August 29, 2025 • 31 mins
In this week’s Votes and Verdicts podcast, Bloomberg Intelligence litigation and policy team looks at some of the key catalysts coming up after Labor Day. Nathan Dean discusses the path to de-regulation in the financials sector, the possibility of a government shutdown in September, and the future of SNAP benefits in the Farm Bill. Elliott Stein discusses Federal Reserve governor Lisa Cook’s lawsuit challenging her termination, litigation concerning sports-event contracts offered by Kalshi and Robinhood, and a class action trial against BNP Paribas concerning genocide in Sudan. Matt Schettenhelm analyzes the future of the TikTok ban, and he and Jen Rie discuss FCC and DOJ review of Nexstar’s proposed purchase of Tegna. We close with Jen’s discussion of the weakness of Elon Musk’s lawsuit against Apple and OpenAI.
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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
(00:37):
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. My name's Elliott Stein. I'm an
analyst with Bloomberg Intelligence covering litigation in the financial sector,
and I'm delighted today as always to be joined by
several of my BI colleagues. And since we're approaching Labor
(00:59):
Day weekend here in the US and the end of summer, sadly,
we thought for today's episode it would be a good
idea to look at some of the major policy and
litigation matters that our team is covering and tracking closely
and that will have important catalysts between now and the
end of the year. As a reminder, you can find
(01:20):
all of our research on the Bloomberg terminal at BI go,
and more specifically, you can find our litigation and policy
coverage on our dashboard at BI laws Go. Just to
time stamp this. It is Thursday, August twenty eighth, twenty
twenty five. It's a little after three pm New York time.
(01:41):
And to get the conversation going, I'm going to bring
in my colleague Nathan Dean, who covers financials policy down
in Washington, DC. Nathan, how you doing good?
Speaker 2 (01:51):
Good? I'm just not sure if I'm happy for the
end of the month or but I will report that
the pumpkin spice lattes at Starbucks are as amazing is
ever And now it's time to start thinking about Halloween.
Speaker 1 (02:04):
As long as you don't spill it on yourself like
you did coming up here on a train a couple
of years ago and then had to go on TV
and hide your stains.
Speaker 2 (02:14):
Most awkward client meeting I've ever.
Speaker 1 (02:16):
Had as a client meet, not a meeting.
Speaker 2 (02:18):
Yeah Midtown Manhattan, stood up in front of a whole
bunch of clients and said, if anybody smells pumpkin spice,
lotte yours.
Speaker 1 (02:24):
Truly it wasn't the stain so much as the stint.
Your shirt looks clean today, Nathan, let's ask you. I
wanted to talk to you about I don't know three
things that you're riding about, deregulation, a potential government shutdown,
and the Farm Bill. Why don't we start with deregulation.
You put out a note this morning saying that Treasury
Secretary Besson's financial deregulation path will kick off between now
(02:51):
and the end of the year. Do you want to
tell us more about that?
Speaker 2 (02:54):
Yeah, and you know, I'm going to focus. There's really
two key areas of focus for financial regula or financial deregulation,
and that's what's going on over at the SEC. And
I would you advise the listeners to go back about
two episodes where we talked about the crypto and the
private fund space, and then the other is the bank
capital deregulation. And so this is really coming from the
(03:15):
Federal Reserve. So even though Scott Bessen is the one
that I titled my note after, you know, deregulation is
one of three of his economic pillars, for one of
three pillars for economic growth, the other two being tariffs
and taxes. So when it comes to deregulation, for the banks.
This is mostly focused on the investment banks, and there
are six proposals that are worth watching. Two of them
(03:38):
are already out. One is a stress testing proposal, fairly benign,
not that big of a deal, could be finalized fairly quickly.
It's actually stresses. The are stretches the timing for these
stress tests at least in terms of taking into these
accounts over twenty four months. And the other one is
called the Enhanced Supplementally Leverage Ratio. Now, there are four
other proposals that we anticipate the FED release between now
(04:01):
and the first quarter of next year. Now, the first
three I don't really have a good sense of timing.
I've heard they could come out as soon as October.
But we're anticipating a proposal on the stress capital buffer,
We're anticipating a proposal on the g SIP surcharge, and
we're anticipating a second proposal on stress tests. And this
one probably has a little bit more teeth to it
in terms of alleviating some of the uncertainty that banks
(04:25):
go through when they go into the FED stress testing program.
And then you have the Bosle three endgame. And if
anybody watched the New York Jets game on Sunday Night Football.
About two years ago they saw commercials saying stop the
bosle three endgame. This is a rule that, if finalized
under the Biden administration, would arise in capital requirements by
(04:45):
about nine percent. We think it's going to be most
likely capital neutral, or at least that's what I'm calling it,
capital neutral ish, because it's not going to be like,
I think, one hundred percent capital neutral, but call it
capital neutral ish. So I think that's gonna come out
in the first half next year. You know FED vice
chairwoman Michelle Bowman, she's the vice chair for supervision. Jack
(05:06):
actually gave an interview on Bloomberg Television last week in
Jackson Hole where she said it would be the last
of these proposals to come out early next year. Now,
the other two things that you asked about, the Farm
Bill and the shutdown. That's actually a good segue to
talk about September because Congress returns next week and it's
going to be a month of headline risk. And I
say headline risk for the Farm bill, and I say
(05:28):
headline risk for the shutdown because the ultimate impact of
both of these on companies isn't all that big of
a deal. Now, let's first start with the Farm Bill. Now,
the Farm Bill historically has been something that's dominated by
SNAP Benefits, the Supplemental Nutrition Assistance Program or formerly known
as food stamps. Very important for companies like Walmart, Albertson's,
(05:51):
Kroger because there is some significant revenue that comes from
the SNAP benefit program. Now, SNAP Benefits was actually curtailed
in President Trump's way Big Beautiful bill. The impact that
really isn't going to start hitting until twenty twenty seven.
There's some new work requirements. They push some of the
requirements off to the state funding. But as a result,
SNAP Benefits is not in the Farm bill. And so
(06:14):
when Congress comes back, I'm anticipating the House Agricultural Committee
is going to release a skinny farm bill, and without
knowing what's in it, it's most likely going to be
extending things like the Conservation Conservation Reserve Program, which paid
out one point eight billion dollars to farmers. Other things
like there should be some hemp regulation in there, so
(06:35):
if you have exposure to hemp products, that may be
something worth We're looking. Again, we'll have to see what
the legislation looks like, but ultimately I don't think they're
going to be able to come to an agreement on
the farm bill by September thirtieth, and then that means
probably another kick of the can of current status quo.
So that's the key thing to note for the farm
bill status quo. Now when it comes to government shutdown, first,
(06:57):
looking at it from a market perspective, there's ruly no
market impacts. You know, even and I shouldn't be saying this,
but every single time, every single time there is a
shutdown threat, many of us of Bloomberg have the same
meeting where we go around and say where are the
company impacts? And every single time we can't come up
(07:20):
with company impacts because if you go back to the
thirty three day shutdown that occurred during the first Trump administration, yes,
the markets dropped about three to four percent within the
first day or so, but then at the end of
the shutdown, the SMP was up over twelve percent from
where it started, and so from a market impact, there
really isn't much there. Again, headline risk, So even if
(07:42):
you look into account defense contractors, if you're talking to
like Wayne Sanders or Will Lee, are folks to look
at the defense contractors. Most of these defense contractors are
paid on an eighteen month two year contract, if not longer,
So two weeks shutdown isn't really going to dramatically change things.
One thing that I have been able to come up
with in my years of covering the shutdown is the
(08:03):
impact on traders. And what I mean by that is,
if you're trying to trade commodities and you're relying on
USDA information or the Commitment of Traders report coming from
the CFTC, some of that information won't be coming to
you if the government shuts down, So those traders who
have to use that data, then that's where the real
big impact is. You're going to have to figure this out. Now,
(08:25):
all that being said, I don't think there's going to
be a shutdown in September. I'm met at a forty
percent chance. And the reason being is is that shutdowns
usually occur because one party thinks it's politically advantageous to
do so. And look, there's a lot of rhetoric right now,
especially coming from the Democratic Party that wants to be
seen fighting President Trump. I get that, but the problem is,
(08:47):
what is the endgame for the Democrats if there is
a shutdown and how do they transform it into something
that they can think is politically advantageous going into the
midterms of next year because from President Trump's perspective or
some of those that were aligned with the Department of
Government Efficiency DOGE, there could be a scenario or if
the government shuts down and somebody says, you don't want
(09:09):
let's try running the country for a year without the
government and see what happens, and if the country doesn't
collapse in other things, you know that the other questions
get asked. So I think this is one of those
situations where the rhetoric is going to be high. There's
going to be a lot of you know, political pushback.
People will say, look, we need to shut the government down.
(09:31):
But ultimately I think they kick the candy either December
or March. And that's important because if they can continue,
then can these continuing resolutions go into next year. Nobody
wants to shut down during a government election year or
midterm election year. So the one thing though that I
would just keep folks on on uh, keep aware for
that could change. This could be push that forty percent
(09:53):
to sixty percent is a pocket recissions threat coming from
the Office of Management and Budget. If you're remember a
couple of months ago, OMB submitted a Recisions package. This
was a nine billion dollar package that rescinds money that
Congress has already approved, and it only requires a majority
vote in the House and a majority vote in the
Senate aka no filibuster, and the Democrats aren't involved. So
(10:17):
if OMB puts out another Recisians package and Congress doesn't
pass it by September thirtieth, and the government shuts down,
then the Recisians package automatically goes into effect and you
can rescind a lot of money that way. Now, Congress
can always overturn that by doing another continuing resolution. But
if you see from OMB coming out, say within the
(10:38):
next week or two, a package that tries to really
rescind a lot of money that Democrats are really thinking
is important for their constituents, then the rhetoric and the
flames would actually intense even more. But again we'll see.
And as of right now, if you're planning to take
your kids to the National Zoo in October first, I
think it'll be open.
Speaker 1 (10:56):
How do you had my mind? That's exactly when I
plan to take them I'm gonna blame you if it's closed.
All right, Nathan, thank you. We're gonna go to Matt
Ettenhelm and Jen reed to talk some things about tech
in a minute. I just wanted to mention a few
things that I'm watching, also in the financials space, more
in the litigation space. The big news this week, of course,
(11:19):
was President Trump's effort to remove Lisa Cook as a
Federal Reserve Board governor as of this recording, Cook Lisa
Cook sued earlier this morning, and there's a court hearing tomorrow, Friday,
August twenty ninth, at ten am to determine whether the
attempted firing can take effect or not. Essentially, I think
(11:42):
Cook is a slight favorite to stay on the board
while the litigation plays out, and I think she's also
a slight favorite eventually to win on the argument that
mere allegations, even of something as serious as mortgage fraud,
in the absence of any investigation, doesn't meet the four
cause standard that the President needs to remove her. So
(12:03):
this is going to be an unbelievably fascinating lawsuit to watch.
It's going to continue for many months, I believe, But
tomorrow's sort of the first critical hearing, and Lisa Cook
got a very good judge, a Biden appointee, So I
think Cook is likely to win her tro application, which
would essentially mean that the termination letter does not take effect.
(12:24):
But then of course we'll have appeals after that. Another
issue I'm watching is concerns prediction markets versus gambling laws.
This is a really interesting set of cases involving sports
event contracts that are offered by the likes of companies
like cal She and robin Hood. States like New Jersey
(12:47):
and Nevada are trying to block those contracts by saying
they constitute unlicensed gambling. The next key catalyst here that
we're watching is a hearing before the Third Circuit Court
of Appeals on some number tenth. Overall, I think Calci
and Robinhood again are slight favorites to win their argument
that the contracts fall under the jurisdiction of the CFTC,
(13:10):
the Commodity Futures Trading Commission, and don't fall under state
gambling regulations. A third case I'm watching concerns BNP Pariba.
The French bank trial is scheduled to start September ninth,
in a class action lawsuit against the bank brought by
about twenty thousand victims of genocide in Sudan. BNP is
(13:32):
accused of aiding and abetting the Sudanese government in this genocide,
and I think the case. I think the case will
settle on the eve of trial. There have been some
indications in the proceedings that lead me to believe that,
and I think BNP will likely wind up paying tens
or maybe hundreds of millions of dollars to resolve the matter.
(13:55):
Just two more issues. One concerns Turkish Bank Hawkbank, which
is still trying to win immunity against the US government's
criminal case against the bank concerning theized violations of sanctions
on Iran. The case has already gone to the Supreme
Court a couple years ago, and the High Court rejected
hawk banks argument for immunity statutory immunity under the Foreign
(14:18):
Sovereign Immunities Act, but the Supreme Court kept alive the
bank's argument for immunity under the common law. That common
law immunity argument has now failed at both the trial
court and appeals court level, but Hawk Bank is once
again asking the Supreme Court for review. And I think
the bank has a decent shot like it did last
(14:39):
time at getting the Supreme Court to take up the case.
But again, like last time, I think the bank will
lose on the merits of its immunity argument and will
ultimately have to wind up settling with the government for potentially,
you know, a billion to two billion dollars based on
the amounts that are at stake. And then, lastly, Fanny Freddy,
(15:01):
the Trump administration has talked about its plans to issue
shares of the companies to the public. My colleague Ben
Elliott covers that issue specifically, but I just want to
flag that under current law, in order to issue new shares,
the companies would have to resolve a pair of cases
that I'm tracking concerning the sweep of profits from the
(15:23):
companies to the treasury that started in twenty twelve. In
the interest of time for this episode, I won't go
into more detail about those cases, but if you're interested
in discussing more, just reach out to me my emails
E Stein twenty six at Bloomberg dot net. All right,
so that's sort of the five cases that I wanted
to flag for the second half of this year. Let
(15:44):
me bring in Matt Shettanhelm now. Matt is our TMT
litigation and policy analyst also based out of DC. Matt,
you have covered the TikTok ban saga for a while.
Now it sort of like goes to slip and then
comes back. The ban was put on hold by the
(16:04):
President and or the Justice Department, but it's set to
take effect again September eighteenth unless something happens. I feel
like this is deja vu, like Groundhog Day.
Speaker 3 (16:14):
Right, It's not supposed to work like this, Elliott, this
is this is not typically how it goes. Congress passed
this law, you know, by overwhelming majorities, the President signed it,
the Supreme Court upheld it. It took effect January nineteenth,
and nothing has happened, and here we are now headed
into September. What the reason nothing has happened is is,
(16:36):
of course, President Trump said that he's not going to
enforce the law. He told his Attorney general in three
executive orders to write letters to the companies that host
TikTok saying that they're not violating the law. It's not
clear exactly to me how her the Attorney General could
write those letters, because you know, the companies are hosting
(17:00):
TikTok and it is after January nineteenth, So I don't
know how she was able to reach that conclusion to
write that in the letters, but she wrote it, and
it's The companies have therefore continued to carry TikTok. And
so we're at the next chapter in this story because
President Trump's latest extension is set to expire September eighteenth
(17:24):
or thereabouts, and so the question is, well, Okay, do
we do this again? And I think the answer is
probably yes. And President Trump gave us some indication of
that last week that he's very likely to kick the
can down the road another round. I think the I
think we might see this continue for a while. But
(17:45):
I think, you know, the thing to take away is
that that doesn't make the logle off the books, and
eventually there's going to have to be something that happens here.
Either there's a genuine divested from byte Dance. That was
the reason this law was enacted. There was concern that
we shouldn't be sending all this data to a company
(18:07):
whose parent is located in China, and so the law
is supposed to force a divestiture. Now there's not a
lot of incentive to do that now that we're not
enforcing the law. But at some point I think there's
going to be a problem because the law doesn't disappear,
and the companies that host TikTok, you know, are potentially
(18:28):
liable for hundreds of billions of dollars if someone ever says, hey,
look at this law that you're violating. So something eventually
is going to happen. I just don't think it's likely
to happen this round. I think we kicked the can
down the road further. So far, no litigation has been
filed to challenge those letters that the Attorney General has
(18:49):
written saying there are no violations here. I think there
could be some vulnerability if a lawsuit were filed asking okay,
how can you write letters like that? But so far nothing,
probably nothing right away either So.
Speaker 1 (19:05):
And if I'm not mistaken, the White House indicated last
week or the week before that it's gonna set up
its own TikTok account, right, So hard to see them
doing that while also allowing the law the ban to
take effect.
Speaker 3 (19:18):
That's right. And President Trump doesn't seem overly concerned by
the security risk. He has talked about how it helped him,
you know, win the election, and so and a lot
of the Republicans who you saw going on TV and
talking up the risks aren't talking about the risks now.
(19:39):
And so I think we're sort of in a status
quo going forward. But as I said, the laws on
the book, so something eventually is going to have to
give here.
Speaker 1 (19:48):
Let's just shift gears a little to Next Star and Tegna.
Next Next Star has said it's buying Tegna for about
six point two billion. That would create, I believe, based
on what you've written, the largest local television company in
the US. I presume the FCC has to review this.
What does that look like?
Speaker 3 (20:06):
Yeah, so the FCC has a huge role to play here,
and we at bi Jen Reeve, who's going to talk
and admit it, and Githa Ranganatha and I have been
talking about the potential for deregulation here and consolidation, and
now we're starting to see it. And this this is
a pretty significant deal. And the key thing to know
is that the deal can't happen right now based on
(20:30):
the rules that are on the books. Current rules at
the FCC say no company can reach more than thirty
nine percent of US households, subject to a little discount.
But this goes way beyond what the existing rules permit.
It also violates a long standing FCC rule that says
you can't own two top four stations in every local market.
(20:53):
This would allow doopolies in many of those markets. And
so in order for the FCC to bless it, and
the FCC must endorse it because this is a change
in license control. These are broadcast licenses that the FCC overseas,
and so before the FCC can say, okay, yes, we
(21:16):
can change these licenses, we first need the FCC to
change its rules. And just at the end of last week,
the FCC finished taking comments on that thirty nine percent
US ownership cap, and broadcasters are pushing the FCC. Look,
we face all this new competition from new forms of media.
A thirty nine percent ownership limit doesn't make sense anymore.
(21:40):
You should get rid of it. And so I think
there's a very good chance the FCC moves ahead in
the fourth quarter of the year to eliminate that thirty
nine percent rule and effectively make no limitation on how
many households TV broadcasters can reach. What's going to be
really interesting and and really important to this deal, though,
(22:04):
is the legal fight that's going to come on on
that question because there's a really tough legal question of
whether the FCC can do that, can it change the
thirty nine percent or can only Congress do that? And
that's going to have to be litigated. I can make
arguments on both sides of it that that that are
(22:24):
I think pretty strong both ways. Ultimately, I think the
FCC probably can win it. When you when you think
about where you know the courts are, where the Supreme
Court is in pretty business friendly, sympathetic to deregulation. But
it's it's not a slam dunk, and and there's going
to be some really interesting dynamics as this deal tries
to get approved and the this litigation over the rule
(22:49):
easing moves ahead. So going to be an interesting story
for the fourth quarter early.
Speaker 1 (22:53):
Who do you expect to see is are like like
trade groups on behalf of consumers?
Speaker 3 (22:58):
Basically, yeah, soub interest groups. There's there's a whole series
of public interest groups that that always defend these rules.
Ye and and so they would sue also cable cable interests.
So the broadcasters sit across the table from the companies
that distribute the broadcast stations and the cable groups say, look,
(23:21):
you're giving these broadcasters so much more leverage by letting
them grow grow larger. So they're at the FCC right
now opposing this sort of deregulation, and and so they
they also could say that the FCC made made an
unlawful decision by by using this rule. So I would
expect primarily those two to be leading the charge against
(23:42):
the FCC order.
Speaker 1 (23:43):
Got it. That's a good segue to Jen, because Jen,
in addition to the FCC review, there must be Justice
Department review concerning antitrust issues as well, right right, Yeah.
Speaker 4 (23:55):
And it's interesting because in the past the do o
J and FCC have pretty much aligned when they're looking
at these deals, and I don't really with all the
rules and all the complications going on at the FCC,
I'm not exactly sure how that's going to juxtapose with
the DOJ review, because they could get all those rules
could get changed, and they could get their FCC clearance,
(24:15):
but it's not totally clear to me that they would
get Department of Justice clearance. And the reason is because
the fccs really looking at this from a public interest perspective,
a public interest standard whereas the DOJ's just applying anti
trust law and all anti trust law is asking and
it kind of relates to what Matt was just talking about,
is how do these companies compete and where do they compete?
(24:36):
And there have been so many deals over the last
twenty years of TV station owners that we've seen a
lot of different DOJ analyzes of the deals, and they're
really consistent, and they look at two things. They look
at the licensing of what I call the Big Four
everybody calls the Big four retransmission consent, which is Fox, NBC, ABC,
(24:57):
and CBS. Right, these are four broadcasting They're considered different
by the DOJ and the FCC from all the other stations. Right,
so they constitute what we would call in any trust
their own relevant product, market and lot.
Speaker 1 (25:11):
You.
Speaker 4 (25:11):
Aligning with what Matt was just talking about, the concern
is that if one TV station owner is affiliated or
operates or owns more than one of those Big four
stations in one local area, which by Nielsen is called
a DMA a designated market area, they have too much
power in talking to these distributors Cable, YouTube, TV, hooluplass,
(25:32):
live TV, any entities that distribute a package of programming.
They have too much power when they negotiate the fees,
and so it's similar to the FCC looking at this,
but it comes from a different place and this hasn't changed.
If you look at those four stations and you make
this assumption, let's say that they have if they're the market,
they each have about twenty five percent share. I know
(25:53):
it's going to be a little bit different, but just generally,
if they each have twenty five percent, if you own two,
you have fifty percent. And that's too much much from
an a trust perspective, too much power. And usually what
it means is that in overlapping DMAs, if they have
this kind of overlap, then stations have to be divested.
Now we know that next Star overlaps in thirty five
(26:15):
of Tegnus fifty one DMAs. I don't have the data
yet to understand whether that overlap involves the Big Four.
I have to assume quite a few of them do.
And so it's still is possible even if the FCC
loosens the rules that the Department Justice would say, look,
in these DMAs where you overlap at the Big four,
you have to divest a station and the other thing
(26:35):
that the one area the DJ's looked at for years
that they might change is another area where they view
these companies as competing. Along with thinking that these big
four stations are different from anything else you can watch
in this package of programming, they think it's different for
local advertisers too, that local advertisers want to reach the
big population that's going to be watching an ABC or CBS,
(26:58):
let's say, more so than PBS or the History Channel
or something like that, and so that is also a
relevant market the local advertisers. And the concern once again
is that if one company has the controls more than
one of these big four stations, they can raise the
fees that they charge to the local advertisers. That could
change a little bit, just because advertising's broadened out so
much in our digital world. And they've talked a little
(27:20):
bit the DJ about looking at this differently, but so
far they haven't. But I do think that if the
FCC goes through everything it has to go through to
get this deal clear, that the DJ will go along.
But I don't rule out that the DJ will ask
for some divestitures in some designated market areas.
Speaker 1 (27:37):
So interesting, so many moving parts, Yeah, that interlock. Okay,
just one other topic that I want to close out
with Elon Musk. He sued Apple and open Ai this week.
What is that about and what's your take on it?
Speaker 4 (27:54):
Well, listen, we just have a complaint and it's full
of all kinds of facts and allegations. But I think
you know, from what we know right now, it's a
really weak case. I mean, it really looks like Elon
Musk is just unhappy with where Groc is in market
share of Groc is Elon's Elon Musk's AI chatbot, and
it's way behind open AI's chatbot, which is chat GPT,
and that's probably because it had a first mover advantage
(28:16):
and it has brand recognition more so than most of
the other AI chat bots. What there is this agreement
between Apple and open Ai where open Ai has been
integrated into Siri and into the iOS generally, and so
certain searches are automatically going to default if AI is needed,
will automatically default to chat gpt. And Musk says, look,
this is these are two monopolists. This is the majority
(28:38):
of the market, and so you're hindering and holding back
all of Groc as well as other most of the
groc is what he cares about, but really generally all
the other AI chat bots. And he says that this
is an illegal conspiracy and illegal monopolization. But honestly, Elliott,
what we all know about AI. If you think about it,
for conspiracy, it's got to be an unreasonable restraint of trade.
It's this is a very normal course business arrangement. It's
(29:01):
hard to see how it could be classified as unreasonable.
And for monopoly there needs to be substantial, significant foreclosure
of rivals. We all know that it's really easy at
this point to use any of the popular chatbots out there,
and it's really easy to take an Apple phone and
download an app and opt to use that chatbot. They
are not foreclosed, They're not prevented from use on an
(29:22):
Apple phone. And so I really just don't think the
foreclosure is there either. And the last thing I'll say
is that anti trust law is meant to protect the
competitive process and not protect competitors. And this really looks
like a case where a plaintiff is just seeking to
protect themselves in where they sit in the competitive playing field.
So I think it's a weak case. It could stick
(29:43):
and not survive dismissal just because anti trust cases are
about the facts, and they allege a lot of facts
and we have to find out whether those facts are
true or not. And so it may not be dismissed
early on, but I think in the long run it
won't succeed.
Speaker 1 (29:58):
You know, what would be fun You take the complaint,
you put it into both chat GPT and GROCK and
ask for their views on what the outcome is.
Speaker 4 (30:05):
Okay, so that's been done, of course, I think that
was this guest on this complaint.
Speaker 2 (30:09):
It has been done.
Speaker 4 (30:10):
It apparently Grock says it's a weak case.
Speaker 2 (30:12):
Oh man, oh god, he's going to fire GROC.
Speaker 1 (30:16):
Yeah.
Speaker 4 (30:16):
And chat GBT is given inconsistent responses, which I've also
seen when I've asked chat GPT about other cases. Depending
on how you say, you can get extremely inconsistent responses,
and it shows us the weakness of using these AI chatbots. Really,
but apparently, yes, it is true that Croc said that
it is a wow.
Speaker 2 (30:31):
That's amazing.
Speaker 1 (30:32):
All right. I think that's a good place to leave it.
We will wrap up this episode of Votes and Verdicts.
As always, thank you for listening. Thank you Nathan, Jen
and Matt for your great insights. If you have any
questions about any of the matter as we discussed on
this episode, please don't hesitate to reach out to us
at your convenience with your questions. As a reminder, you
can find all of our research on the Bloomberg terminal
(30:53):
at big You can find all of our litigation and
policy coverage at 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
(00:37):
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. My name's Elliott Stein. I'm an
analyst with Bloomberg Intelligence covering litigation in the financial sector,
and I'm delighted today as always to be joined by
several of my BI colleagues. And since we're approaching Labor
(00:59):
Day weekend here in the US and the end of summer, sadly,
we thought for today's episode it would be a good
idea to look at some of the major policy and
litigation matters that our team is covering and tracking closely
and that will have important catalysts between now and the
end of the year. As a reminder, you can find
(01:20):
all of our research on the Bloomberg terminal at BI go,
and more specifically, you can find our litigation and policy
coverage on our dashboard at BI laws Go. Just to
time stamp this. It is Thursday, August twenty eighth, twenty
twenty five. It's a little after three pm New York time.
(01:41):
And to get the conversation going, I'm going to bring
in my colleague Nathan Dean, who covers financials policy down
in Washington, DC. Nathan, how you doing good?
Speaker 2 (01:51):
Good? I'm just not sure if I'm happy for the
end of the month or but I will report that
the pumpkin spice lattes at Starbucks are as amazing is
ever And now it's time to start thinking about Halloween.
Speaker 1 (02:04):
As long as you don't spill it on yourself like
you did coming up here on a train a couple
of years ago and then had to go on TV
and hide your stains.
Speaker 2 (02:14):
Most awkward client meeting I've ever.
Speaker 1 (02:16):
Had as a client meet, not a meeting.
Speaker 2 (02:18):
Yeah Midtown Manhattan, stood up in front of a whole
bunch of clients and said, if anybody smells pumpkin spice,
lotte yours.
Speaker 1 (02:24):
Truly it wasn't the stain so much as the stint.
Your shirt looks clean today, Nathan, let's ask you. I
wanted to talk to you about I don't know three
things that you're riding about, deregulation, a potential government shutdown,
and the Farm Bill. Why don't we start with deregulation.
You put out a note this morning saying that Treasury
Secretary Besson's financial deregulation path will kick off between now
(02:51):
and the end of the year. Do you want to
tell us more about that?
Speaker 2 (02:54):
Yeah, and you know, I'm going to focus. There's really
two key areas of focus for financial regula or financial deregulation,
and that's what's going on over at the SEC. And
I would you advise the listeners to go back about
two episodes where we talked about the crypto and the
private fund space, and then the other is the bank
capital deregulation. And so this is really coming from the
(03:15):
Federal Reserve. So even though Scott Bessen is the one
that I titled my note after, you know, deregulation is
one of three of his economic pillars, for one of
three pillars for economic growth, the other two being tariffs
and taxes. So when it comes to deregulation, for the banks.
This is mostly focused on the investment banks, and there
are six proposals that are worth watching. Two of them
(03:38):
are already out. One is a stress testing proposal, fairly benign,
not that big of a deal, could be finalized fairly quickly.
It's actually stresses. The are stretches the timing for these
stress tests at least in terms of taking into these
accounts over twenty four months. And the other one is
called the Enhanced Supplementally Leverage Ratio. Now, there are four
other proposals that we anticipate the FED release between now
(04:01):
and the first quarter of next year. Now, the first
three I don't really have a good sense of timing.
I've heard they could come out as soon as October.
But we're anticipating a proposal on the stress capital buffer,
We're anticipating a proposal on the g SIP surcharge, and
we're anticipating a second proposal on stress tests. And this
one probably has a little bit more teeth to it
in terms of alleviating some of the uncertainty that banks
(04:25):
go through when they go into the FED stress testing program.
And then you have the Bosle three endgame. And if
anybody watched the New York Jets game on Sunday Night Football.
About two years ago they saw commercials saying stop the
bosle three endgame. This is a rule that, if finalized
under the Biden administration, would arise in capital requirements by
(04:45):
about nine percent. We think it's going to be most
likely capital neutral, or at least that's what I'm calling it,
capital neutral ish, because it's not going to be like,
I think, one hundred percent capital neutral, but call it
capital neutral ish. So I think that's gonna come out
in the first half next year. You know FED vice
chairwoman Michelle Bowman, she's the vice chair for supervision. Jack
(05:06):
actually gave an interview on Bloomberg Television last week in
Jackson Hole where she said it would be the last
of these proposals to come out early next year. Now,
the other two things that you asked about, the Farm
Bill and the shutdown. That's actually a good segue to
talk about September because Congress returns next week and it's
going to be a month of headline risk. And I
say headline risk for the Farm bill, and I say
(05:28):
headline risk for the shutdown because the ultimate impact of
both of these on companies isn't all that big of
a deal. Now, let's first start with the Farm Bill. Now,
the Farm Bill historically has been something that's dominated by
SNAP Benefits, the Supplemental Nutrition Assistance Program or formerly known
as food stamps. Very important for companies like Walmart, Albertson's,
(05:51):
Kroger because there is some significant revenue that comes from
the SNAP benefit program. Now, SNAP Benefits was actually curtailed
in President Trump's way Big Beautiful bill. The impact that
really isn't going to start hitting until twenty twenty seven.
There's some new work requirements. They push some of the
requirements off to the state funding. But as a result,
SNAP Benefits is not in the Farm bill. And so
(06:14):
when Congress comes back, I'm anticipating the House Agricultural Committee
is going to release a skinny farm bill, and without
knowing what's in it, it's most likely going to be
extending things like the Conservation Conservation Reserve Program, which paid
out one point eight billion dollars to farmers. Other things
like there should be some hemp regulation in there, so
(06:35):
if you have exposure to hemp products, that may be
something worth We're looking. Again, we'll have to see what
the legislation looks like, but ultimately I don't think they're
going to be able to come to an agreement on
the farm bill by September thirtieth, and then that means
probably another kick of the can of current status quo.
So that's the key thing to note for the farm
bill status quo. Now when it comes to government shutdown, first,
(06:57):
looking at it from a market perspective, there's ruly no
market impacts. You know, even and I shouldn't be saying this,
but every single time, every single time there is a
shutdown threat, many of us of Bloomberg have the same
meeting where we go around and say where are the
company impacts? And every single time we can't come up
(07:20):
with company impacts because if you go back to the
thirty three day shutdown that occurred during the first Trump administration, yes,
the markets dropped about three to four percent within the
first day or so, but then at the end of
the shutdown, the SMP was up over twelve percent from
where it started, and so from a market impact, there
really isn't much there. Again, headline risk, So even if
(07:42):
you look into account defense contractors, if you're talking to
like Wayne Sanders or Will Lee, are folks to look
at the defense contractors. Most of these defense contractors are
paid on an eighteen month two year contract, if not longer,
So two weeks shutdown isn't really going to dramatically change things.
One thing that I have been able to come up
with in my years of covering the shutdown is the
(08:03):
impact on traders. And what I mean by that is,
if you're trying to trade commodities and you're relying on
USDA information or the Commitment of Traders report coming from
the CFTC, some of that information won't be coming to
you if the government shuts down, So those traders who
have to use that data, then that's where the real
big impact is. You're going to have to figure this out. Now,
(08:25):
all that being said, I don't think there's going to
be a shutdown in September. I'm met at a forty
percent chance. And the reason being is is that shutdowns
usually occur because one party thinks it's politically advantageous to
do so. And look, there's a lot of rhetoric right now,
especially coming from the Democratic Party that wants to be
seen fighting President Trump. I get that, but the problem is,
(08:47):
what is the endgame for the Democrats if there is
a shutdown and how do they transform it into something
that they can think is politically advantageous going into the
midterms of next year because from President Trump's perspective or
some of those that were aligned with the Department of
Government Efficiency DOGE, there could be a scenario or if
the government shuts down and somebody says, you don't want
(09:09):
let's try running the country for a year without the
government and see what happens, and if the country doesn't
collapse in other things, you know that the other questions
get asked. So I think this is one of those
situations where the rhetoric is going to be high. There's
going to be a lot of you know, political pushback.
People will say, look, we need to shut the government down.
(09:31):
But ultimately I think they kick the candy either December
or March. And that's important because if they can continue,
then can these continuing resolutions go into next year. Nobody
wants to shut down during a government election year or
midterm election year. So the one thing though that I
would just keep folks on on uh, keep aware for
that could change. This could be push that forty percent
(09:53):
to sixty percent is a pocket recissions threat coming from
the Office of Management and Budget. If you're remember a
couple of months ago, OMB submitted a Recisions package. This
was a nine billion dollar package that rescinds money that
Congress has already approved, and it only requires a majority
vote in the House and a majority vote in the
Senate aka no filibuster, and the Democrats aren't involved. So
(10:17):
if OMB puts out another Recisians package and Congress doesn't
pass it by September thirtieth, and the government shuts down,
then the Recisians package automatically goes into effect and you
can rescind a lot of money that way. Now, Congress
can always overturn that by doing another continuing resolution. But
if you see from OMB coming out, say within the
(10:38):
next week or two, a package that tries to really
rescind a lot of money that Democrats are really thinking
is important for their constituents, then the rhetoric and the
flames would actually intense even more. But again we'll see.
And as of right now, if you're planning to take
your kids to the National Zoo in October first, I
think it'll be open.
Speaker 1 (10:56):
How do you had my mind? That's exactly when I
plan to take them I'm gonna blame you if it's closed.
All right, Nathan, thank you. We're gonna go to Matt
Ettenhelm and Jen reed to talk some things about tech
in a minute. I just wanted to mention a few
things that I'm watching, also in the financials space, more
in the litigation space. The big news this week, of course,
(11:19):
was President Trump's effort to remove Lisa Cook as a
Federal Reserve Board governor as of this recording, Cook Lisa
Cook sued earlier this morning, and there's a court hearing tomorrow, Friday,
August twenty ninth, at ten am to determine whether the
attempted firing can take effect or not. Essentially, I think
(11:42):
Cook is a slight favorite to stay on the board
while the litigation plays out, and I think she's also
a slight favorite eventually to win on the argument that
mere allegations, even of something as serious as mortgage fraud,
in the absence of any investigation, doesn't meet the four
cause standard that the President needs to remove her. So
(12:03):
this is going to be an unbelievably fascinating lawsuit to watch.
It's going to continue for many months, I believe, But
tomorrow's sort of the first critical hearing, and Lisa Cook
got a very good judge, a Biden appointee, So I
think Cook is likely to win her tro application, which
would essentially mean that the termination letter does not take effect.
(12:24):
But then of course we'll have appeals after that. Another
issue I'm watching is concerns prediction markets versus gambling laws.
This is a really interesting set of cases involving sports
event contracts that are offered by the likes of companies
like cal She and robin Hood. States like New Jersey
(12:47):
and Nevada are trying to block those contracts by saying
they constitute unlicensed gambling. The next key catalyst here that
we're watching is a hearing before the Third Circuit Court
of Appeals on some number tenth. Overall, I think Calci
and Robinhood again are slight favorites to win their argument
that the contracts fall under the jurisdiction of the CFTC,
(13:10):
the Commodity Futures Trading Commission, and don't fall under state
gambling regulations. A third case I'm watching concerns BNP Pariba.
The French bank trial is scheduled to start September ninth,
in a class action lawsuit against the bank brought by
about twenty thousand victims of genocide in Sudan. BNP is
(13:32):
accused of aiding and abetting the Sudanese government in this genocide,
and I think the case. I think the case will
settle on the eve of trial. There have been some
indications in the proceedings that lead me to believe that,
and I think BNP will likely wind up paying tens
or maybe hundreds of millions of dollars to resolve the matter.
(13:55):
Just two more issues. One concerns Turkish Bank Hawkbank, which
is still trying to win immunity against the US government's
criminal case against the bank concerning theized violations of sanctions
on Iran. The case has already gone to the Supreme
Court a couple years ago, and the High Court rejected
hawk banks argument for immunity statutory immunity under the Foreign
(14:18):
Sovereign Immunities Act, but the Supreme Court kept alive the
bank's argument for immunity under the common law. That common
law immunity argument has now failed at both the trial
court and appeals court level, but Hawk Bank is once
again asking the Supreme Court for review. And I think
the bank has a decent shot like it did last
(14:39):
time at getting the Supreme Court to take up the case.
But again, like last time, I think the bank will
lose on the merits of its immunity argument and will
ultimately have to wind up settling with the government for potentially,
you know, a billion to two billion dollars based on
the amounts that are at stake. And then, lastly, Fanny Freddy,
(15:01):
the Trump administration has talked about its plans to issue
shares of the companies to the public. My colleague Ben
Elliott covers that issue specifically, but I just want to
flag that under current law, in order to issue new shares,
the companies would have to resolve a pair of cases
that I'm tracking concerning the sweep of profits from the
(15:23):
companies to the treasury that started in twenty twelve. In
the interest of time for this episode, I won't go
into more detail about those cases, but if you're interested
in discussing more, just reach out to me my emails
E Stein twenty six at Bloomberg dot net. All right,
so that's sort of the five cases that I wanted
to flag for the second half of this year. Let
(15:44):
me bring in Matt Shettanhelm now. Matt is our TMT
litigation and policy analyst also based out of DC. Matt,
you have covered the TikTok ban saga for a while.
Now it sort of like goes to slip and then
comes back. The ban was put on hold by the
(16:04):
President and or the Justice Department, but it's set to
take effect again September eighteenth unless something happens. I feel
like this is deja vu, like Groundhog Day.
Speaker 3 (16:14):
Right, It's not supposed to work like this, Elliott, this
is this is not typically how it goes. Congress passed
this law, you know, by overwhelming majorities, the President signed it,
the Supreme Court upheld it. It took effect January nineteenth,
and nothing has happened, and here we are now headed
into September. What the reason nothing has happened is is,
(16:36):
of course, President Trump said that he's not going to
enforce the law. He told his Attorney general in three
executive orders to write letters to the companies that host
TikTok saying that they're not violating the law. It's not
clear exactly to me how her the Attorney General could
write those letters, because you know, the companies are hosting
(17:00):
TikTok and it is after January nineteenth, So I don't
know how she was able to reach that conclusion to
write that in the letters, but she wrote it, and
it's The companies have therefore continued to carry TikTok. And
so we're at the next chapter in this story because
President Trump's latest extension is set to expire September eighteenth
(17:24):
or thereabouts, and so the question is, well, Okay, do
we do this again? And I think the answer is
probably yes. And President Trump gave us some indication of
that last week that he's very likely to kick the
can down the road another round. I think the I
think we might see this continue for a while. But
(17:45):
I think, you know, the thing to take away is
that that doesn't make the logle off the books, and
eventually there's going to have to be something that happens here.
Either there's a genuine divested from byte Dance. That was
the reason this law was enacted. There was concern that
we shouldn't be sending all this data to a company
(18:07):
whose parent is located in China, and so the law
is supposed to force a divestiture. Now there's not a
lot of incentive to do that now that we're not
enforcing the law. But at some point I think there's
going to be a problem because the law doesn't disappear,
and the companies that host TikTok, you know, are potentially
(18:28):
liable for hundreds of billions of dollars if someone ever says, hey,
look at this law that you're violating. So something eventually
is going to happen. I just don't think it's likely
to happen this round. I think we kicked the can
down the road further. So far, no litigation has been
filed to challenge those letters that the Attorney General has
(18:49):
written saying there are no violations here. I think there
could be some vulnerability if a lawsuit were filed asking okay,
how can you write letters like that? But so far nothing,
probably nothing right away either So.
Speaker 1 (19:05):
And if I'm not mistaken, the White House indicated last
week or the week before that it's gonna set up
its own TikTok account, right, So hard to see them
doing that while also allowing the law the ban to
take effect.
Speaker 3 (19:18):
That's right. And President Trump doesn't seem overly concerned by
the security risk. He has talked about how it helped him,
you know, win the election, and so and a lot
of the Republicans who you saw going on TV and
talking up the risks aren't talking about the risks now.
(19:39):
And so I think we're sort of in a status
quo going forward. But as I said, the laws on
the book, so something eventually is going to have to
give here.
Speaker 1 (19:48):
Let's just shift gears a little to Next Star and Tegna.
Next Next Star has said it's buying Tegna for about
six point two billion. That would create, I believe, based
on what you've written, the largest local television company in
the US. I presume the FCC has to review this.
What does that look like?
Speaker 3 (20:06):
Yeah, so the FCC has a huge role to play here,
and we at bi Jen Reeve, who's going to talk
and admit it, and Githa Ranganatha and I have been
talking about the potential for deregulation here and consolidation, and
now we're starting to see it. And this this is
a pretty significant deal. And the key thing to know
is that the deal can't happen right now based on
(20:30):
the rules that are on the books. Current rules at
the FCC say no company can reach more than thirty
nine percent of US households, subject to a little discount.
But this goes way beyond what the existing rules permit.
It also violates a long standing FCC rule that says
you can't own two top four stations in every local market.
(20:53):
This would allow doopolies in many of those markets. And
so in order for the FCC to bless it, and
the FCC must endorse it because this is a change
in license control. These are broadcast licenses that the FCC overseas,
and so before the FCC can say, okay, yes, we
(21:16):
can change these licenses, we first need the FCC to
change its rules. And just at the end of last week,
the FCC finished taking comments on that thirty nine percent
US ownership cap, and broadcasters are pushing the FCC. Look,
we face all this new competition from new forms of media.
A thirty nine percent ownership limit doesn't make sense anymore.
(21:40):
You should get rid of it. And so I think
there's a very good chance the FCC moves ahead in
the fourth quarter of the year to eliminate that thirty
nine percent rule and effectively make no limitation on how
many households TV broadcasters can reach. What's going to be
really interesting and and really important to this deal, though,
(22:04):
is the legal fight that's going to come on on
that question because there's a really tough legal question of
whether the FCC can do that, can it change the
thirty nine percent or can only Congress do that? And
that's going to have to be litigated. I can make
arguments on both sides of it that that that are
(22:24):
I think pretty strong both ways. Ultimately, I think the
FCC probably can win it. When you when you think
about where you know the courts are, where the Supreme
Court is in pretty business friendly, sympathetic to deregulation. But
it's it's not a slam dunk, and and there's going
to be some really interesting dynamics as this deal tries
to get approved and the this litigation over the rule
(22:49):
easing moves ahead. So going to be an interesting story
for the fourth quarter early.
Speaker 1 (22:53):
Who do you expect to see is are like like
trade groups on behalf of consumers?
Speaker 3 (22:58):
Basically, yeah, soub interest groups. There's there's a whole series
of public interest groups that that always defend these rules.
Ye and and so they would sue also cable cable interests.
So the broadcasters sit across the table from the companies
that distribute the broadcast stations and the cable groups say, look,
(23:21):
you're giving these broadcasters so much more leverage by letting
them grow grow larger. So they're at the FCC right
now opposing this sort of deregulation, and and so they
they also could say that the FCC made made an
unlawful decision by by using this rule. So I would
expect primarily those two to be leading the charge against
(23:42):
the FCC order.
Speaker 1 (23:43):
Got it. That's a good segue to Jen, because Jen,
in addition to the FCC review, there must be Justice
Department review concerning antitrust issues as well, right right, Yeah.
Speaker 4 (23:55):
And it's interesting because in the past the do o
J and FCC have pretty much aligned when they're looking
at these deals, and I don't really with all the
rules and all the complications going on at the FCC,
I'm not exactly sure how that's going to juxtapose with
the DOJ review, because they could get all those rules
could get changed, and they could get their FCC clearance,
(24:15):
but it's not totally clear to me that they would
get Department of Justice clearance. And the reason is because
the fccs really looking at this from a public interest perspective,
a public interest standard whereas the DOJ's just applying anti
trust law and all anti trust law is asking and
it kind of relates to what Matt was just talking about,
is how do these companies compete and where do they compete?
(24:36):
And there have been so many deals over the last
twenty years of TV station owners that we've seen a
lot of different DOJ analyzes of the deals, and they're
really consistent, and they look at two things. They look
at the licensing of what I call the Big Four
everybody calls the Big four retransmission consent, which is Fox, NBC, ABC,
(24:57):
and CBS. Right, these are four broadcasting They're considered different
by the DOJ and the FCC from all the other stations. Right,
so they constitute what we would call in any trust
their own relevant product, market and lot.
Speaker 1 (25:11):
You.
Speaker 4 (25:11):
Aligning with what Matt was just talking about, the concern
is that if one TV station owner is affiliated or
operates or owns more than one of those Big four
stations in one local area, which by Nielsen is called
a DMA a designated market area, they have too much
power in talking to these distributors Cable, YouTube, TV, hooluplass,
(25:32):
live TV, any entities that distribute a package of programming.
They have too much power when they negotiate the fees,
and so it's similar to the FCC looking at this,
but it comes from a different place and this hasn't changed.
If you look at those four stations and you make
this assumption, let's say that they have if they're the market,
they each have about twenty five percent share. I know
(25:53):
it's going to be a little bit different, but just generally,
if they each have twenty five percent, if you own two,
you have fifty percent. And that's too much much from
an a trust perspective, too much power. And usually what
it means is that in overlapping DMAs, if they have
this kind of overlap, then stations have to be divested.
Now we know that next Star overlaps in thirty five
(26:15):
of Tegnus fifty one DMAs. I don't have the data
yet to understand whether that overlap involves the Big Four.
I have to assume quite a few of them do.
And so it's still is possible even if the FCC
loosens the rules that the Department Justice would say, look,
in these DMAs where you overlap at the Big four,
you have to divest a station and the other thing
(26:35):
that the one area the DJ's looked at for years
that they might change is another area where they view
these companies as competing. Along with thinking that these big
four stations are different from anything else you can watch
in this package of programming, they think it's different for
local advertisers too, that local advertisers want to reach the
big population that's going to be watching an ABC or CBS,
(26:58):
let's say, more so than PBS or the History Channel
or something like that, and so that is also a
relevant market the local advertisers. And the concern once again
is that if one company has the controls more than
one of these big four stations, they can raise the
fees that they charge to the local advertisers. That could
change a little bit, just because advertising's broadened out so
much in our digital world. And they've talked a little
(27:20):
bit the DJ about looking at this differently, but so
far they haven't. But I do think that if the
FCC goes through everything it has to go through to
get this deal clear, that the DJ will go along.
But I don't rule out that the DJ will ask
for some divestitures in some designated market areas.
Speaker 1 (27:37):
So interesting, so many moving parts, Yeah, that interlock. Okay,
just one other topic that I want to close out
with Elon Musk. He sued Apple and open Ai this week.
What is that about and what's your take on it?
Speaker 4 (27:54):
Well, listen, we just have a complaint and it's full
of all kinds of facts and allegations. But I think
you know, from what we know right now, it's a
really weak case. I mean, it really looks like Elon
Musk is just unhappy with where Groc is in market
share of Groc is Elon's Elon Musk's AI chatbot, and
it's way behind open AI's chatbot, which is chat GPT,
and that's probably because it had a first mover advantage
(28:16):
and it has brand recognition more so than most of
the other AI chat bots. What there is this agreement
between Apple and open Ai where open Ai has been
integrated into Siri and into the iOS generally, and so
certain searches are automatically going to default if AI is needed,
will automatically default to chat gpt. And Musk says, look,
this is these are two monopolists. This is the majority
(28:38):
of the market, and so you're hindering and holding back
all of Groc as well as other most of the
groc is what he cares about, but really generally all
the other AI chat bots. And he says that this
is an illegal conspiracy and illegal monopolization. But honestly, Elliott,
what we all know about AI. If you think about it,
for conspiracy, it's got to be an unreasonable restraint of trade.
It's this is a very normal course business arrangement. It's
(29:01):
hard to see how it could be classified as unreasonable.
And for monopoly there needs to be substantial, significant foreclosure
of rivals. We all know that it's really easy at
this point to use any of the popular chatbots out there,
and it's really easy to take an Apple phone and
download an app and opt to use that chatbot. They
are not foreclosed, They're not prevented from use on an
(29:22):
Apple phone. And so I really just don't think the
foreclosure is there either. And the last thing I'll say
is that anti trust law is meant to protect the
competitive process and not protect competitors. And this really looks
like a case where a plaintiff is just seeking to
protect themselves in where they sit in the competitive playing field.
So I think it's a weak case. It could stick
(29:43):
and not survive dismissal just because anti trust cases are
about the facts, and they allege a lot of facts
and we have to find out whether those facts are
true or not. And so it may not be dismissed
early on, but I think in the long run it
won't succeed.
Speaker 1 (29:58):
You know, what would be fun You take the complaint,
you put it into both chat GPT and GROCK and
ask for their views on what the outcome is.
Speaker 4 (30:05):
Okay, so that's been done, of course, I think that
was this guest on this complaint.
Speaker 2 (30:09):
It has been done.
Speaker 4 (30:10):
It apparently Grock says it's a weak case.
Speaker 2 (30:12):
Oh man, oh god, he's going to fire GROC.
Speaker 1 (30:16):
Yeah.
Speaker 4 (30:16):
And chat GBT is given inconsistent responses, which I've also
seen when I've asked chat GPT about other cases. Depending
on how you say, you can get extremely inconsistent responses,
and it shows us the weakness of using these AI chatbots. Really,
but apparently, yes, it is true that Croc said that
it is a wow.
Speaker 2 (30:31):
That's amazing.
Speaker 1 (30:32):
All right. I think that's a good place to leave it.
We will wrap up this episode of Votes and Verdicts.
As always, thank you for listening. Thank you Nathan, Jen
and Matt for your great insights. If you have any
questions about any of the matter as we discussed on
this episode, please don't hesitate to reach out to us
at your convenience with your questions. As a reminder, you
can find all of our research on the Bloomberg terminal
(30:53):
at big You can find all of our litigation and
policy coverage at BI laws Go. Thank you again for listening,
and have a great day.
Host
Elliott Stein
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