Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the litigation and policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. Just a quick word
Speaker 1: about Bloomberg Intelligence for those who are unfamiliar. We are
Speaker 1: the investment research platform on the Bloomberg terminal, with five
Speaker 1: hundred analysts and strategists working across the globe and focused
Speaker 1: on all major markets. Our coverage includes over two thousand
Speaker 1: equities and credits, and we have outlooks on more than
Speaker 1: ninety industries and one hundred market industries, currencies, and commodities.
Speaker 1: This podcast series examines the intersection of business policy and law,
Speaker 1: and today we'll be looking at the litigation and policy
Speaker 1: catalysts that our team is watching in the second half
Speaker 1: of twenty twenty four and that we think will impact
Speaker 1: companies across a number of different sectors. My name is
Speaker 1: Elliot Stein. I'm a senior litigation analyst covering litigation in
Speaker 1: the financial sector, and I'll be your host for today,
Speaker 1: July tenth, twenty twenty four. If you have any questions
Speaker 1: about any of the matters that we'll be talking about
Speaker 1: on this episode, please don't hesitate to reach out to
Speaker 1: us at your convenience with questions. So we'll be discussing
Speaker 1: a handful of sectors today. First, we'll start with financials
Speaker 1: and we'll bring in Nathan Dean, our senior financials policy analysts,
Speaker 1: to discuss the US elections in November and their potential
Speaker 1: impact on the Inflation Reduction Act and the energy and
Speaker 1: healthcare sectors in particular. And then Nathan will also talk
Speaker 1: about the Basel three endgame and what it means for
Speaker 1: potential capital requirements for banks. Sticking with financials, I'll discuss
Speaker 1: litigation that I expect will strike down the CFPB's credit
Speaker 1: card late fee rule, and I'll also talk about what
Speaker 1: we're watching in the SEC's case against Coinbase, and then
Speaker 1: i'll also mention a few money laundering probes of big
Speaker 1: banks that we're watching. After that, Jenrie, our senior anti
Speaker 1: trust analyst, will give us an update on several cases
Speaker 1: against Google, as well as FTC lawsuits to block deals
Speaker 1: like Kroger, Albertson's and Tapestry Capri. Sticking with anti trust,
Speaker 1: justin Teresi, we'll discuss the thirty billion dollar visa and
Speaker 1: MasterCard interchange fees settlement with merchants that will need to
Speaker 1: be reworked after a court order recently, and Justin will
Speaker 1: also talk about a potential doj antitrust lawsuit against United Health,
Speaker 1: and he'll also talk about the proliferation of cases alleging
Speaker 1: price collusion between real page and landlords in the real
Speaker 1: estate rental market. After that, Matt Schttenhelm, who covers TMT
Speaker 1: policy and litigation, we'll discuss potential internet legislation, including a
Speaker 1: law to protect kids online, and Matt will also discuss
Speaker 1: TikTok's litigation to up end US lawmakers sale or ban law,
Speaker 1: and then he'll also walk us through litigation in California
Speaker 1: that could bring Lift and Uber a big win. Sticking
Speaker 1: with tech Tamlin Basin, who covers techip litigation, we'll discuss
Speaker 1: pegasystems pending effort to slash Appian's two billion dollar jury award.
Speaker 1: After that, Holly Frome will discuss litigation concerning Zantac, Johnson
Speaker 1: and Johnson talcum powder, and the forever chemicals known as pfas.
Speaker 1: And last, but not least, Dwyane Wright, who covers healthcare
Speaker 1: policy in Washington, d C. Will discuss the Biosecure Act,
Speaker 1: which aims to bolster US manufacturing at the expense of China,
Speaker 1: and also a medicare advantage shakeup that could benefit Humana
Speaker 1: and United Health. So all of this research is available
Speaker 1: on the Bloomberg terminal at bi GO. And with all
Speaker 1: that out of the way, let's get started with the content. Nathan,
Speaker 1: let's bring you in. The biggest catalyst in the second
Speaker 1: half of this year in our coverage world is probably
Speaker 1: the US elections in November. Why don't you come in
Speaker 1: and tell us what you're watching related to the elections.
Speaker 2: Yeah, so, thanks, Elliot.
Speaker 3: So just a couple of dates to keep in mind
Speaker 3: as you think of headline risk and what can happen
Speaker 3: with the election between now and November fifth. So it
Speaker 3: will start though on July fifteenth, which is the start
Speaker 3: of the Republican Convention that will go through July eighteenth,
Speaker 3: and at that point we will see that President Trump
Speaker 3: will have picked the vice president nominee and he and
Speaker 3: this vice president nominee will be nominated to the ticket.
Speaker 3: The next major date is around July twenty first. This
Speaker 3: is when the Democrats are going to probably hold a
Speaker 3: virtual role call that state is not sent in stone,
Speaker 3: but think of it around July twenty first, this virtual
Speaker 3: roll call will essentially be a meeting to nominate President
Speaker 3: Biden and Vice President Kamala Harris to the ticket in
Speaker 3: order to get that onto the ballot in the state
Speaker 3: of Ohio, Ohio law states that the nominee has to
Speaker 3: be picked by August seventh. And because the Democratic Convention
Speaker 3: in our third catalyst is on August nineteenth, which is
Speaker 3: when the Democrats meet in Chicago, you know that July
Speaker 3: twenty first date is important because then it would put
Speaker 3: President Biden on the ticket. The third date, the August nineteenth,
Speaker 3: that's when President Biden and Vice President Kamala Harris would
Speaker 3: be formally nominated. And I think a lot of the
Speaker 3: talk of whether President Biden and whether would he continue
Speaker 3: to run or not will drop at that point if
Speaker 3: he is formulated nominated. And then finally on September second,
Speaker 3: you have the second debate between the presidential candidates leading
Speaker 3: until the election to number fifth. So that's just some
Speaker 3: dates to keep in mind. Now in terms of the election,
Speaker 3: how to think about that, Well, you know, a lot
Speaker 3: of things can change, and we're actually working on a
Speaker 3: fairly large and comprehensive report on the election. But one
Speaker 3: of the things we are telling our clients to look
Speaker 3: at is the Inflation Reduction Act because it is so
Speaker 3: important in terms of future growth for clean energy, pharmaceuticals,
Speaker 3: other types of utilities, construction companies, and so forth like that. Now,
Speaker 3: the way that you should think about the tax of
Speaker 3: the Inflation Reduction Act is unlike the Infrastructure Investment in
Speaker 3: Jobs Act, which was this bipartisan infrastructure bill that had
Speaker 3: five hundred billion dollars in new spending, this is seven
Speaker 3: hundred and thirty nine billion in terms of tax changes
Speaker 3: in enforcement. So the IRA is carrots and incentives, if
Speaker 3: you will, rather than direct monies going out to boost
Speaker 3: the economy. Now, our thesis has to always been that
Speaker 3: the IRA will not be fully repealed. The votes are
Speaker 3: just not there. A lot of the beneficiaries of the
Speaker 3: IRA are GOP states.
Speaker 2: And we don't think that those.
Speaker 3: Lawmakers, if you will, will want to go to their
Speaker 3: constituents and say, let's go back and roll back something
Speaker 3: that is actuallyinging money to our district. However, because the
Speaker 3: twenty seventeen Trump era tax cuts expired at the end
Speaker 3: of twenty twenty five, tax changes are going to be
Speaker 3: in the cards next year, and so as we approach
Speaker 3: between now and the election, it's important to start looking
Speaker 3: at some of the tax changes in particular that could
Speaker 3: play out as part of the IRA, namely electric vehicles.
Speaker 3: Justin did a lot of work on this on the
Speaker 3: terminal in terms of looking at what the impact could
Speaker 3: be for Tesla, Rivian, even Ford and GM because if
Speaker 3: the EV tax credits, if you will go away as
Speaker 3: part of this tax reform effort, a big charge of
Speaker 3: the IRA could be at risk.
Speaker 2: So that's just a taste.
Speaker 3: There's going to be a lot more out there to
Speaker 3: keep in mind, not for and a lot of that
Speaker 3: will come out as the RNC continues to develop their agenda,
Speaker 3: which they just recently put out, and we get more
Speaker 3: policy statements from President Trump going on and on as
Speaker 3: we get closer to the election date. Now turning away
Speaker 3: from the legislative and the presidential branch and moving more
Speaker 3: towards the regulatory side, it's also important to talk about
Speaker 3: BASO three endgame. This is the proposal that came out
Speaker 3: in twenty twenty three that would raise as proposed capital
Speaker 3: requirements for Bank America at JP, Morgan City Group and
Speaker 3: so forth. Nineteen percent under the proposed that's a dramatic increase. Now,
Speaker 3: the FED has always said that broad in material changes,
Speaker 3: and I'm using that in their quotes broad in material
Speaker 3: changes is coming because that's their words. And we finally
Speaker 3: got confirmation from FED Chairman Jerome Poll when he testified
Speaker 3: to the State Banking Committee on July ninth that a
Speaker 3: reproposal is coming. Now it is not going to be
Speaker 3: a reproposal of the entire rule, but rather they are
Speaker 3: going to repropose certain portions of that rule. Now, we
Speaker 3: think that's going to come out in September. Look for
Speaker 3: that September timeframe. We think it will be a sixty
Speaker 3: day comment period, so look for comments to go into
Speaker 3: say late November early December. But what this does mean
Speaker 3: is that the BOSO three endgame is not going to
Speaker 3: be finalized in twenty twenty four, and it's going to
Speaker 3: be punted to twenty twenty five.
Speaker 2: Now.
Speaker 3: Chairman Powell is insinuating that it's going to be finalized
Speaker 3: in the early half of twenty twenty five, and we
Speaker 3: think our ultimate impact is going to be around seven
Speaker 3: to ten percent increase in capital requirements for those large banks.
Speaker 3: But it's important to note that this is the FED view,
Speaker 3: this is not the FDIC or the Office of the
Speaker 3: Comptroller of the Currency view, and they may disagree. Now
Speaker 3: if they disagree, essentially just means stagnation, nothing happens. So ultimately,
Speaker 3: I think what will happen is is that this reproposal
Speaker 3: will come out. Obviously, it's depending on President Biden winning
Speaker 3: the election. And President Trump wins, the head of the
Speaker 3: OCC would almost immediately flip and they would not be
Speaker 3: on board with this. But if President Biden does win,
Speaker 3: you're looking at a much less dramatic, less much less
Speaker 3: impacting Bossel three endgame rule being finalized, probably in the second.
Speaker 2: Or third quarter of twenty twenty five.
Speaker 3: So I know that's a lot, but I'll pass it
Speaker 3: back to you.
Speaker 1: No, that's good stuff, thanks, Nathan. All Right, we'll stick
Speaker 1: with financials and I'll jump in here and talk about
Speaker 1: just a few cases and issues that I'm watching in
Speaker 1: the second half. You know, there's obviously a number of
Speaker 1: lawsuits we're tracking that are challenging financial rules that the
Speaker 1: Biden administration has promulgated. And with the demise of judicial
Speaker 1: deference to regulatory agencies, you know, as exemplified by the
Speaker 1: Supreme Courts overruling of the Chevron doctrine just about ten
Speaker 1: days ago. We expect a lot of those lawsuits to succeed.
Speaker 1: I want to focus on one of them, and that's
Speaker 1: a lawsuit by bank trade groups challenging the CFPB's credit
Speaker 1: card late fee rule. I've spoken about this case on
Speaker 1: this podcast previously, but I want to give another update
Speaker 1: because it's a pretty active docket and there's things happening
Speaker 1: all the time. I'll give some background first. The CFPB,
Speaker 1: of course, is the Consumer Financial Protection Bureau that's the
Speaker 1: main regulator for the consumer finance sector. In March, the
Speaker 1: agency issued a rule that would effectively reduce the typical
Speaker 1: late fee that credit card issuers charge from thirty two
Speaker 1: dollars down to eight dollars. That would eliminate roughly billion
Speaker 1: dollars in credit card late fees for credit card issuers
Speaker 1: with at least one million open accounts. So think of
Speaker 1: credit card issuers like JP Morgan, American Express, City Bank,
Speaker 1: Capital One, Bank of America, Discover, Synchrony Financial, etc. The
Speaker 1: bank trade groups are challenging the rule in court, and
Speaker 1: they've succeeded so far in putting the rule on hold.
Speaker 1: They've also succeeded in rebuffing CFPB efforts to move the
Speaker 1: case to Washington, d C. From Texas. Texas, of course,
Speaker 1: is a much more favorable jurisdiction and venue, So as
Speaker 1: of right now, the case is in Texas Federal Court,
Speaker 1: which we think will ultimately help the bank trade groups
Speaker 1: in terms of things we're watching in two h In
Speaker 1: this litigation, First, the CFPB is trying to lift the
Speaker 1: preliminary injunction of the rule that the court entered earlier
Speaker 1: in the case. That injunction was based on a Fifth
Speaker 1: Circuit decision in twenty twenty three that found the CFPB's
Speaker 1: funding mechanism on constitutional But since then the Supreme Court
Speaker 1: has reversed the Fifth Circuit on that issue. So the
Speaker 1: banks now need to show that they're likely to prevail
Speaker 1: in this litigation, but you know, for different reasons, and
Speaker 1: I think they have good arguments, namely that the CFPB
Speaker 1: exceeded its statutory authority in issuing the rule. The argument
Speaker 1: here being that the CFPB didn't sufficiently consider factors it
Speaker 1: was supposed to under the relevant statutes, things like post
Speaker 1: charge off costs, the turrent effects, and cardholder conduct. So
Speaker 1: you know, the judge actually found these other arguments compelling
Speaker 1: when he issued the preliminary injunction a couple months ago,
Speaker 1: but he didn't actually need to reach the merits of
Speaker 1: them because he ruled on a different basis. But as
Speaker 1: a result, I think he will now have to decide
Speaker 1: on these other arguments, and I think he'll agree with
Speaker 1: the bank trade groups, and as a result, you know,
Speaker 1: I think the bank trade groups will use the same
Speaker 1: arguments to ultimately prevail on the merits of the higher litigation,
Speaker 1: which is why we think they'll win ruling striking down
Speaker 1: this CFIB rule, likely by year end. So that's one
Speaker 1: of the things we're watching in two h The next
Speaker 1: case I want to talk about is the SEC's enforcement
Speaker 1: action against crypto platform Coinbase. Arguably one of the most
Speaker 1: important cases in crypto and it raises a lot of
Speaker 1: very interesting securities laws issues as background. Again, the SEC
Speaker 1: sued Coinbase in June of last year, accusing it of
Speaker 1: violating federal securities laws by essentially allegedly operating as an
Speaker 1: unregistered securities exchange broker and clearing agency. Coinbase has a
Speaker 1: lot of money at stake here, potentially billions of dollars
Speaker 1: representing what the SEC has alleged to be ill gotten
Speaker 1: gains that the agency wants to disgorge. In March, the
Speaker 1: court dismissed one of the SEC claims against the company,
Speaker 1: but it did allow the rest of the case to proceed,
Speaker 1: including the SEC claims that you know, trading of digital
Speaker 1: assets on the coin base platform constituted transactions of unregistered securities.
Speaker 1: This is one of the biggest unresolved legal issues in crypto.
Speaker 1: That is, you know, when do digital asset transactions constitute
Speaker 1: securities transactions which the SEC could then oversee. Of course,
Speaker 1: Coinbase is currently asking for an immediate appeal of that
Speaker 1: March ruling, and that's sort of the next thing we're
Speaker 1: looking for in two h We think Coinbase is a
Speaker 1: good chance of being allowed to appeal immediately, you know,
Speaker 1: rather than having to wait until the end of the case,
Speaker 1: as you often have to do in federal court. And
Speaker 1: the reason I think that is that, you know, the
Speaker 1: legal question at issue really permeates so many crypto crypto
Speaker 1: cases currently, including you know, other SEC cases against companies
Speaker 1: like Binance, Ripple, Krack and Consensus and others. So on
Speaker 1: the merits, you know, I think Base is likely to
Speaker 1: prevail ultimately, but you know, a Merit's ruling is probably
Speaker 1: not coming this year. It could come next year, but
Speaker 1: I don't think it'll be by this by the end
Speaker 1: of this year. And you know the reason I think
Speaker 1: that is, I think the sales of digital assets on
Speaker 1: secondary markets on public exchanges like those on Coinbase don't
Speaker 1: really fit neatly into the Howie test, which is you know,
Speaker 1: comes from a Supreme Court decision in nineteen forty six
Speaker 1: and is used to determine what constitutes an investment contract,
Speaker 1: which is a security. That was actually the main takeaway
Speaker 1: from a very recent decision in the SEC versus Binance case.
Speaker 1: There was also, you know, the takeaway from the Court's
Speaker 1: decision last year in the SEC's case against Ripple, and
Speaker 1: essentially in secondary transactions, you know, I just think there's
Speaker 1: less likely to be a common enterprise or reasonable expectation
Speaker 1: of profits from the efforts of others, both of which
Speaker 1: are key elements of the Howie test. So, you know,
Speaker 1: this area of law is still developing. But the next
Speaker 1: thing to watch in this particular case is whether Coinbase
Speaker 1: can appeal immediately appeal the decision in March that allowed
Speaker 1: part of the SEC's case to go forward. And then
Speaker 1: just lastly, I know I've been talking for a little bit,
Speaker 1: but the last issue I'm keeping an eye on. These
Speaker 1: are a few money laundering probes of various large banks.
Speaker 1: A probe of TD Bank Toronto Dominion is probably the
Speaker 1: highest profile one that we're watching, following the banks four
Speaker 1: hundred and fifty million dollar provision at the end of
Speaker 1: April for the investigation. Now, these probes are handled confidentially,
Speaker 1: so we don't get updates like we do in litigation.
Speaker 1: There's no docket to track, but based on what we
Speaker 1: know so far as well as comparable cases, I think
Speaker 1: TD Bank could face a potential fine of between six
Speaker 1: hundred million dollars and one point one billion dollars, and
Speaker 1: I think the fines could come by year end. We're
Speaker 1: also keeping an eye on a probe of Morgan Stanley
Speaker 1: by several federal agencies. Again, the timing here, you know,
Speaker 1: of a potential resolution is a little less certain, and
Speaker 1: I think, you know, given the conduct here, I think
Speaker 1: it's less egregious as well, so I think fines are
Speaker 1: likely to be under five hundred million dollars from Morgan Stanley.
Speaker 1: And then finally, we've been tracking a US money money
Speaker 1: laundering probe of Swedish bank sweat Bank for a few
Speaker 1: years now. You know, the probes themselves have been going
Speaker 1: on since like twenty twenty, maybe even earlier, and so
Speaker 1: I do think a resolution by by the end of
Speaker 1: this year is a distinct possibility. And my estimate of
Speaker 1: a fine for sweat Bank is between three hundred and
Speaker 1: eighty five million dollars in about seven hundred and seventy
Speaker 1: million dollars, and that's based on the bank's profits during
Speaker 1: the relevant period and a settlement by Danish bank Donska
Speaker 1: Bank with US authorities from a couple of years ago.
Speaker 1: So a lot of things we're watching in terms of
Speaker 1: litigation and also enforcement actions. I'll stop here, but feel
Speaker 1: free to reach out to me with any questions about
Speaker 1: these matters or any other matters concerning litigation in the
Speaker 1: financial sector. All right, So with that, let's move on
Speaker 1: to a different area. Jen, Let's bring you into talk antitrust.
Speaker 1: As always, you know, there's a ton going on. Let's
Speaker 1: start with Google. There's a pair of DOJ cases against
Speaker 1: the company you're watching. There's the Epic Games case, why
Speaker 1: don't you come in and tell us what you're watching?
Speaker 4: And sure, thanks Elliott. I mean, it's so much going
Speaker 4: on in two h with respect to politics and the
Speaker 4: financial markets, and I guess likewise and anti trust. So
Speaker 4: and as you said, most of it has to do
Speaker 4: with Google. The company has been accused of monopolistic conduct
Speaker 4: with respect to three separate different parts of its business.
Speaker 4: It's search engine, it's ad tech stack. I'll get into
Speaker 4: what that is later, and it's play store. And there
Speaker 4: are lawsuits targeting all of these businesses that are ongoing,
Speaker 4: and they all have important catalyst in the second half.
Speaker 4: So let me start with search. So the Justice Department
Speaker 4: had to accuse Google of monopolistic conduct in search and
Speaker 4: search advertising because mostly it pays third parties billions of
Speaker 4: dollars every year to set Google Search as the default
Speaker 4: search engine pretty much wherever you have an Internet access point,
Speaker 4: so like behind Apple Safari browser or behind Mozilla's Firefox browser.
Speaker 4: And the DOJ says this forecloses search engine competitors and
Speaker 4: importantly it denies them the ability to get the scale
Speaker 4: they need to improve. Most people like Google Search better,
Speaker 4: let's say, than Bing, but they say, well, search engines
Speaker 4: learn and improve with every single search that's done, and
Speaker 4: if they can't get in there and do the searches,
Speaker 4: they can't improve. So in this one, the trial ended
Speaker 4: in late twenty twenty three and the closing arguments were
Speaker 4: in early May, So I do expect a decision soon.
Speaker 4: I mean it could be any day. I sort of
Speaker 4: think it's going to be later this year, but likely
Speaker 4: this year. We're slightly leaning toward the DOJ winning this
Speaker 4: one on liability only, and if that that's the case,
Speaker 4: we have to restart proceedings on remedy. I mean, discovery
Speaker 4: has to be done on what the proper remedy is.
Speaker 4: Expert work has to be done. There will be another hearing,
Speaker 4: So that's very much a next year event. Now let's
Speaker 4: talk about Google's Playstore. So Google lost in a jury
Speaker 4: trial in December of twenty twenty three against Epic Games.
Speaker 4: The jury had decided that Google's refusal to allow, or
Speaker 4: at least google would make it difficult. I shouldn't say
Speaker 4: they completely refused to allow third party app stores on
Speaker 4: Android devices and third party payment processors within its own playstore.
Speaker 4: That this conduct is unlawful, and so that's the decision
Speaker 4: even though Google is appealing. Now the judge is going
Speaker 4: to have to decide on the remedies, and that phase
Speaker 4: is ongoing, and I really suspect the judge is going
Speaker 4: to order the company to allow third party app stores
Speaker 4: on Android devices and allow for alternative payment services within
Speaker 4: the pay store. The judge might even go as far
Speaker 4: as requiring Google to share its whole catalog of apps
Speaker 4: with third party app stores with developers' permissions for some
Speaker 4: amount of time to sort of give a leg up
Speaker 4: to these new third party app stores. That decision is
Speaker 4: probably going to come out this year, but I should
Speaker 4: say that given that Google's appealing, that if there's a remedy,
Speaker 4: it's going likely going to be stayed. And now, last
Speaker 4: is this ad tech stack matter. This is a really
Speaker 4: complex market and there are actually three different lawsuits over
Speaker 4: ads tech stack, but I'm just going to talk about
Speaker 4: one by the DOJ in a group of states because
Speaker 4: that's going to trial in the Eastern District of Virginia
Speaker 4: in September. And the judges acted really really fast in
Speaker 4: this case, so a decision this year is even possible.
Speaker 4: But because the matter is very complex, I kind of
Speaker 4: think first half twenty five is more likely. So the
Speaker 4: ad tech stack group of technologies include two where Google
Speaker 4: allegedly has dominance, a publisher ad server and an ad exchange,
Speaker 4: and they obtain these technologies be an acquisition of a
Speaker 4: company called double Click. Now, the publisher ad Server acts
Speaker 4: as a manager for large publishers AD inventory that's impressions
Speaker 4: websites for ads, and the AD exchange is a real
Speaker 4: time auction marketplace that matches up multiple buyers and sellers
Speaker 4: on an impression by impression basis. Now, there's this really
Speaker 4: long laundry list of very specific and kind of detailed
Speaker 4: and complex anti competitive conduct. The DJ alleges Google has
Speaker 4: engaged in all of which kind of results in a
Speaker 4: manipulation of the whole process by Google to benefit itself,
Speaker 4: take fees all along the way, and it access to
Speaker 4: the detriment of publishers and advertisers. And this is an
Speaker 4: important case because the DJ is really gunning for a
Speaker 4: structural remedy the divestiture of Google's publisher ad server and
Speaker 4: or at exchange. Now that's a really tall order for
Speaker 4: a judge, and this is a really complex, complex case.
Speaker 4: I think it's probably unlikely that that would be the
Speaker 4: remedy imposed, though I do think that there's a good
Speaker 4: a good possibility here of a finding of liability, as
Speaker 4: I said, probably next year. Now, let me really quickly
Speaker 4: just get into a couple of merger trials happening in
Speaker 4: second half. First, the FTC is trying to stop Kroger
Speaker 4: and Albertson's closing their deal, and that's going to go
Speaker 4: to trial in mid August in Portland, Oregon. This really
Speaker 4: traditional deal. It just combines two competitors, and there are
Speaker 4: some overlap areas where the concentration is just too high
Speaker 4: between these two companies. You guys, if you're out there
Speaker 4: grocery shopping, you might think, well, I don't see either
Speaker 4: of these companies. But each one owns about fifteen to
Speaker 4: twenty different brands, So there's a good chance where people
Speaker 4: are grocery shopping that store is owned by a Kroger's
Speaker 4: or an Aupresense. So the main issue here is the remedy.
Speaker 4: The companies are offering to sell a bunch of stores
Speaker 4: and a bunch of other sort of ancillary facilities to
Speaker 4: a company called CNS. Now, I think there's an issue
Speaker 4: here with the remedy. The FTC didn't accept it, and
Speaker 4: I think the judge could have troubled accepting it because
Speaker 4: CNS is not a grocery store operator for the most part,
Speaker 4: it's a wholesaler, and the judge is going to have
Speaker 4: to get comfortable that this company has the incentive and
Speaker 4: the ability to go forward and viably compete pretty fast
Speaker 4: with these stores. And as a wholesaler that doesn't really
Speaker 4: run stores or have that expertise and has already has
Speaker 4: some documents questioning whether they have to keep all the
Speaker 4: stores they buy, I think there's some problems now In
Speaker 4: real time, Kroger's is sort of sweetening the pot. They
Speaker 4: recently announced that Albertson's COO would move over to CNS
Speaker 4: post divestiture. And that's good because the more they beef
Speaker 4: up CNS to show expertise, to show commitment, I think
Speaker 4: the more likely they can win in court. And I
Speaker 4: do think a decision will be in four Q. Very
Speaker 4: last one. Let me try to wrap this up. This
Speaker 4: is Tapestry and Capri. A real surprise that the FTC
Speaker 4: is trying to block this deal. These two companies own
Speaker 4: fashion brands. Tapestry has coach Kate Spade and Sewart Whitzman,
Speaker 4: Capri has Arsace, Jimmy two, and Michael Cores. The FTC
Speaker 4: has a problem with this case because they say that
Speaker 4: it brings together handbag brands in the affordable luxury category
Speaker 4: and it's an overly concentrated market. They are each other's
Speaker 4: primary competitors with Coach Kate's Bade and Michael Core's. Now,
Speaker 4: I think they have a real problem with that market definition.
Speaker 4: Cases like this can be dispositive because the sphere of
Speaker 4: competition basically defines what the concentration is, what the market
Speaker 4: shares are, and whether or not it's a problematic market share.
Speaker 4: And I think it's very hard to put parameters around
Speaker 4: a market like affordable luxury. Where did the price point
Speaker 4: start and where.
Speaker 2: Do they end?
Speaker 4: So I think the FTC will have a more difficult
Speaker 4: time challenging this deal. This one, by the way, goes
Speaker 4: to court in the Southern District of New York on
Speaker 4: September ninth, and I also think a decision this year
Speaker 4: is likely. With that, Elliott, I'm going to pass it
Speaker 4: back to you.
Speaker 1: Great, thanks Jen, so much, good stuff. As always, all right,
Speaker 1: justin let's bring you in to continue the antitrust talk. First,
Speaker 1: why don't you tell us about the thirty billion dollar
Speaker 1: interchange fee settlement between Visa MasterCard and retail merchants. I
Speaker 1: was rejected by the court last month. What happens next
Speaker 1: and what are you watching in two h Yeah?
Speaker 2: Sure, thank you really appreciate it.
Speaker 5: So, you know, in a story we first broke with
Speaker 5: our colleague over at Bloomberg News, Judge Brodie in the
Speaker 5: Eastern District of New York rejected a preliminary approval of
Speaker 5: this thirty billion dollar equitable class settlement between Visa MasterCard
Speaker 5: and nationwide merchants on grounds the deal didn't really provide
Speaker 5: adequate relief to all of the class members that would
Speaker 5: have been covered by that deal. And this is that
Speaker 5: interchange fee antitrust litigation. It's been going on now for
Speaker 5: nearly two decades. First kind of reached its MDL status
Speaker 5: back in two thousand and five, and as we had discussed,
Speaker 5: you know, a couple of calls ago, you know, namely,
Speaker 5: larger retailers like Target and Walmart were really opposed this
Speaker 5: deal because they said they just didn't woantn't benefit nearly
Speaker 5: as much as smaller merchants in terms of being able
Speaker 5: to band together and negotiate people, were interchange fees to
Speaker 5: be charged them as a group, and all these other
Speaker 5: facets of the deal that they said they already were
Speaker 5: getting on their own through their own negotiations with Visa MasterCard.
Speaker 5: So we thought that was going to be a hurle,
Speaker 5: and the court really agreed with that that sentiment, and
Speaker 5: what it said basically is that, you know, a lot
Speaker 5: of the aspects of the deal were merely just clarifying
Speaker 5: policies that already existed in some places, and there was
Speaker 5: a real lack of changes made to many of the
Speaker 5: rules that are issue in the litigation, such that the
Speaker 5: limited lower intercharge rates that were part of the deal
Speaker 5: for a five year period really didn't make up for
Speaker 5: the lack of permanent changes to rules that the larger
Speaker 5: retailers are really looking for in the litigation. And when
Speaker 5: I say that, you know, the big rule that really
Speaker 5: wasn't modified as part of the settlement with the honor
Speaker 5: are all excuse me, honor all cards rule, which basically
Speaker 5: says that merchants who accept Visa are a master card,
Speaker 5: that you have to accept all visas or all master cards, right,
Speaker 5: so basically, you know, I have to take all of
Speaker 5: those cards without regard to varying interchange fees between different
Speaker 5: cards with that Visa and MasterCard logo on it, So
Speaker 5: kind of stepping back here. You know, this deal was
Speaker 5: valued at thirty billion dollars with all the fee concessions
Speaker 5: that are going to be made over a five year period.
Speaker 5: But you know, we don't really know what an acceptable
Speaker 5: deal looks like for the court moving forward. And the
Speaker 5: judge really said just as much during a June thirteenth
Speaker 5: hearing too that she too doesn't really know what terms
Speaker 5: would make the deal more palatable for preliminary approval by
Speaker 5: the court down the road. But we really think in
Speaker 5: two h here the parties are really going to go
Speaker 5: back to the drawing board and probably try to develop
Speaker 5: another package to bring before the court, because the risk
Speaker 5: of bringing this case through to trial, and really it
Speaker 5: is almost trial ready at this point, is very high.
Speaker 5: For Visa MasterCard. We just don't know what a jury
Speaker 5: verdict would look like if they found liability here. The
Speaker 5: actual damages could far exceed what was already on the
Speaker 5: table before. With a thirty billion dollar at valuation of
Speaker 5: the deal, you know, even if the deal is even
Speaker 5: a bit higher here going forward for a next attempt.
Speaker 5: Really a jury verdict, you know, could be substantially higher
Speaker 5: than whatever the next try is too. So that's I
Speaker 5: think really on the mind of Visa MasterCard here is
Speaker 5: they try to hammer out something new moving forward. So
Speaker 5: look during the page a bit here too. What we're seeing,
Speaker 5: you know, on the antitrust front is a collection of
Speaker 5: private at lawsuits and mostly class actions here involving AI
Speaker 5: pricing algorithms or artificial intelligence pricing algorithms and how they're
Speaker 5: kind of being deployed in different industries. We think the
Speaker 5: trend here is that we're probably going to see more
Speaker 5: of these lawsuits popping up. The big one right now
Speaker 5: that's really in focus is a case against real Page,
Speaker 5: which is a software It's a software company that really
Speaker 5: has this revenue management system the landlords can use to
Speaker 5: kind of get the best rate, if you will, for
Speaker 5: the rental prices that are being charge in a residential market.
Speaker 5: The issue here is that what's being alleged is that
Speaker 5: different landlords, different competitors, horizontal competitors, are kind of they're
Speaker 5: pooling their non public data through real Page, which then
Speaker 5: produces a pricing recommendation for residential rents based on the
Speaker 5: AI algorithm that's at play.
Speaker 2: And how that works.
Speaker 5: Here is that, you know, what's being alleged by plaintiffs
Speaker 5: is that there's not really an ability to reject these
Speaker 5: recommendations on the part of landlords. Once Real Page is
Speaker 5: spitting out what the rental price should be for a
Speaker 5: particular unit. There's a lot of disagreement between the parties
Speaker 5: as to whether or not that's actually the case here.
Speaker 5: The landlords and Real Page say they actually reject these recommendations.
Speaker 5: Quite often plaintiffs say that's not the case, but for
Speaker 5: purposes of emotion to dismiss the case has been allowed
Speaker 5: to move forward in an MDL. So that is a
Speaker 5: bit concerning there. From the standpoint of this technology moving forward,
Speaker 5: I think really what we're going to see here is
Speaker 5: this case developing through discovery.
Speaker 2: It's really going to matter what's.
Speaker 5: Uncovered in terms of internal documents, what set in depositions,
Speaker 5: and that's really going to produce, you know, what we
Speaker 5: see in the context of a summary judgment proceeding later
Speaker 5: on down the road, probably not until early twenty twenty six.
Speaker 5: In that particular matter, this particular algorithm that Real Page
Speaker 5: Hosts is also facing lawsuits from the attorney attorneys general
Speaker 5: in DC and Arizona. We think more suits could follow
Speaker 5: from other attorneys general if those are viewed as successful.
Speaker 5: The Arizona suit is currently in emotion to dismiss stage
Speaker 5: of the case. The DC suit is proceeding past emotion dismiss.
Speaker 5: The claims there similarly have survived those attempts in DC.
Speaker 5: What we've seen so far is this algorithm algorithmic kind
Speaker 5: of antitrust issue is also at play in the hotel industry.
Speaker 5: There are allegations that similar are similar software is being
Speaker 5: used between hotel competitors kind of get the best rates
Speaker 5: they can for hotel rooms. A case in Las Vegas
Speaker 5: was dismissed for still waiting to see if some of
Speaker 5: the other suits will survive emotion to dismiss in other places.
Speaker 5: But I think again the big takeaway here is that
Speaker 5: plaintiff's lawyers are really trying to sharpen their knives to
Speaker 5: see if there's a formula that can support these cases
Speaker 5: not just through emotion to dismiss, but also through some
Speaker 5: ary judgment and on to an eventual settlement. Here, the
Speaker 5: actual antitrust laws at at issue here the Sherman Act,
Speaker 5: it looks like really, under current law, we don't see
Speaker 5: that that that kind of per se violation that would
Speaker 5: give automatic liability, if you will, for for use of
Speaker 5: these pricing algorithms. The law doesn't seem to really cover
Speaker 5: it in that context. Yet there's legislation in Congress that
Speaker 5: would change that, especially their specific legislation that looks at
Speaker 5: banning the use of these algorithms in a residential rent context,
Speaker 5: other legislation that would make use of these algorithms in
Speaker 5: any context a per se violation of the antitrust laws.
Speaker 2: But there was surprise this is.
Speaker 5: Pretty much stalled in Congress, even though we seem to
Speaker 5: have some bipartisan support at the moment. We'll see if
Speaker 5: things change there after the election. And last, but certainly
Speaker 5: not least kind of piggybacking what Jen was saying with
Speaker 5: the review of deals with FTC, we're also keeping an
Speaker 5: eye on FTC and DJ action in terms of investigations
Speaker 5: that are ongoing and while they are not those will
Speaker 5: lead to lawsuits. Prior to the election, big news last
Speaker 5: month was that DOJ and FTC reported that they've split
Speaker 5: their investigations in the AI space again. DOJ is reportedly
Speaker 5: concentrating its efforts on the videos position as the leader
Speaker 5: and semiconductors the power AI, and the FTC is focusing
Speaker 5: its efforts on Microsoft and its investment in open Ai.
Speaker 5: We just saw on news today that Microsoft will be
Speaker 5: stepping away from its role from a seat as an
Speaker 5: observer on open AI's board of directors. Probably a preemptive
Speaker 5: move there to to stay away for a little bit
Speaker 5: of corrective action that would ultimately be suggested from FTC
Speaker 5: down the road. But we do think a lawsuit against
Speaker 5: United Health and it's likely in the coming months prior
Speaker 5: to the election, probably by October if it's going to
Speaker 5: happen this year. Don't want to get too close to
Speaker 5: the election, But what's that issue? There is vertical consolidation
Speaker 5: by United Health and the healthcare space, So really what's
Speaker 5: happened is Health similar to competitors Signa and at what
Speaker 5: we've seen is United Health acquired Optum Health, which is
Speaker 5: you know what the what all of these folks in
Speaker 5: the space seem to be doing, and now owns Pharmacy
Speaker 5: Benefit Managers PBMU under the optim Health line, as well
Speaker 5: as a large national network of physicians offices too, So
Speaker 5: everything's really big being consolidated into this one kind of
Speaker 5: healthcare conglomer at every aspect of healthcare under one roof.
Speaker 5: But the problem with that, no surprise here, is that
Speaker 5: by doing so, you know, the health is probably or
Speaker 5: probably at some point will be teamed to and steering
Speaker 5: patients toward its own services rather than unaffiliated doctors or pharmacies,
Speaker 5: and so doing reimbursements with then stay on the company's
Speaker 5: actual balance sheets rather than leaving the company and going
Speaker 5: to other actors in the healthcare space. So it's just
Speaker 5: a roundup of some of the things we're looking at
Speaker 5: my side of the shop here for endit trust in
Speaker 5: two age as well.
Speaker 1: Thanks Justin. Yeah, so mu's going on in anti trust world?
Speaker 1: We needed two people, great stuff, Thank you. All right, Matt,
Speaker 1: let's bring you in to talk tech non anti trust
Speaker 1: tech legal and policy issues. Among potential legislation that you're tracking,
Speaker 1: it sounds like there's a bill to protect kids online
Speaker 1: that might actually pass.
Speaker 6: Yeah, yeah, So I thought i'd focus on three things
Speaker 6: for the second half of the year, and the first
Speaker 6: one is is that so Congress has been struggling to
Speaker 6: regulate Internet platforms for a number of years now not
Speaker 6: being able to get anything done, and I expect that
Speaker 6: to continue. On some higher profile and more impactful bills
Speaker 6: like eliminating Section two thirty's Safe Harbor and a comprehensive
Speaker 6: data privacy bill, I just don't see those getting done.
Speaker 6: What has a chance, though, is this legislation aimed at
Speaker 6: kids online. The Kids Online Safety Act has nearly seventy
Speaker 6: co sponsors in the US Senate, It's cleared a key
Speaker 6: Senate committee and is a waiting time on the floor.
Speaker 6: In the House, it still needs to get through committee,
Speaker 6: but with that much bipartisan support, I think it has
Speaker 6: a decent chance to get through. So far, it's been
Speaker 6: tripped up in the House because of its ties to
Speaker 6: a larger comprehensive data privacy bill. I think, you know,
Speaker 6: it's still still difficulty separating the two, so it's far
Speaker 6: from a sure thing, but it's worth watching. And so
Speaker 6: this could sort of break the dam in terms of
Speaker 6: allowing Congress to finally start regulating these companies. I don't
Speaker 6: think legislation aimed at kids is the most disruptive legislation,
Speaker 6: but still the companies would like to continue keeping Congress
Speaker 6: out of regulating it, and this could be a first step.
Speaker 6: It's worth watching in the second half of this year.
Speaker 6: The second thing I wanted to highlight in terms of
Speaker 6: impacts in the second half in the Internet space is
Speaker 6: the TikTok legal case that should play out over the
Speaker 6: second half. If TikTok doesn't win this case, it's effectively
Speaker 6: banned in the US on January twentieth. And if, obviously,
Speaker 6: if it goes away, that's a big win for TikTok's
Speaker 6: competitors Meta snap Alphabet, for example. So the case will
Speaker 6: be argued September sixteenth. The parties asked the court to
Speaker 6: decide it by December sixth, and so if TikTok loses
Speaker 6: that decision, it's only chance to remain viable on January twentieth,
Speaker 6: will be an emergency petition to the Supreme Court. And
Speaker 6: so my take on how it plays out, I do
Speaker 6: think courts are going to be inclined to defer to
Speaker 6: Congress on national security matters. But what stands out to
Speaker 6: me when I look into the briefing on this is
Speaker 6: just how sparse the record is that Congress built here.
Speaker 6: Congress went so fast that it basically built nothing into
Speaker 6: the record, it didn't show it considered alternatives, that it
Speaker 6: evaluated the risks, and I think that could be tough
Speaker 6: for the government to overcome in this first litigation. I
Speaker 6: think the DC Circuit in particular could make Congress try
Speaker 6: again and at least show it took a harder look
Speaker 6: at the details. So that's worth watching in the second half.
Speaker 6: And then one last note. Uber and Lyft are awaiting
Speaker 6: a major decision from the California Supreme Court that's crucial
Speaker 6: to the business model. That should come down in the
Speaker 6: second half here too. This concerns a state voter initiative
Speaker 6: from twenty twenty that said that gig drivers in the
Speaker 6: state are contractors, they're not employees. But a lower court
Speaker 6: struck that down and that threatens severe cost tikes for
Speaker 6: the companies. I expect the Supreme Court in California to
Speaker 6: issue its decision late this month or early August, and
Speaker 6: almost certainly by August nineteenth, and I expect I think
Speaker 6: it will be good news for the companies. I expect
Speaker 6: the courts to say that that Proposition twenty two remains
Speaker 6: valid good law despite what that lower court said, So
Speaker 6: watch for those catalysts in the second half back to you, Elliott.
Speaker 1: Great, thanks Matt, really interesting stuff. Maybe I'll try to
Speaker 1: take my kids to the TikTok here in September.
Speaker 6: You said, yes, September it is yep.
Speaker 1: All right, Tam, let's bring you in. We'll stick with tech.
Speaker 1: We'll bring you into talk tech IP. And I know
Speaker 1: there's a case you're watching involving Pegasystems and Appien and
Speaker 1: involves a two billion dollar jury award that Pega is
Speaker 1: trying to reduce dramatically. You want to tell us about that?
Speaker 7: Yeah, sure, thanks Elliott. So this is a case that
Speaker 7: we've been following for some time, beginning with a jury
Speaker 7: verdict from May twenty two that awarded APN over two
Speaker 7: billion dollars from rival Pega Systems. Now, the jury verdict
Speaker 7: followed a seven week trial in a Virginia state court. Now,
Speaker 7: we've been skeptical of the amount pretty much the entire
Speaker 7: period we've been tracking in this case. One of the
Speaker 7: reasons is that this is the largest damages award in
Speaker 7: a trade secrets case ever, whether it be a state
Speaker 7: or a federal court, and that comes from from companies
Speaker 7: that are really not that big. So, for context, the
Speaker 7: damages award was about twenty five percent of the pre
Speaker 7: verdict market cap of the combined companies. No other award
Speaker 7: in history has been above sort of five percent, so
Speaker 7: so that just sort of shows you how far of
Speaker 7: that liear this was. Now Pega Systems appealed and the
Speaker 7: oral argument was held November fifteenth. The arguments really reinforced
Speaker 7: our view that this award would be significantly reduced, primarily
Speaker 7: because of a burden shifting decision made by the District
Speaker 7: Court that we think winninggainst both the Virginia statue and
Speaker 7: case law. Now we believe there is a strong like
Speaker 7: like the appeals Court is going to reverse and reman
Speaker 7: for a new trial on damages. There's also a chance
Speaker 7: that the court entirely overturns the finding that APN had
Speaker 7: established trade secret protection and misappropriation in the first place.
Speaker 7: If it does that, then that would entirely eliminate the
Speaker 7: damages award. Now, we had been expecting a decision in
Speaker 7: one age, but that was based on how quickly the
Speaker 7: court was working through decisions in twenty twenty three. Now,
Speaker 7: that was the very first full year that the court
Speaker 7: was in existence, so it's not all that surprising that
Speaker 7: the timing has been pushed out now that the court
Speaker 7: has a little bit more of a backlog. However, that
Speaker 7: makes said we do fully expect a decision to come
Speaker 7: in the second half of this year.
Speaker 1: I'll leave it there, Earliott, Great, short and sweet. Thanks Hamlin.
Speaker 1: All right, Holly, let's have you come in. We'll talk
Speaker 1: about mass towards class actions. I know there's a lot
Speaker 1: of mass tort class actions that you're watching. Let's start
Speaker 1: with litigation over Johnson and Johnson's talcum powder. Can you
Speaker 1: tell us about that case and what you're watching there?
Speaker 8: Sure, thanks Elliott. So J and J faces about fifty
Speaker 8: seven thousand lawsuits. Now a legend tal comp powder causes
Speaker 8: ovarian cancer or mesophilioma. Federal cases were consolidated in a
Speaker 8: multi district case in New Jersey where the court has
Speaker 8: reopened so called Doubert or expert proceedings. In these cases,
Speaker 8: plaintiffs cannot prove their case without an expert, but in
Speaker 8: order for planiffs to present the experts testimony to the jury,
Speaker 8: the court has to first opine that the testimony is reliable. Previously,
Speaker 8: the federal court found Planets experts reliable and allowed them
Speaker 8: to testify, but the court has revisited that ruling is
Speaker 8: reevaluating whether that testimony should come in. If the court
Speaker 8: allows the experts to testify, a trial may be held
Speaker 8: in twenty twenty five, absent a deal or stay. We
Speaker 8: should know more about the Court's rulings on expert motions
Speaker 8: in late to EAH when we think there will be
Speaker 8: a hearing on them. And earlier I said there could
Speaker 8: be a stay. And the reason why I say that
Speaker 8: is because while this litigation proceeds in the district court,
Speaker 8: Johnson and Johnson continues to explore bankruptcy options. By way
Speaker 8: of background, its subsidiary had previously filed two Chapter eleven filings,
Speaker 8: and both filings were on separate occasions. Both filings were dismissed,
Speaker 8: the first after an appeal and the second by the
Speaker 8: bankruptcy court because the courts found Chapter elevens were filed
Speaker 8: in bad faith given that the subsidiary that held all
Speaker 8: the legal liabilities related to TALC was not in financial distress.
Speaker 8: As Jane Joy reportedly explores, a third bankruptcy filing, more
Speaker 8: claimants seem to agree to the roughly six billion dollar
Speaker 8: proposal it has floated to result current in future ovarian
Speaker 8: cancer claims, but it remains to be seen whether a
Speaker 8: third bankruptcy attempt would be successful. In the meantime, state
Speaker 8: trials State court trials continue and are scheduled throughout two
Speaker 8: h In Zantac cases, a Delaware court in May allowed
Speaker 8: plaintiffs experts to testify by way of background. Tens of
Speaker 8: thousands of planets filed lawsuits against manufacturers JSK, Bow and
Speaker 8: Jeriffizers and other makers of Zantac, claiming an ingredient in
Speaker 8: it causes various cancers. Over fifty thousand claims were filed
Speaker 8: in federal court. Federal cases were consolidated in a multi
Speaker 8: district litigation in Florida. Plane just chose only to pursue
Speaker 8: five types of cancer they said Zantak caused. In December
Speaker 8: twenty twenty two, the federal court there barred plaineff experts
Speaker 8: from testifying as to all the so called designated cancers,
Speaker 8: finding the expert testimony unreliable, so she dismissed the cases
Speaker 8: because those cases couldn't be prosecuted without an expert. But
Speaker 8: the federal court's ruling was not binding on state courts,
Speaker 8: so many cases alleging not just the designated cancer. Those
Speaker 8: five designated cancers, but other types of cancers as well,
Speaker 8: were filed in state court in Delaware, where some of
Speaker 8: the defendant companies were headquartered. Over seventy thousand cases were
Speaker 8: filed there, and in May, the Delaware Court issued a
Speaker 8: decision finding plaintiffs experts reliable as to all of the
Speaker 8: cancer's plaintiffs alleged. The defendants have requested to immediately appeal
Speaker 8: that order. Normally, such orders that don't end cases are
Speaker 8: not immediately appealable. The challenger needs permission to appeal the
Speaker 8: court's permission to appeal. The defendant asked the lower court
Speaker 8: for permission on July first. The lower court rejected their request.
Speaker 8: The defendant has now the Delaware Supreme Court for permission
Speaker 8: to appeal. We think it may grant their request in
Speaker 8: two h and if it does, it may issue decision
Speaker 8: before the first Bell Weather case goes to trial. If
Speaker 8: it doesn't, the manufacturers could face potential headline rest which
Speaker 8: with potential negative verdicts before the appeal is decided. In
Speaker 8: litigation against three and DuPont Comors and others over alleged
Speaker 8: p pass contamination discovery on personal injury trials to continue through
Speaker 8: two h By way of background, those companies and others
Speaker 8: were sued because they allegedly manufactured so called pfas were
Speaker 8: forever chemicals that do not degrade and contaminate water and
Speaker 8: are now in the blood of nearly every American. In
Speaker 8: mid two thousand, a science panel commissioned in connection with
Speaker 8: a lawsuit over a DuPont manufacturing facility, link those chemicals
Speaker 8: to six diseases, to which include cancer. Law are cancer
Speaker 8: lawsuits were filed over specific products so called aqueous film
Speaker 8: forming foam, used at military bases and commercial airports and
Speaker 8: elsewhere to put out fires. US alleged that a triple
Speaker 8: F as it's called, resulted in water contamination and personal
Speaker 8: injuries as a result of the consumption oftaminated water. In
Speaker 8: June twenty twenty three, before the first Bellwether trial on
Speaker 8: water authorities who alleged contamination was held three and reached
Speaker 8: a ten million dollar deal to resolve those cases. Those
Speaker 8: water authorities had sued for remediation. Remediation not ten it
Speaker 8: was ten to twelve billion dollars, and that deal was
Speaker 8: approved by the court. Earlier this year, DuPont also reached
Speaker 8: a settlement for one point two billion dollars that was
Speaker 8: also approved by the court. The next phase a litigation
Speaker 8: will focus on personal injury cases. As of April, there
Speaker 8: are around five thousand personal injury cases, over half of
Speaker 8: which were cancer cases, but that number could dramatically increase
Speaker 8: depending on trial results. A pool of cases has been
Speaker 8: selected to be worked up for trial. Discovery will proceed
Speaker 8: through too, eh and we think by next year we
Speaker 8: could get a decision on whether plaintiffs experts will be
Speaker 8: allowed to testify. And with that, I'll turn it back
Speaker 8: to you, Elliott.
Speaker 1: And last but not least, Dwayne, let's talk healthcare policy.
Speaker 1: In two h you've written that the Biosecure Act is
Speaker 1: not dead yet. Why don't you come in maybe tell
Speaker 1: us first what that is and then tell us what
Speaker 1: the timing and outlook are for it.
Speaker 9: Yes, thanks Elliott. The key here for me and I
Speaker 9: want to talk about this is because Republican speaker that
Speaker 9: was Mike Johnson recently made comments that the House will
Speaker 9: vote on the Biosecure Act at some point soon. This
Speaker 9: first time he said this publicly. By way background, the
Speaker 9: bill would restrict fairly funded medical providers from contracting with
Speaker 9: a select group of Chinese biotech companies or using their
Speaker 9: equipment or services. Some of the companies that have been
Speaker 9: mentioned uji Apteci Biologics, among others China's bgig No Mix,
Speaker 9: which is notable because it is on the Commerce Department's
Speaker 9: export control list over concerns that it collects genetic data
Speaker 9: and contributes to Beijing surveillance efforts. So this is all
Speaker 9: part of a broader national security effort that could also
Speaker 9: bolster US manufacturing at the expensive China's The comments provide
Speaker 9: new momentum for Bioscure Act after it was omitted from
Speaker 9: a Defense authorization bill and that generated headline noise about
Speaker 9: maybe the Bioscure Act is dead and is not going
Speaker 9: to happen. We think it could get a standalone vote
Speaker 9: over the summer or potentially after the AUX recess. It's
Speaker 9: also possible in the Senate they could add the Bioscure
Speaker 9: Act during floor debate, but at the end of the day,
Speaker 9: the big thing to watch is the Lane duck session,
Speaker 9: and this could be or we think this is on
Speaker 9: the pretty high on the list of priorities, or a
Speaker 9: catch all bill. There's enough support for it in both chambers.
Speaker 9: The bill, or at least a version of the bill,
Speaker 9: has passed the House and Senate committees overwhelmingly, maybe one
Speaker 9: or two votes against, and it's been modified in a
Speaker 9: way to provide a runway for the drug makers to
Speaker 9: find other sources in terms of getting their drugs developed
Speaker 9: and onto the market, basically until twenty thirty two to
Speaker 9: come up with or rejigger their supply chain. So I
Speaker 9: think that has made some headway and ease some concerns
Speaker 9: from lawmakers about supply chain issues, and so it bolsters
Speaker 9: our view that this is going to happen this year.
Speaker 1: Got it? And what else are you looking at in
Speaker 1: the biotech and pharma space for the second half of
Speaker 1: the year.
Speaker 9: Well, the big thing is the IRA, the truck negotiation piece.
Speaker 9: That the negotiation winds down for the first set of
Speaker 9: drugs August first. We'll know by September what the prices
Speaker 9: are for those ten party drugs September first Sunday, so
Speaker 9: we'll probably see a rollout for one or multiple drugs
Speaker 9: on a daily basis the week before that. It should
Speaker 9: provide some clues on how future negotiations can work. Where
Speaker 9: the or at least this administration might end up in
Speaker 9: terms of price, though you know, if a Republican ends
Speaker 9: up putting the White House, that could change. I think
Speaker 9: it's worth noting the president or former President Trump hasn't
Speaker 9: said anything about the or said much about the health
Speaker 9: pieces of the IRA He once supported negotiation before opposing
Speaker 9: it as president, and he has his own proposals in
Speaker 9: terms of tying prices for drug sold in this country
Speaker 9: to those in other countries. The bill does have a
Speaker 9: lot of latitude for I'm sorry, the law does have
Speaker 9: a latitude for a future President Trump to set deeper
Speaker 9: discounts or be more favorable to pharma.
Speaker 2: Point being, we.
Speaker 9: Shouldn't assume that the election outcome could be a victory
Speaker 9: for the industry. And I'll also note that it's worth
Speaker 9: noting that February one, twenty twenty five, that's when we'll
Speaker 9: know what the next set of drugs will be that
Speaker 9: will be subject to negotiation. Some pretty big drugs like
Speaker 9: ozempic will likely be on the list, and cancer drugs
Speaker 9: at Sandy and high brands from Advisor. So but the
Speaker 9: big thing short term is knowing what the prices are
Speaker 9: for the first list of drugs.
Speaker 1: Got it all right? And shifting to Medicare. You've written
Speaker 1: that there's a Medicare advantage shake up that could benefit Humana,
Speaker 1: United Health and others. What's that about and what are
Speaker 1: the key dates for MCOs this year?
Speaker 9: Yeah, so the big day is going to be our
Speaker 9: two refers. That's when Medicare advantaged plans are allowed to
Speaker 9: start marketing for the open enrollment season and the new
Speaker 9: plan year January. First two things we're watching. One the
Speaker 9: impact of MA rate changes. For the second year in
Speaker 9: a row, the MAA plans got a negative payment update
Speaker 9: and this is on top of higher medical cost trends
Speaker 9: and leading.
Speaker 2: Two.
Speaker 9: Feedback from some of the more popular bigger plans like
Speaker 9: Humanity CBS that the combination of the two that will
Speaker 9: be scaling that back their footprints in some markets to
Speaker 9: grow margin. We did see one company indicate they're leaving
Speaker 9: a specific MA market that puts about half a billion
Speaker 9: dollars in premium revenue up from grabs. Companies like United
Speaker 9: Health and Elements might benefit from that specific example, but
Speaker 9: maybe overall, just depending on where some of these other
Speaker 9: companies just decide to exit. The other piece for watching
Speaker 9: is the IRA impact, because there is the part d redesign.
Speaker 9: The negotiation piece gets all the attention, but the redesign
Speaker 9: is important because that caps out of pocket costs and
Speaker 9: shifts the financial burden in the catastrophic phase, which is
Speaker 9: basically the limit the area where the government typically paid
Speaker 9: most of the drug costs for some individuals. But it's
Speaker 9: shifting to health plans. So how this coupled with the
Speaker 9: low payment rate utilization trend changes. How will this affect
Speaker 9: benefit package design and pricing prem A and Part D
Speaker 9: plans will be interesting to watch, And the fact that
Speaker 9: it's October first, one month before the election, will be
Speaker 9: interesting in terms of pricing and how seniors react to
Speaker 9: potentially needing to find new healthcare plans.
Speaker 1: Great, all right, thanks Dwayne, really appreciate it. All right,
Speaker 1: So with that, I think we'll wrap up this episode
Speaker 1: of Votes and Verdicts. As always, thank you for listening,
Speaker 1: And as a reminder, you can find all of our
Speaker 1: research on the Bloomberg terminal at BIG and we encourage
Speaker 1: you to reach out to us with any questions that
Speaker 1: you may have about any of the issues that we
Speaker 1: talked about today. We also encourage you to listen to
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Speaker 1: you again for listening and have a break down