:43,520 --> 00:18:47,199 Speaker 1: a political scientist, or a lawyer. So one of the 293 00:18:47,240 --> 00:18:49,240 Speaker 1: things that we end up spending a lot of time doing, 294 00:18:49,240 --> 00:18:51,960 Speaker 1: and particularly myself I will say, is, you know, I 295 00:18:52,080 --> 00:18:55,080 Speaker 1: teach business law, which on some level can be thought 296 00:18:55,080 --> 00:18:58,320 Speaker 1: of as a very large, ornate field for trying to 297 00:18:58,400 --> 00:19:03,520 Speaker 1: structure organizations and businesses in large part to create value, 298 00:19:03,560 --> 00:19:06,240 Speaker 1: which from a business perspective is how do you minimize 299 00:19:06,240 --> 00:19:09,080 Speaker 1: your tax liability? That's a big chunk of it. And 300 00:19:09,240 --> 00:19:12,159 Speaker 1: just what it turns out that many of those structures 301 00:19:12,160 --> 00:19:16,399 Speaker 1: that corporations are large, you know, limited partnerships or venture 302 00:19:16,440 --> 00:19:19,960 Speaker 1: capital funds used for limiting their tax liability, they can 303 00:19:20,040 --> 00:19:24,760 Speaker 1: carry over almost directly to family trusts, to family owned businesses, 304 00:19:25,040 --> 00:19:28,520 Speaker 1: and if you are a person of considerable means it 305 00:19:28,560 --> 00:19:31,520 Speaker 1: can be a vehicle by which to not only manage 306 00:19:31,560 --> 00:19:35,760 Speaker 1: things like tax liability, but also protect those assets against 307 00:19:35,760 --> 00:19:40,080 Speaker 1: any you know, problematic creditors or downturns that that one 308 00:19:40,119 --> 00:19:43,000 Speaker 1: sees later on. So the well healed in the United 309 00:19:43,040 --> 00:19:45,760 Speaker 1: States and across the world, This is not news to them. 310 00:19:45,800 --> 00:19:48,080 Speaker 1: This has been a set of structures that have been 311 00:19:48,560 --> 00:19:54,399 Speaker 1: routinely utilized by particularly wealthy individuals and businesses over the 312 00:19:54,440 --> 00:19:57,960 Speaker 1: decades um and in fact, in some respects, many of 313 00:19:58,000 --> 00:20:01,880 Speaker 1: the tax reforms and business reforms that took place starting 314 00:20:01,880 --> 00:20:04,840 Speaker 1: in the late nineteen seventies and through pretty much two 315 00:20:04,880 --> 00:20:08,120 Speaker 1: thousand added more fuel to the fire. It became possible 316 00:20:08,200 --> 00:20:10,800 Speaker 1: not only to utilize some of these structures and tax 317 00:20:10,800 --> 00:20:14,639 Speaker 1: protection devices as long as you're wealthy enough to make 318 00:20:14,720 --> 00:20:17,520 Speaker 1: it worth while, but also to almost you know, almost 319 00:20:17,520 --> 00:20:20,560 Speaker 1: weaponize it in some ways that that it it almost 320 00:20:20,600 --> 00:20:25,720 Speaker 1: had an accelerating feature on on how you know, opportunity 321 00:20:25,840 --> 00:20:28,439 Speaker 1: and wealth were distributed in a in a kind of 322 00:20:28,440 --> 00:20:31,000 Speaker 1: a in a kind of a lopsided way within the 323 00:20:31,080 --> 00:20:33,679 Speaker 1: United States as well as the world. And you know, 324 00:20:33,760 --> 00:20:36,199 Speaker 1: it's it's a it's a hard issue to tackle in 325 00:20:36,280 --> 00:20:39,960 Speaker 1: part because, um, you know, part of those wealth creation 326 00:20:40,119 --> 00:20:46,080 Speaker 1: moments were probably also social value creation moments. They were innovations. 327 00:20:46,080 --> 00:20:48,680 Speaker 1: There were new businesses that were being put into play 328 00:20:48,920 --> 00:20:51,159 Speaker 1: that I think anyone would say, yes, this is added 329 00:20:51,200 --> 00:20:54,360 Speaker 1: to the welfare of the United States and the world. 330 00:20:54,480 --> 00:20:57,639 Speaker 1: But it but in the same moment that it did that, uh, 331 00:20:57,920 --> 00:21:02,879 Speaker 1: that added productivity, that add growth also seemed to increasingly 332 00:21:02,960 --> 00:21:07,840 Speaker 1: divide towards uh, towards the investor class. And uh and 333 00:21:07,960 --> 00:21:11,639 Speaker 1: you know, we found ourselves even before this pandemic began, 334 00:21:12,160 --> 00:21:15,680 Speaker 1: on the heels of a of a decade long migration 335 00:21:16,040 --> 00:21:18,960 Speaker 1: that was often aided and assisted by some of these 336 00:21:19,040 --> 00:21:22,760 Speaker 1: legal intax structures to put us ourselves in a position where, 337 00:21:22,960 --> 00:21:25,639 Speaker 1: you know, we haven't seen this kind of uh of 338 00:21:26,080 --> 00:21:31,200 Speaker 1: lopsided form of wealth and income distribution since the nineteen twenties. Uh. 339 00:21:31,200 --> 00:21:34,600 Speaker 1: And it carries over not just into that context, but 340 00:21:34,680 --> 00:21:38,400 Speaker 1: there are also many other sorts of follow on artifacts 341 00:21:38,400 --> 00:21:41,679 Speaker 1: of it as well. UH. Education and schooling tends to 342 00:21:42,119 --> 00:21:46,119 Speaker 1: tends to track some of these some of these features. UH. Nutrition, 343 00:21:46,400 --> 00:21:48,760 Speaker 1: health tends attract some of these features as well. So 344 00:21:49,240 --> 00:21:51,879 Speaker 1: UH it it in many respects, I think is is 345 00:21:52,040 --> 00:21:54,880 Speaker 1: of all the all the episodes. One of the biggest 346 00:21:54,920 --> 00:21:59,000 Speaker 1: and toughest eggs to crack. Speaking of cracking that egg, 347 00:21:59,359 --> 00:22:04,480 Speaker 1: what can be done to address income inequality in our country. Well, 348 00:22:04,480 --> 00:22:06,280 Speaker 1: one of the things that will come out when you 349 00:22:06,400 --> 00:22:08,720 Speaker 1: listen to the to the episodes that there is not 350 00:22:08,840 --> 00:22:11,240 Speaker 1: going to be a magic pill that we take it 351 00:22:11,359 --> 00:22:14,879 Speaker 1: suddenly wealth and income into quality problems are going to 352 00:22:14,920 --> 00:22:17,320 Speaker 1: be gone. I just don't think that that is, uh, 353 00:22:17,720 --> 00:22:21,040 Speaker 1: neither of my guests in the podcast episode, and I 354 00:22:21,080 --> 00:22:25,119 Speaker 1: don't think that that's a realistic possibility. That having been said, 355 00:22:25,680 --> 00:22:28,360 Speaker 1: it seems to me that there's growing and coalescing support 356 00:22:28,440 --> 00:22:31,040 Speaker 1: behind a couple of different things that might work. First, 357 00:22:31,200 --> 00:22:34,359 Speaker 1: it turns out that even though many of these different 358 00:22:34,400 --> 00:22:37,960 Speaker 1: types of business and tax structures have over the years 359 00:22:38,040 --> 00:22:41,800 Speaker 1: systematically favored the well to do and the people who 360 00:22:41,800 --> 00:22:45,560 Speaker 1: could sort of afford to engineer them, the once engineered, 361 00:22:45,600 --> 00:22:47,520 Speaker 1: they're not that hard to copy it. So there are 362 00:22:47,560 --> 00:22:51,480 Speaker 1: definitely some ways that that some of these structures can 363 00:22:51,520 --> 00:22:57,080 Speaker 1: be incorporated into ordinary um individual finance, not at the 364 00:22:57,440 --> 00:22:59,919 Speaker 1: you know, ten million dollar net worth level, but at 365 00:23:00,000 --> 00:23:03,199 Speaker 1: a far at a far lower network level. So on 366 00:23:03,320 --> 00:23:06,360 Speaker 1: some level, this is you know, access to reasonably good 367 00:23:06,440 --> 00:23:09,520 Speaker 1: legal advice and how to navigate these very very same 368 00:23:09,560 --> 00:23:11,920 Speaker 1: structures that the well to do have been able to 369 00:23:12,240 --> 00:23:15,440 Speaker 1: navigate for years. Now, that's obviously only one, uh, one 370 00:23:15,520 --> 00:23:18,360 Speaker 1: piece in the bucket. There is now, I think, growing 371 00:23:18,400 --> 00:23:21,399 Speaker 1: impetus for trying to figure out how not only to 372 00:23:21,560 --> 00:23:25,200 Speaker 1: engage in some sort of support of particularly of the 373 00:23:25,240 --> 00:23:28,119 Speaker 1: lower middle class and the and the and the poor, 374 00:23:28,359 --> 00:23:30,280 Speaker 1: but also to do so in a way that that 375 00:23:30,440 --> 00:23:33,199 Speaker 1: is going to um allow them to to to be 376 00:23:33,359 --> 00:23:37,119 Speaker 1: retrained for what is a you know, a changing workforce 377 00:23:37,240 --> 00:23:40,240 Speaker 1: and and one that is probably changing, uh, you know, 378 00:23:40,400 --> 00:23:43,240 Speaker 1: more dramatically than it has in my life, and I 379 00:23:43,280 --> 00:23:46,199 Speaker 1: think the pandemic on some level. When you think about 380 00:23:46,560 --> 00:23:49,320 Speaker 1: the the effects of the pandemic, it doesn't take too 381 00:23:49,359 --> 00:23:51,320 Speaker 1: long for you to open up the Wall Street Journal 382 00:23:51,320 --> 00:23:53,480 Speaker 1: and the Financial Times in the New York Times to 383 00:23:53,560 --> 00:23:56,240 Speaker 1: read an article that says, yet another industry that has 384 00:23:56,320 --> 00:23:59,159 Speaker 1: been focusing on, you know, an awful lot of a 385 00:23:59,280 --> 00:24:03,000 Speaker 1: mix of of person power and an automation has decided 386 00:24:03,040 --> 00:24:06,720 Speaker 1: to go fully automated because, uh, you know, slowdowns due 387 00:24:06,760 --> 00:24:10,920 Speaker 1: to COVID make the economics of automating appropriate right now. 388 00:24:11,200 --> 00:24:13,720 Speaker 1: So you know, my sense is that the crisis that 389 00:24:13,880 --> 00:24:17,000 Speaker 1: the pandemic is going to send us even further into 390 00:24:17,680 --> 00:24:20,919 Speaker 1: a type of a transition zone where even you know, 391 00:24:21,080 --> 00:24:24,000 Speaker 1: jobs manufacturing, jobs that we thought were likely to be 392 00:24:24,040 --> 00:24:26,840 Speaker 1: populated by humans for years to come are now going 393 00:24:26,880 --> 00:24:29,959 Speaker 1: to be accelerated in that automated fashion. And and that 394 00:24:30,000 --> 00:24:33,320 Speaker 1: doesn't mean that there won't be other employment opportunities in fact, 395 00:24:33,440 --> 00:24:35,920 Speaker 1: nature of horrors of vacuum in this regard, but it 396 00:24:36,080 --> 00:24:38,320 Speaker 1: will mean that the types of what employment opportunities are 397 00:24:38,320 --> 00:24:39,880 Speaker 1: going to be different than the types that we saw 398 00:24:39,920 --> 00:24:43,440 Speaker 1: even seven or eight years ago. If in fact, this 399 00:24:43,200 --> 00:24:47,399 Speaker 1: this pandemic ends up visiting the types of transformation that 400 00:24:47,400 --> 00:24:48,919 Speaker 1: that a lot of people think are going to happen. 401 00:24:49,480 --> 00:24:53,160 Speaker 1: The pandemic has led to a number of bankruptcies, and 402 00:24:53,200 --> 00:24:57,199 Speaker 1: we see small businesses closing all the time. One of 403 00:24:57,240 --> 00:25:02,240 Speaker 1: your podcast is entitled making Bankruptcy a Better Tool for Resilience. 404 00:25:02,760 --> 00:25:05,800 Speaker 1: First of all, what are the major problems that you 405 00:25:05,960 --> 00:25:09,880 Speaker 1: see right now with the bankruptcy code? Yeah, well, this 406 00:25:09,960 --> 00:25:14,000 Speaker 1: was a fascinating uh, this is a fascinating episode podcast. 407 00:25:14,080 --> 00:25:16,639 Speaker 1: And one of the things that's interesting about it is 408 00:25:16,680 --> 00:25:20,280 Speaker 1: that that when this pandemic started, I think people were 409 00:25:20,320 --> 00:25:25,040 Speaker 1: expecting to see just a cavalcade of bankruptcies, and while 410 00:25:25,080 --> 00:25:27,320 Speaker 1: there has been a little bit of an uptake, particularly 411 00:25:27,359 --> 00:25:31,000 Speaker 1: with with with some larger firms, it's been way smaller 412 00:25:31,040 --> 00:25:33,040 Speaker 1: than people expected it to be. And I think that 413 00:25:33,119 --> 00:25:35,680 Speaker 1: may be in part simply because we bought ourselves in 414 00:25:35,840 --> 00:25:39,000 Speaker 1: time with the Cares Act and and that payroll protection 415 00:25:39,040 --> 00:25:42,480 Speaker 1: program that essentially allowed some businesses to limp a law 416 00:25:42,720 --> 00:25:48,000 Speaker 1: probably until December of this year, things like uh forbearance 417 00:25:48,080 --> 00:25:51,440 Speaker 1: on on various types of leases and mortgages as well. 418 00:25:51,800 --> 00:25:54,560 Speaker 1: Um that having been said, you know, it seems to 419 00:25:54,560 --> 00:25:56,560 Speaker 1: me that there are an awful lot of people that 420 00:25:56,680 --> 00:25:59,399 Speaker 1: are in fact predicting that the rate of filing of 421 00:25:59,480 --> 00:26:02,440 Speaker 1: bankrupts you're going to go way up. And there's also 422 00:26:02,480 --> 00:26:06,520 Speaker 1: a shadow bankruptcy. There's a there is. You know, bankruptcy 423 00:26:06,680 --> 00:26:09,400 Speaker 1: is really just the legal proceedings by which an insolvent 424 00:26:09,480 --> 00:26:14,560 Speaker 1: person restructures their debts. But but knowing that that maybe 425 00:26:14,680 --> 00:26:18,280 Speaker 1: on the road ahead often gets rise to almost any 426 00:26:18,359 --> 00:26:22,639 Speaker 1: type of private restructuring that you can possibly imagine. And 427 00:26:22,720 --> 00:26:26,080 Speaker 1: so so one of the areas that that is really 428 00:26:26,119 --> 00:26:28,440 Speaker 1: kind of fascinating to think about is, you know, how 429 00:26:28,440 --> 00:26:31,960 Speaker 1: do you design bankruptcy laws not necessarily so that the 430 00:26:32,000 --> 00:26:35,119 Speaker 1: bankruptcy process itself is the is the key focus, but 431 00:26:35,200 --> 00:26:38,720 Speaker 1: also how to help facilitate some of those private decisions 432 00:26:38,760 --> 00:26:40,880 Speaker 1: to restructure. And we get the sense that a lot 433 00:26:40,920 --> 00:26:43,400 Speaker 1: of that has been happening over the last six months. 434 00:26:43,480 --> 00:26:45,359 Speaker 1: But let me give you an example of one area 435 00:26:45,400 --> 00:26:49,320 Speaker 1: where bankruptcy law has not done a particularly good job 436 00:26:49,400 --> 00:26:53,080 Speaker 1: of trying to figure things out. There are you know, 437 00:26:53,119 --> 00:26:55,720 Speaker 1: and and and and the example might be in various 438 00:26:55,720 --> 00:26:59,400 Speaker 1: types of securitization. And what I mean by a securitization 439 00:26:59,560 --> 00:27:02,200 Speaker 1: is just, you know, maybe someone uh you know has 440 00:27:02,240 --> 00:27:05,720 Speaker 1: borrowed money for a mortgage for a commercial property, and 441 00:27:05,760 --> 00:27:08,240 Speaker 1: their mortgage is put into a pool with a bunch 442 00:27:08,240 --> 00:27:11,040 Speaker 1: of others, and then the cash flows from that entire 443 00:27:11,119 --> 00:27:13,679 Speaker 1: pool are sold off. Well, it turns out that that 444 00:27:13,800 --> 00:27:16,240 Speaker 1: structure was sent around for a long time and very 445 00:27:16,280 --> 00:27:19,080 Speaker 1: much contributed to the last finance of crisis we had. 446 00:27:19,520 --> 00:27:22,080 Speaker 1: Is a very rigid one. There are so many parties involved, 447 00:27:22,119 --> 00:27:25,480 Speaker 1: and there's this sort of master contract that governs when 448 00:27:25,560 --> 00:27:29,400 Speaker 1: and under what circumstances, uh, those things can be restructured 449 00:27:29,680 --> 00:27:32,119 Speaker 1: in environment where you didn't have all those things thrown 450 00:27:32,119 --> 00:27:35,800 Speaker 1: into a pool and locked into a securitization system, it 451 00:27:35,840 --> 00:27:39,560 Speaker 1: would be somewhat easier to restructure the mortgages, to kind 452 00:27:39,600 --> 00:27:41,639 Speaker 1: of alter the terms in a way that would allow 453 00:27:41,680 --> 00:27:44,200 Speaker 1: them to be paid back in a in a way 454 00:27:44,240 --> 00:27:48,440 Speaker 1: that better accommodates the current economic crisis. But those structures 455 00:27:48,440 --> 00:27:51,520 Speaker 1: are hugely rigid, and so there is a definitely a 456 00:27:51,600 --> 00:27:54,960 Speaker 1: lack of information about what they look like and a 457 00:27:55,040 --> 00:27:58,840 Speaker 1: real lack of of perceived ability to kind of induce 458 00:27:58,920 --> 00:28:02,320 Speaker 1: the restructuring of those sorts of contracts. And and they 459 00:28:02,320 --> 00:28:05,119 Speaker 1: haven't played out yet. There's a reasonable chance that that 460 00:28:05,200 --> 00:28:07,160 Speaker 1: kind of a horror show that we saw play out 461 00:28:07,200 --> 00:28:09,320 Speaker 1: in the two thousand and eight two thousand nine financial 462 00:28:09,320 --> 00:28:12,439 Speaker 1: crisis could recur again where um, you know, no one 463 00:28:12,520 --> 00:28:15,240 Speaker 1: is able to really restructure their mortgages. Their cash flows 464 00:28:15,240 --> 00:28:18,080 Speaker 1: has gone way down because you know, you know, economic 465 00:28:18,359 --> 00:28:21,640 Speaker 1: operations and economic activity is much lower, and it ends 466 00:28:21,720 --> 00:28:25,439 Speaker 1: up almost forcing people either into insolvency or bankruptcy. So 467 00:28:25,560 --> 00:28:27,960 Speaker 1: one of the things that that uh that you know, 468 00:28:28,600 --> 00:28:31,600 Speaker 1: I think you know, bankruptcy scholars and you know also 469 00:28:31,720 --> 00:28:35,159 Speaker 1: commercial law you know, policy makers can think about is 470 00:28:35,320 --> 00:28:38,640 Speaker 1: how can we you know, how can we reconceptualize these 471 00:28:38,680 --> 00:28:42,400 Speaker 1: deals that that makes them a little bit more resilient 472 00:28:42,480 --> 00:28:45,800 Speaker 1: in the face of of a systemwide economic crash. And 473 00:28:46,040 --> 00:28:48,000 Speaker 1: you know, on some level, it's a little embarrassing that 474 00:28:48,040 --> 00:28:50,160 Speaker 1: we weren't able to solve this, given that we went 475 00:28:50,200 --> 00:28:53,040 Speaker 1: through a financial crisis twelve years ago and exactly the 476 00:28:53,080 --> 00:28:58,720 Speaker 1: same issue occurred. So related to this is small businesses. 477 00:28:58,960 --> 00:29:03,040 Speaker 1: And you have UH podcast called Helping Small Businesses Survive 478 00:29:03,320 --> 00:29:06,280 Speaker 1: and Thrive. This is a really tough time for a 479 00:29:06,320 --> 00:29:08,520 Speaker 1: lot of small businesses. And you know, you look in 480 00:29:08,560 --> 00:29:11,080 Speaker 1: your own neighborhood, you're bound to see small businesses that 481 00:29:11,120 --> 00:29:15,440 Speaker 1: have closed. Yeah. Absolutely, this is a this is a 482 00:29:15,560 --> 00:29:18,440 Speaker 1: big issue, and it is closely related to the bankruptcy issue. 483 00:29:18,520 --> 00:29:21,200 Speaker 1: You know, I I love right by Columbia Law School, 484 00:29:21,240 --> 00:29:24,320 Speaker 1: and we're up in in northern Manhattan and Harlem, and 485 00:29:24,320 --> 00:29:28,280 Speaker 1: and this was this is a vibrant area of entrepreneurs 486 00:29:28,320 --> 00:29:31,479 Speaker 1: opening restaurants and coffee shops and stores and and and 487 00:29:31,520 --> 00:29:34,600 Speaker 1: that's been underway for many years and UH and many 488 00:29:34,600 --> 00:29:37,560 Speaker 1: of the local residents around here and local businesses have 489 00:29:37,720 --> 00:29:40,800 Speaker 1: really taken in the shops during the course of the 490 00:29:41,560 --> 00:29:44,680 Speaker 1: of of this particular crisis. And it's exactly the group 491 00:29:44,800 --> 00:29:47,800 Speaker 1: of businesses that you would think the businesses that end 492 00:29:47,880 --> 00:29:50,680 Speaker 1: up relying on uh, you know, a business model that 493 00:29:50,760 --> 00:29:54,280 Speaker 1: requires people to congregate in some area, you know, fitness 494 00:29:54,320 --> 00:29:58,600 Speaker 1: clubs and cafes and UH and and and and bars 495 00:29:58,640 --> 00:30:02,240 Speaker 1: and some restaurants. There's so there're been other ones that that, 496 00:30:02,280 --> 00:30:05,120 Speaker 1: in fact have probably done a little bit better things, 497 00:30:05,480 --> 00:30:08,400 Speaker 1: you know, things having to do with home delivery services 498 00:30:08,400 --> 00:30:10,320 Speaker 1: and so forth. But on the whole, it's been very, 499 00:30:10,400 --> 00:30:13,240 Speaker 1: very difficult for a lot of these entrepreneurs to make 500 00:30:13,240 --> 00:30:16,240 Speaker 1: it through. Now, some of them took advantage of the 501 00:30:16,320 --> 00:30:19,360 Speaker 1: payroll Protection Program and we're able to you know, make 502 00:30:19,520 --> 00:30:23,240 Speaker 1: make it this far, you know, paying their their employees 503 00:30:23,800 --> 00:30:26,560 Speaker 1: with the assistance of some of these grants that were 504 00:30:26,600 --> 00:30:29,160 Speaker 1: made by the federal government, but those are about to 505 00:30:29,240 --> 00:30:32,080 Speaker 1: run out. And in addition, a lot of these businesses 506 00:30:32,160 --> 00:30:35,360 Speaker 1: just realized, look, we're not going to be generating revenue 507 00:30:35,720 --> 00:30:38,440 Speaker 1: in this you know, in this bar or restaurant or 508 00:30:38,320 --> 00:30:41,720 Speaker 1: or or or gym for for for months, if not years, 509 00:30:41,760 --> 00:30:44,120 Speaker 1: and let me just shutter. And so you know, if 510 00:30:44,160 --> 00:30:46,480 Speaker 1: you if you look at some of the more reliable 511 00:30:46,960 --> 00:30:50,480 Speaker 1: databases on small businesses, like yelp, uh, it's a it's 512 00:30:50,520 --> 00:30:53,280 Speaker 1: an astounding number of small businesses that are not just 513 00:30:53,360 --> 00:30:57,520 Speaker 1: temporarily closed, but are permanently closed. UM. And so so 514 00:30:57,920 --> 00:31:00,800 Speaker 1: this is in many ways one of the big as tragedies. 515 00:31:00,840 --> 00:31:03,400 Speaker 1: With the current of the of the current uh you 516 00:31:03,480 --> 00:31:08,000 Speaker 1: know situation, there may be some benefits on the uh 517 00:31:08,160 --> 00:31:10,280 Speaker 1: you know going forward, but I think they would also 518 00:31:10,320 --> 00:31:13,440 Speaker 1: require a little bit of of attention from a legal 519 00:31:13,440 --> 00:31:17,000 Speaker 1: and regulatory perspective. So, for example, UM, one of the 520 00:31:17,000 --> 00:31:19,840 Speaker 1: things that that is, you know, if you're an owner 521 00:31:19,920 --> 00:31:24,479 Speaker 1: of a vacant commercial uh you know space that you 522 00:31:24,480 --> 00:31:26,520 Speaker 1: were you know, thinking maybe I'd like to lease out 523 00:31:26,640 --> 00:31:30,280 Speaker 1: someone who's thinking about opening a business, but you've been 524 00:31:30,400 --> 00:31:33,520 Speaker 1: leasing it for you know, fifty thou dollars a month, 525 00:31:33,560 --> 00:31:36,080 Speaker 1: and now it's going to be really hard to lease 526 00:31:36,120 --> 00:31:39,560 Speaker 1: it for anything more than thirty thou dollars a month. UM. 527 00:31:39,600 --> 00:31:42,800 Speaker 1: It may in some circumstances be more profitable just to 528 00:31:42,920 --> 00:31:45,520 Speaker 1: leave it vacant, to leave it um, to to leave 529 00:31:45,560 --> 00:31:49,920 Speaker 1: it shuttered, um and use those tax losses to offset 530 00:31:50,000 --> 00:31:53,560 Speaker 1: gains that you have somewhere else. Wint on some level 531 00:31:53,640 --> 00:31:55,560 Speaker 1: is a little bit crazy, but but you know, our 532 00:31:55,640 --> 00:31:59,800 Speaker 1: tax code systems sometimes rewards UH owners who really just 533 00:32:00,000 --> 00:32:03,280 Speaker 1: don't want to to uh to to to you know, 534 00:32:03,360 --> 00:32:06,720 Speaker 1: rent their commercial properties and anything lower than their historical value. 535 00:32:07,240 --> 00:32:10,080 Speaker 1: And there are some legal reforms that can be helpful 536 00:32:10,080 --> 00:32:12,600 Speaker 1: in doing that. San Francisco is about to you know, 537 00:32:12,680 --> 00:32:18,760 Speaker 1: is implementing a vacancy tax for for for for businesses 538 00:32:18,840 --> 00:32:20,560 Speaker 1: they look but it will also be costly for you 539 00:32:20,600 --> 00:32:24,680 Speaker 1: to keep those businesses vacant. Another thing that's probably worth 540 00:32:24,720 --> 00:32:28,920 Speaker 1: thinking about is these entrepreneurs who have gone out of business. 541 00:32:28,920 --> 00:32:31,920 Speaker 1: A lot of the value of those business businesses is 542 00:32:32,000 --> 00:32:36,560 Speaker 1: in the entrepreneur himself or herself. And so I think 543 00:32:36,600 --> 00:32:38,680 Speaker 1: there is a sense in which some of these folks 544 00:32:38,840 --> 00:32:41,160 Speaker 1: they are going to be back in business. They may 545 00:32:41,160 --> 00:32:43,080 Speaker 1: not be exactly the same business, or it may not 546 00:32:43,120 --> 00:32:46,000 Speaker 1: be cast exactly the same way, but the very same 547 00:32:46,040 --> 00:32:51,000 Speaker 1: imaginativeness and creativeness and and uh and grit is out there. 548 00:32:51,400 --> 00:32:53,239 Speaker 1: Um And one of the key things that we need 549 00:32:53,280 --> 00:32:56,640 Speaker 1: to think about is how do we facilitate that resurgence 550 00:32:56,640 --> 00:32:59,200 Speaker 1: want it occurs and you know, some of these you know, 551 00:32:59,680 --> 00:33:03,040 Speaker 1: you know ideas on how you would incentivize commercial real 552 00:33:03,200 --> 00:33:06,680 Speaker 1: estateholders to welcome back these folks they try to outlap 553 00:33:06,720 --> 00:33:10,800 Speaker 1: businesses is a key part of the Equation. Thanks Eric. 554 00:33:11,080 --> 00:33:14,240 Speaker 1: That's Eric Tallely of Columbia Law School and you can 555 00:33:14,280 --> 00:33:19,360 Speaker 1: listen to his podcast series Beyond Unprecedented on Apple Podcasts, Spotify, 556 00:33:19,640 --> 00:33:22,880 Speaker 1: or Columbia Law School's website. And that's for this edition 557 00:33:22,880 --> 00:33:25,440 Speaker 1: of The Bloomberg Law Show. Remember you can always get 558 00:33:25,480 --> 00:33:28,280 Speaker 1: the latest legal news on our Bloomberg Lawn Podcast. You 559 00:33:28,320 --> 00:33:32,440 Speaker 1: can find them on Apple podcast or www dot Bloomberg 560 00:33:32,480 --> 00:33:37,200 Speaker 1: dot com slash podcast Slash Law. I'm June Grosso. Thanks 561 00:33:37,200 --> 00:33:39,440 Speaker 1: so much for listening, and remember to tune to The 562 00:33:39,440 --> 00:33:42,320 Speaker 1: Bloomberg Law Show every weeknight at chenpm East Joan right 563 00:33:42,400 --> 00:33:43,600 Speaker 1: here on Bloomberg Radio