June 27, 2025 • 36 mins
Key court rulings on June 23 and 25 in cases against Anthropic and Meta over the use of copyrighted material in large language models are among the catalysts Bloomberg Intelligence litigation and policy analysts are watching this week. The decisions are also relevant for Google, Microsoft, the New York Times, OpenAI and others. The team also discussed the outlook for antitrust enforcement of M&A under US President Donald Trump, with ramifications for several pending deals, such as Dick’s Sporting Goods-Foot Locker, Charter-Cox and Google-Wiz. CVS and Cigna Express Scripts are challenging an Arkansas law that would ban operators of pharmacy benefit managers from holding pharmacy licenses. Finally, we discussed the outlook for FCC deregulation, including removal of broadcast caps, with implications for Nexstar, Sinclair and Tegna.
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Episode Transcript
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Speaker 1 (00:15):
Hello and welcome to the Votes and Verdicts podcast, hosted
by the Litigation and policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we have
(00:36):
outlooks on more than ninety industries and one hundred market industries,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today's our weekly check in
on the litigation and policy catalysts that we're watching, or
at least some of them, and that we think will
impact companies across a number of different sectors. My name
(00:56):
is Elliott Stein. I'm an analyst with the Bloomberg Intelligence
covering litigation in the financials sector. I'm delighted today as always,
to be joined by a handful of my colleagues who
cover litigation and policy for BI. As always, you can
find all of our research on the Bloomberg terminal at
big and more specifically, you can find our litigation and
policy research on the Bloomberg terminal at BI laws go.
(01:22):
Today is June twenty sixth, twenty twenty five. It's about
nine am here in New York. And with that, let's
get started. I want to bring in my colleague Tamlin Basin,
who covers techp issues that are being litigated or in
(01:42):
some sort of policy development. So, Tamlin, you have been
covering a bunch of cases related to AI, artificial intelligence
and potential copyright infringement. Super interesting issue. Just this week,
in fact, I think just yesterday we got a really
big decision involving META. A couple of days before that
(02:02):
we got another sort of groundbreaking decision. I think, why
don't you come in sort of give us, you know,
the layer of the lay and what the overall context
is here and what these decisions mean.
Speaker 2 (02:13):
Yeah, sure, thank you, Ellia, And you're right. So in
the US alone, there's over forty lawsuits and these are
lawsuits that are being litigated by copyright owners content owners.
So this is print media, authors, books, films, music recordings,
and they've sued developers of large language models. Now this
includes both some of those pure play large language model
(02:35):
firms like open AI, Anthropic Perplexity Stability AI as well
as some of the larger tech firms that have also
tried their hand in developing large language models. So Meta, Google,
Microsoft have all been sued. Now, No, I have been
covering this for a while, and just a few weeks
ago we put out a deep dive report that really
examines in more detail all of these issues that are
(02:58):
at play. As you mentioned this week, there was sort
of an acceleration moving this legal forward. And so first
what we had was Anthropic. This was a case that
was brought by a group of authors claiming that by
training Anthropics large language model claud on these publications, that
that was copyright infringement. Now, there was a summary judgment
(03:21):
hearing that was held in the spring, and on I
believe it was Monday night, the judge in that case
came out and found in favor of Anthropic.
Speaker 3 (03:31):
On fair use.
Speaker 2 (03:31):
Now, I think it's important to note that there are
four fair use factors. Really, what courts are looking at
are sort of factors, one which is looking at whether
this was a transformative use. In factor four, which is
whether or not the way that the defendant used the
content impacted the market for the original. So the judge
in that case found in anthropics favor on both of
(03:54):
those issues, but really focusing more on the transformative use side,
saying this was highly transformative and sort of waved away
the market harm issue. Then we had last night in
the Meta case, and this was also a case it
was brought by another group of authors challenging Meta's development
of its own large language model Lama now Here. Although
the court did again find in favor of Meta, he
(04:16):
focused really a lot of attention on this potential market
harm aspect, on the fourth factor, and he made it
very clear that this was a ruling in metas favor,
not necessarily because the overall law the landscape for use
it self dictates that, like he said, the evidentiary record
before him was not showing any impacts of mark harm. However,
(04:37):
he sort of went to grow the great lengths to
say that this might be an outlier overall in terms
of these AI copyright cases, and if there had been
a better record of market harm that this would go differently.
So I think the broad takeaway is that this is
a positive development for AI firms, at least in terms
of whether inputs used to train large language models were infringing. However,
(04:58):
I don't think it was quite a resounding victory that
those firms would have been looking.
Speaker 1 (05:02):
For somewhat of a victory for this, and that it
sounds like the judge in the medic case sort of
gave a like a playbook for future plaintiffs to potentially prevail.
Speaker 2 (05:14):
Yeah, he really did, and it was quite interesting to
see him do that. He really took quite a bit
of issue with sort of the lack of evidence on
this in this case about potential market harm, and I
think what he was really concerned about was whether or
not the proliferation of AI generator materials could down the
line be rode demand for those original content works. And
(05:38):
he sort of explicitly said that maybe you're not going
to see that in something like fiction works, where people
might not be turning to a fiction book that was
written by AI firm. However, he's had in other instances
something like news paper reporting also sort of photographic imagery,
where there might be a much stronger case for market harm.
(05:58):
So I think we'll get the There are other cases
that do alleged things closer along those lines, and I
think if this judge's reasoning has followed, then those firms
might have a much more difficult time getting somewhere in
judgement on fair use, especially with respect to market impact.
Speaker 1 (06:14):
Yeah, and in this case against Meta, is that is
that the case for Sarah Silverman's one of the planiffs.
Speaker 2 (06:19):
She is, well, she's one of the planeffs. In an interview,
they've also sued I believe Google. Certainly they've sued open Ai.
So yes, a lot of authors sort of had joined
together on this and teamed up to follows a lot
of the lms.
Speaker 1 (06:35):
And do you think the planeffs in the case against
Mata are they gonna have another shot to bolster their record,
to maybe show some of the facts that the judge
said they needed to show.
Speaker 3 (06:45):
I'm not sure if on this they are.
Speaker 2 (06:47):
However, the case isn't actually over because specifically summary judgment
was only on the reproduction of their works. That is,
when when the Large Language Model reproduced the works to train.
There's actually another issue where Meta sort of admittedly turned
to BitTorrent to get a lot of these books, and
is sue there was whether they subjected those books that
(07:07):
they downloaded to BitTorrent.
Speaker 3 (07:09):
In doing that process, you can subject those works to
other people who might be engaging in BitTorrent.
Speaker 2 (07:15):
So I think there's still going to be a potential
distribution claim, and he's going to hold a hearing later
in the summer.
Speaker 3 (07:22):
I believe, to decide what to do with that. I
think it's relatively likely that he.
Speaker 2 (07:26):
May allow this to be appealed as it is, and
I also think there's a potential that we might have
a quick appeal of that anthropic case. Both of they're
more in different courts, but both we'll go up to
the Ninth Circuit.
Speaker 1 (07:37):
Right yeah, they're both in the Northern District of California,
right yeah, yeah, yeah, And just give us a flavor,
I mean, and I know you sort of quantified this
in your research decks. Give us a flavor of how
much does at stake here?
Speaker 2 (07:50):
I mean, truthfully, it's potentially trillions of dollars and the
reason for that sort of eye popping number that we're
highly unlikely to see, but just because statutory images under
the US Copyright Act can be up to one hundred
and fifty thousand dollars per copyrighted work, and in the
sort of anthropic case alone, we know that they also
turned a bit torrent, and the allegation was that they
(08:11):
downloaded as many as seven million books to that BitTorrent,
So if you add statute or damages across all of that,
you could get really eye popping numbers. These are sort
of just related to inputs, and again, I think both
of these cases found fair use on inputs. I think
it's going to be a much more challenging issue when
(08:31):
you're looking at outputs. This is when a generative AI
producer's output that more closely mimics what it trained on.
I think that might be not only a reproduction, but
a potential distribution.
Speaker 3 (08:42):
And we have later cases that are going to test that.
Speaker 2 (08:45):
I think both of if you read both of these decisions,
they make it clear that if outputs were alleged in
these cases and they weren't, that it would have been
a much different outcome on fair use. So I think
we're going to be paying a lot more attention to how.
Speaker 3 (08:56):
That's going to develop.
Speaker 2 (08:57):
One of the major cases that's going to be testing
that is the New York Times first Open AI and
Microsoft case. It's being litigated in New York, but that's
gonna be quite a bit more delayed in terms of this,
just because you have so many different more parties are
litigating that one.
Speaker 1 (09:11):
Such an interesting issue and sounds like it's going to
play out for a while. I guess just given how
many different cases there are, and you mentioned your deep
dive earlier, I just want to plug that again for
our listeners. This is Talent's really put out a comprehensive,
very comprehensive report covering all these issues that he's talking about.
(09:31):
You can get a hard copy version, just reach out
to us if you're interested, and then if you're a
terminal subscriber, there's a report as well on the terminal.
All right, Talent, thank you so much. Speaking of deep dives,
let's turn to Jen ree are one of our anti
trust gurus here, because Jen is also working on a
(09:52):
deep dive related to antitrust enforcement under the Trump administration
and what that looks like. So Jen, why don't you
you come in and maybe give us a sense of
you know, what you are writing in your report about
what we know so far in terms of anti trust
enforcement under President Trump.
Speaker 4 (10:15):
Yeah, thanks, Elliott.
Speaker 5 (10:16):
I mean this has really been the subject of a
lot of speculation because, you know, stepping back, you know,
antitrust for many many years was really predictable I mean really,
particularly with respect to how mergers and acquisitions that need
to be filed with the government in reviewed, the way
they would be treated. It's kind of been the same
and the same changes since nineteen seventies, since the nineteen seventies,
(10:39):
and you know, we would expect when a new administration
would come in there would be slight changes a matter
of degree. The Republicans tended to be a little bit
more business friendly in certain ways to deal treatment, and
the Democrats tended to be just slightly tougher, but again
a matter of degree. Everybody kind of knew what the
play of the land was and how things were going
to go, and that all change changed. And that's why
(11:01):
we've been watching so carefully what's going to happen with
Trump's because it all changed when Biden was elected president
and he put in place enforcers that were really on
a mission. They wanted to revitalize antitrust enforcement. They really
thought big was bad, they didn't like deals in combinations,
and they wanted to do whatever they could to slow consolidation.
And I think that after Trump was elected in the
(11:23):
fourth quarter of twenty twenty four, there was kind of
a reaction of glee for you know, those interested in
deal making because of this expectation, well, everything was going
to go back to the way that it was before Biden,
and now we're going to get predictability again, and these
deals are going to go through. And honestly, you know,
we took the position here that that's probably not the case,
(11:43):
that it's still going to be sort of heightened. There's
still going to be this heightened level of aggression. And
we saw that President Trump appointed people who are professed
economic populists, right, so they are a little bit different
than some of the Republicans of old that have run
the Trade Commission and Department of Justice, and so we've
been watching carefully to see what they're going to do
(12:04):
with deal making. And now we've got a few months
of track record, right, so we're watching to see what
they're going to do. It's been very unclear based on
their speeches and what they've said, Hey, we're going to
continue to be aggressive. But I am beginning to see
some of the pathways opening up to deals getting done,
and I think that's going to be you know, all
of those companies out there looking have a lot of money,
(12:25):
looking to do a combination are going to be very
happy about it. And what that is is a renewed
acceptance of remedies to resolve otherwise problematic deals. So when
I'm talking about remedies, when merging companies come together, let's
say they have one product line, they each have the
same product line, they compete, they're going to bring those
product lines together in a concentrated market. So even for
that one product line, and let's say they have thirty
(12:47):
product lines, you're going to have a problematic anti trust issue.
So what with a remedy. You can sell off that
one product line, remove that overlap, and then get the
bigger underlying deal closed, get rid of the bad part,
hold on to what's good about the deal, and let
it go forward. And likewise, if they don't compete, but
they're vertically related and the merger would result in vertical integration.
(13:08):
And if the deal raises a concern that companies that
come together like that could foreclose their rivals because they
secure a needed input for their rivals, so long as
they made a commitment that they'd make that input available
on a non discriminatory, fair and reasonable basis, they could
usually get the deals closed. So the vast majority of
deals that raised antitrust problems for many, many many years
(13:29):
closed during the Biden administration, though instead the vast majority
either got student court or were abandoned or this is
what they really wanted. Deals didn't get signed to begin
with because the companies realized this is going to be
a tough road. We don't have the time, we can't
do it. Deals can't really last the long road of
litigation in most cases. So we had this huge spike
(13:49):
and abandoned deals. But what we've seen now is that
President Trump's FDC and DJ have cleared with remedies for
deals in the last two months. That is more than
occurred under the Biden administration in his last two years.
Speaker 4 (14:03):
And for three of those deals there were divestitures.
Speaker 5 (14:07):
That was Synopsis Ansis Key Sites Byront and Saffron, which
acquired some assets from RTX formerly Raytheon.
Speaker 1 (14:13):
After litigation has already been commenced. This is in lieu
of litigation.
Speaker 4 (14:18):
So it's in lieu of litigation.
Speaker 5 (14:20):
I think sometimes there's confusion, to be honest, because a
complaint has to be filed in order for it to
be settled.
Speaker 4 (14:25):
There's a settlement.
Speaker 5 (14:27):
So what happens is the agencies file a complaint, but
simultaneously with that complaint, they file a settlement what's called
a consent agreement, which shows what the companies agreed to
do that allowed them to settle this complaint. It's interesting
that you say that because the ones that were settled
under Biden actually went into litigation. They've got sued, they
started the litigation, they might have even gotten into trial.
(14:48):
I think the FDC or DJ whoever it was that
was responsible was reading the tea leaps seeing they probably
weren't going to win, and ended up settling mid litigation.
But these are pre litigation settlements simultaneous is with the complaint.
And the interesting thing too, is that there was one
other deal that was cleared with the behavioral commitment. That
was Omnicom, Interpublic, two huge ad agencies, which was a
(15:11):
particular interesting circumstance because these enforcers have said that they
don't like behavioral commitments, but they went ahead and accepted
that one. So we're getting to it's a pretty significant rollback,
in my mind, slightly back to that more conventional approach,
because it does allow a way for deals that might
raise some minor problems or problems with pieces of their
(15:32):
business to actually have a way to convince the agencies
to let them get the deal closed. And I think
that there are many factors in the economy that caused
deal making to pause, such as inflation and tariffs and
interest rates and things like that, but antitrust has also
been a contributor, and I think that's going to sort
of fall to the wayside Aside from that, you know,
(15:53):
we're still reading the tea leaves with respect to how
aggressive they're going to be, And we have a bunch
of pretty interesting deals that are pending, like Google Whiz,
which will be a really good one to watch because
these agencies have said we're going to be really tough
on big tech platforms. But I really don't think the
facts in that case support any theory of harm that
would hold up in court. So we'll have to see
(16:14):
what happens there.
Speaker 1 (16:15):
Remind us what Whiz is.
Speaker 5 (16:17):
So Whiz is cloud security, cybersecurity and the cloud. So
you have a Google which has a cloud, have cloud business,
and then you have their buying cybersecurity for that cloud,
and Whiz right now is free to be used by
any cloud company, any.
Speaker 4 (16:33):
Company that has a cloud business.
Speaker 5 (16:34):
But then they will be again, it's, as I said,
Google is going to be taking on the ownership of
an input needed by some of its competitors, and so
there's always that possibility of foreclosure. But the reason I
say there's not really a good theory here is because
usually that kind of harm can only occur when the
company has market power in one or in both of
the markets that we're talking about. And Google is third
(16:56):
buy and has a less than twenty percent share in
the cloud market, and wiz has a lot of big
competitors in cybersecurity, and so when there are a lot
of other options out there in the market, they usually
don't have the ability to do something that would harm
the market.
Speaker 1 (17:09):
Interesting at Google's thurn, who are the top two?
Speaker 4 (17:11):
Amazon and Microsoft?
Speaker 6 (17:14):
Yeah, yeah, that makes sense.
Speaker 1 (17:16):
And okay, what other interesting deals are you watching?
Speaker 6 (17:19):
Right?
Speaker 5 (17:19):
So you mentioned well the other the other deals really
interesting Dick's foot locker.
Speaker 6 (17:23):
Which is you know, Weekend.
Speaker 5 (17:25):
Yeah, everybody knows those companies, So not for myself, that's
going to be an interesting one. I do think they're
probably going to have to divest some stores, but as
I said, under Biden, that wouldn't have been an option
for them. But under Trumpet looks like that will be
an option. So, you know, this is one of those
things where if this deal had been struck during the
Biden administration, I would have said, I don't think it
can get closed without litigation. But today I'm saying I
(17:48):
do think it can get closed if they're willing to
invest the stores that need to be sold.
Speaker 4 (17:52):
Charter Cox cable companies. That's another big one.
Speaker 5 (17:55):
It's going to be interesting to see if the agencies
acknowledge the way the industry changed with respect to how
people view view content, video content and the way they
can access it. You know, we have five G now,
which we didn't have in the past when broadband companies
came together. We have Getty Images, shutter Stock they supply
stock photographs, but they're the two really Biggies and Disney Fubo.
Speaker 4 (18:19):
Which is really interesting.
Speaker 5 (18:20):
So, and we had mars Kelenova, which I've been writing
about in the FTC cleared that last night. Oh really yeah,
chocolate company buying prinkles.
Speaker 4 (18:32):
I know.
Speaker 5 (18:33):
The European Union actually just opened up an in depth
investigation for that one. The Commission is concerned about something
called portfolio effects, which we do not think is a
viable theory here in the US. But they're worried that
the company is going to have too many must have
products and it will give them leverage because they'll have
that big bundle and they can engage in like full
line forcing for the supermarkets that buy the products. But
(18:55):
it's interesting to me that they think that, you know,
Pringles is a must have product or grain bars or
kind bars, which are the products that these companies own.
Obviously Mars, we all know owns a lot of chocolate
and candy.
Speaker 1 (19:07):
And just one last question, are you I know, like
in the monopolization cases, there are some differences between the
industries and it seems like they're more aggressive against tech,
but maybe less AGGRESSI against other industries. Are you seeing
anything some like that in the M and A space,
Well not yet.
Speaker 5 (19:25):
I mean I sort of suspect that we will, but
we haven't yet. And I say that because I do
think that there could be some political influence, more so
than in the past, on the outcome of these deals.
I say that because we saw it during Trump's first
term where it seemed that it deals he took a
particular interest in that he wanted to get cleared. He
pushed his regulators to clear them, and the deals that
(19:46):
he wanted to have blocked, he pushed the officials to
try to block them. And so I think if you
have companies that he are his favorites or donated a
lot of money or something, and he wants their deal cleared,
you'll push for that. And if we see companies that
are engaging in M and A that are not his
favored industries or companies, then maybe he'll push them to
(20:10):
block it.
Speaker 4 (20:10):
We'll have to see what happens there.
Speaker 1 (20:12):
That makes sense. I mean, it doesn't really make sense,
but yeah, but I think that's probably a fair assessment.
All right, Cool, So you're just again for listeners, look
out for a deep dive report that Jenre and Justin Taresi,
who we're going to talk to in a second, are
putting out on all this, on all things anti trust
(20:33):
under the Trump administration. But if you are a terminal subscriber,
there's already a version on the terminal that you can read,
and if you can't find it, just reach out to
any of us. All right, thanks, Jen, Justin, let's bring
you in. We're going to stick with anti trust, but
switch industries, switch sectors, to pharma. Here, you're following a
(20:54):
case by CBS and signa express Scripts challenging in Arkansas
law that would ban operators of PBMs pharmacy benefit managers
from holding pharmacy licenses. Hopefully I got that all right,
but you'll correct me if I'm wrong. Come in, tell
us what this case is about in why it matters?
Speaker 6 (21:14):
Yeah, you bet, thanks Elliott.
Speaker 7 (21:16):
And you know so easy to follow a discussion of
snack foods with a discussion of pharmacy benefit managers.
Speaker 6 (21:21):
So try to bear with me, folks.
Speaker 7 (21:23):
But in a nutshell, what's happened here is just in
April of this year, Sarah Huckapee Sanders, a governor of Arkansas,
signed into law the first of its kind, first of
its kind bill across the nation.
Speaker 6 (21:35):
And what it would do, basically.
Speaker 7 (21:37):
Is prevent any company with a direct or indirect interest
in a pharmacy benefit manager from being issued a pharmacy
license in the state of Arkansas.
Speaker 6 (21:45):
Well what does that mean?
Speaker 7 (21:46):
So we're talking about folks like CVS, who operates those
brick and mortar retail locations that most of us are
familiar with. They also operate mail order pharmacies sick as
express Scripts operates a mail order pharmacy, many of which
do business with the federal government through other trycare or
other kinds of employee benefit programs. There and then there's
also United Health often which operates a mail order service
(22:07):
as well, so making these companies also operate large PBMs.
They are the largest three PBM operators in the United
States today, having over eighty six percent of the actual
market share in that space from what I believe combined.
So what this does though, is it basically if it
polled licenses from pharmacy licenses from folks who operate a PBM,
(22:28):
what that would mean was that would be the closure
of CVS physical retail locations within the state of Arkansas,
and also would apply to mail order services coming into
the state as well, so these PBMs would be these
companies would be prevented from operating any pharmacy services within
the state. The argument behind the law is that, look,
what this is really doing is these companies who operate
(22:49):
the PBMs are funneling or steering business into their own
pharmacies and away from local independent pharmacies, cutting off their
ability to survive. No surprise here, the law assigned in
April it's it's set to take effect in January, but
there are significant lawsuits with a significant number of issues
that have been filed to halt implementation of that law.
(23:11):
A bunch of different grounds here, one being a dormant
commerce clause, one being their Privileges and Immunities clause. Like
all all this really scintilating constitutional law. But I think
at the end of the day, what's most applicable here
probably is this really evolving case law right now around
federal preemption for ARISA plans, for Medicare plans, and for
Tricare the Militaries Pharmacy plan for service members and former
(23:34):
service members. So why is that important or why is
that what's really relevant here? The statutes are really broad
with their federal preemption powers, and basically, whenever anything starts
to touch the design of plans that operate under Medicare
or Tricare, then it's preempted under federal law. Here, the
question is does this actually touch that issue of plan design, right?
Speaker 6 (23:57):
And I think probably it does.
Speaker 7 (23:59):
But there's really avolving precedent here too, And really what
it would do is it would restrict who these folks
could contract with and providing their services under the plants.
I think that probably crosses the threshold throw the necessary
threshold for it to become an interference with the plan
of the design of the planet itself. Other arguments though, too,
and one other wrinkle to point out here. You know,
(24:19):
I don't think the legislature in Arkansas necessarily did itself
any favors with some of the history that I've read
in coming about to pass the bill. But they did
include an exception for pharmacy employers who operate at PPM
only for the benefit of their own employees. I know
that's a mouthful, but you know they're exempted from this law.
And what that does basically is it exempts Walmart, the
(24:41):
largest corporation in Arkansas that also operates pharmacies, from coverage
under the statute. So they'd still be able to operate
their pharmacies from a retail perspective even though they operate
at PBM, but only for their employees. It is, it is,
and you can imagine that that's what folks are screaming
about and all of the complaints that have been filed
(25:01):
against the law. However, there's a couple of wrinkles here though,
and I don't think that's necessarily the issue that's going
to carry water the way folks think it's going to.
It's not just Walmart that would be exempted. There is
a grocery store called Harps, for example, which would also
be exempted.
Speaker 6 (25:15):
Under the law.
Speaker 7 (25:17):
And also, you know, there are all of these other
mail order pharmacies who have business coming from out of
state who don't operate a PBM, and the statute does
nothing on its face to stop them from joining business
in Arkansas. So you've got folks like Amazon Pharmacy, even
does a substantial amount of business in all fifty states now,
don't operate a PBM, so they would likely.
Speaker 6 (25:36):
Be exempted as well. And you've got Walgreens right who.
Speaker 7 (25:39):
Operates, so it's physical retail locations too, but they don't
own a PBM. So I think again that those physical
locations are fine. The whole argument that is just to
protect in state interest really has a hard time carrying
water when you have facts I like that standing in
the face of the law.
Speaker 1 (25:54):
That's interesting on the federal preem SERSU has the federal
government weighed in on that at all.
Speaker 7 (26:00):
Not in this case, but they have went in another
case right now that that's been filed with the Supreme
Court for Sircherai right, and it's been conference now. I
think we're tended to its third conference today June twenty sixth,
after the federal government filed position in that case. And
what happened there is the Tenth Circuit struck down an
(26:20):
Oklahoma law that kind of dealt with certain aspects of
how a PBM does business, basically requiring PBMs to open up,
you know, their their plans to any willing pharmacies or
pharmacies they might not want to include as part of
their preferred their preferred networks. That the Tenth Circuit struck
down that law in Oklahoma as saying that that actually
(26:40):
was a preemption issue in terms of ARISA and medicare.
There seems to be some disagreement with us obviously, some
interest in the court here to hear the case. They've
conferenced it so many times. The federal government says, no,
that's actually should not have been upheld. You know, it's
fine to toss it away because it does have this
preemption issue going on. But those issues there are part
and part of what the we're seeing in this case
(27:01):
in Arkansas.
Speaker 6 (27:01):
I think so if.
Speaker 7 (27:02):
The Supreme Court does take the case, everything, that really
could have a huge impact on the direction of the
litigation there in Arkansas.
Speaker 1 (27:08):
Oh interesting, So is that what you're looking for next
or is there some other catalysts you're watching in the
Arkansas case?
Speaker 7 (27:13):
So I think that's the biggest one, you know, and
we might know by Monday even whether or not the
Supreme Court will plan to take that case, you know,
in the coming term, So that that's one catalyst, you know.
Speaker 6 (27:24):
I think, you know.
Speaker 7 (27:26):
It's likely that we're going to see a preliminitary injunction
at least issued with regard to the Arkansas Statute. I
think there's just too much on the table, and there
is you know, may perhaps not a high likelihood that
these companies would win, but a likelihood for sure. Right,
So I think that all being what it is, we're
likely to see a preliminary injunction issue before the law
can go into effect, probably sometime this fall, you know,
(27:47):
but we've got years ahead here, I think for how
this ultimately plays out. This certainly is not an issue
that's going to be designed at the district court level
and finality, and.
Speaker 1 (27:55):
Just one last question, are do you expect other states
to pass similar laws.
Speaker 7 (28:00):
I do, and I think, you know, obviously what happens
in Arkansas is going to be influential. What happens at
the Supreme Court, whether or not they take this case,
the Mulready case, is going to be influential. But just
just last month or this month actually in Louisiana, at
the close of their legislative session, there was a huge
push to pass a similar bill in Louisiana. Donald Trump
Junior gun involved on Twitter and advocated for the passage
(28:22):
of that legislation. CVS CBS Health is actually now accused
of texting its customers within the state to encourage their
state legislators to vote no on the bill. And you know,
whether or not that actually happened, that's that is up
for debate. But Louisiana Attorney General has actually filed suit
against CVS for a violation of privacy, privacy laws and
(28:43):
all these other things. Now, you know, I was saying, hey,
you can't do that, that's not the reason you collected
those phone numbers for.
Speaker 6 (28:49):
So there's a lot rolling out, you know, I.
Speaker 7 (28:51):
Think Louisiana, there there's talk of a special session even
to pass legislation that would do the same there.
Speaker 6 (28:56):
I think likely it spreads. It's a hot button issue.
Speaker 7 (28:58):
Everybody seems to want to do something about PBMs, but
the one actor who probably should and has the power
to Congress, has yet to do so.
Speaker 1 (29:05):
Shocking. All right, good stuff, thanks justin. All right, let's
bring in Matt Sentenhelm. We're gonna pivot back to TMT.
I guess in some ways, so Matt. Last week, the
Senate confirmed President Trump's Republican nominee to the FCC, Olivia Trustee.
Great last name. I know you've been tracking the potential
(29:26):
for major changes to broadcast regulation. You know, just give
us the brief overview of where things stand now.
Speaker 3 (29:34):
Yeah, that's right, Elliott.
Speaker 8 (29:35):
The Senate confirmed trustee on June eighteenth, and as a
result of that move, Republicans now have an advantage. There's
a two to one advantage at the FCC. Brendan Carr
and Olivia Trustee are the two Republicans. There's one Democrat,
Ana Gomez. So that frees up Republicans to move ahead
(29:56):
with some of the more aggressive moves that they couldn't
do when the f CC was evenly split. The FCC
requires three members to have a quorum, so they have three,
and so pretty much they're good to go now. And
so one of the most significant issues to watch, I
think for investors in the space are people that watch
(30:17):
TV and radio broadcast companies. The FCC's had media ownership
limit dating from the nineteen seventies that limit how many
stations these companies can own. They're very different from the
environment faced by new media companies like internet platforms or
streaming platforms. They offer very similar services, they don't face
(30:41):
any of this regulation, and so Republicans have been calling
for years for an easing or an elimination of those
rules for the traditional broadcasters. I think it may now
get done in a significant way. And so the same
day the Senate confirmed Olivia Trusty, the FCC put out
a public notice on this issue for TV broadcasters and
(31:04):
it said, we'd like to refresh our record on this
rule making about the rule that limits how many TV
stations a company can own right now, the rule says
you can only reach thirty nine percent of US households,
subject to a discount and a little tinkering around the edges,
but it's a significant limit on how many stations one
(31:25):
company how many households one company can reach, how many
stations they can own effectively. NAB National Association of Broadcasters
has asked the FCC scrap.
Speaker 3 (31:36):
That rule, get rid of it, no limit.
Speaker 8 (31:39):
And so what that means for companies like Nextstar, Sinclair
Tegna is that while they're limited now to only reaching
a small fraction of US households, after this change is adopted,
they could reach every US household In theory, it's a
huge change, enormous economies of scale, opportunities to buy up
(32:01):
stations across the country if this goes ahead. And as
I said, two to one, now Republicans are in the
driver's seat and they can move ahead with this sort
of sort of change.
Speaker 1 (32:12):
And that give us a sense of the time. And
I mean, how quickly you know is this going to happen?
I assume they have to go through the normal rule
making notice time.
Speaker 8 (32:20):
Yeah, So in twenty seventeen they put out a notice
of proposed rulemaking and never closed it. So they kind
of took that initial step already. What they put out
last week is a call for a refresh of the
record on that old notice of proposed rulemaking. And so
the timing there when you sketch out how long those
comments will be filed, it takes you to about mid August.
(32:42):
We're waiting for publication in the Federal Register, so a
little little movement around the edges, but basically mid August
they'll be done with the record. Then it's just a
question of how quickly car wants to call it for
a commission vote. Typically you'd wait a couple of months well,
you know, while you put together a final decision. He
could move faster or slower on this, but I i'd
(33:03):
ballpark October as a good good time to you.
Speaker 3 (33:07):
Know, a reasonable target for this.
Speaker 8 (33:09):
The FCC often acts that it's monthly meetings on these things,
So October twenty eighth is the one to circle. And
if that's correct, you want to really want to watch
three weeks before it is when he'll release the agenda.
So October seventh is what I'll be circling on my
calendar as the date where you could see, you know,
a major driver for companies like like Next Star, Sinclair Tegna.
Speaker 1 (33:32):
That's pretty quick.
Speaker 8 (33:33):
Yeah, that would be fast and so and and it's
off in a good bet with the FCC that things
take longer than you think so I might might be
regretting that, but that's but I do think car wants
to move quickly on this stuff. He seems to be
aggressive on this front, so it seems reasonable. But the
(33:55):
whole fourth quarter is a possibility. There there are monthly
meetings in November and December. It's also hosip he tries
to do this outside of a monthly meeting that usually
still takes thirty to forty days.
Speaker 3 (34:05):
So fourth quarter is likely, I.
Speaker 8 (34:09):
Think to see action, then you're gonna have litigation over
it going into next step.
Speaker 1 (34:13):
That was going to be my nice question. Do you
expect anyone to see Yeah?
Speaker 3 (34:16):
Absolutely.
Speaker 8 (34:16):
There's a big question about whether only Congress can change
that thirty nine percent limit or whether the FCC can
do it. And that's really what stemy the FCC in
twenty eighteen. The Republicans couldn't agree on this, and so
there's there's inevitably going to be a big fight over that.
(34:38):
I think the FCC can win it and say that
the FCC has the power to change the rule itself,
but it might who who would see So you're likely
to see opposition from public interest groups on this who
defend these rules. You're likely to see opposition from the
companies that sit across the table from broadcasters in negotiations
(35:00):
about carriage of their station. So cable companies have to
pay the broadcasters for distribution rights. And if the broadcasters
are suddenly much bigger players, they have much more leverage
over the distributors, and so the cable companies, you know,
resist these changes in the rules as much as they can.
(35:23):
So there's definitely going to be oppositioned from from different angles,
and they're likely to file lawsuits.
Speaker 1 (35:31):
Well, that'll be fun for you to cover after the
rulemaking process gets completed. It's always fun to cover the litigation.
All right, Matt, good stuff.
Speaker 3 (35:40):
Thank you.
Speaker 1 (35:41):
All right, I think we're gonna leave it there. We'll
wrap up this episode of Votes and Verdicts. As always,
thank you for listening, and also, as always, if you
have any questions about anything that we discussed on this episode,
please do not hesitate to reach out to any of
us at you're convenience with questions. As a reminder, you
can find all of our research on the Bloomberg terminal
at big or on our litigation and policy dashboard at
(36:04):
BI laws Go. Thank you again for listening. And have
a great day.
Hello and welcome to the Votes and Verdicts podcast, hosted
by the Litigation and policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we have
(00:36):
outlooks on more than ninety industries and one hundred market industries,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today's our weekly check in
on the litigation and policy catalysts that we're watching, or
at least some of them, and that we think will
impact companies across a number of different sectors. My name
(00:56):
is Elliott Stein. I'm an analyst with the Bloomberg Intelligence
covering litigation in the financials sector. I'm delighted today as always,
to be joined by a handful of my colleagues who
cover litigation and policy for BI. As always, you can
find all of our research on the Bloomberg terminal at
big and more specifically, you can find our litigation and
policy research on the Bloomberg terminal at BI laws go.
(01:22):
Today is June twenty sixth, twenty twenty five. It's about
nine am here in New York. And with that, let's
get started. I want to bring in my colleague Tamlin Basin,
who covers techp issues that are being litigated or in
(01:42):
some sort of policy development. So, Tamlin, you have been
covering a bunch of cases related to AI, artificial intelligence
and potential copyright infringement. Super interesting issue. Just this week,
in fact, I think just yesterday we got a really
big decision involving META. A couple of days before that
(02:02):
we got another sort of groundbreaking decision. I think, why
don't you come in sort of give us, you know,
the layer of the lay and what the overall context
is here and what these decisions mean.
Speaker 2 (02:13):
Yeah, sure, thank you, Ellia, And you're right. So in
the US alone, there's over forty lawsuits and these are
lawsuits that are being litigated by copyright owners content owners.
So this is print media, authors, books, films, music recordings,
and they've sued developers of large language models. Now this
includes both some of those pure play large language model
(02:35):
firms like open AI, Anthropic Perplexity Stability AI as well
as some of the larger tech firms that have also
tried their hand in developing large language models. So Meta, Google,
Microsoft have all been sued. Now, No, I have been
covering this for a while, and just a few weeks
ago we put out a deep dive report that really
examines in more detail all of these issues that are
(02:58):
at play. As you mentioned this week, there was sort
of an acceleration moving this legal forward. And so first
what we had was Anthropic. This was a case that
was brought by a group of authors claiming that by
training Anthropics large language model claud on these publications, that
that was copyright infringement. Now, there was a summary judgment
(03:21):
hearing that was held in the spring, and on I
believe it was Monday night, the judge in that case
came out and found in favor of Anthropic.
Speaker 3 (03:31):
On fair use.
Speaker 2 (03:31):
Now, I think it's important to note that there are
four fair use factors. Really, what courts are looking at
are sort of factors, one which is looking at whether
this was a transformative use. In factor four, which is
whether or not the way that the defendant used the
content impacted the market for the original. So the judge
in that case found in anthropics favor on both of
(03:54):
those issues, but really focusing more on the transformative use side,
saying this was highly transformative and sort of waved away
the market harm issue. Then we had last night in
the Meta case, and this was also a case it
was brought by another group of authors challenging Meta's development
of its own large language model Lama now Here. Although
the court did again find in favor of Meta, he
(04:16):
focused really a lot of attention on this potential market
harm aspect, on the fourth factor, and he made it
very clear that this was a ruling in metas favor,
not necessarily because the overall law the landscape for use
it self dictates that, like he said, the evidentiary record
before him was not showing any impacts of mark harm. However,
(04:37):
he sort of went to grow the great lengths to
say that this might be an outlier overall in terms
of these AI copyright cases, and if there had been
a better record of market harm that this would go differently.
So I think the broad takeaway is that this is
a positive development for AI firms, at least in terms
of whether inputs used to train large language models were infringing. However,
(04:58):
I don't think it was quite a resounding victory that
those firms would have been looking.
Speaker 1 (05:02):
For somewhat of a victory for this, and that it
sounds like the judge in the medic case sort of
gave a like a playbook for future plaintiffs to potentially prevail.
Speaker 2 (05:14):
Yeah, he really did, and it was quite interesting to
see him do that. He really took quite a bit
of issue with sort of the lack of evidence on
this in this case about potential market harm, and I
think what he was really concerned about was whether or
not the proliferation of AI generator materials could down the
line be rode demand for those original content works. And
(05:38):
he sort of explicitly said that maybe you're not going
to see that in something like fiction works, where people
might not be turning to a fiction book that was
written by AI firm. However, he's had in other instances
something like news paper reporting also sort of photographic imagery,
where there might be a much stronger case for market harm.
(05:58):
So I think we'll get the There are other cases
that do alleged things closer along those lines, and I
think if this judge's reasoning has followed, then those firms
might have a much more difficult time getting somewhere in
judgement on fair use, especially with respect to market impact.
Speaker 1 (06:14):
Yeah, and in this case against Meta, is that is
that the case for Sarah Silverman's one of the planiffs.
Speaker 2 (06:19):
She is, well, she's one of the planeffs. In an interview,
they've also sued I believe Google. Certainly they've sued open Ai.
So yes, a lot of authors sort of had joined
together on this and teamed up to follows a lot
of the lms.
Speaker 1 (06:35):
And do you think the planeffs in the case against
Mata are they gonna have another shot to bolster their record,
to maybe show some of the facts that the judge
said they needed to show.
Speaker 3 (06:45):
I'm not sure if on this they are.
Speaker 2 (06:47):
However, the case isn't actually over because specifically summary judgment
was only on the reproduction of their works. That is,
when when the Large Language Model reproduced the works to train.
There's actually another issue where Meta sort of admittedly turned
to BitTorrent to get a lot of these books, and
is sue there was whether they subjected those books that
(07:07):
they downloaded to BitTorrent.
Speaker 3 (07:09):
In doing that process, you can subject those works to
other people who might be engaging in BitTorrent.
Speaker 2 (07:15):
So I think there's still going to be a potential
distribution claim, and he's going to hold a hearing later
in the summer.
Speaker 3 (07:22):
I believe, to decide what to do with that. I
think it's relatively likely that he.
Speaker 2 (07:26):
May allow this to be appealed as it is, and
I also think there's a potential that we might have
a quick appeal of that anthropic case. Both of they're
more in different courts, but both we'll go up to
the Ninth Circuit.
Speaker 1 (07:37):
Right yeah, they're both in the Northern District of California,
right yeah, yeah, yeah, And just give us a flavor,
I mean, and I know you sort of quantified this
in your research decks. Give us a flavor of how
much does at stake here?
Speaker 2 (07:50):
I mean, truthfully, it's potentially trillions of dollars and the
reason for that sort of eye popping number that we're
highly unlikely to see, but just because statutory images under
the US Copyright Act can be up to one hundred
and fifty thousand dollars per copyrighted work, and in the
sort of anthropic case alone, we know that they also
turned a bit torrent, and the allegation was that they
(08:11):
downloaded as many as seven million books to that BitTorrent,
So if you add statute or damages across all of that,
you could get really eye popping numbers. These are sort
of just related to inputs, and again, I think both
of these cases found fair use on inputs. I think
it's going to be a much more challenging issue when
(08:31):
you're looking at outputs. This is when a generative AI
producer's output that more closely mimics what it trained on.
I think that might be not only a reproduction, but
a potential distribution.
Speaker 3 (08:42):
And we have later cases that are going to test that.
Speaker 2 (08:45):
I think both of if you read both of these decisions,
they make it clear that if outputs were alleged in
these cases and they weren't, that it would have been
a much different outcome on fair use. So I think
we're going to be paying a lot more attention to how.
Speaker 3 (08:56):
That's going to develop.
Speaker 2 (08:57):
One of the major cases that's going to be testing
that is the New York Times first Open AI and
Microsoft case. It's being litigated in New York, but that's
gonna be quite a bit more delayed in terms of this,
just because you have so many different more parties are
litigating that one.
Speaker 1 (09:11):
Such an interesting issue and sounds like it's going to
play out for a while. I guess just given how
many different cases there are, and you mentioned your deep
dive earlier, I just want to plug that again for
our listeners. This is Talent's really put out a comprehensive,
very comprehensive report covering all these issues that he's talking about.
(09:31):
You can get a hard copy version, just reach out
to us if you're interested, and then if you're a
terminal subscriber, there's a report as well on the terminal.
All right, Talent, thank you so much. Speaking of deep dives,
let's turn to Jen ree are one of our anti
trust gurus here, because Jen is also working on a
(09:52):
deep dive related to antitrust enforcement under the Trump administration
and what that looks like. So Jen, why don't you
you come in and maybe give us a sense of
you know, what you are writing in your report about
what we know so far in terms of anti trust
enforcement under President Trump.
Speaker 4 (10:15):
Yeah, thanks, Elliott.
Speaker 5 (10:16):
I mean this has really been the subject of a
lot of speculation because, you know, stepping back, you know,
antitrust for many many years was really predictable I mean really,
particularly with respect to how mergers and acquisitions that need
to be filed with the government in reviewed, the way
they would be treated. It's kind of been the same
and the same changes since nineteen seventies, since the nineteen seventies,
(10:39):
and you know, we would expect when a new administration
would come in there would be slight changes a matter
of degree. The Republicans tended to be a little bit
more business friendly in certain ways to deal treatment, and
the Democrats tended to be just slightly tougher, but again
a matter of degree. Everybody kind of knew what the
play of the land was and how things were going
to go, and that all change changed. And that's why
(11:01):
we've been watching so carefully what's going to happen with
Trump's because it all changed when Biden was elected president
and he put in place enforcers that were really on
a mission. They wanted to revitalize antitrust enforcement. They really
thought big was bad, they didn't like deals in combinations,
and they wanted to do whatever they could to slow consolidation.
And I think that after Trump was elected in the
(11:23):
fourth quarter of twenty twenty four, there was kind of
a reaction of glee for you know, those interested in
deal making because of this expectation, well, everything was going
to go back to the way that it was before Biden,
and now we're going to get predictability again, and these
deals are going to go through. And honestly, you know,
we took the position here that that's probably not the case,
(11:43):
that it's still going to be sort of heightened. There's
still going to be this heightened level of aggression. And
we saw that President Trump appointed people who are professed
economic populists, right, so they are a little bit different
than some of the Republicans of old that have run
the Trade Commission and Department of Justice, and so we've
been watching carefully to see what they're going to do
(12:04):
with deal making. And now we've got a few months
of track record, right, so we're watching to see what
they're going to do. It's been very unclear based on
their speeches and what they've said, Hey, we're going to
continue to be aggressive. But I am beginning to see
some of the pathways opening up to deals getting done,
and I think that's going to be you know, all
of those companies out there looking have a lot of money,
(12:25):
looking to do a combination are going to be very
happy about it. And what that is is a renewed
acceptance of remedies to resolve otherwise problematic deals. So when
I'm talking about remedies, when merging companies come together, let's
say they have one product line, they each have the
same product line, they compete, they're going to bring those
product lines together in a concentrated market. So even for
that one product line, and let's say they have thirty
(12:47):
product lines, you're going to have a problematic anti trust issue.
So what with a remedy. You can sell off that
one product line, remove that overlap, and then get the
bigger underlying deal closed, get rid of the bad part,
hold on to what's good about the deal, and let
it go forward. And likewise, if they don't compete, but
they're vertically related and the merger would result in vertical integration.
(13:08):
And if the deal raises a concern that companies that
come together like that could foreclose their rivals because they
secure a needed input for their rivals, so long as
they made a commitment that they'd make that input available
on a non discriminatory, fair and reasonable basis, they could
usually get the deals closed. So the vast majority of
deals that raised antitrust problems for many, many many years
(13:29):
closed during the Biden administration, though instead the vast majority
either got student court or were abandoned or this is
what they really wanted. Deals didn't get signed to begin
with because the companies realized this is going to be
a tough road. We don't have the time, we can't
do it. Deals can't really last the long road of
litigation in most cases. So we had this huge spike
(13:49):
and abandoned deals. But what we've seen now is that
President Trump's FDC and DJ have cleared with remedies for
deals in the last two months. That is more than
occurred under the Biden administration in his last two years.
Speaker 4 (14:03):
And for three of those deals there were divestitures.
Speaker 5 (14:07):
That was Synopsis Ansis Key Sites Byront and Saffron, which
acquired some assets from RTX formerly Raytheon.
Speaker 1 (14:13):
After litigation has already been commenced. This is in lieu
of litigation.
Speaker 4 (14:18):
So it's in lieu of litigation.
Speaker 5 (14:20):
I think sometimes there's confusion, to be honest, because a
complaint has to be filed in order for it to
be settled.
Speaker 4 (14:25):
There's a settlement.
Speaker 5 (14:27):
So what happens is the agencies file a complaint, but
simultaneously with that complaint, they file a settlement what's called
a consent agreement, which shows what the companies agreed to
do that allowed them to settle this complaint. It's interesting
that you say that because the ones that were settled
under Biden actually went into litigation. They've got sued, they
started the litigation, they might have even gotten into trial.
(14:48):
I think the FDC or DJ whoever it was that
was responsible was reading the tea leaps seeing they probably
weren't going to win, and ended up settling mid litigation.
But these are pre litigation settlements simultaneous is with the complaint.
And the interesting thing too, is that there was one
other deal that was cleared with the behavioral commitment. That
was Omnicom, Interpublic, two huge ad agencies, which was a
(15:11):
particular interesting circumstance because these enforcers have said that they
don't like behavioral commitments, but they went ahead and accepted
that one. So we're getting to it's a pretty significant rollback,
in my mind, slightly back to that more conventional approach,
because it does allow a way for deals that might
raise some minor problems or problems with pieces of their
(15:32):
business to actually have a way to convince the agencies
to let them get the deal closed. And I think
that there are many factors in the economy that caused
deal making to pause, such as inflation and tariffs and
interest rates and things like that, but antitrust has also
been a contributor, and I think that's going to sort
of fall to the wayside Aside from that, you know,
(15:53):
we're still reading the tea leaves with respect to how
aggressive they're going to be, And we have a bunch
of pretty interesting deals that are pending, like Google Whiz,
which will be a really good one to watch because
these agencies have said we're going to be really tough
on big tech platforms. But I really don't think the
facts in that case support any theory of harm that
would hold up in court. So we'll have to see
(16:14):
what happens there.
Speaker 1 (16:15):
Remind us what Whiz is.
Speaker 5 (16:17):
So Whiz is cloud security, cybersecurity and the cloud. So
you have a Google which has a cloud, have cloud business,
and then you have their buying cybersecurity for that cloud,
and Whiz right now is free to be used by
any cloud company, any.
Speaker 4 (16:33):
Company that has a cloud business.
Speaker 5 (16:34):
But then they will be again, it's, as I said,
Google is going to be taking on the ownership of
an input needed by some of its competitors, and so
there's always that possibility of foreclosure. But the reason I
say there's not really a good theory here is because
usually that kind of harm can only occur when the
company has market power in one or in both of
the markets that we're talking about. And Google is third
(16:56):
buy and has a less than twenty percent share in
the cloud market, and wiz has a lot of big
competitors in cybersecurity, and so when there are a lot
of other options out there in the market, they usually
don't have the ability to do something that would harm
the market.
Speaker 1 (17:09):
Interesting at Google's thurn, who are the top two?
Speaker 4 (17:11):
Amazon and Microsoft?
Speaker 6 (17:14):
Yeah, yeah, that makes sense.
Speaker 1 (17:16):
And okay, what other interesting deals are you watching?
Speaker 6 (17:19):
Right?
Speaker 5 (17:19):
So you mentioned well the other the other deals really
interesting Dick's foot locker.
Speaker 6 (17:23):
Which is you know, Weekend.
Speaker 5 (17:25):
Yeah, everybody knows those companies, So not for myself, that's
going to be an interesting one. I do think they're
probably going to have to divest some stores, but as
I said, under Biden, that wouldn't have been an option
for them. But under Trumpet looks like that will be
an option. So, you know, this is one of those
things where if this deal had been struck during the
Biden administration, I would have said, I don't think it
can get closed without litigation. But today I'm saying I
(17:48):
do think it can get closed if they're willing to
invest the stores that need to be sold.
Speaker 4 (17:52):
Charter Cox cable companies. That's another big one.
Speaker 5 (17:55):
It's going to be interesting to see if the agencies
acknowledge the way the industry changed with respect to how
people view view content, video content and the way they
can access it. You know, we have five G now,
which we didn't have in the past when broadband companies
came together. We have Getty Images, shutter Stock they supply
stock photographs, but they're the two really Biggies and Disney Fubo.
Speaker 4 (18:19):
Which is really interesting.
Speaker 5 (18:20):
So, and we had mars Kelenova, which I've been writing
about in the FTC cleared that last night. Oh really yeah,
chocolate company buying prinkles.
Speaker 4 (18:32):
I know.
Speaker 5 (18:33):
The European Union actually just opened up an in depth
investigation for that one. The Commission is concerned about something
called portfolio effects, which we do not think is a
viable theory here in the US. But they're worried that
the company is going to have too many must have
products and it will give them leverage because they'll have
that big bundle and they can engage in like full
line forcing for the supermarkets that buy the products. But
(18:55):
it's interesting to me that they think that, you know,
Pringles is a must have product or grain bars or
kind bars, which are the products that these companies own.
Obviously Mars, we all know owns a lot of chocolate
and candy.
Speaker 1 (19:07):
And just one last question, are you I know, like
in the monopolization cases, there are some differences between the
industries and it seems like they're more aggressive against tech,
but maybe less AGGRESSI against other industries. Are you seeing
anything some like that in the M and A space,
Well not yet.
Speaker 5 (19:25):
I mean I sort of suspect that we will, but
we haven't yet. And I say that because I do
think that there could be some political influence, more so
than in the past, on the outcome of these deals.
I say that because we saw it during Trump's first
term where it seemed that it deals he took a
particular interest in that he wanted to get cleared. He
pushed his regulators to clear them, and the deals that
(19:46):
he wanted to have blocked, he pushed the officials to
try to block them. And so I think if you
have companies that he are his favorites or donated a
lot of money or something, and he wants their deal cleared,
you'll push for that. And if we see companies that
are engaging in M and A that are not his
favored industries or companies, then maybe he'll push them to
(20:10):
block it.
Speaker 4 (20:10):
We'll have to see what happens there.
Speaker 1 (20:12):
That makes sense. I mean, it doesn't really make sense,
but yeah, but I think that's probably a fair assessment.
All right, Cool, So you're just again for listeners, look
out for a deep dive report that Jenre and Justin Taresi,
who we're going to talk to in a second, are
putting out on all this, on all things anti trust
(20:33):
under the Trump administration. But if you are a terminal subscriber,
there's already a version on the terminal that you can read,
and if you can't find it, just reach out to
any of us. All right, thanks, Jen, Justin, let's bring
you in. We're going to stick with anti trust, but
switch industries, switch sectors, to pharma. Here, you're following a
(20:54):
case by CBS and signa express Scripts challenging in Arkansas
law that would ban operators of PBMs pharmacy benefit managers
from holding pharmacy licenses. Hopefully I got that all right,
but you'll correct me if I'm wrong. Come in, tell
us what this case is about in why it matters?
Speaker 6 (21:14):
Yeah, you bet, thanks Elliott.
Speaker 7 (21:16):
And you know so easy to follow a discussion of
snack foods with a discussion of pharmacy benefit managers.
Speaker 6 (21:21):
So try to bear with me, folks.
Speaker 7 (21:23):
But in a nutshell, what's happened here is just in
April of this year, Sarah Huckapee Sanders, a governor of Arkansas,
signed into law the first of its kind, first of
its kind bill across the nation.
Speaker 6 (21:35):
And what it would do, basically.
Speaker 7 (21:37):
Is prevent any company with a direct or indirect interest
in a pharmacy benefit manager from being issued a pharmacy
license in the state of Arkansas.
Speaker 6 (21:45):
Well what does that mean?
Speaker 7 (21:46):
So we're talking about folks like CVS, who operates those
brick and mortar retail locations that most of us are
familiar with. They also operate mail order pharmacies sick as
express Scripts operates a mail order pharmacy, many of which
do business with the federal government through other trycare or
other kinds of employee benefit programs. There and then there's
also United Health often which operates a mail order service
(22:07):
as well, so making these companies also operate large PBMs.
They are the largest three PBM operators in the United
States today, having over eighty six percent of the actual
market share in that space from what I believe combined.
So what this does though, is it basically if it
polled licenses from pharmacy licenses from folks who operate a PBM,
(22:28):
what that would mean was that would be the closure
of CVS physical retail locations within the state of Arkansas,
and also would apply to mail order services coming into
the state as well, so these PBMs would be these
companies would be prevented from operating any pharmacy services within
the state. The argument behind the law is that, look,
what this is really doing is these companies who operate
(22:49):
the PBMs are funneling or steering business into their own
pharmacies and away from local independent pharmacies, cutting off their
ability to survive. No surprise here, the law assigned in
April it's it's set to take effect in January, but
there are significant lawsuits with a significant number of issues
that have been filed to halt implementation of that law.
(23:11):
A bunch of different grounds here, one being a dormant
commerce clause, one being their Privileges and Immunities clause. Like
all all this really scintilating constitutional law. But I think
at the end of the day, what's most applicable here
probably is this really evolving case law right now around
federal preemption for ARISA plans, for Medicare plans, and for
Tricare the Militaries Pharmacy plan for service members and former
(23:34):
service members. So why is that important or why is
that what's really relevant here? The statutes are really broad
with their federal preemption powers, and basically, whenever anything starts
to touch the design of plans that operate under Medicare
or Tricare, then it's preempted under federal law. Here, the
question is does this actually touch that issue of plan design, right?
Speaker 6 (23:57):
And I think probably it does.
Speaker 7 (23:59):
But there's really avolving precedent here too, And really what
it would do is it would restrict who these folks
could contract with and providing their services under the plants.
I think that probably crosses the threshold throw the necessary
threshold for it to become an interference with the plan
of the design of the planet itself. Other arguments though, too,
and one other wrinkle to point out here. You know,
(24:19):
I don't think the legislature in Arkansas necessarily did itself
any favors with some of the history that I've read
in coming about to pass the bill. But they did
include an exception for pharmacy employers who operate at PPM
only for the benefit of their own employees. I know
that's a mouthful, but you know they're exempted from this law.
And what that does basically is it exempts Walmart, the
(24:41):
largest corporation in Arkansas that also operates pharmacies, from coverage
under the statute. So they'd still be able to operate
their pharmacies from a retail perspective even though they operate
at PBM, but only for their employees. It is, it is,
and you can imagine that that's what folks are screaming
about and all of the complaints that have been filed
(25:01):
against the law. However, there's a couple of wrinkles here though,
and I don't think that's necessarily the issue that's going
to carry water the way folks think it's going to.
It's not just Walmart that would be exempted. There is
a grocery store called Harps, for example, which would also
be exempted.
Speaker 6 (25:15):
Under the law.
Speaker 7 (25:17):
And also, you know, there are all of these other
mail order pharmacies who have business coming from out of
state who don't operate a PBM, and the statute does
nothing on its face to stop them from joining business
in Arkansas. So you've got folks like Amazon Pharmacy, even
does a substantial amount of business in all fifty states now,
don't operate a PBM, so they would likely.
Speaker 6 (25:36):
Be exempted as well. And you've got Walgreens right who.
Speaker 7 (25:39):
Operates, so it's physical retail locations too, but they don't
own a PBM. So I think again that those physical
locations are fine. The whole argument that is just to
protect in state interest really has a hard time carrying
water when you have facts I like that standing in
the face of the law.
Speaker 1 (25:54):
That's interesting on the federal preem SERSU has the federal
government weighed in on that at all.
Speaker 7 (26:00):
Not in this case, but they have went in another
case right now that that's been filed with the Supreme
Court for Sircherai right, and it's been conference now. I
think we're tended to its third conference today June twenty sixth,
after the federal government filed position in that case. And
what happened there is the Tenth Circuit struck down an
(26:20):
Oklahoma law that kind of dealt with certain aspects of
how a PBM does business, basically requiring PBMs to open up,
you know, their their plans to any willing pharmacies or
pharmacies they might not want to include as part of
their preferred their preferred networks. That the Tenth Circuit struck
down that law in Oklahoma as saying that that actually
(26:40):
was a preemption issue in terms of ARISA and medicare.
There seems to be some disagreement with us obviously, some
interest in the court here to hear the case. They've
conferenced it so many times. The federal government says, no,
that's actually should not have been upheld. You know, it's
fine to toss it away because it does have this
preemption issue going on. But those issues there are part
and part of what the we're seeing in this case
(27:01):
in Arkansas.
Speaker 6 (27:01):
I think so if.
Speaker 7 (27:02):
The Supreme Court does take the case, everything, that really
could have a huge impact on the direction of the
litigation there in Arkansas.
Speaker 1 (27:08):
Oh interesting, So is that what you're looking for next
or is there some other catalysts you're watching in the
Arkansas case?
Speaker 7 (27:13):
So I think that's the biggest one, you know, and
we might know by Monday even whether or not the
Supreme Court will plan to take that case, you know,
in the coming term, So that that's one catalyst, you know.
Speaker 6 (27:24):
I think, you know.
Speaker 7 (27:26):
It's likely that we're going to see a preliminitary injunction
at least issued with regard to the Arkansas Statute. I
think there's just too much on the table, and there
is you know, may perhaps not a high likelihood that
these companies would win, but a likelihood for sure. Right,
So I think that all being what it is, we're
likely to see a preliminary injunction issue before the law
can go into effect, probably sometime this fall, you know,
(27:47):
but we've got years ahead here, I think for how
this ultimately plays out. This certainly is not an issue
that's going to be designed at the district court level
and finality, and.
Speaker 1 (27:55):
Just one last question, are do you expect other states
to pass similar laws.
Speaker 7 (28:00):
I do, and I think, you know, obviously what happens
in Arkansas is going to be influential. What happens at
the Supreme Court, whether or not they take this case,
the Mulready case, is going to be influential. But just
just last month or this month actually in Louisiana, at
the close of their legislative session, there was a huge
push to pass a similar bill in Louisiana. Donald Trump
Junior gun involved on Twitter and advocated for the passage
(28:22):
of that legislation. CVS CBS Health is actually now accused
of texting its customers within the state to encourage their
state legislators to vote no on the bill. And you know,
whether or not that actually happened, that's that is up
for debate. But Louisiana Attorney General has actually filed suit
against CVS for a violation of privacy, privacy laws and
(28:43):
all these other things. Now, you know, I was saying, hey,
you can't do that, that's not the reason you collected
those phone numbers for.
Speaker 6 (28:49):
So there's a lot rolling out, you know, I.
Speaker 7 (28:51):
Think Louisiana, there there's talk of a special session even
to pass legislation that would do the same there.
Speaker 6 (28:56):
I think likely it spreads. It's a hot button issue.
Speaker 7 (28:58):
Everybody seems to want to do something about PBMs, but
the one actor who probably should and has the power
to Congress, has yet to do so.
Speaker 1 (29:05):
Shocking. All right, good stuff, thanks justin. All right, let's
bring in Matt Sentenhelm. We're gonna pivot back to TMT.
I guess in some ways, so Matt. Last week, the
Senate confirmed President Trump's Republican nominee to the FCC, Olivia Trustee.
Great last name. I know you've been tracking the potential
(29:26):
for major changes to broadcast regulation. You know, just give
us the brief overview of where things stand now.
Speaker 3 (29:34):
Yeah, that's right, Elliott.
Speaker 8 (29:35):
The Senate confirmed trustee on June eighteenth, and as a
result of that move, Republicans now have an advantage. There's
a two to one advantage at the FCC. Brendan Carr
and Olivia Trustee are the two Republicans. There's one Democrat,
Ana Gomez. So that frees up Republicans to move ahead
(29:56):
with some of the more aggressive moves that they couldn't
do when the f CC was evenly split. The FCC
requires three members to have a quorum, so they have three,
and so pretty much they're good to go now. And
so one of the most significant issues to watch, I
think for investors in the space are people that watch
(30:17):
TV and radio broadcast companies. The FCC's had media ownership
limit dating from the nineteen seventies that limit how many
stations these companies can own. They're very different from the
environment faced by new media companies like internet platforms or
streaming platforms. They offer very similar services, they don't face
(30:41):
any of this regulation, and so Republicans have been calling
for years for an easing or an elimination of those
rules for the traditional broadcasters. I think it may now
get done in a significant way. And so the same
day the Senate confirmed Olivia Trusty, the FCC put out
a public notice on this issue for TV broadcasters and
(31:04):
it said, we'd like to refresh our record on this
rule making about the rule that limits how many TV
stations a company can own right now, the rule says
you can only reach thirty nine percent of US households,
subject to a discount and a little tinkering around the edges,
but it's a significant limit on how many stations one
(31:25):
company how many households one company can reach, how many
stations they can own effectively. NAB National Association of Broadcasters
has asked the FCC scrap.
Speaker 3 (31:36):
That rule, get rid of it, no limit.
Speaker 8 (31:39):
And so what that means for companies like Nextstar, Sinclair
Tegna is that while they're limited now to only reaching
a small fraction of US households, after this change is adopted,
they could reach every US household In theory, it's a
huge change, enormous economies of scale, opportunities to buy up
(32:01):
stations across the country if this goes ahead. And as
I said, two to one, now Republicans are in the
driver's seat and they can move ahead with this sort
of sort of change.
Speaker 1 (32:12):
And that give us a sense of the time. And
I mean, how quickly you know is this going to happen?
I assume they have to go through the normal rule
making notice time.
Speaker 8 (32:20):
Yeah, So in twenty seventeen they put out a notice
of proposed rulemaking and never closed it. So they kind
of took that initial step already. What they put out
last week is a call for a refresh of the
record on that old notice of proposed rulemaking. And so
the timing there when you sketch out how long those
comments will be filed, it takes you to about mid August.
(32:42):
We're waiting for publication in the Federal Register, so a
little little movement around the edges, but basically mid August
they'll be done with the record. Then it's just a
question of how quickly car wants to call it for
a commission vote. Typically you'd wait a couple of months well,
you know, while you put together a final decision. He
could move faster or slower on this, but I i'd
(33:03):
ballpark October as a good good time to you.
Speaker 3 (33:07):
Know, a reasonable target for this.
Speaker 8 (33:09):
The FCC often acts that it's monthly meetings on these things,
So October twenty eighth is the one to circle. And
if that's correct, you want to really want to watch
three weeks before it is when he'll release the agenda.
So October seventh is what I'll be circling on my
calendar as the date where you could see, you know,
a major driver for companies like like Next Star, Sinclair Tegna.
Speaker 1 (33:32):
That's pretty quick.
Speaker 8 (33:33):
Yeah, that would be fast and so and and it's
off in a good bet with the FCC that things
take longer than you think so I might might be
regretting that, but that's but I do think car wants
to move quickly on this stuff. He seems to be
aggressive on this front, so it seems reasonable. But the
(33:55):
whole fourth quarter is a possibility. There there are monthly
meetings in November and December. It's also hosip he tries
to do this outside of a monthly meeting that usually
still takes thirty to forty days.
Speaker 3 (34:05):
So fourth quarter is likely, I.
Speaker 8 (34:09):
Think to see action, then you're gonna have litigation over
it going into next step.
Speaker 1 (34:13):
That was going to be my nice question. Do you
expect anyone to see Yeah?
Speaker 3 (34:16):
Absolutely.
Speaker 8 (34:16):
There's a big question about whether only Congress can change
that thirty nine percent limit or whether the FCC can
do it. And that's really what stemy the FCC in
twenty eighteen. The Republicans couldn't agree on this, and so
there's there's inevitably going to be a big fight over that.
(34:38):
I think the FCC can win it and say that
the FCC has the power to change the rule itself,
but it might who who would see So you're likely
to see opposition from public interest groups on this who
defend these rules. You're likely to see opposition from the
companies that sit across the table from broadcasters in negotiations
(35:00):
about carriage of their station. So cable companies have to
pay the broadcasters for distribution rights. And if the broadcasters
are suddenly much bigger players, they have much more leverage
over the distributors, and so the cable companies, you know,
resist these changes in the rules as much as they can.
(35:23):
So there's definitely going to be oppositioned from from different angles,
and they're likely to file lawsuits.
Speaker 1 (35:31):
Well, that'll be fun for you to cover after the
rulemaking process gets completed. It's always fun to cover the litigation.
All right, Matt, good stuff.
Speaker 3 (35:40):
Thank you.
Speaker 1 (35:41):
All right, I think we're gonna leave it there. We'll
wrap up this episode of Votes and Verdicts. As always,
thank you for listening, and also, as always, if you
have any questions about anything that we discussed on this episode,
please do not hesitate to reach out to any of
us at you're convenience with questions. As a reminder, you
can find all of our research on the Bloomberg terminal
at big or on our litigation and policy dashboard at
(36:04):
BI laws Go. Thank you again for listening. And have
a great day.
Host
Elliott Stein
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