May 16, 2025 • 36 mins
The status of the Republicans’ tax-cut bill and the Inflation Reduction Act — with ramifications for hospitals like HCA and Tenet, health insurers like Centene, electric-vehicle makers like Ford and Tesla and solar companies like First Solar — is among the key catalysts BI litigation and policy analysts are watching this week. The team also discussed President Donald Trump’s “Most-Favored Nation” drug-pricing executive order and the status of antitrust trials, specifically DOJ v. Google over search, and FTC v. Meta. We also discussed an FCC inquiry of EchoStar on May 12 asking for comments on whether the agency should reconsider a Sept. 20 decision by its wireless telecommunications bureau to extend the company’s deadlines to complete construction under a series of FCC licenses.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
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 indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today is our weekly check
in on the litigation and policy catalysts that we're watching
and that we think will impact companies across a number
of different sectors. My name's Elliott Stein. I'm an analyst
(00:59):
with Bloomberg Intelligence covering litigation in the financial sector. Today
is May fifteenth. It's around three pm Eastern daylight time.
Since things move very quickly these days, we always think
it's a good idea to timestamp things because some of
what we say maybe out of date within an hour.
I'm delighted today to be joined by a handful of
(01:21):
my colleagues on the litigation and policy team, and as always,
you can find all of our research on the Bloomberg
terminal at big and more specifically on our litigation and
Policy dashboard, which is available at BI Laws.
Speaker 2 (01:36):
Go.
Speaker 1 (01:37):
All right, so Nathan Dean, let's bring you in. Nathan
is our financials policy analyst, but does a lot more
than that. Covers a lot of things policy related, including
all this stuff about reconciliation and tax cuts and the budget. Nathan,
what is going on with reconciliation? I mean, there's a
(01:59):
lot going on in the news, and I have a
hard time tracking it, but I know you're all over it.
It seems to me like there's a lot of competing
interests between the deficit hawks, the Salt Caucus, those who
are against Medicaid cuts. How are the Republicans going to
thread the needle here?
Speaker 3 (02:15):
Apologize, folks. I was just on mute, and now that
I've unmuted, I am going to get into Elliott's question.
Speaker 1 (02:21):
It's twenty twenty five and people still forget to unmute themselves.
Speaker 3 (02:24):
I was up on the Capitol Hill today and the
amount of times that the witnesses didn't press the button
and the millmakers were like leaning over and going pl
with the button.
Speaker 1 (02:33):
Please, by the way, shout out you were on the
hill because our colleague Guy Rid Jersey was testifying there today.
Speaker 3 (02:39):
So if anybody wants to go back, How's Financial Services Committee,
mateenth one of the most interesting subcommittees that I've ever
been a part of anyway. But to answer your question
on the reconciliation and Dwayne, feel free to jump in
here because Dwayne's covering the Medicaid cuts side of this
as well, and that's such a really big piece here.
He said, there's three committee that really happened this week,
(03:01):
and that was the House Energy and Commerce Committee that
was seeking to cut things like the Inflation Reduction Act provisions,
the grant provisions, the carrots if you will, of the
IRA plus the Medicaid portion that Dwayne covers. You have
the House ad Committee, which covers the cuts of approximately
two hundred and thirty billion for snap Benefits also known
as formerly known as food Stamp. And then you have
(03:23):
the House Ways and Means Committee, which is the tax
provisions of this bill. Now, the provisions came out, the
legislation came out, and to make this a two minute
answer as opposed to a thirty minute answer, We were
most surprised by how nice this bill was to the
solar and wind industry, the renewables industry. In the IRA
portion of this, for example, there's been and look, if
(03:45):
you talk to some of the folks on the Hill,
they will certainly say that this guts the Inflation Reduction Act.
And they may not be wrong, because it does cut
a lot of the grants and the loans and stuff
of the IRA. But what they did is and for example,
instead of getting rid of this tax credit called the
forty five, which is key for the solar industry, they
phased it out one year earlier. Even the wind industry,
which President Trump does not like, the wind industry still
(04:07):
has a little bit better of a phase out than
the elimination. Now there is eliminations in here, though, of
tax credits like the electric Vehicle tax credit, so for
like Tesla for GM. You know, under this bill this
tax credit for individuals purchasing evs would go away. So
obviously there's a lot of moving parts here. For the
folks that live in New York and New Jersey and
(04:28):
Connecticut that are listening to this, you know, the salt
deduction is certainly important. The salt deduction is currently a
ten thousand dollars cap on state and local tax deductions.
In this bill, they've offered it up to thirty thousand
dollars with income phaseouts, which means that if you make
more than a certain amount I think it's one hundred
thousand dollars is when it begins to phase out, then
obviously that salt deduction goes down. Now, the Salty Caucus,
(04:51):
if you will, led by Representative Mike Lawler of New York,
has been meeting with leadership in this speaker House Speaker
Mike Johnson to try and come up with it's a
better solution. The general thought here is a fifty thousand,
but I just saw earlier today that the Chairman of
House Weeds and Means Committee said to the Salty Caucus
essentially take thirty or not. So we'll see what happens there.
(05:13):
But they do have a lot of leverage they being
the Salty Caucus, So I do anticipate that this will
go up to about fifty thousand, maybe sixty four thousand,
and then way it's potential for income phase outs. Now
going forward, this is where the challenge is is because
it has to go to the House Budget Committee, and
one member of the House Budget Committee has already said
(05:33):
they're going to vote no. And you know, but that's
within our expectations. We think there are a lot more
political hiccups coming. This bill is not the final bill.
There's a lot of amendments coming. We think the House
can eventually get to a point of agreement. And again
this is this is you know, there's a lot of
other folks around Washington who think it can't get done.
But if it is going to get done, it would
(05:54):
probably happen in June. It then goes to the Senate
Senata says, thank you very much, they throw it out,
they do whatever they want, They jam the House anyway,
and then they potentially could try and get this wrapped
up by the late July if the dead ceiling is included.
If the dead ceiling is not included and they can't
come to an agreement, the dead ceiling gets stripped out,
and then this gets pushed off to probably October November.
But ultimately something will happen that will increase or at
(06:16):
least stave off those tax increases. And as of right now,
our thesis is, you know, there are some cuts to
snap benefits, and I'll let towain talking about Medicaid. And
you know, it's the Inflation Reduction Act, but it's not
as bad as it could have been for the sector's recover.
Speaker 1 (06:32):
Why do you think they were not as harsh as
you expected on solar and wind.
Speaker 3 (06:37):
I think it was more of a realistic expectation on
the Republican part to like, look times of the essence here.
We could vote to just strip it all out, but
we know that the Senate is going to jam us
up anyway. And Senator Tom Tillis in North Carolina has
already sent a letter and he had three other Republican
senators joining him, which is four, which is already puts
you in the no camp. They sent the letter to
(06:58):
the House essentially saying, don't touch dan for Reduction Act.
I have a plant being built in my district or
in my state, don't touch it. And so I think
they realized that there were going to be some people
that are fighting tooth and nail in this. It's much easier,
and I've said this multiple multiple times, it's much easier
to vote to increase the deficit borrow today, pay for
(07:19):
later than it is to vote to cut somebody's benefit.
Speaker 4 (07:22):
That's going to happen today.
Speaker 1 (07:23):
But how do you then get the deficit hawks on board?
And they're just going to suck it up to give
President President Trump will win.
Speaker 3 (07:30):
I think President Trump at a certain point has to use
the bully pulpit, and I think the bully pulpit can
get the deficit hawks in line. And look, Senator Ron
Johnson Wisconsin came out and said this the way they're
doing this right now, it does not cut enough. And
he said I'd be an automatic no vote. So but again,
you're at fifty three. You can only afford to lose
three in the report in the Senate. But that's why
(07:52):
for all the discussions we're having on this bill right now,
we really have to see what the Senate comes up with,
because they're going to be the ones that ultimately drive
what the final package looks like.
Speaker 1 (08:01):
Yeah, got it all right? Good stuff, Dwayne, Why don't
you jump in here too. I don't know if you
want to pick up on any of this related to
the IRA and Medicaid. And then obviously, the other big
issue this week was executive order that President Trump signed
I think on Monday regarding most favorite nation status for drugs,
and you had a nice note out on the terminal
(08:22):
today with the headline quote how Trump's MFN might find
its way into IRA drug negotiations end quote. So it
all sort of ties in together, it seems.
Speaker 5 (08:33):
Yeah. So thanks, I'll pick up where Nathan leftoff and
talk about the Medicaid ACA side of things. I think
when you think about the hospitals and the health insurers,
they probably did better than folks maybe thought going into this.
So if you think about the hospitals and you know,
(08:55):
thinking about HCA's and tenants of the world, the biggest
concerns they had were how Medicare pays for services and
outpatient and patient settings. They're different, and there's been a
desire to to close that gap, which could have been
a worst case scenario or outcome one hundred and fifty
(09:15):
billion dollars over ten years. That's a lot of lost
revenue coming from the hospital secutor that's not in there.
There are provisions relating to how states pay for their
portion of Medicaid spending, the scheme that's called provider taxes.
There are limits in current law, and there was some
(09:35):
fear amongst providers that there be lower limits on that,
so that requires states to pony up more money to
fund their program that's not in there. But there's a
limit on a new provider taxes, so to the extent
that there is a recession or a budget shortfall, these
(09:56):
states can't rely on those kind of schemes to fund
their Medicaid. And there are some other things on the
hospital side, but by and large they do fairly well
coming out of this bill. On the health insurance side,
I think people will gravitate to the number of people
who will be uninsured compared to if this bill hadn't
(10:18):
passed or the policies hadn't passed don't pass and it's
roughly about seven to eight million people over a ten
year period. Now that's probably on the face of it,
that's not good for those individual people. But when you
think about how Republicans get there by not going after
the Medicaid expansion program, which there was some fear there,
(10:41):
block raining was never really a fear, but some other
issues or other policies. They do implement work requirements for
the Medicaid population and there are some significant savings there,
but that by and large everybody assumed what happened. So
while most of these savings do come from Medicaid. It's
(11:02):
not as bad as it could be, but it's still
going to be a challenge, especially when you think about
for ensures. What's not in this bill and may never
happen is an expansion of the or extension of the
ACA subsidies that expire at the end of the year.
So it's probably a good outcome for hospitals, a mixed
(11:23):
outcome for insurers. But to Nathan's point, this is just
the first step. We're early innings, and depending on how
the conversations go with the Deaf sitt Hawks and the Senate,
some of these policies that we're talking about now that
aren't in the bill may find their way into the
version that goes to the President for a signature. So
(11:46):
we'll be following this as this plays out over the
coming coming weeks and months. But I do want to
flag two things that are drug pricing related. One of
them is actually in the Higher or the Reconciliation Bill
and providing some expansion of protections for operent drugs from
(12:08):
price cuts in the IRA. I think that's low hanging fruit,
and we may see in addition to that some protections
for drugs based on how long they've been on the market,
the whole pill penalty, small molecule versus large molecule disparity,
that's not in there, but this could find its way
in there. I think it will at the end of
(12:28):
the day now going to Monday or earlier in the
week where the President announced his most Favored Nations policy.
I think it's let's say a couple of things. One,
no surprise that the president's going down this wrote. He
tried to do this during his first term. He wasn't
(12:50):
able to the court's blockne this time around, there was
a lot of fear of the worst case outcome that
he was going to actually implement an MFN on the
spot and start the rulemaking process. That didn't really happen either,
which is why we saw the pharma stocks search after
his announcement. So, like any executive order, it doesn't have
(13:12):
the force of law. But this executive order is defanged
in a lot of ways because it really says HHS
Secretary Kennedy start to discussion on forcing companies to set
their prices to those overseas and there's little detail as
(13:32):
to the size and scope of those drugs and there's
also little detail of what happens if the farmer companies
don't negotiate those prices down, and so there's the threat
of rulemaking down the road. In my view, this is
all is set up for the Inflation Reduction Act, because
(13:54):
negotiation is on the next fifteen party. Drugs are already underway,
and while the IRI Statute doesn't have anything in there
about mfn or OUs prices, there's nothing stopping them. The
administration I basically looking over to Canada or any European country,
(14:15):
Australia or whatever, basically saying well, this is what they're paying.
We'll do an average. We're not going to tell you
that's what we're doing because that's not in the statute,
but we'll get there eventually. And if it's all about optics,
the objects of making demands and the objects of getting
what you say you want it at the beginning of
(14:35):
the conversation, this is a perfect setup for in November,
when those prices are announced, the President basing saying, hey, look,
I told the companies to come in and negotiate prices
that are closer to what they're paying overseas, and I
got it now. I think if you're following the IRA.
It's take your or leave it for these drug companies,
and if you don't like it, you can pull all
(14:56):
your products from the Medicare program. It's not going to happen.
So we'll see at the end of the day how
far the President and the White House are willing to
go to drive down prices, because one central key component
of this is the IRA sets a ceiling but not
a floor. So time will tell how they're willing to
(15:18):
go about this.
Speaker 1 (15:19):
Do you anticipate lawsuits and do you think there's any
legal problems with that approach?
Speaker 5 (15:24):
Well, so we know that there are lawsuits now over
various definitions of the IRA. I think everything is on
the table for litigation as it relates to as it
relates to the law, and pricing in and of itself
(15:45):
was not an issue once Biden announced. But if we
start to see huge discounts off of net prices that
actually do resemble what's being paid overseas, and the rationale
for setting those prices in really clear, I think the
door is open to that. But the truck companies have
been very unsuccessful so far. Lawsuit sure, it's possible. How
(16:11):
successful they'd be You know we'll have to wait and
say got it?
Speaker 1 (16:16):
All right, great stuff, all right, thanks to Wayne. All right,
let's bring in uh Jenree and Justin TREESI our anti
trust analysts. They've both been down in DC for I
don't know, it seems like a while now, several weeks. Right,
you're you're, You're both in the same courthouse, but in
different courtrooms, analysts passing in the night. I guess in
(16:40):
the halls of the what is it the Brett Perryman Building?
Speaker 4 (16:44):
Is that all right? Pretty much?
Speaker 1 (16:45):
Pretty pretty man? Yeah, I always mess that up. Okay,
which one of you wants to go first?
Speaker 5 (16:51):
Well?
Speaker 2 (16:51):
I will, This is Jen. I will say that given
how many computer scientists from mi T were testifying at
my trial, it seemed longer than three weeks.
Speaker 1 (17:00):
Sounds like a set up for a joke.
Speaker 2 (17:01):
It was a little bit like an episode of Big
Bang Theory. So right, switching gears and moving to something
that's even slower than Capitol Hill. And that's anti dress litigation.
What I was listening to at the courthouse in Washington,
d C. Was a remedies hearing in the United States
Department of Justice lawsuit against Google over illegal monopoly maintenance
(17:22):
of its search engine. Now it's a remedies hearing because
for anyone who may not know, I mean, it's been
widely publicized, but for anyone who may not know. Back
in the third quarter of twenty twenty four, a judge
ruled that Google was illegally maintaining its monopoly and search
and search search text ads, and it was doing this
by basically blocking out search engine rifles, being and Duck
(17:43):
dot Go really are the main two rivals it has
in the search engine world, and it was doing that
by sort of creating agreements, getting into agreements that were
taking all of the search access points available to consumers,
search apps, browser apps, sery, alexa, et cetera. They pay
the browser developers billions of dollars to place Google Search
(18:03):
as the default option, right, and they also were giving
revenue shares for advertising revenues to the OEMs, the makers
of the Android bones to pre install Chrome and pre
install Google Search and not to install rival browsers or
search engines. And so what this really meant is that
the only time people used bing or Ductugo was really
if the person went in and took the steps to
(18:23):
change their default, which a lot of people don't know
they can do or don't know how to do, or
maybe they use the Microsoft Edge browser and things already
the default there. But really those two companies weren't getting
a lot of searches and they couldn't improve without the
data that they would get from the searches. So now
the judge has to decide what to do about it,
and the DJ's really asked for an extensive list of actions.
(18:44):
They want the judge to force Google to sell Chrome,
that would be a big one. They want to force
Google to share a lot of user and advertiser data
as well as it's search index with these rival search engines.
And they want Google to be prohibited from provider anything
of value to browsers or OEMs or other third parties
to essentially favor Google Search and disfavor competitor search engines.
(19:07):
They want to remove these barriers to entry right and
break down these walls so that others can new search
engines could come in, AI can flourish, because because AI
actually does work with search engines, it's not really a replacement.
I kind of learned in this trial. And and by
the way, all of these remedies would extend to Google's
AI products as well, and you know, right and right now,
(19:28):
we learned that it is currently in the process of
asking OEMs to pre install its Gemini chatbot app in
the Android phones that they make, and also they're trying
to get an agreement with Apple for Gemini to be
part of Apple Intelligence. Apple Intelligence doesn't have a large
language model behind it, so it's basically got an agreement
already now with open Ai, and it will make agreements
(19:49):
maybe with Perplexity, maybe with Gemini so that people use
Apple Intelligence and want access to that sort of broader
AI product, confuse to use one of those others.
Speaker 1 (19:58):
Wow.
Speaker 5 (19:59):
Yeah, it's a big deal.
Speaker 4 (20:00):
Yeah, it's a big deal.
Speaker 2 (20:01):
It really is. And of course Google says all of
this is overkill and it should be able to do
really whatever it wants to.
Speaker 1 (20:08):
And I mean, but they were unliable, so I mean
they must they must have, they must have to come
up with sort of some sort of remedy, but not
anything that egregious.
Speaker 2 (20:17):
You know, that's exactly right, Elliot. What they're saying is, well,
we should really be able to keep paying revenue shares
for companies that use Google Search, but just make it
non exclusive, right, in the bath past, these agreements were exclusive.
We should just make it non exclusive. So in other words, OEMs,
we're not going to make and put any conditions on
you pre installing Gemini. You can you can have Android,
you have the license to Android, you can have YouTube,
(20:39):
you can put Chrome on, you can put Gemini on,
but we're not going to tell you can't put open
Ai on or Perplexity or anybody else, right, which is
what they kind of did before. So you know, our
view after listening to the trial and reading transcripts, really
is that the judge, I think, as you would expect,
is going to meet them in the middle. That's what
I think, and I thought that going in and I
(20:59):
still think it coming out. I don't think Google's going
to have to sell Chrome. I do think it's going
to have to share some of its search data, which
it really doesn't want to, but I think it will,
and also stop paying for this preferential and default treatment
for Google Search. And I do think the judge is
probably going to require Google to provide choice screens as
well for default search engines. For Chrome users can't bores
(21:20):
Apple to do anything with Safari, but Chrome is a
Google product. Now Google internally modeled the impact of loss
of default positions at a net loss of twenty eight
to thirty two billion dollars, So that's a pretty big impact.
I was surprised by that because I would think even
without paying for those default positions, people will still continue
to use BING. Nonetheless, it'll be about what people do
(21:43):
when these remedies have to go into effect. The judge
said he's going to decide in August, and once that
decision comes out, Google's likely going to appeal and try
to stay the remedy pending the appeal, So we'll find
out this year.
Speaker 1 (21:55):
That was going to be my nice question. So decision
in August, are they still closing all you? And so
ahead of that ye?
Speaker 2 (22:01):
May thirtieth, okay, yeah, and then that's it, and then
after that some briefing post trial briefing, and then we'll
get the decision.
Speaker 1 (22:07):
And then a decision when everyone's on vacation exactly, All right,
good stuff. And that's judge Meta, right, yes, which is
my segue to justin who's covering FTC versus Meta? Not
the judge but the company.
Speaker 4 (22:21):
I haven't heard that joke before, Elliott. That's the first
time anybody said that the last few weeks.
Speaker 1 (22:25):
Noah, I'm sure, yeah, yeah.
Speaker 4 (22:27):
So yeah, piggyback in what Jen said. You know, I've
been attending the FDC versus Meta anti trust trial and
DC and this case really involves the acquisitions Meta made
over a decade it now a decade ago now of
WhatsApp and Instagram, in charging that those acquisitions were anti
competitive in nature, the reason being allegedly that that Meta
(22:48):
made these acquisitions in an effort to kill competition for
these nason competitors that were growing rather rapidly at the time.
So moving forward here, the FTC is resting its case
now and are our review is largely unchanged from the
first week of the trial, that being that we really
do give Meta the advantage here and its effort to
defeat these claims right now, holding about a sixty percent chance,
(23:11):
we think that Meta is able to do so through
the conclusion of this trial and the main reasons why
there are two of them. Number one, you know, the
FTC really has been able to put on you know,
a host of evidence through bad documents and some live
witness testimony saying that look, you know, these acquisitions might
have been made with this anti competitive intent, right, that
(23:31):
there might have been this desire to cush this competition
before it really got off the ground. But even that
being the case, even if that intent was in fact there,
in many ways we think that's a bit of relevant
because the reality is, you know, it's really difficult to
point to these actual consumer harms here in this case
that outweigh the actual benefits that have been conferred upon
consumers through the Metas acquisition of these two apps. We
(23:54):
don't really know what's app or Instagram would look like
today in a BUTT four world. If there's a positions
had never taken place, there's a high chance that neither
of those apps would even exist anymore today if those
acquisitions hadn't actually taken place. So that's really been on
the minds a lot of folks in the courtroom. It's
been really elicited from the testimony that we just don't
know what that world would actually look like. But through
(24:16):
the case, you know, on that point, you know, we've
really seen the STC put forward this evidence, right, we'd
have witnesses on this dand saying, look, there was this
kind of bad intent here on the part on the
part of Meta or there were things that Meta did
once it acquired Instagram and WhatsApp that really wasn't to
the benefit of Instagram or WhatsApp. But you know, for
whatever forward kind of whatever, whatever progress the STC has
(24:39):
made with regard to that testimony, the cross exams have
been really good, I would say, in kind of dialing
that back, and really by the time witnesses have been
done on this dand things have really been a bit
of a wash, and I don't think the FDC's case
has really been forwarded in a way where those again,
those antiqu competitive anti competitive conduct might have outweighed the
pro competitive benefit.
Speaker 1 (25:00):
It's here, and just to jump in those witnesses are
these experts, are these inside company insiders or what?
Speaker 4 (25:06):
Yeah? Yeah, so both And you know, I'll point to
the example to two particular examples for witnesses here where
that's really been the case. The first is Kevin Systrom,
who is the actual founder of Instagram, right, and he
was at the company for a good six years after
the sale of Instagram to Meta. You know, when he
took the stand, he really had expressed his view that
he thought, you know, whether tubris or not, he thought
(25:26):
Instagram really could have survived on its own here, right,
and that even though Meta might have conferred some benefits
upon the company when it made its acquisition that you know,
Instagram could be alive and thriving today if that buy
never happened. But across exam, you know, Meta was really
successful I think in getting system to say, look, no,
there were these benefits that we actually did receive here.
(25:46):
You know, there are all these new features that were
added to Instagram after that acquisition took place. And you know,
at the time of the acquisition, Instagram was having a
really hard time with spam right there. There was a
huge problem on the app with that and once it
Meta made the acquisition, they were able to clean up
those issues really quickly and allowed Instagram to thrive and
focus on other aspects of its business. So that's one
(26:07):
example there. The same really from Adam as Ai who's
heading Instagram right now, same kind of viewpoint that you
know for all of the kind of detracting in a
way that Meta might have done from Instagram. Around twenty eighteen,
when it was worried that Facebook, Facebook's main app wasn't
really getting the traction need of the time, there were
just all of these different these benefits conferred to Instagram,
they were added reels for example, that really gave it
(26:28):
the ability to compete against TikTok. So really, you know,
the witnesses took the sand, they said what they said,
but by the time cross examination was finished, things kind
of washed out.
Speaker 1 (26:38):
So this is interesting these two When is the two
you just mentioned, this is ft This is the FTC's case, right, Yes,
and yeah, And they called them as witnesses. Are they
call I mean, this is sort of like sort of
too nerdy, but are they calling them as hostile witnesses
and then essentially asking them cross examination questions and then
meta comes in and basically does it direct on them?
Speaker 4 (27:00):
Yeah, you've got it. That's exactly the way that it's
kind of gone.
Speaker 3 (27:03):
Right.
Speaker 4 (27:03):
They called Mark Zuckerberg for example too in Shales and
Berg the first week of the trial. So that's exactly
how it's been planning out thus far. And the majority
of the witness is called by the FTC have been
those company insiders, right, And I think they feel like
we have these bad documents here, right, So that's how
we're going to get them into evidence, is to have
these folks come and talk about these emails that might
have said, you know, a decade ago, but that's how
(27:25):
it's rolling out, you know. I think there's also vulnerability
here for the FTC with regard to its market definition.
You know, there's been a lot of testimony, you know
about you know, how things have evolved since this case
was brought, and in many ways, if we were trying
this case maybe in twenty twenty or twenty twenty one,
before TikTok really got off the ground, you know, the
FTC might have a better, you know, better chance of
(27:45):
being victorious at trial. The reason being that so much
of this activity that you're seeing on Instagram is really
morphed into this kind of real based you know, consumption
of content that's not connected to friends and really as
a head on a head competitor a TikTok, much more
than it might be to Snapchat or another social media
kind of traditional social media service.
Speaker 1 (28:03):
So interesting, all right, So just quickly, what what what's next?
Speaker 5 (28:08):
Yeah?
Speaker 4 (28:08):
So at the trial should wrap I think within the
next couple of weeks, probably the first or second week
of June at latest, and then I think we can
expect a decision from Judge Boseberg by the end of
the year in liability.
Speaker 1 (28:18):
Sounds good. All right, well, thank you Justin and Jen.
All right, so Matt Shettenhelm, let's we'll move on from
anti trust and talk a little bit. Well, well, we'll
move from tech anti trust to other tech related issues.
You had a headline in a note that you wrote today.
(28:40):
I think it was today, Maybe it was yesterday, and
it was The headline was EchoStar encircled by SCC's inquiry,
but risk of licensed loss low. What what is? What
is EchoStar? Maybe start there and then what is the
SCC trying to do?
Speaker 6 (28:57):
Yeah, I think you know, building off of Jen and
Justin's discussion, if you go back to the to the
big T Mobile Sprint deal that had to win antitrust
approval a couple of years ago, the only way that
the FCC and the dj would approve that is if
they said, we need to create a fourth competitor, which
is Dish to provide broadband service. Dish has since been
(29:21):
acquired by EchoStar, and so the company has been working
to become a fourth broadband provider to compete with T Mobile,
AT and T Verizon. It's been building out its network
since twenty nineteen and it has, you know, thirty billion
dollars worth of FCC licenses that it's acquired over the
(29:45):
past you know, decade or so to do that. And
so that's why this attracted so much attention this week
when Brendan Carr came out with a letter to the
company and also the opening of two dockets at the FCC,
(30:05):
and the more important of those two was to take
a look at whether the Biden era FCC properly granted
an extension to Dish for its final build out deadline
to finish that broadband network. And so what they did
last November September, I believe it was was was to say, look,
(30:27):
we'll give you two more years to finish up that
the deadline was supposed to be June twenty twenty five.
Everything's operational, You're going to have seventy percent coverage in
every market. EchoStar came in and said, look, we're not
quite there because of COVID, because of supply shortages and
things like that. We need two more years in a
number of these markets. The Biden FCC granted that now
(30:51):
there's a risk of a reversal on that from this FCC,
which is being pushed by SpaceX that want access to
these licenses, you know, to the same band of spectrum.
All of a sudden there's pressure from this FCC and
so what the technical step that's happened is there is
a reconsideration of that grant of that three year delay,
(31:14):
and so there's the risk worst case scenario. What does
this mean for EchoStar is that the FCC comes back
and says, nope, we reconsider that grant to that extension.
June twenty twenty five is your deadline to build the
whole thing, and FCC rules says if you don't meet
that deadline, you lose your license. So you invested thirty
(31:35):
billion dollars in these licenses, you lose them automatically by law.
Speaker 1 (31:40):
How I mean, can Echo start challenge that. It seems like,
you know, they sort of relied on this previous approval
by the Biden administration and now there's sort of you know,
getting the rug pulled.
Speaker 6 (31:49):
Out absolutely, and so that's sort of you know, the
immediate reaction in the market was pretty severe when you
saw these headlines because it's it's such an important asset
to to think about losing these licenses entirely and technically
it's true that if you don't, you know, I think
the SCC can reconsider it's deadline, and technically, if you
don't meet the milestone, you lose the licenses. But the
(32:11):
technical I think is a little different than the reality
because there is going to be a court sitting behind
anything the FCC does here, and I think it's going
to have major due process concerns. If the FCC were
to come out and take the hard line that hey,
that extension we granted, forget about it, you're back to
(32:32):
June twenty twenty five the end. The Court's not going
to go for that. So I think as a practical matter,
Echo Star is going to have you know, maybe less time,
maybe not three years that it was granted by the
Biden administration. It's going to have pressure, but I think
it's going to the FCC is going to have to
act reasonably in everything it does here to avoid, you know,
(32:55):
claims that it's acting in an arbitrary way or violating
due process. So I think that that's sort of my
big picture takeaway. Maybe this isn't as severe as it
initially looked, but it is a risk to the company,
and clearly the signals are bad. From Brendan Carr, certainly
he's looking to align with SpaceX, maybe not so interested
(33:17):
in facilitating this broadband network to be a success as
much as he has been in the past.
Speaker 1 (33:24):
So you think without SpaceX and the picture, this might
not have happened.
Speaker 6 (33:28):
I mean, it's that certainly was a driver of it,
because you can look through recent filings at the FCC
and see, you know, letter after letter from SpaceX saying, look,
Echo Stars not not using this frequency the way it
should be, and we we would and and and so
I certainly think that it's it's a very likely catalyst
(33:51):
for for what's been going on at the FCC on
this issue. I think it will continue to play a
factor as we go ahead.
Speaker 1 (34:00):
And then, I mean June twenty twenty five is coming up, right,
I mean it's today's May fifteen, so we're almost there.
So what happens next is it just like a series
of letters back and forth and then the FCC decide.
Speaker 6 (34:12):
So what the FCC did this week is it created
a comment period on that petition for reconsideration of the extension.
And that comment period runs through from late May to
mid June, almost right until I think June fourteenth was
the technical deadline, so I think the comment period closes
a little bit before June fourteenth. In theory, the FCC
(34:33):
could act pretty quickly. Then this is all done at
the staff level, at the bureau level, so you don't
need a full commission vote on this stuff. So in theory,
if Brendan Carr really wanted to play hardball, he could
act in June and just say you know, your deadline's
back in place. I don't think he's going to do that,
but that's what we'll be watching is how quickly will
(34:56):
the FCC act on this. I don't know that it
will be in June would be, but I think it
will be shortly thereafter where there's some sort of action.
I think the FCC is probably going to have to
go for some sort of, you know, a tougher deadline
than three years from now, but not imminent. I think
that there will be pressure on the company h but
but not in an imminent threat of hey, you're going
(35:17):
to lose your licenses.
Speaker 1 (35:19):
I'm envisiting Elon Musk getting like a million people to
write a letter in favor of a SpaceX.
Speaker 4 (35:25):
Yeah.
Speaker 6 (35:25):
Yeah, it would wouldn't wouldn't surprise me at all.
Speaker 1 (35:28):
All right, well that's super interesting and mark and market
moving right because all right, well, great stuff all around,
Thank you everybody. I think we'll leave it there. We'll
wrap up this episode of Votes and Verdicts as always,
thank you for listening. If you have any questions about
any of the matters that we discussed on today's episode,
please don't hesitate to reach out to us with any
(35:49):
questions that you have. As a reminder, you can find
all of our research on the Bloomberg terminal at BI
go or on our litigation and policy dashboard at BI
laws go, and we always encourage you to listen to
other episodes of Votes and Verdicts on whatever platform you
like to get your favorite podcasts. Thanks 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 indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today is our weekly check
in on the litigation and policy catalysts that we're watching
and that we think will impact companies across a number
of different sectors. My name's Elliott Stein. I'm an analyst
(00:59):
with Bloomberg Intelligence covering litigation in the financial sector. Today
is May fifteenth. It's around three pm Eastern daylight time.
Since things move very quickly these days, we always think
it's a good idea to timestamp things because some of
what we say maybe out of date within an hour.
I'm delighted today to be joined by a handful of
(01:21):
my colleagues on the litigation and policy team, and as always,
you can find all of our research on the Bloomberg
terminal at big and more specifically on our litigation and
Policy dashboard, which is available at BI Laws.
Speaker 2 (01:36):
Go.
Speaker 1 (01:37):
All right, so Nathan Dean, let's bring you in. Nathan
is our financials policy analyst, but does a lot more
than that. Covers a lot of things policy related, including
all this stuff about reconciliation and tax cuts and the budget. Nathan,
what is going on with reconciliation? I mean, there's a
(01:59):
lot going on in the news, and I have a
hard time tracking it, but I know you're all over it.
It seems to me like there's a lot of competing
interests between the deficit hawks, the Salt Caucus, those who
are against Medicaid cuts. How are the Republicans going to
thread the needle here?
Speaker 3 (02:15):
Apologize, folks. I was just on mute, and now that
I've unmuted, I am going to get into Elliott's question.
Speaker 1 (02:21):
It's twenty twenty five and people still forget to unmute themselves.
Speaker 3 (02:24):
I was up on the Capitol Hill today and the
amount of times that the witnesses didn't press the button
and the millmakers were like leaning over and going pl
with the button.
Speaker 1 (02:33):
Please, by the way, shout out you were on the
hill because our colleague Guy Rid Jersey was testifying there today.
Speaker 3 (02:39):
So if anybody wants to go back, How's Financial Services Committee,
mateenth one of the most interesting subcommittees that I've ever
been a part of anyway. But to answer your question
on the reconciliation and Dwayne, feel free to jump in
here because Dwayne's covering the Medicaid cuts side of this
as well, and that's such a really big piece here.
He said, there's three committee that really happened this week,
(03:01):
and that was the House Energy and Commerce Committee that
was seeking to cut things like the Inflation Reduction Act provisions,
the grant provisions, the carrots if you will, of the
IRA plus the Medicaid portion that Dwayne covers. You have
the House ad Committee, which covers the cuts of approximately
two hundred and thirty billion for snap Benefits also known
as formerly known as food Stamp. And then you have
(03:23):
the House Ways and Means Committee, which is the tax
provisions of this bill. Now, the provisions came out, the
legislation came out, and to make this a two minute
answer as opposed to a thirty minute answer, We were
most surprised by how nice this bill was to the
solar and wind industry, the renewables industry. In the IRA
portion of this, for example, there's been and look, if
(03:45):
you talk to some of the folks on the Hill,
they will certainly say that this guts the Inflation Reduction Act.
And they may not be wrong, because it does cut
a lot of the grants and the loans and stuff
of the IRA. But what they did is and for example,
instead of getting rid of this tax credit called the
forty five, which is key for the solar industry, they
phased it out one year earlier. Even the wind industry,
which President Trump does not like, the wind industry still
(04:07):
has a little bit better of a phase out than
the elimination. Now there is eliminations in here, though, of
tax credits like the electric Vehicle tax credit, so for
like Tesla for GM. You know, under this bill this
tax credit for individuals purchasing evs would go away. So
obviously there's a lot of moving parts here. For the
folks that live in New York and New Jersey and
(04:28):
Connecticut that are listening to this, you know, the salt
deduction is certainly important. The salt deduction is currently a
ten thousand dollars cap on state and local tax deductions.
In this bill, they've offered it up to thirty thousand
dollars with income phaseouts, which means that if you make
more than a certain amount I think it's one hundred
thousand dollars is when it begins to phase out, then
obviously that salt deduction goes down. Now, the Salty Caucus,
(04:51):
if you will, led by Representative Mike Lawler of New York,
has been meeting with leadership in this speaker House Speaker
Mike Johnson to try and come up with it's a
better solution. The general thought here is a fifty thousand,
but I just saw earlier today that the Chairman of
House Weeds and Means Committee said to the Salty Caucus
essentially take thirty or not. So we'll see what happens there.
(05:13):
But they do have a lot of leverage they being
the Salty Caucus, So I do anticipate that this will
go up to about fifty thousand, maybe sixty four thousand,
and then way it's potential for income phase outs. Now
going forward, this is where the challenge is is because
it has to go to the House Budget Committee, and
one member of the House Budget Committee has already said
(05:33):
they're going to vote no. And you know, but that's
within our expectations. We think there are a lot more
political hiccups coming. This bill is not the final bill.
There's a lot of amendments coming. We think the House
can eventually get to a point of agreement. And again
this is this is you know, there's a lot of
other folks around Washington who think it can't get done.
But if it is going to get done, it would
(05:54):
probably happen in June. It then goes to the Senate
Senata says, thank you very much, they throw it out,
they do whatever they want, They jam the House anyway,
and then they potentially could try and get this wrapped
up by the late July if the dead ceiling is included.
If the dead ceiling is not included and they can't
come to an agreement, the dead ceiling gets stripped out,
and then this gets pushed off to probably October November.
But ultimately something will happen that will increase or at
(06:16):
least stave off those tax increases. And as of right now,
our thesis is, you know, there are some cuts to
snap benefits, and I'll let towain talking about Medicaid. And
you know, it's the Inflation Reduction Act, but it's not
as bad as it could have been for the sector's recover.
Speaker 1 (06:32):
Why do you think they were not as harsh as
you expected on solar and wind.
Speaker 3 (06:37):
I think it was more of a realistic expectation on
the Republican part to like, look times of the essence here.
We could vote to just strip it all out, but
we know that the Senate is going to jam us
up anyway. And Senator Tom Tillis in North Carolina has
already sent a letter and he had three other Republican
senators joining him, which is four, which is already puts
you in the no camp. They sent the letter to
(06:58):
the House essentially saying, don't touch dan for Reduction Act.
I have a plant being built in my district or
in my state, don't touch it. And so I think
they realized that there were going to be some people
that are fighting tooth and nail in this. It's much easier,
and I've said this multiple multiple times, it's much easier
to vote to increase the deficit borrow today, pay for
(07:19):
later than it is to vote to cut somebody's benefit.
Speaker 4 (07:22):
That's going to happen today.
Speaker 1 (07:23):
But how do you then get the deficit hawks on board?
And they're just going to suck it up to give
President President Trump will win.
Speaker 3 (07:30):
I think President Trump at a certain point has to use
the bully pulpit, and I think the bully pulpit can
get the deficit hawks in line. And look, Senator Ron
Johnson Wisconsin came out and said this the way they're
doing this right now, it does not cut enough. And
he said I'd be an automatic no vote. So but again,
you're at fifty three. You can only afford to lose
three in the report in the Senate. But that's why
(07:52):
for all the discussions we're having on this bill right now,
we really have to see what the Senate comes up with,
because they're going to be the ones that ultimately drive
what the final package looks like.
Speaker 1 (08:01):
Yeah, got it all right? Good stuff, Dwayne, Why don't
you jump in here too. I don't know if you
want to pick up on any of this related to
the IRA and Medicaid. And then obviously, the other big
issue this week was executive order that President Trump signed
I think on Monday regarding most favorite nation status for drugs,
and you had a nice note out on the terminal
(08:22):
today with the headline quote how Trump's MFN might find
its way into IRA drug negotiations end quote. So it
all sort of ties in together, it seems.
Speaker 5 (08:33):
Yeah. So thanks, I'll pick up where Nathan leftoff and
talk about the Medicaid ACA side of things. I think
when you think about the hospitals and the health insurers,
they probably did better than folks maybe thought going into this.
So if you think about the hospitals and you know,
(08:55):
thinking about HCA's and tenants of the world, the biggest
concerns they had were how Medicare pays for services and
outpatient and patient settings. They're different, and there's been a
desire to to close that gap, which could have been
a worst case scenario or outcome one hundred and fifty
(09:15):
billion dollars over ten years. That's a lot of lost
revenue coming from the hospital secutor that's not in there.
There are provisions relating to how states pay for their
portion of Medicaid spending, the scheme that's called provider taxes.
There are limits in current law, and there was some
(09:35):
fear amongst providers that there be lower limits on that,
so that requires states to pony up more money to
fund their program that's not in there. But there's a
limit on a new provider taxes, so to the extent
that there is a recession or a budget shortfall, these
(09:56):
states can't rely on those kind of schemes to fund
their Medicaid. And there are some other things on the
hospital side, but by and large they do fairly well
coming out of this bill. On the health insurance side,
I think people will gravitate to the number of people
who will be uninsured compared to if this bill hadn't
(10:18):
passed or the policies hadn't passed don't pass and it's
roughly about seven to eight million people over a ten
year period. Now that's probably on the face of it,
that's not good for those individual people. But when you
think about how Republicans get there by not going after
the Medicaid expansion program, which there was some fear there,
(10:41):
block raining was never really a fear, but some other
issues or other policies. They do implement work requirements for
the Medicaid population and there are some significant savings there,
but that by and large everybody assumed what happened. So
while most of these savings do come from Medicaid. It's
(11:02):
not as bad as it could be, but it's still
going to be a challenge, especially when you think about
for ensures. What's not in this bill and may never
happen is an expansion of the or extension of the
ACA subsidies that expire at the end of the year.
So it's probably a good outcome for hospitals, a mixed
(11:23):
outcome for insurers. But to Nathan's point, this is just
the first step. We're early innings, and depending on how
the conversations go with the Deaf sitt Hawks and the Senate,
some of these policies that we're talking about now that
aren't in the bill may find their way into the
version that goes to the President for a signature. So
(11:46):
we'll be following this as this plays out over the
coming coming weeks and months. But I do want to
flag two things that are drug pricing related. One of
them is actually in the Higher or the Reconciliation Bill
and providing some expansion of protections for operent drugs from
(12:08):
price cuts in the IRA. I think that's low hanging fruit,
and we may see in addition to that some protections
for drugs based on how long they've been on the market,
the whole pill penalty, small molecule versus large molecule disparity,
that's not in there, but this could find its way
in there. I think it will at the end of
(12:28):
the day now going to Monday or earlier in the
week where the President announced his most Favored Nations policy.
I think it's let's say a couple of things. One,
no surprise that the president's going down this wrote. He
tried to do this during his first term. He wasn't
(12:50):
able to the court's blockne this time around, there was
a lot of fear of the worst case outcome that
he was going to actually implement an MFN on the
spot and start the rulemaking process. That didn't really happen either,
which is why we saw the pharma stocks search after
his announcement. So, like any executive order, it doesn't have
(13:12):
the force of law. But this executive order is defanged
in a lot of ways because it really says HHS
Secretary Kennedy start to discussion on forcing companies to set
their prices to those overseas and there's little detail as
(13:32):
to the size and scope of those drugs and there's
also little detail of what happens if the farmer companies
don't negotiate those prices down, and so there's the threat
of rulemaking down the road. In my view, this is
all is set up for the Inflation Reduction Act, because
(13:54):
negotiation is on the next fifteen party. Drugs are already underway,
and while the IRI Statute doesn't have anything in there
about mfn or OUs prices, there's nothing stopping them. The
administration I basically looking over to Canada or any European country,
(14:15):
Australia or whatever, basically saying well, this is what they're paying.
We'll do an average. We're not going to tell you
that's what we're doing because that's not in the statute,
but we'll get there eventually. And if it's all about optics,
the objects of making demands and the objects of getting
what you say you want it at the beginning of
(14:35):
the conversation, this is a perfect setup for in November,
when those prices are announced, the President basing saying, hey, look,
I told the companies to come in and negotiate prices
that are closer to what they're paying overseas, and I
got it now. I think if you're following the IRA.
It's take your or leave it for these drug companies,
and if you don't like it, you can pull all
(14:56):
your products from the Medicare program. It's not going to happen.
So we'll see at the end of the day how
far the President and the White House are willing to
go to drive down prices, because one central key component
of this is the IRA sets a ceiling but not
a floor. So time will tell how they're willing to
(15:18):
go about this.
Speaker 1 (15:19):
Do you anticipate lawsuits and do you think there's any
legal problems with that approach?
Speaker 5 (15:24):
Well, so we know that there are lawsuits now over
various definitions of the IRA. I think everything is on
the table for litigation as it relates to as it
relates to the law, and pricing in and of itself
(15:45):
was not an issue once Biden announced. But if we
start to see huge discounts off of net prices that
actually do resemble what's being paid overseas, and the rationale
for setting those prices in really clear, I think the
door is open to that. But the truck companies have
been very unsuccessful so far. Lawsuit sure, it's possible. How
(16:11):
successful they'd be You know we'll have to wait and
say got it?
Speaker 1 (16:16):
All right, great stuff, all right, thanks to Wayne. All right,
let's bring in uh Jenree and Justin TREESI our anti
trust analysts. They've both been down in DC for I
don't know, it seems like a while now, several weeks. Right,
you're you're, You're both in the same courthouse, but in
different courtrooms, analysts passing in the night. I guess in
(16:40):
the halls of the what is it the Brett Perryman Building?
Speaker 4 (16:44):
Is that all right? Pretty much?
Speaker 1 (16:45):
Pretty pretty man? Yeah, I always mess that up. Okay,
which one of you wants to go first?
Speaker 5 (16:51):
Well?
Speaker 2 (16:51):
I will, This is Jen. I will say that given
how many computer scientists from mi T were testifying at
my trial, it seemed longer than three weeks.
Speaker 1 (17:00):
Sounds like a set up for a joke.
Speaker 2 (17:01):
It was a little bit like an episode of Big
Bang Theory. So right, switching gears and moving to something
that's even slower than Capitol Hill. And that's anti dress litigation.
What I was listening to at the courthouse in Washington,
d C. Was a remedies hearing in the United States
Department of Justice lawsuit against Google over illegal monopoly maintenance
(17:22):
of its search engine. Now it's a remedies hearing because
for anyone who may not know, I mean, it's been
widely publicized, but for anyone who may not know. Back
in the third quarter of twenty twenty four, a judge
ruled that Google was illegally maintaining its monopoly and search
and search search text ads, and it was doing this
by basically blocking out search engine rifles, being and Duck
(17:43):
dot Go really are the main two rivals it has
in the search engine world, and it was doing that
by sort of creating agreements, getting into agreements that were
taking all of the search access points available to consumers,
search apps, browser apps, sery, alexa, et cetera. They pay
the browser developers billions of dollars to place Google Search
(18:03):
as the default option, right, and they also were giving
revenue shares for advertising revenues to the OEMs, the makers
of the Android bones to pre install Chrome and pre
install Google Search and not to install rival browsers or
search engines. And so what this really meant is that
the only time people used bing or Ductugo was really
if the person went in and took the steps to
(18:23):
change their default, which a lot of people don't know
they can do or don't know how to do, or
maybe they use the Microsoft Edge browser and things already
the default there. But really those two companies weren't getting
a lot of searches and they couldn't improve without the
data that they would get from the searches. So now
the judge has to decide what to do about it,
and the DJ's really asked for an extensive list of actions.
(18:44):
They want the judge to force Google to sell Chrome,
that would be a big one. They want to force
Google to share a lot of user and advertiser data
as well as it's search index with these rival search engines.
And they want Google to be prohibited from provider anything
of value to browsers or OEMs or other third parties
to essentially favor Google Search and disfavor competitor search engines.
(19:07):
They want to remove these barriers to entry right and
break down these walls so that others can new search
engines could come in, AI can flourish, because because AI
actually does work with search engines, it's not really a replacement.
I kind of learned in this trial. And and by
the way, all of these remedies would extend to Google's
AI products as well, and you know, right and right now,
(19:28):
we learned that it is currently in the process of
asking OEMs to pre install its Gemini chatbot app in
the Android phones that they make, and also they're trying
to get an agreement with Apple for Gemini to be
part of Apple Intelligence. Apple Intelligence doesn't have a large
language model behind it, so it's basically got an agreement
already now with open Ai, and it will make agreements
(19:49):
maybe with Perplexity, maybe with Gemini so that people use
Apple Intelligence and want access to that sort of broader
AI product, confuse to use one of those others.
Speaker 1 (19:58):
Wow.
Speaker 5 (19:59):
Yeah, it's a big deal.
Speaker 4 (20:00):
Yeah, it's a big deal.
Speaker 2 (20:01):
It really is. And of course Google says all of
this is overkill and it should be able to do
really whatever it wants to.
Speaker 1 (20:08):
And I mean, but they were unliable, so I mean
they must they must have, they must have to come
up with sort of some sort of remedy, but not
anything that egregious.
Speaker 2 (20:17):
You know, that's exactly right, Elliot. What they're saying is, well,
we should really be able to keep paying revenue shares
for companies that use Google Search, but just make it
non exclusive, right, in the bath past, these agreements were exclusive.
We should just make it non exclusive. So in other words, OEMs,
we're not going to make and put any conditions on
you pre installing Gemini. You can you can have Android,
you have the license to Android, you can have YouTube,
(20:39):
you can put Chrome on, you can put Gemini on,
but we're not going to tell you can't put open
Ai on or Perplexity or anybody else, right, which is
what they kind of did before. So you know, our
view after listening to the trial and reading transcripts, really
is that the judge, I think, as you would expect,
is going to meet them in the middle. That's what
I think, and I thought that going in and I
(20:59):
still think it coming out. I don't think Google's going
to have to sell Chrome. I do think it's going
to have to share some of its search data, which
it really doesn't want to, but I think it will,
and also stop paying for this preferential and default treatment
for Google Search. And I do think the judge is
probably going to require Google to provide choice screens as
well for default search engines. For Chrome users can't bores
(21:20):
Apple to do anything with Safari, but Chrome is a
Google product. Now Google internally modeled the impact of loss
of default positions at a net loss of twenty eight
to thirty two billion dollars, So that's a pretty big impact.
I was surprised by that because I would think even
without paying for those default positions, people will still continue
to use BING. Nonetheless, it'll be about what people do
(21:43):
when these remedies have to go into effect. The judge
said he's going to decide in August, and once that
decision comes out, Google's likely going to appeal and try
to stay the remedy pending the appeal, So we'll find
out this year.
Speaker 1 (21:55):
That was going to be my nice question. So decision
in August, are they still closing all you? And so
ahead of that ye?
Speaker 2 (22:01):
May thirtieth, okay, yeah, and then that's it, and then
after that some briefing post trial briefing, and then we'll
get the decision.
Speaker 1 (22:07):
And then a decision when everyone's on vacation exactly, All right,
good stuff. And that's judge Meta, right, yes, which is
my segue to justin who's covering FTC versus Meta? Not
the judge but the company.
Speaker 4 (22:21):
I haven't heard that joke before, Elliott. That's the first
time anybody said that the last few weeks.
Speaker 1 (22:25):
Noah, I'm sure, yeah, yeah.
Speaker 4 (22:27):
So yeah, piggyback in what Jen said. You know, I've
been attending the FDC versus Meta anti trust trial and
DC and this case really involves the acquisitions Meta made
over a decade it now a decade ago now of
WhatsApp and Instagram, in charging that those acquisitions were anti
competitive in nature, the reason being allegedly that that Meta
(22:48):
made these acquisitions in an effort to kill competition for
these nason competitors that were growing rather rapidly at the time.
So moving forward here, the FTC is resting its case
now and are our review is largely unchanged from the
first week of the trial, that being that we really
do give Meta the advantage here and its effort to
defeat these claims right now, holding about a sixty percent chance,
(23:11):
we think that Meta is able to do so through
the conclusion of this trial and the main reasons why
there are two of them. Number one, you know, the
FTC really has been able to put on you know,
a host of evidence through bad documents and some live
witness testimony saying that look, you know, these acquisitions might
have been made with this anti competitive intent, right, that
(23:31):
there might have been this desire to cush this competition
before it really got off the ground. But even that
being the case, even if that intent was in fact there,
in many ways we think that's a bit of relevant
because the reality is, you know, it's really difficult to
point to these actual consumer harms here in this case
that outweigh the actual benefits that have been conferred upon
consumers through the Metas acquisition of these two apps. We
(23:54):
don't really know what's app or Instagram would look like
today in a BUTT four world. If there's a positions
had never taken place, there's a high chance that neither
of those apps would even exist anymore today if those
acquisitions hadn't actually taken place. So that's really been on
the minds a lot of folks in the courtroom. It's
been really elicited from the testimony that we just don't
know what that world would actually look like. But through
(24:16):
the case, you know, on that point, you know, we've
really seen the STC put forward this evidence, right, we'd
have witnesses on this dand saying, look, there was this
kind of bad intent here on the part on the
part of Meta or there were things that Meta did
once it acquired Instagram and WhatsApp that really wasn't to
the benefit of Instagram or WhatsApp. But you know, for
whatever forward kind of whatever, whatever progress the STC has
(24:39):
made with regard to that testimony, the cross exams have
been really good, I would say, in kind of dialing
that back, and really by the time witnesses have been
done on this dand things have really been a bit
of a wash, and I don't think the FDC's case
has really been forwarded in a way where those again,
those antiqu competitive anti competitive conduct might have outweighed the
pro competitive benefit.
Speaker 1 (25:00):
It's here, and just to jump in those witnesses are
these experts, are these inside company insiders or what?
Speaker 4 (25:06):
Yeah? Yeah, so both And you know, I'll point to
the example to two particular examples for witnesses here where
that's really been the case. The first is Kevin Systrom,
who is the actual founder of Instagram, right, and he
was at the company for a good six years after
the sale of Instagram to Meta. You know, when he
took the stand, he really had expressed his view that
he thought, you know, whether tubris or not, he thought
(25:26):
Instagram really could have survived on its own here, right,
and that even though Meta might have conferred some benefits
upon the company when it made its acquisition that you know,
Instagram could be alive and thriving today if that buy
never happened. But across exam, you know, Meta was really
successful I think in getting system to say, look, no,
there were these benefits that we actually did receive here.
(25:46):
You know, there are all these new features that were
added to Instagram after that acquisition took place. And you know,
at the time of the acquisition, Instagram was having a
really hard time with spam right there. There was a
huge problem on the app with that and once it
Meta made the acquisition, they were able to clean up
those issues really quickly and allowed Instagram to thrive and
focus on other aspects of its business. So that's one
(26:07):
example there. The same really from Adam as Ai who's
heading Instagram right now, same kind of viewpoint that you
know for all of the kind of detracting in a
way that Meta might have done from Instagram. Around twenty eighteen,
when it was worried that Facebook, Facebook's main app wasn't
really getting the traction need of the time, there were
just all of these different these benefits conferred to Instagram,
they were added reels for example, that really gave it
(26:28):
the ability to compete against TikTok. So really, you know,
the witnesses took the sand, they said what they said,
but by the time cross examination was finished, things kind
of washed out.
Speaker 1 (26:38):
So this is interesting these two When is the two
you just mentioned, this is ft This is the FTC's case, right, Yes,
and yeah, And they called them as witnesses. Are they
call I mean, this is sort of like sort of
too nerdy, but are they calling them as hostile witnesses
and then essentially asking them cross examination questions and then
meta comes in and basically does it direct on them?
Speaker 4 (27:00):
Yeah, you've got it. That's exactly the way that it's
kind of gone.
Speaker 3 (27:03):
Right.
Speaker 4 (27:03):
They called Mark Zuckerberg for example too in Shales and
Berg the first week of the trial. So that's exactly
how it's been planning out thus far. And the majority
of the witness is called by the FTC have been
those company insiders, right, And I think they feel like
we have these bad documents here, right, So that's how
we're going to get them into evidence, is to have
these folks come and talk about these emails that might
have said, you know, a decade ago, but that's how
(27:25):
it's rolling out, you know. I think there's also vulnerability
here for the FTC with regard to its market definition.
You know, there's been a lot of testimony, you know
about you know, how things have evolved since this case
was brought, and in many ways, if we were trying
this case maybe in twenty twenty or twenty twenty one,
before TikTok really got off the ground, you know, the
FTC might have a better, you know, better chance of
(27:45):
being victorious at trial. The reason being that so much
of this activity that you're seeing on Instagram is really
morphed into this kind of real based you know, consumption
of content that's not connected to friends and really as
a head on a head competitor a TikTok, much more
than it might be to Snapchat or another social media
kind of traditional social media service.
Speaker 1 (28:03):
So interesting, all right, So just quickly, what what what's next?
Speaker 5 (28:08):
Yeah?
Speaker 4 (28:08):
So at the trial should wrap I think within the
next couple of weeks, probably the first or second week
of June at latest, and then I think we can
expect a decision from Judge Boseberg by the end of
the year in liability.
Speaker 1 (28:18):
Sounds good. All right, well, thank you Justin and Jen.
All right, so Matt Shettenhelm, let's we'll move on from
anti trust and talk a little bit. Well, well, we'll
move from tech anti trust to other tech related issues.
You had a headline in a note that you wrote today.
(28:40):
I think it was today, Maybe it was yesterday, and
it was The headline was EchoStar encircled by SCC's inquiry,
but risk of licensed loss low. What what is? What
is EchoStar? Maybe start there and then what is the
SCC trying to do?
Speaker 6 (28:57):
Yeah, I think you know, building off of Jen and
Justin's discussion, if you go back to the to the
big T Mobile Sprint deal that had to win antitrust
approval a couple of years ago, the only way that
the FCC and the dj would approve that is if
they said, we need to create a fourth competitor, which
is Dish to provide broadband service. Dish has since been
(29:21):
acquired by EchoStar, and so the company has been working
to become a fourth broadband provider to compete with T Mobile,
AT and T Verizon. It's been building out its network
since twenty nineteen and it has, you know, thirty billion
dollars worth of FCC licenses that it's acquired over the
(29:45):
past you know, decade or so to do that. And
so that's why this attracted so much attention this week
when Brendan Carr came out with a letter to the
company and also the opening of two dockets at the FCC,
(30:05):
and the more important of those two was to take
a look at whether the Biden era FCC properly granted
an extension to Dish for its final build out deadline
to finish that broadband network. And so what they did
last November September, I believe it was was was to say, look,
(30:27):
we'll give you two more years to finish up that
the deadline was supposed to be June twenty twenty five.
Everything's operational, You're going to have seventy percent coverage in
every market. EchoStar came in and said, look, we're not
quite there because of COVID, because of supply shortages and
things like that. We need two more years in a
number of these markets. The Biden FCC granted that now
(30:51):
there's a risk of a reversal on that from this FCC,
which is being pushed by SpaceX that want access to
these licenses, you know, to the same band of spectrum.
All of a sudden there's pressure from this FCC and
so what the technical step that's happened is there is
a reconsideration of that grant of that three year delay,
(31:14):
and so there's the risk worst case scenario. What does
this mean for EchoStar is that the FCC comes back
and says, nope, we reconsider that grant to that extension.
June twenty twenty five is your deadline to build the
whole thing, and FCC rules says if you don't meet
that deadline, you lose your license. So you invested thirty
(31:35):
billion dollars in these licenses, you lose them automatically by law.
Speaker 1 (31:40):
How I mean, can Echo start challenge that. It seems like,
you know, they sort of relied on this previous approval
by the Biden administration and now there's sort of you know,
getting the rug pulled.
Speaker 6 (31:49):
Out absolutely, and so that's sort of you know, the
immediate reaction in the market was pretty severe when you
saw these headlines because it's it's such an important asset
to to think about losing these licenses entirely and technically
it's true that if you don't, you know, I think
the SCC can reconsider it's deadline, and technically, if you
don't meet the milestone, you lose the licenses. But the
(32:11):
technical I think is a little different than the reality
because there is going to be a court sitting behind
anything the FCC does here, and I think it's going
to have major due process concerns. If the FCC were
to come out and take the hard line that hey,
that extension we granted, forget about it, you're back to
(32:32):
June twenty twenty five the end. The Court's not going
to go for that. So I think as a practical matter,
Echo Star is going to have you know, maybe less time,
maybe not three years that it was granted by the
Biden administration. It's going to have pressure, but I think
it's going to the FCC is going to have to
act reasonably in everything it does here to avoid, you know,
(32:55):
claims that it's acting in an arbitrary way or violating
due process. So I think that that's sort of my
big picture takeaway. Maybe this isn't as severe as it
initially looked, but it is a risk to the company,
and clearly the signals are bad. From Brendan Carr, certainly
he's looking to align with SpaceX, maybe not so interested
(33:17):
in facilitating this broadband network to be a success as
much as he has been in the past.
Speaker 1 (33:24):
So you think without SpaceX and the picture, this might
not have happened.
Speaker 6 (33:28):
I mean, it's that certainly was a driver of it,
because you can look through recent filings at the FCC
and see, you know, letter after letter from SpaceX saying, look,
Echo Stars not not using this frequency the way it
should be, and we we would and and and so
I certainly think that it's it's a very likely catalyst
(33:51):
for for what's been going on at the FCC on
this issue. I think it will continue to play a
factor as we go ahead.
Speaker 1 (34:00):
And then, I mean June twenty twenty five is coming up, right,
I mean it's today's May fifteen, so we're almost there.
So what happens next is it just like a series
of letters back and forth and then the FCC decide.
Speaker 6 (34:12):
So what the FCC did this week is it created
a comment period on that petition for reconsideration of the extension.
And that comment period runs through from late May to
mid June, almost right until I think June fourteenth was
the technical deadline, so I think the comment period closes
a little bit before June fourteenth. In theory, the FCC
(34:33):
could act pretty quickly. Then this is all done at
the staff level, at the bureau level, so you don't
need a full commission vote on this stuff. So in theory,
if Brendan Carr really wanted to play hardball, he could
act in June and just say you know, your deadline's
back in place. I don't think he's going to do that,
but that's what we'll be watching is how quickly will
(34:56):
the FCC act on this. I don't know that it
will be in June would be, but I think it
will be shortly thereafter where there's some sort of action.
I think the FCC is probably going to have to
go for some sort of, you know, a tougher deadline
than three years from now, but not imminent. I think
that there will be pressure on the company h but
but not in an imminent threat of hey, you're going
(35:17):
to lose your licenses.
Speaker 1 (35:19):
I'm envisiting Elon Musk getting like a million people to
write a letter in favor of a SpaceX.
Speaker 4 (35:25):
Yeah.
Speaker 6 (35:25):
Yeah, it would wouldn't wouldn't surprise me at all.
Speaker 1 (35:28):
All right, well that's super interesting and mark and market
moving right because all right, well, great stuff all around,
Thank you everybody. I think we'll leave it there. We'll
wrap up this episode of Votes and Verdicts as always,
thank you for listening. If you have any questions about
any of the matters that we discussed on today's episode,
please don't hesitate to reach out to us with any
(35:49):
questions that you have. As a reminder, you can find
all of our research on the Bloomberg terminal at BI
go or on our litigation and policy dashboard at BI
laws go, and we always encourage you to listen to
other episodes of Votes and Verdicts on whatever platform you
like to get your favorite podcasts. Thanks for listening and
have a great day.
Host
Elliott Stein
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