Latest / Bloomberg Law / Meta on Trial & What Can Blue States Do?

Transcript

Meta on Trial & What Can Blue States Do? · Bloomberg Law

• 0:02
  Speaker 1: This is Bloomberg Law with June Grosseol from Bloomberg Radio.
• 0:08
  Speaker 1: We're going to work with President Trump to push back
• 0:11
  Speaker 1: on governments around the world. They're going after American companies
• 0:14
  Speaker 1: and pushing to censor more.
• 0:17
  Speaker 2: Meta's Mark Zuckerberg has been courting President Donald Trump since
• 0:21
  Speaker 2: his election, scrapping his platform's content moderation policies on Facebook, Instagram,
• 0:27
  Speaker 2: and threads, donating one million dollars to Trump's inauguration, and
• 0:33
  Speaker 2: visiting the White House several times in recent weeks. Despite
• 0:37
  Speaker 2: all that, the historic anti trust case against Meta that
• 0:41
  Speaker 2: was started in the first Trump administration went to trial
• 0:45
  Speaker 2: this week in Washington, d C. As the Federal Trade
• 0:49
  Speaker 2: Commission tries to force Metta to divest Instagram and WhatsApp,
• 0:54
  Speaker 2: and Mark Zuckerberg was the first witness the government called
• 0:58
  Speaker 2: joining me is anti Trump? Law expert Harry First, a
• 1:01
  Speaker 2: professor at NYU Law School, Harry, what's the main issue
• 1:05
  Speaker 2: the FGC has to prove? Here?
• 1:08
  Speaker 1: There are a few main issues. The first issue is
• 1:10
  Speaker 1: the definition of the market. So the question is who
• 1:14
  Speaker 1: are Facebook's competitors? That sort of in some ways a
• 1:17
  Speaker 1: simple question. Who will consumers turn to? What sellers? If
• 1:22
  Speaker 1: the sellers they're looking at offers a bad deal. Usually
• 1:26
  Speaker 1: it's raises price, they switch to something else. We do
• 1:29
  Speaker 1: this all the time. So the question is who are
• 1:31
  Speaker 1: the rivals of Facebook and who do consumers switch to
• 1:36
  Speaker 1: if they wanted to switch. Market definition always critical issue
• 1:41
  Speaker 1: in any trust cases, and the first issue to resolve.
• 1:44
  Speaker 1: The second issue is are they a monopolists in this market?
• 1:47
  Speaker 1: You know, do they have a large enough share of
• 1:50
  Speaker 1: the market. Is it hard to enter the market so
• 1:53
  Speaker 1: they can sort of have power to do what they want?
• 1:56
  Speaker 1: Do we see them doing the bad things that monopolists do,
• 2:00
  Speaker 1: which often means, you know, selling something at a high price.
• 2:03
  Speaker 1: Of course, Facebook says, hey, we give our thing away
• 2:07
  Speaker 1: for free. So what's their problem? And then the third
• 2:10
  Speaker 1: thing is, okay, if they are monopoly with monopoly power,
• 2:14
  Speaker 1: have they engaged in anti competitive conduct that excludes competitors
• 2:19
  Speaker 1: unreasonably from the market? Engage in some exclusion And so
• 2:24
  Speaker 1: that's the third thing, and that's where the acquisitions of
• 2:27
  Speaker 1: Instagram and WhatsApp come in.
• 2:30
  Speaker 2: Let's start with the market definition, which was one of
• 2:33
  Speaker 2: the key points Zuckerberg was questioned about. So tell us
• 2:37
  Speaker 2: how the FTC and Meta are viewing the market.
• 2:42
  Speaker 1: So the big argument is does Facebook compete with YouTube
• 2:46
  Speaker 1: and Twitter, because YouTube and Twitter have huge numbers of users,
• 2:52
  Speaker 1: and Facebook contends that the market is you know, whatever
• 2:58
  Speaker 1: it was, maybe intoy eleven. Now there are lots of
• 3:02
  Speaker 1: competitors and Facebook is doing things similar to particularly TikTok.
• 3:08
  Speaker 1: So the Federal Trade Commission has called the market we
• 3:11
  Speaker 1: always love these names and any trust, the Personal Social
• 3:15
  Speaker 1: Networking Services market, and then they use an acronym, so
• 3:19
  Speaker 1: you think it's something special, the PSN market, and basically
• 3:23
  Speaker 1: that's friends and family, you know where Facebook started out
• 3:26
  Speaker 1: putting people together and creating the social network, as the
• 3:31
  Speaker 1: name of that movie was way back at the start.
• 3:35
  Speaker 1: So this is the market now updated by name personal
• 3:39
  Speaker 1: social Networking services, and the Federal Trade Commission says that's
• 3:43
  Speaker 1: really the core of their services and it's not something
• 3:45
  Speaker 1: that actually other platforms except for Instagram offer They don't
• 3:50
  Speaker 1: really offer that sort of friends and family networking, and
• 3:54
  Speaker 1: TikTok doesn't really follow people, but you know, not for
• 3:57
  Speaker 1: keeping up on what your high school buddies are doing.
• 4:00
  Speaker 1: So the first question is how how broad is that market?
• 4:04
  Speaker 1: And it's complicated by a couple of things that Facebook's done.
• 4:08
  Speaker 1: They do have a chat function, Messenger, so that might
• 4:12
  Speaker 1: bring in you know, other you know chat platforms Apple
• 4:16
  Speaker 1: for example. Or they do have reels, which are you know,
• 4:21
  Speaker 1: these short videos. Of course that's TikTok, and that was
• 4:25
  Speaker 1: an effort to compete with them. So Facebook says, hey,
• 4:29
  Speaker 1: you know, lots of choices for consumers. They don't want
• 4:31
  Speaker 1: to watch reels on Facebook, they go to TikTok and
• 4:35
  Speaker 1: vice versa. So we have to include them in the market,
• 4:38
  Speaker 1: says Meta. And you know, that's what a lot of
• 4:41
  Speaker 1: the argument's going to be with data and consumer surveys
• 4:45
  Speaker 1: and so forth. And the analogy that the Commission has
• 4:49
  Speaker 1: used and I think will continue to use is supermarkets.
• 4:53
  Speaker 1: So there was a famous case involving Whole Foods and
• 4:57
  Speaker 1: an acquisition that Whole Foods did, and the market that
• 5:02
  Speaker 1: the Federal Trade Commission called it and that they won
• 5:07
  Speaker 1: was the PNOS market got it premium natural organic supermarkets.
• 5:14
  Speaker 1: And when Whole Foods made this acquisition of another market
• 5:19
  Speaker 1: like that, they said, ah, that's the market. Other supermarkets
• 5:22
  Speaker 1: are not in this market, you know, like stopping shopper
• 5:26
  Speaker 1: and so forth. And the court in which this case
• 5:29
  Speaker 1: is being tried. The PC Circuit accepted that definition, and
• 5:33
  Speaker 1: the point is sort of a simple one. Yeah, they've
• 5:35
  Speaker 1: got lots of things in the supermarket, but you go
• 5:37
  Speaker 1: to certain supermarkets sort of a core of users for
• 5:42
  Speaker 1: a core of things. So you go to Whole Foods
• 5:45
  Speaker 1: because you like to pay high prices. Oh wait a minute,
• 5:47
  Speaker 1: that's wrong. You go to Whole Foods because you want
• 5:50
  Speaker 1: the organic, natural, premium stuff that they specialize in, and
• 5:54
  Speaker 1: then you buy milk. So you know, you go to
• 5:57
  Speaker 1: Facebook because you want to communicate with your friends and
• 6:00
  Speaker 1: family and then you know, maybe you'll look at some
• 6:03
  Speaker 1: reels or maybe do some other things or what whatever
• 6:05
  Speaker 1: other feeds they've got, but the core is still that.
• 6:08
  Speaker 1: So that's going to be the legal and sort of
• 6:11
  Speaker 1: factual contention that the parties are going to litigate over
• 6:15
  Speaker 1: during the course of this trial.
• 6:17
  Speaker 2: Yeah, and Zuckerberg said that Facebook's feed has turned away
• 6:22
  Speaker 2: from family and friends and toward quote more of a
• 6:26
  Speaker 2: broad discovery entertainment.
• 6:28
  Speaker 1: Space, right, yeah, yeah, they sure we compete with television, Yeah,
• 6:34
  Speaker 1: and tennis and the national football They're not going to
• 6:37
  Speaker 1: go that far. But you know, the game if you
• 6:40
  Speaker 1: want to call it that. But The idea is you
• 6:42
  Speaker 1: broaden out. Consumers do have lots of choices, do do
• 6:46
  Speaker 1: different things, and they you know, they don't only look
• 6:50
  Speaker 1: at Facebook, and Facebook over time has tried to bring
• 6:55
  Speaker 1: more things within its ecosystem, within the platform and to
• 6:59
  Speaker 1: keep people centered on Facebook. So they're gone into virtual reality.
• 7:04
  Speaker 1: That's why Zuckerberg renamed the company Meta because he wants
• 7:09
  Speaker 1: the metaverse so true that you know, but that doesn't
• 7:13
  Speaker 1: take away from the fact that they still sell groceries,
• 7:16
  Speaker 1: you know. You know, they may want to have espressos,
• 7:18
  Speaker 1: you know, in the grocery store, but they're not an
• 7:21
  Speaker 1: espresso store, so you know, they still sell their core
• 7:24
  Speaker 1: function and that's why people put up with all the
• 7:27
  Speaker 1: junk pardon my French that they see with these ads constantly.
• 7:33
  Speaker 1: Can barely find things, you know, summing through all the
• 7:37
  Speaker 1: ads that you get fits, so people still stick with that.
• 7:42
  Speaker 2: So how do you show that Meta is a monopolist?
• 7:46
  Speaker 1: Yeah, this is a good question. A normal way is
• 7:49
  Speaker 1: by what is referred to as the structure of the market.
• 7:52
  Speaker 1: So what's their share of the market and how easier
• 7:57
  Speaker 1: hard is it for others to enter the market and
• 8:00
  Speaker 1: reduce their power. So if it's very easy to enter,
• 8:03
  Speaker 1: and you have one hundred percent of the market, you
• 8:06
  Speaker 1: don't really have much power because someone can come in
• 8:08
  Speaker 1: tomorrow and just wreck your plans. So you sort of
• 8:12
  Speaker 1: look at both things, and they'll measure shares by daily
• 8:16
  Speaker 1: average users and monthly average users doors and mows. You know,
• 8:21
  Speaker 1: how long do people stay, what's their engagement? They've got
• 8:24
  Speaker 1: all sorts of data about that, and they're going to
• 8:26
  Speaker 1: fight over how much of that time is spent on
• 8:30
  Speaker 1: friends and family, and how much of that time is
• 8:32
  Speaker 1: spent on let's say, reels or advertising or the news
• 8:37
  Speaker 1: feed or whatever. And so maybe the share isn't so hard,
• 8:41
  Speaker 1: so they'll look at market share. The judges already in
• 8:45
  Speaker 1: the past have refused to dismiss the case on sort
• 8:49
  Speaker 1: of arguments they don't have a monopoly share. But you
• 8:52
  Speaker 1: have to work through the facts and now convince the
• 8:54
  Speaker 1: judge with all the data and how easier heart is
• 8:57
  Speaker 1: it to get in well. Last, and you try to
• 9:00
  Speaker 1: start a PSN company, it's pretty tough given the number
• 9:06
  Speaker 1: of users they have and the unwillingness of people to
• 9:10
  Speaker 1: you know, sort of move all their photos and information
• 9:12
  Speaker 1: to some other platform. There's another way of proving it.
• 9:15
  Speaker 1: The other is you act like a monopolist. You have
• 9:18
  Speaker 1: high prices. So since there are no prices, and the
• 9:21
  Speaker 1: Federal Trade Commission is saying they take it out by
• 9:24
  Speaker 1: degrading the product, they don't give us the privacy we'd like,
• 9:28
  Speaker 1: and they increase the ad load so you get more
• 9:32
  Speaker 1: and more ads. That seems like an easy one to me,
• 9:36
  Speaker 1: for what little I use Facebook. But there'll as soon
• 9:39
  Speaker 1: be some evidence and testimony about the extent to which,
• 9:42
  Speaker 1: over time Facebook serves its users who think they're getting
• 9:46
  Speaker 1: something for free, more and more ads that they've got
• 9:49
  Speaker 1: to go through and maybe they'll click on. Facebook says, hey,
• 9:53
  Speaker 1: that's a service. People love ads. I'll leave that to
• 9:56
  Speaker 1: the judge to decide.
• 9:57
  Speaker 2: But yeah, in the opening state, Meta's attorney said, quote,
• 10:03
  Speaker 2: a lot of people find them useful, even entertaining. I
• 10:07
  Speaker 2: guess I'm just not one of those people.
• 10:09
  Speaker 1: Yeah, advertising, you know, is information, but good lord, ad
• 10:14
  Speaker 1: load is just well anyway, they can argue over that,
• 10:17
  Speaker 1: and they're going to, you know, make those arguments to
• 10:19
  Speaker 1: the judge. But it strikes me as a heavy lift
• 10:23
  Speaker 1: for Facebook at some point to say that all these
• 10:26
  Speaker 1: ads which we serve you because you happen to have
• 10:30
  Speaker 1: clicked on one thing and then that's all you see
• 10:33
  Speaker 1: for a while. That that's a great thing.
• 10:36
  Speaker 2: Stay with me, Harry coming up next on the Bloomberg
• 10:39
  Speaker 2: Lawn Show, I'll continue this conversation with Professor Harry First
• 10:43
  Speaker 2: of NYU Law School. How important is Zuckerberg's testimony and
• 10:48
  Speaker 2: if the judge finds against Meta, my trump step in.
• 10:52
  Speaker 2: I'm June Grosso. When you're listening to Bloomberg, I've been
• 10:56
  Speaker 2: talking to Professor Harry First of NYU Law School. The
• 11:00
  Speaker 2: FTC has some smoking gun emails from Meta executives, including Zuckerberg,
• 11:07
  Speaker 2: particularly one from twenty twelve where he described the Instagram
• 11:11
  Speaker 2: deal as a way to quote neutralize a competitor.
• 11:15
  Speaker 1: Yeah, that's a good one. Yeah. I could see the
• 11:18
  Speaker 1: lawyers looking at that going, oh my god, Zuckerberg, did
• 11:23
  Speaker 1: you write that. There's a good reason why that would
• 11:25
  Speaker 1: be called a smoking gun because it shows, you know,
• 11:28
  Speaker 1: not every acquisition that a major platform or a monopoly,
• 11:32
  Speaker 1: let's say, makes is illegal. It's not illegal for that reason.
• 11:36
  Speaker 1: Firms make acquisitions all the time. The ones that are
• 11:39
  Speaker 1: illegal in this context are those that are done to
• 11:43
  Speaker 1: snuff out a threat to the monopolist. It's a, as
• 11:46
  Speaker 1: they said, a buyer bury strategy. They would just buy
• 11:49
  Speaker 1: up the competitions they were worried about. So on its
• 11:52
  Speaker 1: face it could be neutral. Well, they made an acquisition,
• 11:55
  Speaker 1: what the heck? And maybe they have some alleged good reasons.
• 11:59
  Speaker 1: But then you re the email in Zuckerberg says, hey,
• 12:01
  Speaker 1: we're you know, we're worried about this company. Let's we
• 12:04
  Speaker 1: better buy it. And their effort at incorporating photographs into
• 12:10
  Speaker 1: Facebook and making it the kind of thing that Instagram
• 12:13
  Speaker 1: was doing was not going well. So they were really
• 12:16
  Speaker 1: being challenged by Instagram. And you know, they responded to
• 12:19
  Speaker 1: that challenge not by making a better product, but by
• 12:23
  Speaker 1: buying their competitor. Classic move, but not a competitive move.
• 12:28
  Speaker 1: It's an anti competitive move, so the government says, and
• 12:31
  Speaker 1: so Mark Zuckerberg apparently said.
• 12:34
  Speaker 2: Is Zuckerberg the most important witness or not?
• 12:38
  Speaker 1: Really, It's hard for me to say exactly. I'm sure
• 12:40
  Speaker 1: that Cheryl Sandberg, who ran a lot of the business,
• 12:44
  Speaker 1: will be a very important witness. I mean, they have
• 12:47
  Speaker 1: flashy emails from Zuckerberg, and I don't know who the
• 12:51
  Speaker 1: more maybe some of the more current operating people, because
• 12:55
  Speaker 1: one of the things sort of as a psychological point,
• 12:58
  Speaker 1: I think the Commission's points the Commission going to make
• 13:01
  Speaker 1: It's not a question that was then and this is now.
• 13:03
  Speaker 1: It's a question of this as always. So they got
• 13:07
  Speaker 1: their monopoly, they maintained it by these acquisitions, and then
• 13:11
  Speaker 1: they've stuck as a monopolist, not as a real competitor.
• 13:16
  Speaker 1: And you know, maybe their platforms have changed over time
• 13:20
  Speaker 1: a little bit, but it's still the same basic playbook
• 13:24
  Speaker 1: that they're following. So I'm looking to see you know,
• 13:27
  Speaker 1: some that more recent testimony and some other executives have
• 13:31
  Speaker 1: to say, but particularly Sheryl Samberg and.
• 13:34
  Speaker 2: Matt Is arguing that Zuckerberg's past statements are no longer
• 13:37
  Speaker 2: relevant because of competition from TikTok YouTube.
• 13:42
  Speaker 1: Yeah, so that was then, this is now. So you know,
• 13:45
  Speaker 1: he wrote that then and maybe he was concerned and
• 13:49
  Speaker 1: maybe should have been, maybe shouldn't have been, But you know,
• 13:52
  Speaker 1: now the competitive environment looks very different, and you know,
• 13:56
  Speaker 1: we're in a world where particularly TikTok but also YouTube,
• 14:01
  Speaker 1: you know, consumers have lots of choices when they you know,
• 14:05
  Speaker 1: look at these media and less and less as the choice.
• 14:09
  Speaker 1: Because I want to be sure, I'm in you know,
• 14:12
  Speaker 1: a friends group with my grandma. It's I want these
• 14:15
  Speaker 1: quick entertainment reels. I'm following performers. I want to know,
• 14:20
  Speaker 1: you know, how to do something. And so the tension,
• 14:24
  Speaker 1: which is, you know, in some sense what the limit
• 14:27
  Speaker 1: is on what people can do, attention has shifted from
• 14:33
  Speaker 1: you know, your father's or grandfather's product, which was Facebook,
• 14:37
  Speaker 1: to you know, these other alternatives.
• 14:40
  Speaker 2: Where does it fit in that the FTC had a
• 14:44
  Speaker 2: chance to challenge the deals for Instagram in twenty twelve,
• 14:48
  Speaker 2: then for whatsappened twenty fourteen.
• 14:52
  Speaker 1: Well, so, first of all, legally it doesn't matter when
• 14:56
  Speaker 1: the Federal Trade Commission or the Justice Department reviews emerge
• 15:00
  Speaker 1: before it's consummated. All they do is look at it
• 15:04
  Speaker 1: to see whether they want to bring suits in. They
• 15:07
  Speaker 1: don't approve mergers, so in some sense it doesn't matter
• 15:11
  Speaker 1: that they passed at that time, but it does cast
• 15:16
  Speaker 1: a psychological poll a bit over the case. You know, well,
• 15:22
  Speaker 1: if it was so obvious that this was, you know,
• 15:24
  Speaker 1: trying to snuff out a Nason competitor, how come you
• 15:27
  Speaker 1: didn't see it? Both of them? It's not like these things,
• 15:31
  Speaker 1: you know, they didn't come across your desk you had
• 15:34
  Speaker 1: never heard of Facebook. I mean, so I think that's
• 15:37
  Speaker 1: part of the poll, even though that doesn't matter, and
• 15:42
  Speaker 1: it can later turn into something that was any competitive.
• 15:46
  Speaker 1: So what I'd assume that that Facebook will try to
• 15:52
  Speaker 1: do is to say, well, that wasn't the deal. Then
• 15:56
  Speaker 1: it wasn't clear they were nason competitors. You don't want
• 15:58
  Speaker 1: to quash companies from acquiring small companies. It's important for innovation,
• 16:04
  Speaker 1: and now to turn around, you know, a decade plus
• 16:07
  Speaker 1: later and say guess what, now we don't like it.
• 16:11
  Speaker 1: Maybe maybe that's not the best approach to antitrust. And
• 16:17
  Speaker 1: it may come up, particularly even if it doesn't come
• 16:20
  Speaker 1: up on liability directly, I'm sure that it's going to
• 16:23
  Speaker 1: come up on remedy when they get to that that
• 16:28
  Speaker 1: you know, time will be an important part of the
• 16:30
  Speaker 1: theme in remedy. If Facebook does lose a.
• 16:34
  Speaker 2: Trial, so remedy. Speaking of remedy, is it an existential
• 16:39
  Speaker 2: threat to Meta or more than that? Estimates say that
• 16:42
  Speaker 2: it earns about half of its advertising revenue from Instagram.
• 16:46
  Speaker 1: Well, I don't know the exact numbers. That sounds plausible,
• 16:50
  Speaker 1: and I don't know the extent to which those numbers
• 16:53
  Speaker 1: are US only, you know, I mean, Facebook's worldwide, so
• 16:58
  Speaker 1: an existential threat you know, probably not, but maybe a
• 17:04
  Speaker 1: threat in terms of future development of AI. I don't
• 17:09
  Speaker 1: know's it's obviously important. They certainly are fighting hard to
• 17:12
  Speaker 1: hold on to both of these acquisitions. So if they
• 17:17
  Speaker 1: do lose on liability, that's sort of an obvious remedy,
• 17:24
  Speaker 1: but not necessarily going to be the one the court
• 17:27
  Speaker 1: will accept. So the threat is a potential threat, important threat,
• 17:33
  Speaker 1: But there are lots of steps before we would see,
• 17:38
  Speaker 1: you know, an order to separate those companies, because.
• 17:41
  Speaker 2: A breakup of that size hasn't happened since AT and
• 17:45
  Speaker 2: T forty years ago.
• 17:47
  Speaker 1: Well, we haven't taken on companies of this size. We
• 17:51
  Speaker 1: did take on Microsoft, didn't order structural relief. The AT
• 17:56
  Speaker 1: and T breakup was by agreement. I mean, it was
• 17:59
  Speaker 1: a result of litigation in a sense, but it was
• 18:02
  Speaker 1: not a decree entered by a court after losing a case.
• 18:08
  Speaker 1: So we don't do divestitures that often, you know, not never,
• 18:14
  Speaker 1: it does get done, but this is certainly of an
• 18:17
  Speaker 1: important magnitude, and you know, puts the court in a
• 18:21
  Speaker 1: difficult role of trying to separate companies that Facebook frankly
• 18:26
  Speaker 1: has done its best to schmush together, to use the
• 18:29
  Speaker 1: technical term. So I think that their operations are very
• 18:33
  Speaker 1: integrated and part is I think probably a conscious effort
• 18:38
  Speaker 1: to make it harder to disintegrate them. So yeah, it
• 18:42
  Speaker 1: would be difficult. There's a famous line that divestiture is
• 18:46
  Speaker 1: a remedy, not a penalty, and Jedge learning Hand said
• 18:50
  Speaker 1: that after the alcoholic case. So even if they broke
• 18:54
  Speaker 1: the law quote unquote found to have violate the Clayton Act,
• 18:59
  Speaker 1: that doesn't mean that, you know, the government is entitled
• 19:03
  Speaker 1: to this remedy. They still will have a tough fight
• 19:07
  Speaker 1: to get the court to do this.
• 19:09
  Speaker 2: Can we read anything into the fact that Judge Bosberg
• 19:14
  Speaker 2: has sounded skeptical about the FTC's case. He dismissed the
• 19:19
  Speaker 2: initial case in twenty twenty one, and in November he
• 19:22
  Speaker 2: said the agency faces hard questions about whether it's claims
• 19:27
  Speaker 2: can hold up in the crucible of trial.
• 19:30
  Speaker 1: Right, Well, he's running the crucible so like an Arthur
• 19:33
  Speaker 1: Miller play. So Judge Boseburg, just you know from reading
• 19:39
  Speaker 1: his opinions, is sharp, he's critical. He is not a
• 19:46
  Speaker 1: pushover for the government. But he's not a pushover for
• 19:49
  Speaker 1: the defendants either, So you know, I read this as
• 19:54
  Speaker 1: saying he'll come out with an opinion that will prove
• 19:59
  Speaker 1: challenge for the losing party on appeal, wherever that is.
• 20:04
  Speaker 1: And I don't predict that he's necessarily going to come
• 20:07
  Speaker 1: out in favor of Facebook, frankly, because he's been willing
• 20:10
  Speaker 1: to accept, at least as a legal matter, important arguments
• 20:14
  Speaker 1: from the government and dismissed some of Facebook's defenses. And
• 20:19
  Speaker 1: you know you're not going to fool a judge.
• 20:23
  Speaker 2: Finally, Harry, So suppose Judge Bosburg does rule for the government.
• 20:29
  Speaker 2: Mark Zuckerberg has been closing up to President Trump for
• 20:33
  Speaker 2: a while now. Could Trump bail Meta out?
• 20:38
  Speaker 1: I guess the answer is short, At least at this point,
• 20:42
  Speaker 1: he has pretty much seized control. I don't know what
• 20:45
  Speaker 1: you want to call it, a hostile takeover, whatever takeover
• 20:48
  Speaker 1: of the Federal Trade Commission. He fired the two Democratic
• 20:52
  Speaker 1: members of the commission. Two commissioners supposed to be balanced
• 20:58
  Speaker 1: bipartisan commission fire the two for no reason other than
• 21:02
  Speaker 1: the Democrats. The chair is slavish in his praise of
• 21:06
  Speaker 1: the President. I think that's a fair word. I have
• 21:09
  Speaker 1: to say. So, yes, I think Trump could very well
• 21:14
  Speaker 1: order whatever he wanted to order, and if the chairman
• 21:18
  Speaker 1: or the other commissioners didn't want to go along, you
• 21:20
  Speaker 1: can just fire them. At least that's how he sees
• 21:22
  Speaker 1: the law. It may turn out that that's not going
• 21:25
  Speaker 1: to be the law. Maybe the Supreme Court is going
• 21:27
  Speaker 1: to not take that final step in terms of ending
• 21:31
  Speaker 1: the independence of regulatory agencies, but we'll have to see.
• 21:36
  Speaker 1: That's in litigation. But if he has control, then he
• 21:40
  Speaker 1: can do that. Even before he did try to pressure
• 21:43
  Speaker 1: in his first administration, pressure the chair of the Federal
• 21:47
  Speaker 1: Trade Commission, who resisted things. But now the ability and
• 21:51
  Speaker 1: willingness of the chairman who resists whatever the president wants
• 21:55
  Speaker 1: is zero. So we'll just have to see. That's said.
• 21:57
  Speaker 1: I'm not quite sure I know or understand, and maybe
• 22:01
  Speaker 1: the President doesn't either what he might want and what
• 22:04
  Speaker 1: he would pressure the Federal Trade Commission to do. Obviously
• 22:08
  Speaker 1: he's not pulled the plug on this litigation, which he
• 22:10
  Speaker 1: could have, so we'll just have to see how it goes.
• 22:14
  Speaker 2: So he's great to talk to you, Harry, Thanks so much.
• 22:16
  Speaker 2: That's Professor Harry First of NYU Law School. Coming up
• 22:20
  Speaker 2: next on the Bloomberg Law Show, it seems like President
• 22:24
  Speaker 2: Trump is targeting blue states? How can they fight back?
• 22:29
  Speaker 2: I'm June Grosso. When you're listening to Bloomberg, is President
• 22:34
  Speaker 2: Trump's blue state bias? Showing some of his recent actions
• 22:38
  Speaker 2: seem to be targeting blue states? Like a Department of
• 22:42
  Speaker 2: Health and Human Services funding cutoff that closed offices in Boston, Chicago,
• 22:48
  Speaker 2: New York City, San Francisco, and Seattle, all cities in
• 22:52
  Speaker 2: blue states. But even if Trump is singling out blue
• 22:56
  Speaker 2: states in his retribution campaign, what can they do about it?
• 23:00
  Speaker 2: My guest is retired federal judge Nancy Gertner, a senior
• 23:04
  Speaker 2: lecturer at Harvard Law School. She's a co author of
• 23:08
  Speaker 2: a Bloomberg Law legal insight piece entitled Trump's Blue State
• 23:13
  Speaker 2: Bias could rip the US apart? Judge, can you start
• 23:17
  Speaker 2: by telling us about some of Trump's actions targeting blue states?
• 23:22
  Speaker 3: Well, the most recent one was when he closed five
• 23:27
  Speaker 3: of the ten AHHS offices, and significantly, the five were
• 23:34
  Speaker 3: all in blue states. In addition, he has suspended the
• 23:38
  Speaker 3: funding for various kinds of programs to hospitals. But really
• 23:43
  Speaker 3: he's listening, we believe, only to the red states that
• 23:47
  Speaker 3: are begging for these this to return. So there was
• 23:51
  Speaker 3: you know, Katie Britt from I think it was Alabama
• 23:54
  Speaker 3: calls him, you know, terre and state, and we believe
• 23:57
  Speaker 3: that he will do that. So he's basically pulling out
• 24:00
  Speaker 3: federal funds who advantage the red states over the blue
• 24:05
  Speaker 3: and we think that that's going to be a pattern
• 24:06
  Speaker 3: going forward. You know, the pattern has not been completed.
• 24:09
  Speaker 3: We haven't seen all aspects of it, but clearly this
• 24:13
  Speaker 3: is what we have seen so far, particularly the thing
• 24:15
  Speaker 3: that happened ten days ago with respect to AHHS. I mean,
• 24:19
  Speaker 3: why do you shut down the regional offices that do
• 24:23
  Speaker 3: the most business, the most business namely you know, New York, Boston,
• 24:29
  Speaker 3: San Francisco, Seattle. I think Chicago was one of them
• 24:33
  Speaker 3: as well. I mean, it's really pretty transparent what's going on?
• 24:36
  Speaker 2: And what does the Supreme Court said about the federal
• 24:39
  Speaker 2: government's requirement to treat states the same?
• 24:45
  Speaker 3: Well in a decision that I mostly disagreed with, which
• 24:48
  Speaker 3: is the Shelby County decision that was dealing with the
• 24:51
  Speaker 3: preclearance requirement of the voting right fact. The preclearance requirement
• 24:55
  Speaker 3: of the voting right fact was a requirement that really
• 24:58
  Speaker 3: reflected discrimination against black people that had occurred in certain
• 25:03
  Speaker 3: states in the South, that was documented, that was well known.
• 25:07
  Speaker 3: The Supreme Court eliminated Preclearance, which basically was a situation
• 25:11
  Speaker 3: in which the government would review any changes in voting
• 25:14
  Speaker 3: rights procedures in those states to make certain that it
• 25:18
  Speaker 3: didn't continue to disadvantage black people or didn't redisadvantage black people.
• 25:23
  Speaker 3: And what happened was the Court eliminated that preclearance requirement
• 25:27
  Speaker 3: on the theory that there was a requirement of equal
• 25:31
  Speaker 3: treatment of all states. And so if that is a
• 25:34
  Speaker 3: principle reaffirmed now only a few years ago, then Trump
• 25:38
  Speaker 3: simply does not have the right to discriminate against blue
• 25:42
  Speaker 3: states in favor of red. He can't use the federal
• 25:46
  Speaker 3: spending power to disadvantage blue states at the expense of red.
• 25:51
  Speaker 2: I've lost track of how many of his executive orders
• 25:53
  Speaker 2: have been challenged, and many of them have been found
• 25:57
  Speaker 2: to be unlawful or unconstantitutional by lower courts. But the
• 26:02
  Speaker 2: administration has not been following all the orders of the
• 26:07
  Speaker 2: lower courts. Have we reached a constitutional crisis yet?
• 26:11
  Speaker 3: I don't think there's any doubt that we are in
• 26:13
  Speaker 3: a constitutional crisis, whatever the name you put on it.
• 26:17
  Speaker 3: I don't think that there's any doubt so far, there
• 26:19
  Speaker 3: isn't a situation, you know, with a Southern politician now
• 26:22
  Speaker 3: barring federal truths from coming into Mississippi or Georgia or
• 26:26
  Speaker 3: Alabama or anything like that. That's not what we have
• 26:29
  Speaker 3: seen yet. What we have seen, as with for example,
• 26:33
  Speaker 3: the most recent case of mister Abrago Garcia, this is
• 26:36
  Speaker 3: an individual who is wrongly deported to El Salvador. What
• 26:42
  Speaker 3: we have seen is the government effectively ignoring a Supreme
• 26:46
  Speaker 3: Court decision. We've seen the government effectively ignoring decisions of
• 26:51
  Speaker 3: the lower courts. We've seen sophistry an outright lying. The
• 26:56
  Speaker 3: sophistry is describing the Spring Court's decision in a way
• 26:58
  Speaker 3: which is patently false, patently false. You know, they're saying
• 27:02
  Speaker 3: things like the Supreme Court, in dealing with the Abrallo
• 27:05
  Speaker 3: Parcia case, didn't really demand that the government do anything,
• 27:09
  Speaker 3: but only they can passively make certain that if Elsa
• 27:14
  Speaker 3: was a release as a man, he could come into
• 27:16
  Speaker 3: the countries. I mean, that's absolutely not what the Supreme
• 27:19
  Speaker 3: Court said. It's not at all what the Supreme Court said,
• 27:22
  Speaker 3: So that's sort of really sophistry in dealing with Supreme
• 27:26
  Speaker 3: Court decisions, and then there's been outright ignoring and disobedience
• 27:30
  Speaker 3: of them. You know, in the cases involving the funding freeze,
• 27:35
  Speaker 3: a court will require that the funding be restored, the
• 27:39
  Speaker 3: losses dealing with the funding freezes on government funds across
• 27:43
  Speaker 3: the country, and the government is just ignoring it, just
• 27:47
  Speaker 3: ignoring it, requiring you know, courts to essentially get to
• 27:51
  Speaker 3: the point to the moment of contempt. So I don't
• 27:55
  Speaker 3: think there's any question we're in a constitutional crisis when
• 27:58
  Speaker 3: the government can as they did in the Oval Office
• 28:03
  Speaker 3: yesterday in the meeting with El Salvador Buquele about again
• 28:08
  Speaker 3: this gentleman Albrego Garcia, when the government can lie flat
• 28:11
  Speaker 3: out that he had been found to be an MS
• 28:15
  Speaker 3: thirteen member, not true anywhere that the government can lie
• 28:20
  Speaker 3: about his arrangements with Bouquele. I don't think there's any
• 28:24
  Speaker 3: doubt that we're in a constitutional crisis.
• 28:27
  Speaker 4: You talk about the misinterpretation of the Supreme Court decision,
• 28:30
  Speaker 4: not only by the Attorney General Pam Bondi, but by
• 28:34
  Speaker 4: Stephen Miller, who said the Supreme Court rule for US
• 28:37
  Speaker 4: unanimously right.
• 28:39
  Speaker 3: Again, this is not even close to true. It's just
• 28:42
  Speaker 3: not even when the Supreme Court says the government has
• 28:45
  Speaker 3: to facilitate its return, and clearly in the context of
• 28:48
  Speaker 3: a decision that is about how there was no right
• 28:52
  Speaker 3: to deport him, when they say he has to facilitate
• 28:55
  Speaker 3: his return, that doesn't mean, well, El Salvador, if you
• 28:59
  Speaker 3: wish to send him, we will allow him in. It's
• 29:03
  Speaker 3: clear that it's meant more than that. It meant affirmative
• 29:06
  Speaker 3: steps to right or wrong. The government was responsible for
• 29:10
  Speaker 3: a wrong and they had to take affirmative steps to
• 29:13
  Speaker 3: write it. I mean. Also, the notion that this is
• 29:16
  Speaker 3: a foreign policy issue is pure poppycock. This is a
• 29:20
  Speaker 3: commercial issue. This is not like returning Brittany Griner from Russia,
• 29:26
  Speaker 3: which was a matter of delicate diplomatic negotiations. This is
• 29:30
  Speaker 3: about a commercial contract between a two big dictator and
• 29:34
  Speaker 3: the United States dealing with a contract for six million
• 29:38
  Speaker 3: dollars to receive deportees from the United States. And clearly
• 29:42
  Speaker 3: the United States has rights under the contract and the
• 29:46
  Speaker 3: United States has power if in the meeting before the
• 29:50
  Speaker 3: public meeting yesterday, Trump had said to Bouquele return this guy,
• 29:55
  Speaker 3: it would have been over. It would have been over.
• 29:58
  Speaker 3: And the fact that they don't need and think that
• 30:01
  Speaker 3: this is a wrong that needs to be righted is stunning.
• 30:06
  Speaker 2: So in the article you talk about tax dollars, how
• 30:09
  Speaker 2: could Blue states use the taxes they pay into the
• 30:12
  Speaker 2: treasury to retaliate.
• 30:15
  Speaker 3: Every state is an employer, and it is oftentimes the
• 30:18
  Speaker 3: major employer in any given state. And as with any employer,
• 30:22
  Speaker 3: the state has to withhold money for federal taxes. And
• 30:26
  Speaker 3: in the case of the Blue states that we mentioned,
• 30:29
  Speaker 3: it is a substantial amount of money. In fact, as
• 30:31
  Speaker 3: we note in the article, the Blue states are net donors.
• 30:36
  Speaker 3: In other words, they give more money to the federal
• 30:39
  Speaker 3: government than they get in the form of services. Now,
• 30:42
  Speaker 3: it would be illegal, and I have to say that
• 30:46
  Speaker 3: quite candidly, for the Blue States to withhold federal dollars.
• 30:51
  Speaker 3: In other words, the withholding that you do on your taxes,
• 30:55
  Speaker 3: you withhold for the purpose of turning it over to
• 30:57
  Speaker 3: the federal government at the appropriate time. This would be
• 31:01
  Speaker 3: illegal to withhold it, frankly, until the government makes the
• 31:06
  Speaker 3: allocations among the states equal. It would certainly be illegal.
• 31:09
  Speaker 3: But it is leverage what we say, and the piece
• 31:12
  Speaker 3: is that the government, if they continue to favor Red
• 31:15
  Speaker 3: states over blue, will be acting illegally and unconstitutionally, and
• 31:20
  Speaker 3: so we speculate that this is something the Blue states
• 31:23
  Speaker 3: could do, although it is illegal.
• 31:26
  Speaker 2: And California has a ballot issue where voters are already
• 31:30
  Speaker 2: considering this right.
• 31:31
  Speaker 3: There's a ballid issue where the voters are not considering
• 31:35
  Speaker 3: withholding tax dollars, California ballot initiative goes even further. The
• 31:40
  Speaker 3: ballot initiative is to secede from the Union, which is extraordinary.
• 31:45
  Speaker 3: It's asking the voters to endorse the idea of secession.
• 31:49
  Speaker 3: It's not clear what legal authority that would have, but
• 31:53
  Speaker 3: that's certainly what California voters are indulging in. Again, you know,
• 31:57
  Speaker 3: both withholding federal tax dollars and obviously seceding from the
• 32:01
  Speaker 3: Union are patently illegal. But the notion here is the
• 32:05
  Speaker 3: government is behaving illegally. Were they to punish Massachusetts and California,
• 32:11
  Speaker 3: for example, in favor of the Red states, the government
• 32:14
  Speaker 3: is behaving blatantly illegally. And to your question about constitutional crisis,
• 32:19
  Speaker 3: there's a question. When the government behaves illegally, citizens have
• 32:23
  Speaker 3: to decide what to do. Citizens have to decide what
• 32:26
  Speaker 3: the appropriate response is. And make no mistake, this government
• 32:30
  Speaker 3: is behaving illegally on numbers of fronts, as numbers of
• 32:34
  Speaker 3: federal courts have found.
• 32:36
  Speaker 2: Do you think that this is the most serious constitutional
• 32:40
  Speaker 2: crisis we face since the Civil War?
• 32:43
  Speaker 3: I think that that's true. It's one thing to have,
• 32:46
  Speaker 3: you know, the pictures of the Southern States defying a
• 32:51
  Speaker 3: constitutional directive to desegregate, requiring troops to be sent to
• 32:57
  Speaker 3: Southern states to enforce the prog vision against segregation. That
• 33:02
  Speaker 3: was a confrontation as between a unified federal government and
• 33:06
  Speaker 3: particular states. This is a confrontation between the federal government
• 33:12
  Speaker 3: as a whole individuals, and a confrontation between the federal
• 33:16
  Speaker 3: government as a whole and the states. It's about to
• 33:19
  Speaker 3: involve almost every aspect of our lives. The federal government
• 33:24
  Speaker 3: is asserting control over universities. The federal government is seeking
• 33:27
  Speaker 3: to control who is in the country and who is not,
• 33:31
  Speaker 3: seeking to control who is a citizen, and flouting the
• 33:34
  Speaker 3: Constitution in numbers of ways. So I mean this is
• 33:38
  Speaker 3: both the scope of the disobedience the scope of the
• 33:41
  Speaker 3: violations by the federal government on every front. So yes,
• 33:46
  Speaker 3: I would call it the most serious constitutional crisis in
• 33:49
  Speaker 3: the Civil War.
• 33:50
  Speaker 2: It seems like Trump threatens and it seems like he's winning.
• 33:54
  Speaker 4: In a lot of respects because, for example, law firms
• 33:58
  Speaker 4: the biggest law firms in the country, you have decided
• 34:01
  Speaker 4: to give him close to a billion dollars in free
• 34:06
  Speaker 4: legal services, and you have universities that have capitulated to
• 34:10
  Speaker 4: his demands. So it seems like there's less fighting back.
• 34:15
  Speaker 3: Well, I think we're beginning to see something different. And
• 34:17
  Speaker 3: let me make a more general point. So, the strength
• 34:20
  Speaker 3: of the United States is not just in representative government,
• 34:23
  Speaker 3: not just having Congress and the president elected by the people,
• 34:29
  Speaker 3: not just having local governments. The strength of the United
• 34:32
  Speaker 3: States is also having civil society, namely organizations like universities
• 34:38
  Speaker 3: and law firms that are independent of the government. They
• 34:41
  Speaker 3: stand for principles that the government can't control. So what
• 34:46
  Speaker 3: Trump has done is he's taken over the government we
• 34:49
  Speaker 3: elected him. That was the product of the voters, namely
• 34:52
  Speaker 3: that he has the House of Representatives, the Senate, and
• 34:55
  Speaker 3: the Lighthouse. But the judges are supposed to be independent,
• 34:58
  Speaker 3: and the judges have been holding the judges have reflected
• 35:01
  Speaker 3: that independence. What he is doing is trying to dismantle
• 35:04
  Speaker 3: civil society. And the way you dismantle civil society is
• 35:07
  Speaker 3: you dismantle the universities, and you dismantle the law firms.
• 35:12
  Speaker 3: Not dismantle exactly, but you sort of tried to co
• 35:14
  Speaker 3: opt the law firms. I think we're seeing a change now.
• 35:18
  Speaker 3: I think there was a certain kind of shock at
• 35:20
  Speaker 3: the beginning of this administration. People didn't quite understand how
• 35:24
  Speaker 3: far he was prepared to go. I think as the
• 35:26
  Speaker 3: firms that have sued the government for its illegal actions,
• 35:30
  Speaker 3: like Wilmer Hale, like Perkins Kohi, like the latest one
• 35:35
  Speaker 3: is Susman Godfrey, the firms that have stood up to
• 35:39
  Speaker 3: the government I think are going to be the wave
• 35:41
  Speaker 3: of the future. Three hundred and forty six retired federal
• 35:45
  Speaker 3: and state judges have signed on to brief supposing the
• 35:50
  Speaker 3: government's actions with respect to Perkins COOHI. Numbers and numbers
• 35:55
  Speaker 3: of people have signed on from all walks of life
• 35:58
  Speaker 3: to a Meeks brief. So the law firms, I think
• 36:01
  Speaker 3: are beginning to learn a different lesson. And Harvard's example
• 36:05
  Speaker 3: yesterday of standing up to Trump, I think will forecast
• 36:10
  Speaker 3: other universities doing exactly the same thing. I think that
• 36:13
  Speaker 3: people there was a certain amount of shock. Surely he
• 36:16
  Speaker 3: didn't mean to go as far as he went, was
• 36:19
  Speaker 3: the sense, And the answer is yes, he has an
• 36:23
  Speaker 3: indeed further.
• 36:24
  Speaker 2: Thanks so much for joining me tonight. That's retired Judge
• 36:27
  Speaker 2: Nancy Gertner a lecture at Harvard Law School. You can
• 36:31
  Speaker 2: read her column on the Bloomberg Terminal. It's entitled Trump's
• 36:34
  Speaker 2: bluestate bias could rip the US apart. And that's it
• 36:39
  Speaker 2: for this edition of The Bloomberg Law Show. Remember you
• 36:42
  Speaker 2: can always get the latest legal news on our Bloomberg
• 36:44
  Speaker 2: Law Podcast. You can find them on Apple Podcasts, Spotify,
• 36:48
  Speaker 2: and at www dot Bloomberg dot com, slash podcast slash Law,
• 36:54
  Speaker 2: And remember to tune into The Bloomberg Law Show every
• 36:56
  Speaker 2: weeknight at ten pm Wall Street Time in grosso and
• 37:00
  Speaker 2: you're listening to Bloomberg mm hmm