Latest / Bloomberg Law / Weekend Law: TikTok's US Ban Fight, Google's Antitrust Trial Begins & AI's Copyright Risks

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Weekend Law: TikTok's US Ban Fight, Google's Antitrust Trial Begins & AI's Copyright Risks · Bloomberg Law

• 0:02
  Speaker 1: This is Bloomberg Law.
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  Speaker 1: Bloomberg Law with June Grosso from Bloomberg Radio.
• 0:38
  Speaker 3: Welcome to Bloomberg Law. I'm Amie Morrison, Washington and for
• 0:41
  Speaker 3: June Grosso. June will be back next week. Now. Today,
• 0:45
  Speaker 3: we'll learn more about the case against TikTok and with
• 0:47
  Speaker 3: driving the push to get byte Dance to divest. We'll
• 0:51
  Speaker 3: also look at the Kroger Albertson's merger and the government's
• 0:54
  Speaker 3: fight to block that. But first, generative artificial intelligence has
• 0:59
  Speaker 3: radically transformed the world of digital images. You want to
• 1:01
  Speaker 3: make a website or a video, you can use an
• 1:04
  Speaker 3: AI program to quickly convert your idea into an image,
• 1:08
  Speaker 3: but you could also be unwittingly risking copyright infringement. Let's
• 1:12
  Speaker 3: bring in Brian Moriarty. He has a principle at Hamilton
• 1:15
  Speaker 3: Brooks Smith Reynolds and specializes in intellectual property law and counseling.
• 1:19
  Speaker 3: He wrote a column about this for Bloomberg Lawn and
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  Speaker 3: he joins us. Now, Brian, thank you so much for
• 1:24
  Speaker 3: joining us. Let's see if I understand this. When we're
• 1:27
  Speaker 3: talking about AI and images. The new image that I
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  Speaker 3: and my AI might have created can't be copyrighted because
• 1:37
  Speaker 3: the AI is not human. But that same image might
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  Speaker 3: also violate a copyright because of how the AI may
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  Speaker 3: have acquired it, and I might be unwittingly liable for that.
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  Speaker 3: Is that about right?
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  Speaker 4: That's that's completely right. And that was the point of
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  Speaker 4: the article, which is you think to yourself, well I can,
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  Speaker 4: and there's the AI machine that I use.
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  Speaker 5: I'm very visually oriented.
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  Speaker 4: I like to create images, you know, partly because I'm
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  Speaker 4: a trial lawyer.
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  Speaker 5: I like to use exhibits. I like to communicate with images.
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  Speaker 4: So you can say, show me Snoopy and Charlie Brown
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  Speaker 4: walking in the in the fall with leaves falling, and
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  Speaker 4: they will produce an image that may look just like
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  Speaker 4: Charlie Brown and Snoopy and you think, oh, that's cool.
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  Speaker 5: Everyone loves Snoopy and Charlie Brown. I'll use this image.
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  Speaker 4: Well that's where you have to stop what you're doing,
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  Speaker 4: because you will know that Charles Schultz and his empire,
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  Speaker 4: whoever owns Peanuts now has copyrights on every Charlie Brown image,
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  Speaker 4: every Snoopy image, and there are you know we can
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  Speaker 4: all actually envision in our mind. Oh yeah, I remember
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  Speaker 4: a picture of Charlie Brown and Snoopy with the great
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  Speaker 4: pumpkin patch and I think they were walking in the
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  Speaker 4: field and there was all these cool leaves, maybe they
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  Speaker 4: were in watercolor. And you said you, oh gosh, my
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  Speaker 4: new AI am it just looks just like that. And
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  Speaker 4: you say, just like that that those aren't the legal
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  Speaker 4: words of copyright infringement, but that is copyright infringement.
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  Speaker 3: Well let me stop you right there. What if you
• 3:14
  Speaker 3: had gotten asked AI to do an image of Charlie
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  Speaker 3: Brown water skiing. I'm almost positive I've never seen that before.
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  Speaker 3: Does that still infringe?
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  Speaker 4: It probably would if it's Charlie Brown because what cartoon
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  Speaker 4: images that are famous probably have broader rights than work
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  Speaker 4: by an unknown author because they have a certain equity
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  Speaker 4: in them, if you will, Because people, when you look
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  Speaker 4: at the image, the first thing you say is that's
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  Speaker 4: Charlie Brown water skiing. You don't say that's that's a
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  Speaker 4: picture of a boy water skiing.
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  Speaker 5: Interesting.
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  Speaker 2: I like it.
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  Speaker 4: You're you're going to focus on Charlie Brown and that
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  Speaker 4: Charlie Brown is copyrighted.
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  Speaker 5: But the issue for us is more of a business
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  Speaker 5: point of view.
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  Speaker 4: If you're a water skiing company and you're going to
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  Speaker 4: start a marketing campaign and you have this picture of
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  Speaker 4: Charlie Brown water skiing, well you may get suited for that.
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  Speaker 3: Now that AI has entered the picture, that adds a
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  Speaker 3: new facet to this. How has that changed things for
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  Speaker 3: you as someone who specializes in this kind of thing?
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  Speaker 3: Does it make it more complicated? Does it really tangle
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  Speaker 3: things up for the person who is unwittingly infringing on copyrightsyes?
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  Speaker 4: Well, first of all, a copyright is actually in the
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  Speaker 4: US constitution right, and it had a long history of
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  Speaker 4: that in the English common law. No copyright rights have
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  Speaker 4: been around, as you say, forever, But.
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  Speaker 5: It changes, It changes.
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  Speaker 4: The copyright picture because people will now use this. It's
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  Speaker 4: a fun new toy and it's very very useful. We
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  Speaker 4: can all create images for our business purposes without hiring
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  Speaker 4: an artist. We don't have to pay some artists to
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  Speaker 4: do it, and we we don't really need need.
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  Speaker 5: Permission from anyone. And so we make these rights.
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  Speaker 4: And there's a there's a whole industry out there that
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  Speaker 4: you probably don't know about. These are some people.
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  Speaker 5: Call them patrol lawyers, and.
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  Speaker 4: They'll they'll and it's particularly prominent in the area of
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  Speaker 4: photography and images. They will sue you without any notice
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  Speaker 4: or warning that you've engaged.
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  Speaker 5: In copyright infringement.
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  Speaker 4: If you take pictures from somebody and you publish them,
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  Speaker 4: you can be liable for copyright infringement and so but
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  Speaker 4: AI is, you know, will make more images, more available,
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  Speaker 4: more often. So this industry of copyright trol lawyers is
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  Speaker 4: going to keep busy and keep attacking people for in lawsuits.
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  Speaker 3: How has the law kept up with AI? Do you
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  Speaker 3: foresee new laws coming or laws that might have to
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  Speaker 3: change to manage these issues that come along with artificial intelligence?
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  Speaker 3: Sort of putting our ability to post other people's work,
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  Speaker 3: or to use other people's work and slap our name
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  Speaker 3: on it, sort of put it in hyperdrive. So can
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  Speaker 3: the law keep up? Does it need to keep up
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  Speaker 3: with that?
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  Speaker 4: Well, there's a major litigation in San Francisco now, and
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  Speaker 4: San Francisco is probably the home of yeah, it's not probably,
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  Speaker 4: it's the home.
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  Speaker 5: Of AI and computers and the.
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  Speaker 4: Whole industry, so it's appropriate that this litigation is there.
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  Speaker 4: It's a massive litigation. There are a group of lawyers
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  Speaker 4: suing representing authors, and they're also representing image makers.
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  Speaker 5: These are different cases.
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  Speaker 4: The authors are typically involved in copyright the theft of
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  Speaker 4: their texts and their expression of ideas, and image makers
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  Speaker 4: are more interested in the theft of their images. But
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  Speaker 4: the court is definitely changing the lawnown and trying to
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  Speaker 4: sort out what is really an infringement and what is not.
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  Speaker 4: And they're very difficult issues trying to figure it out
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  Speaker 4: that the cases we've talked about are more obvious. If
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  Speaker 4: you go use AI to create an image of Charlie Brown,
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  Speaker 4: you're probably going to have a major problem. If you
• 7:27
  Speaker 4: go take an image of some image of some character
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  Speaker 4: that's in a Hollywood movie, you're going to have a
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  Speaker 4: problem because the people that make those images protect them
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  Speaker 4: and they go after infringers.
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  Speaker 5: But when you take it to the next level, you're like, well,
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  Speaker 5: Charlie Brown water.
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  Speaker 4: Skiing the example you gave, that's not anyone's image.
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  Speaker 5: But then you get into the problem. Everyone knows it's
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  Speaker 5: Charlie Brown.
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  Speaker 4: You're trading off that image of Charlie Brown, and you're
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  Speaker 4: using it for your own purposes that I think you're
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  Speaker 4: just Charlie Brown as stopyright Maybe the water skiing part is,
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  Speaker 4: but his big bean head is definitely copyrighted.
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  Speaker 5: Everyone knows what his head works like and.
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  Speaker 4: You probably quiz like fifty people are like, yeah, I know.
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  Speaker 4: He wears a shirt with a black zigzag stripe and
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  Speaker 4: he's got like three hairs on his head and he
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  Speaker 4: always looks depressed.
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  Speaker 5: And you know, so if you do that, but the
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  Speaker 5: laws are going to change it to question that for sure.
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  Speaker 3: I was going to ask because we keep coming back
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  Speaker 3: to the Charlie Brown image because it's easy. But at
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  Speaker 3: the same time, everybody knows what it is is that
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  Speaker 3: the bar that has to be met.
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  Speaker 4: The test is pretty simple, is the is the alleged
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  Speaker 4: infringing activity substantially similar to the copyrighted work. So the
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  Speaker 4: first thing is the work has to be copyrighted. It's
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  Speaker 4: very unsettled with just using your voice, you know, to
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  Speaker 4: take it a step sideways here because it's easier to do.
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  Speaker 4: There's a lot of fine artists, painters, and that there's
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  Speaker 4: an industry where the computer looks at all their paintings
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  Speaker 4: and says, well, this guy uses this style of bruststroke,
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  Speaker 4: and when he uses crimson, he always uses yellow next
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  Speaker 4: to it, and the computer, the AI computer can mimic
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  Speaker 4: what the artist does. So they go out and sell it.
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  Speaker 4: And they say, well, you know, we can't use an
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  Speaker 4: old artist because like Picasso or something like that, because
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  Speaker 4: they probably don't have copyrights anymore. But say a modern artist.
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  Speaker 4: They'll sell pictures this is in the style of artist X,
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  Speaker 4: and people are like, oh, that's great, I love that
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  Speaker 4: guy style. The problem is the original artist who's the
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  Speaker 4: source of the style. He doesn't get any money, right
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  Speaker 4: because he has no copyrights. That AI created something very
• 9:50
  Speaker 4: similar to his that's not his art, of his work,
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  Speaker 4: but they copy his style.
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  Speaker 5: So that's one big issue.
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  Speaker 4: That's actually going to be litigated, is mimicking someone style
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  Speaker 4: so closely that people believe it's him.
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  Speaker 5: Is that copyright infringement? And right now that's an open question.
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  Speaker 3: Wow, so this is not anywhere near complete where we've
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  Speaker 3: got a long way to.
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  Speaker 4: Go with this, right Well, yeah, you have, you have
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  Speaker 4: lawyers and fighting and then you know the when you
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  Speaker 4: think about it, the real image making industry is Hollywood
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  Speaker 4: and the media, and.
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  Speaker 5: They put a lot of time and effort to make
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  Speaker 5: their images. That's their business.
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  Speaker 4: So they're not going to sit back and say, oh, well,
• 10:33
  Speaker 4: you know, he just copied it. Once you know, they
• 10:36
  Speaker 4: will fight you, as you probably know.
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  Speaker 3: Yeah, yeah, yeah, AI is turning into the full employment
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  Speaker 3: plan for attorneys everywhere.
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  Speaker 4: Yeah, and you know, a lot of like the plaintiffs
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  Speaker 4: in that case they call the AI infringement machines.
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  Speaker 5: Yeah, it's a little bit over the top, oh wow, but.
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  Speaker 4: Yeah, but also keep in mind, if you know, the
• 10:56
  Speaker 4: other point is you can use AI to create images
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  Speaker 4: nobody's ever seen before. They're not like anybody else and
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  Speaker 4: they're yours, but you can't copyright them.
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  Speaker 5: Got it?
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  Speaker 4: So it does I mean the overall view of AIS,
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  Speaker 4: it can create a lot of new images that.
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  Speaker 5: Don't have copyright problems.
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  Speaker 4: The problem occurs is when they're way too similar to
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  Speaker 4: what the prior images are.
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  Speaker 5: And I don't know if you want to get into
• 11:23
  Speaker 5: the training set.
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  Speaker 3: It sounds to me like as far as the law
• 11:27
  Speaker 3: is concerned, this is a work definitely in progress that's
• 11:30
  Speaker 3: only just now getting started. And from what you've tell
• 11:34
  Speaker 3: me and set me straight if I'm wrong about this,
• 11:36
  Speaker 3: it sounds like the legal profession is beginning to realize
• 11:39
  Speaker 3: that AI is going to change at least a chunk
• 11:44
  Speaker 3: of how the laws work because of the speed and
• 11:48
  Speaker 3: the efficiency and the way that AI works in its
• 11:52
  Speaker 3: own in its own right.
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  Speaker 5: You follow me, Yeah, they'll be changes. I mean, the
• 11:57
  Speaker 5: copyright law.
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  Speaker 4: Will be the same law, but how it's applied and
• 12:00
  Speaker 4: understood as applying to images we'll get tweaked. And the
• 12:06
  Speaker 4: courts need to create a standard that everyone understands so
• 12:09
  Speaker 4: they can use it. But they'll, you know what will happen.
• 12:13
  Speaker 4: It's in San Francisco case, maybe in a year or so,
• 12:16
  Speaker 4: they'll issue a big pronouncement about what they view the
• 12:18
  Speaker 4: law as. That'll go to the Ninth Circuit.
• 12:21
  Speaker 5: Which is the California Appeals Court.
• 12:23
  Speaker 4: And then that case or similar case we'll probably go
• 12:25
  Speaker 4: to the Supreme Court will ultimately start deciding what the
• 12:28
  Speaker 4: contours of AI and copyright.
• 12:30
  Speaker 3: Are our thanks to Brian Moury, already principal at Hamilton
• 12:34
  Speaker 3: Brooks Smith Reynolds specializing in intellectual property law and counseling.
• 12:38
  Speaker 3: Coming up, TikTok's day in court and later how the
• 12:42
  Speaker 3: Kroger Albertson's challenge is redefining the grocery store. That's next
• 12:46
  Speaker 3: on Bloomberg Law. I'm Amy Morris in for June Grosso.
• 12:49
  Speaker 3: This is Bloomberg.
• 13:02
  Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
• 13:08
  Speaker 3: This is Bloomberg Law. I'm Amy Morris and for June Grosso.
• 13:11
  Speaker 3: TikTok getting its day in court, a case that could
• 13:14
  Speaker 3: have big implications for the get tough on China mood
• 13:17
  Speaker 3: that is sweeping through Washington. Arguments began this past week
• 13:20
  Speaker 3: at the US Circuit Court of Appeals for the DC
• 13:23
  Speaker 3: Circuit in TikTok's challenge to a law that would ban
• 13:26
  Speaker 3: the social media app in the US unless it's Beijing
• 13:29
  Speaker 3: based parent company Byte Dance sells it. And now we
• 13:32
  Speaker 3: bring in Bloomberg Senior editor for Technology and Strategic Industries,
• 13:36
  Speaker 3: Michael Shepherd is going to set us all straight on
• 13:39
  Speaker 3: how this is going down. So, Michael, is that part
• 13:41
  Speaker 3: of the argument what we had said before, this get
• 13:44
  Speaker 3: tough on China sentiment that's helping drive this push to
• 13:47
  Speaker 3: get TikTok off of our phones unless byte Edance can
• 13:51
  Speaker 3: give it up.
• 13:52
  Speaker 6: Amy, you've hit the nail on the head there. This
• 13:55
  Speaker 6: really is part of the larger concern about the national
• 13:59
  Speaker 6: security risk posed by China to the US, and in
• 14:02
  Speaker 6: this case, policy makers have been arguing for several years,
• 14:07
  Speaker 6: really dating back to the Trump administration, that TikTok poses
• 14:11
  Speaker 6: a risk to national security on two fronts. First is
• 14:15
  Speaker 6: that TikTok, which we all know and many of us love, it,
• 14:20
  Speaker 6: gathers a lot of data on its users so that
• 14:24
  Speaker 6: it can power its algorithm to very specifically tailor the
• 14:29
  Speaker 6: videos and other content that are powered directly to users.
• 14:32
  Speaker 6: That's been the secret of its success, and that data
• 14:36
  Speaker 6: is something that policy makers here in Washington fear could
• 14:40
  Speaker 6: be taken back by its Chinese owners and shared with
• 14:44
  Speaker 6: the Chinese government. The second concern is about the use
• 14:47
  Speaker 6: of the platform as a means to convey Chinese propaganda
• 14:51
  Speaker 6: to users here, maybe not directly in terms of propaganda,
• 14:55
  Speaker 6: but more subtly on various issues, say the war in
• 14:59
  Speaker 6: Ukraine or what's happening in the Mid East. The concern
• 15:02
  Speaker 6: is that China may be able to use the platform
• 15:05
  Speaker 6: to influence public opinion.
• 15:07
  Speaker 3: Here, Okay, let's break all of that down, if you
• 15:09
  Speaker 3: don't mind, let's get into the national security concerns. Let's
• 15:13
  Speaker 3: start with the propaganda. That's the last thing you mentioned.
• 15:15
  Speaker 3: Do they have any evidence that that has been happening.
• 15:18
  Speaker 3: Have they started to see any of that sort of
• 15:20
  Speaker 3: trickling out and how does that work anyway?
• 15:23
  Speaker 6: Well, that's a great question, and that is one of
• 15:25
  Speaker 6: the arguments that TikTok has been putting forth. Where is
• 15:29
  Speaker 6: the evidence, first of all, justified this law that would
• 15:32
  Speaker 6: require a divestiture by January nineteenth. That's not much time
• 15:38
  Speaker 6: to sell an entity as big as TikTok, And the
• 15:41
  Speaker 6: company has been arguing that, Wait, you in Congress, as
• 15:44
  Speaker 6: you passed this law, did not show enough evidence that
• 15:47
  Speaker 6: this kind of manipulation, either the use of data or
• 15:50
  Speaker 6: misuse of data, was happening, or that there was some
• 15:53
  Speaker 6: sort of fiddling with the algorithm to favor China's government
• 15:59
  Speaker 6: one way or another. Saying that evidence wasn't there. However,
• 16:02
  Speaker 6: there were classified hearings held in Congress where members of
• 16:06
  Speaker 6: the administration from the national security community briefed members of Congress,
• 16:10
  Speaker 6: and members of Congress emerge from those meetings and said, yeah,
• 16:14
  Speaker 6: we really need to act. However, that evidence was never
• 16:17
  Speaker 6: really shared publicly in a public forum. For national security concerns.
• 16:22
  Speaker 6: You know, there are sources and methods that the government
• 16:24
  Speaker 6: wants to protect, and in court, the Justice Department filings
• 16:29
  Speaker 6: that refer to this evidence they've been redacted. So the
• 16:32
  Speaker 6: question is what will the public get to see and
• 16:35
  Speaker 6: how much of that will actually fully be shared in court.
• 16:38
  Speaker 3: It sounds like there are a lot of geopolitical implications
• 16:40
  Speaker 3: here anyway, that part of the broader struggle over tech
• 16:43
  Speaker 3: between the US and China, and this is a big
• 16:45
  Speaker 3: chunk of it. Does this just represent the bigger mountain
• 16:49
  Speaker 3: or is this the mountain?
• 16:51
  Speaker 6: This is part of the mountain. That's a good way
• 16:53
  Speaker 6: to put it, because there are so many areas where
• 16:56
  Speaker 6: the world's two largest economies, the US and China, are
• 16:59
  Speaker 6: compete in terms of technology, but also in terms of
• 17:04
  Speaker 6: just globally, in the Pacific Rim, in the Global South,
• 17:09
  Speaker 6: and we see it, for instance, in hard technology like
• 17:14
  Speaker 6: semiconductors and other sensitive equipment, you know, some of the
• 17:19
  Speaker 6: components that would go into electric vehicles. The US is
• 17:22
  Speaker 6: looking into restricting the presence of Chinese products for electric
• 17:27
  Speaker 6: vehicles into the US. So all of this fits into
• 17:30
  Speaker 6: the larger challenge and competition between the US and China
• 17:36
  Speaker 6: right now.
• 17:37
  Speaker 3: And you had mentioned that this dates back to the
• 17:39
  Speaker 3: Trump administration when he first started talking about TikTok being
• 17:43
  Speaker 3: a threat to national security. I remember that have we
• 17:46
  Speaker 3: seen issues about this before the Trump administration or is
• 17:50
  Speaker 3: TikTok a relatively new on this scene.
• 17:53
  Speaker 6: TikTok's relatively new on the scene, and it caught the
• 17:55
  Speaker 6: administration's eye around twenty nineteen, twenty eighteen, twenty nineteen, and
• 18:02
  Speaker 6: members of Congress also started paying attention. And it was
• 18:05
  Speaker 6: late in the Trump presidency that he actually signed an
• 18:08
  Speaker 6: executive order seeking to ban TikTok. However, that was voided
• 18:12
  Speaker 6: in court because lawyers for the company were able to
• 18:15
  Speaker 6: successfully argue that the president lacked the authority to be
• 18:20
  Speaker 6: able to issue and carry out that executive order. The
• 18:23
  Speaker 6: order wasn't written well enough to survive a court challenge,
• 18:27
  Speaker 6: and Similarly, the state of Montana also attempted to ban
• 18:30
  Speaker 6: the app that too, was overturned in court. What they've
• 18:34
  Speaker 6: tried to do with the law as written in Congress
• 18:37
  Speaker 6: and passed as part of a broader foreign aid package
• 18:41
  Speaker 6: in April, they have tried to make sure it was
• 18:45
  Speaker 6: sound enough to survive a challenge on First Amendment grounds
• 18:48
  Speaker 6: as we're seeing unfold now.
• 18:50
  Speaker 3: Well, that's what I wanted to ask about. Do they
• 18:52
  Speaker 3: have the company by dance? Does it have a legitimate
• 18:55
  Speaker 3: First Amendment argument?
• 18:56
  Speaker 6: That was an issue that came up in court pretty vigorously,
• 19:00
  Speaker 6: and the arguments from TikTok's lawyers were greeted with some
• 19:03
  Speaker 6: skepticism by the three judge panel here at the court
• 19:08
  Speaker 6: in Washington. One of the questions that came up was, well,
• 19:13
  Speaker 6: if it's is it really a Chinese company or is
• 19:17
  Speaker 6: it an American company? And if it's a Chinese company
• 19:22
  Speaker 6: doesn't have the same legal protections. That was one of
• 19:25
  Speaker 6: the questions that came up, and one of the judges
• 19:29
  Speaker 6: was musing about, you know how far these protections extend
• 19:34
  Speaker 6: to an entity that is in essence tied to a
• 19:40
  Speaker 6: foreign adversary, in this case China. The US government lawyers
• 19:44
  Speaker 6: also were subject to some tough questioning, and what they
• 19:48
  Speaker 6: wanted to emphasize is that they were not going after
• 19:50
  Speaker 6: a specific company an entity. They were going after the
• 19:54
  Speaker 6: actions and the conduct, and their concern is that because
• 19:57
  Speaker 6: of the Chinese ownership and the potential ties to Beijing
• 20:02
  Speaker 6: and the risk of China's government stepping in and asking
• 20:06
  Speaker 6: for data and somehow using the platform, it is really
• 20:10
  Speaker 6: more those actions that is causing the US to call
• 20:15
  Speaker 6: for a divestiture. And short of that, if they can't
• 20:18
  Speaker 6: sell the company, then the app needs to be banned
• 20:21
  Speaker 6: here in the US.
• 20:22
  Speaker 3: When you talk about divestiture, and I think I've heard
• 20:24
  Speaker 3: you talk about this before on Bloomberg Radio, and that
• 20:27
  Speaker 3: is how Byteedance would divest itself from TikTok, would actually
• 20:33
  Speaker 3: destroy TikTok. It would have to because of the algorithm.
• 20:35
  Speaker 6: Right, Well, that's it. And you know, in a normal sale,
• 20:39
  Speaker 6: you would take, you know, all the parts that make
• 20:43
  Speaker 6: up the company and sell them to the buyer. But
• 20:46
  Speaker 6: in this case, the company at least is arguing that
• 20:49
  Speaker 6: its algorithm is inextricably linked with the parent company byte Dance,
• 20:54
  Speaker 6: So you can't really disentangle the TikTok algorithm from byte Dance,
• 21:00
  Speaker 6: and the Chinese government has also said, look our best technology,
• 21:05
  Speaker 6: and in this case, the algorithm is quite sophisticated in advance,
• 21:09
  Speaker 6: when you know, compared to social media. Appears they don't
• 21:13
  Speaker 6: want to see that sol because just on an economic basis,
• 21:16
  Speaker 6: it can be quite lucrative and effective in doing what
• 21:20
  Speaker 6: it does to be able to reach users out there.
• 21:23
  Speaker 3: So what came from the most recent hearing on this
• 21:25
  Speaker 3: our sense was.
• 21:26
  Speaker 6: That the judges looked at this skeptically. And one of
• 21:30
  Speaker 6: our colleagues on Bloomberg Intelligence, Matchettleheim, his view was that
• 21:35
  Speaker 6: it was not a great day for TikTok in court
• 21:38
  Speaker 6: and it doesn't augur well for them to be able
• 21:42
  Speaker 6: to prevail and overturning the law. And now that's not
• 21:45
  Speaker 6: a guarantee. This is really based on the way the
• 21:48
  Speaker 6: questioning unfolded during the hearing. But our reporters, you know,
• 21:54
  Speaker 6: certainly heard all those exchanges and came away with the
• 21:58
  Speaker 6: sense that the judges were much more more skeptical of
• 22:01
  Speaker 6: the Byte Dance and TikTok arguments and the governments.
• 22:04
  Speaker 3: Okay, I'm just going to lay it all out there.
• 22:06
  Speaker 3: I don't have TikTok on my phone. I think I've
• 22:09
  Speaker 3: aged out. Basically, TikTok really does appeal to the younger set,
• 22:14
  Speaker 3: does it not.
• 22:15
  Speaker 6: It really does, And in fact, what's interesting is that TikTok,
• 22:21
  Speaker 6: when you go out and do a public opinion survey,
• 22:24
  Speaker 6: as Pew Research just did, it does hold a wide appeal.
• 22:29
  Speaker 6: Seventeen percent of people in the US get their news
• 22:33
  Speaker 6: from TikTok. That's what they say a new study that
• 22:36
  Speaker 6: just came out, and from a year ago, we're seeing
• 22:41
  Speaker 6: far fewer people supporting a ban. Only thirty two percent
• 22:45
  Speaker 6: of people in the US now support a ban, and
• 22:48
  Speaker 6: that's down from fifty percent a couple of years ago,
• 22:51
  Speaker 6: also according to Pew. So we're seeing the popularity and
• 22:55
  Speaker 6: it's appeal with younger users is something that has caught
• 22:58
  Speaker 6: the attention of the political campaigns. Former President Donald Trump
• 23:02
  Speaker 6: has his own TikTok account, which he has been using.
• 23:05
  Speaker 6: Vice President Kamala Harris over the summer launched her TikTok
• 23:10
  Speaker 6: account in connection with her campaign, and even even President
• 23:14
  Speaker 6: Joe Biden, while he was still running and had his
• 23:18
  Speaker 6: campaign going, had a campaign version of TikTok. They know
• 23:20
  Speaker 6: that it is a way to reach that coveted demographic
• 23:24
  Speaker 6: of younger voters whose enthusiasm really could make a difference
• 23:27
  Speaker 6: in the November election.
• 23:29
  Speaker 3: Doesn't that tangle this up a lot more? Though, when
• 23:31
  Speaker 3: you have those world leaders you just mentioned using TikTok,
• 23:36
  Speaker 3: this app that they may have to enforce a ban
• 23:39
  Speaker 3: of in this country, while they have the younger sect
• 23:43
  Speaker 3: of their constituents loving the app, not wanting it to
• 23:46
  Speaker 3: go away. And then at the same time, it looks
• 23:49
  Speaker 3: like the app is really facing some legal challenges that
• 23:52
  Speaker 3: it's not going to be able to meet.
• 23:54
  Speaker 6: It is wrapped up in so many contradictions, and Donald
• 23:58
  Speaker 6: Trump himself presents that because as president, he signed the
• 24:03
  Speaker 6: executive order saying he would ban it. More recently, he
• 24:06
  Speaker 6: has come out and even told our reporters during an
• 24:09
  Speaker 6: interview we had with him over the summer, he no
• 24:12
  Speaker 6: longer supports a ban on the app, and in part
• 24:16
  Speaker 6: it's because he sees it as a viable competitor to
• 24:19
  Speaker 6: meta platforms offerings of Facebook and Instagram. But you really
• 24:23
  Speaker 6: do see the challenge that these top level policy makers have.
• 24:28
  Speaker 6: They don't want to alienate a younger part of the population,
• 24:32
  Speaker 6: and the electorate, but at the same time they have
• 24:35
  Speaker 6: to respond to and acknowledge and national security risk. So
• 24:38
  Speaker 6: the way the Biden administration officials and including the Vice
• 24:42
  Speaker 6: President have put it, look, we don't want to ban TikTok.
• 24:45
  Speaker 6: We want TikTok to be up and running and serving
• 24:50
  Speaker 6: all the users here in the US, but it needs
• 24:54
  Speaker 6: to be sold.
• 24:55
  Speaker 3: Is this heading to the Supreme Court?
• 24:56
  Speaker 6: Kind of all but certain it is written in the
• 24:58
  Speaker 6: stars that it will head to the Supreme Court. The
• 25:01
  Speaker 6: company and the Justice Department have asked the Seppellate Court
• 25:05
  Speaker 6: in Washington to rule by December sixth, so that there's
• 25:09
  Speaker 6: enough time for one side or the other to be
• 25:11
  Speaker 6: able to make an appeal to the nation's top court.
• 25:15
  Speaker 6: And you would see it center around this fight over
• 25:19
  Speaker 6: national security versus the First Amendment protections.
• 25:23
  Speaker 3: What a mess? Indeed, all right, Bloomberg Senior editor for
• 25:27
  Speaker 3: Technology and Strategic Industries, Michael Sheppard, thank you so much
• 25:30
  Speaker 3: for joining us. Thank you Coming up now that a
• 25:33
  Speaker 3: judge has ruled Google's search engine a monopoly. What happens next?
• 25:37
  Speaker 3: That's just ahead on Bloomberg Law. I'm Amy Morris and
• 25:39
  Speaker 3: for June Grosso, and this is Bloomberg.
• 25:54
  Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
• 26:00
  Speaker 3: This is Bloomberg Law. I'm Ami Morris in Washington. June
• 26:03
  Speaker 3: Grosso is off and a federal judge in DC last
• 26:07
  Speaker 3: month ruled Google search engine is an illegal monopoly after
• 26:11
  Speaker 3: a ten week trial. Prosecutors alleged that Google paid billions
• 26:14
  Speaker 3: of dollars to companies like Apple and Samsung and Mozilla
• 26:18
  Speaker 3: to be the default search engine on their devices. Now
• 26:21
  Speaker 3: this is expected to impact Google and how competition may
• 26:24
  Speaker 3: work on the Internet. The Justice Department is considering what
• 26:27
  Speaker 3: punishment to ask for, including whether to break up Google.
• 26:31
  Speaker 3: Bloomberg legal team leader in Washington, Sarah Forden, joins us.
• 26:34
  Speaker 3: Now kind of straighten it all up for us, Sarah,
• 26:36
  Speaker 3: thank you so much for joining us.
• 26:38
  Speaker 7: Thank you for having me.
• 26:39
  Speaker 3: Can the Justice Department break up Google?
• 26:42
  Speaker 7: So the Justice Department is currently pondering what remedies to
• 26:47
  Speaker 7: usk the judge to impose, and they are scheduled to
• 26:50
  Speaker 7: make a filing where they will lay out to the
• 26:52
  Speaker 7: judge what they think needs to be done, and then
• 26:55
  Speaker 7: the judge is in a hold a hearing. So this
• 26:57
  Speaker 7: is a whole second phase of the trial. That's going
• 26:59
  Speaker 7: to start next year, and one of the options on
• 27:03
  Speaker 7: the table is to ask for a breakup, so it
• 27:06
  Speaker 7: could be something like breaking off Chrome or breaking off Android,
• 27:10
  Speaker 7: but there are other options that they're also considering. They're
• 27:13
  Speaker 7: very interested in all the data that Google gets from
• 27:17
  Speaker 7: these search searches, and they are compiling all of our
• 27:20
  Speaker 7: data and running it through their machines, and that is
• 27:24
  Speaker 7: one of the reasons why they're the better search engine,
• 27:27
  Speaker 7: for example, because the other search engines have not been
• 27:30
  Speaker 7: able over time to accumulate the same quantities of data
• 27:33
  Speaker 7: that Google has. So one option that they're looking at
• 27:37
  Speaker 7: is looking at whether Google could be forced to license
• 27:41
  Speaker 7: the data to other search engines or share it with
• 27:43
  Speaker 7: other search engines. So there may be some innovative proposals
• 27:47
  Speaker 7: coming on the table from them.
• 27:49
  Speaker 3: So every time this is a little sidebar, but every
• 27:52
  Speaker 3: time we do a search on Google, they're gathering data
• 27:55
  Speaker 3: on us.
• 27:56
  Speaker 7: Absolutely. I mean, the data has really been at the
• 27:59
  Speaker 7: center of a lot of the agreements that Google has
• 28:01
  Speaker 7: signed over the years, and they've been working on this
• 28:05
  Speaker 7: for over a decade. They had exclusive contracts with news publishers.
• 28:12
  Speaker 7: The contract at the heart of this search case is
• 28:14
  Speaker 7: a contract with Apple, so that every time that somebody
• 28:17
  Speaker 7: certainly makes a search on their iPhone, all that data
• 28:20
  Speaker 7: goes to Google.
• 28:22
  Speaker 3: So does apphabet slash Google? Do they have any recourse
• 28:25
  Speaker 3: when it comes to this? Do they have appeals? Or
• 28:27
  Speaker 3: is this a done deal? And now they're just waiting
• 28:29
  Speaker 3: for sentencing so to speak.
• 28:31
  Speaker 7: So they can appeal it. And one of the issues
• 28:34
  Speaker 7: that is going to be addressed is whether they need
• 28:37
  Speaker 7: to wait until the whole process is finished, including a remedy,
• 28:41
  Speaker 7: or whether they can appeal it preemptively before a remedy
• 28:44
  Speaker 7: is put into place.
• 28:45
  Speaker 3: Okay, so this is still very definitely active, very active. Yes,
• 28:49
  Speaker 3: what about the tech companies that Google did have those
• 28:51
  Speaker 3: contracts with you mentioned Apple, Do they have a role
• 28:54
  Speaker 3: in all of this as far as could they be
• 28:56
  Speaker 3: held somehow liable or something?
• 28:59
  Speaker 7: So they're not complicated in this case, but they you know,
• 29:02
  Speaker 7: they were getting twenty billion dollars a year from Google
• 29:05
  Speaker 7: to have them as their as their default search engines,
• 29:09
  Speaker 7: So certainly there's there's a monetary implication if that deal
• 29:13
  Speaker 7: gets unwound.
• 29:14
  Speaker 3: This sounds like a mess, Sarah.
• 29:16
  Speaker 7: So this this is really a landmark ruling that has
• 29:18
  Speaker 7: the potential to redraw a lot of the dynamics in
• 29:22
  Speaker 7: the online marketplace. So it's going to be very interesting
• 29:25
  Speaker 7: to see, as you point out, not only what happens
• 29:28
  Speaker 7: to Google and whether it has to be broken up
• 29:30
  Speaker 7: or shared its data, but what happens to Apple, what
• 29:33
  Speaker 7: happens to Samsung and some of the other companies that
• 29:36
  Speaker 7: had deals with Google. It could also offer new opportunities
• 29:40
  Speaker 7: for companies like Bing for example, which Microsoft, you know,
• 29:45
  Speaker 7: poured millions of dollars into Bing and never really got
• 29:47
  Speaker 7: it off the ground. But if this case opens up,
• 29:50
  Speaker 7: you know, access to data for being or or browsers
• 29:54
  Speaker 7: like Duck, dut Go, Mozilla. So there there there's a
• 29:58
  Speaker 7: potential for this to spa actually a new kind of
• 30:01
  Speaker 7: cadre of competitors in the search space.
• 30:04
  Speaker 3: So the idea is to level the playing field as
• 30:06
  Speaker 3: much as possible, even though Google has owned the playing
• 30:08
  Speaker 3: field for so long. Exactly is this what happens when
• 30:11
  Speaker 3: a company becomes so big and ubiquitous? Google is a verb,
• 30:15
  Speaker 3: of course, I mean, it's in our regular lexicon. So
• 30:17
  Speaker 3: is this the sort of thing that happens when a
• 30:19
  Speaker 3: company becomes so big and so ubiquitous? Or is this
• 30:22
  Speaker 3: how a company becomes so big and so ubiquitous that
• 30:26
  Speaker 3: figured it out.
• 30:27
  Speaker 7: That's a great question. I would say both they figured
• 30:30
  Speaker 7: it out. They were able to evade any kind of regulation.
• 30:34
  Speaker 7: You know, the FTC opened an investigation into into Google
• 30:39
  Speaker 7: in twenty eleven, but that was shut down three years
• 30:42
  Speaker 7: later with no recourse. It was a voluntary settlement. So
• 30:48
  Speaker 7: you know, if you trace back the roots of this
• 30:51
  Speaker 7: case that we're talking about right now, it goes back
• 30:53
  Speaker 7: even to that period and the things that Google was
• 30:56
  Speaker 7: able to do after it had escaped scrutiny, you know,
• 31:01
  Speaker 7: putting more products, searches in front of consumers, you know,
• 31:05
  Speaker 7: rechanging all of their reviews. They were scraping data from Yelp.
• 31:11
  Speaker 7: So they really had kind of a free reign over
• 31:15
  Speaker 7: the Internet.
• 31:16
  Speaker 3: What are you watching for in this case? What's the
• 31:18
  Speaker 3: next step that's going to happen?
• 31:19
  Speaker 7: So now we're watching the second trial. So it's interesting that,
• 31:22
  Speaker 7: you know, we have the landmark ruling and the Search case,
• 31:25
  Speaker 7: but the Justice Department broke broke the Google investigation, which
• 31:29
  Speaker 7: was a massive one, into two parts. And the first part,
• 31:33
  Speaker 7: which was the Search case, was actually filed by former
• 31:36
  Speaker 7: Attorney General Bill Barr under Trump. And so that's the
• 31:39
  Speaker 7: case that we have the remedy hearings coming up on.
• 31:43
  Speaker 7: The second case looks at the digital advertising market and
• 31:47
  Speaker 7: it looks at how Google owns all the tools that
• 31:51
  Speaker 7: underlie the display advertising market. And so that is actually
• 31:55
  Speaker 7: ongoing right now in a federal court in Alexander, Virginia,
• 31:59
  Speaker 7: and that case would last probably another week or ten days.
• 32:03
  Speaker 3: It is not lost on me, nor is it lost
• 32:05
  Speaker 3: probably on our audience that this is such a massive
• 32:08
  Speaker 3: antitrust case that it had to be broken up into
• 32:10
  Speaker 3: two things, searches and ads. That speaks to how big
• 32:14
  Speaker 3: this truly is.
• 32:15
  Speaker 7: Yeah, and they're related too, because some of the ad
• 32:18
  Speaker 7: tools also are connected to the search process. So the
• 32:22
  Speaker 7: dj is looking to show proof to the judge that
• 32:26
  Speaker 7: Google not only has a monopoly we would say chokehold
• 32:30
  Speaker 7: over how these ads are placed, but that each of
• 32:34
  Speaker 7: the three tools that create that pipeline are monopolies in
• 32:38
  Speaker 7: their own right. So it's a very interesting case. They've
• 32:41
  Speaker 7: called more than thirty witnesses in just two weeks, and
• 32:45
  Speaker 7: we're preparing to hear now Google's side of the story.
• 32:49
  Speaker 3: Okay, we're going to shift gears now from cyberspace to
• 32:51
  Speaker 3: brick and mortar. Speaking of big companies, a merger pending
• 32:55
  Speaker 3: between Kroger and Albertson's a little bit more down to earth,
• 32:59
  Speaker 3: but still huge, twenty billion dollar merger creating an enormous,
• 33:04
  Speaker 3: I don't know, grocery store enterprise. It's going to create
• 33:07
  Speaker 3: this enormous behemoth where we can shop. How is this
• 33:11
  Speaker 3: redefining the concept of the grocery store.
• 33:14
  Speaker 7: So this is the biggest supermarket merger ever. Most of
• 33:19
  Speaker 7: the grocery store brands that you're familiar with would becoming
• 33:22
  Speaker 7: under one roof. The FTC has sued to block it,
• 33:25
  Speaker 7: saying that it's anti competitive and there are several things
• 33:29
  Speaker 7: at the heart of this case, but they're really looking
• 33:31
  Speaker 7: at how do we define a grocery store. So the
• 33:35
  Speaker 7: FTC is arguing that this is a merger of what
• 33:38
  Speaker 7: we call traditional grocery stores, which is your one stop
• 33:42
  Speaker 7: shop where you can go and buy everything from milk
• 33:44
  Speaker 7: to produce to dry goods. The companies are arguing that
• 33:50
  Speaker 7: there's so many other places now where people shop that
• 33:53
  Speaker 7: it's unfair to call this an uncompetitive merger. So you
• 33:57
  Speaker 7: can buy milk at a seven to eleven, you can
• 34:01
  Speaker 7: you can buy you know, you can join a club
• 34:04
  Speaker 7: like a Costcos, you can go to Walmart. So so
• 34:09
  Speaker 7: one of the first things that judge is going to
• 34:11
  Speaker 7: have to decide is what's the definition of the market
• 34:13
  Speaker 7: And that's really key to any any an a trust trial.
• 34:16
  Speaker 3: Oh wow, So what is the government's concerned then with this?
• 34:19
  Speaker 3: If we could, if I could buy my milk down
• 34:22
  Speaker 3: at the seven eleven without having to go to a
• 34:25
  Speaker 3: Kroger Albertson's behemoth, what what is their concern?
• 34:28
  Speaker 7: So the biggest concern is really what's happening in regional
• 34:32
  Speaker 7: markets and it's it's so uh, the implications are so
• 34:37
  Speaker 7: serious that we also have several states that have filed
• 34:40
  Speaker 7: their own lawsuits. So for example, in Washington State and Colorado,
• 34:44
  Speaker 7: the attorney's general attorney generals in those states have filed
• 34:46
  Speaker 7: their own lawsuits because it means that you might have
• 34:50
  Speaker 7: rural communities where you have, you know, an Albertson's on
• 34:55
  Speaker 7: one corner, Safeway on another, and if if these companies merge,
• 34:59
  Speaker 7: one of those would probably go away.
• 35:01
  Speaker 3: And creating food deserts is that you could have food deserts.
• 35:04
  Speaker 7: You can have no breaks on price increases, if they
• 35:08
  Speaker 7: all belong to the same owner. And so the concern
• 35:11
  Speaker 7: is that this could actually be really bad for consumers
• 35:14
  Speaker 7: in some of the most remote areas where they would
• 35:16
  Speaker 7: maybe have to drive, you know, sixty miles to buy
• 35:18
  Speaker 7: a gallon of milk.
• 35:19
  Speaker 3: So they're not only concerned about the prices for the consumers,
• 35:23
  Speaker 3: but then I would think the paychecks for the people
• 35:26
  Speaker 3: who work there also.
• 35:27
  Speaker 7: And this is one of the first cases that also
• 35:29
  Speaker 7: defines unionized labor as a market and so, and this
• 35:34
  Speaker 7: is really kind of a part of the FTC's expanded
• 35:38
  Speaker 7: focus and I trust focus to include labor issues. And
• 35:42
  Speaker 7: they're saying that it makes it harder for unions to
• 35:45
  Speaker 7: negotiate for their contracts if these companies come under one roof.
• 35:51
  Speaker 3: So what happens next, is this ever going to come
• 35:54
  Speaker 3: to fruition.
• 35:56
  Speaker 7: So what we just saw wrap up in Portland, Oregon,
• 36:00
  Speaker 7: it was actually a preliminary hearing. So the FTC had
• 36:03
  Speaker 7: filed to a federal judge to keep the two companies
• 36:07
  Speaker 7: separate while they then pursue their own trial in their
• 36:11
  Speaker 7: in house court, which is scheduled for later on. But
• 36:15
  Speaker 7: de facto, this preliminary hearing becomes kind of a mini trial,
• 36:18
  Speaker 7: you know, it's like a trial in a bottle, because
• 36:20
  Speaker 7: both sides call witnesses, they present evidence, and then if
• 36:23
  Speaker 7: the judge, if the judge grants this preliminary injunction, that
• 36:29
  Speaker 7: means that the companies won't be able to close, and
• 36:31
  Speaker 7: it could effectively scuttle the deal because it would take
• 36:34
  Speaker 7: so long to get through. Then the FTC's administrative trial
• 36:38
  Speaker 7: that their way past their deadline for the deal. If
• 36:43
  Speaker 7: the judge grants the preliminary injunction, I mean doesn't grant
• 36:46
  Speaker 7: the preliminary injunction and decides that the companies are free
• 36:49
  Speaker 7: to close, then that makes it much harder for the
• 36:52
  Speaker 7: FTC to prevail at their own trial.
• 36:54
  Speaker 3: So if the judge doesn't act fast enough and this
• 36:57
  Speaker 3: is a done, this is dead in the water. Anyway,
• 36:59
  Speaker 3: exactly what's going to happen?
• 37:01
  Speaker 7: Sarah, Well, it's also complicated because there are two other
• 37:05
  Speaker 7: trials that are going to play out. We've got the
• 37:07
  Speaker 7: trial in Washington State that's brought by the Washington Attorney
• 37:11
  Speaker 7: General and the one in Colorado. So there's a lot
• 37:15
  Speaker 7: writing against this deal right now.
• 37:17
  Speaker 3: Okay, So not only would it be the biggest merger ever,
• 37:20
  Speaker 3: in the history of grocery stores and in that industry.
• 37:24
  Speaker 3: And not only do you have the federal government bearing
• 37:26
  Speaker 3: down on them, but you also have states as well.
• 37:28
  Speaker 7: You have states as well, exactly, And it's also proven
• 37:31
  Speaker 7: to be a very expensive deal for the companies. They've
• 37:34
  Speaker 7: spent over eight hundred million dollars already just in you know,
• 37:39
  Speaker 7: their efforts to try to get this deal done.
• 37:41
  Speaker 3: So I wonder what's on the other side of this
• 37:42
  Speaker 3: deal that makes it worth spending that much money and
• 37:45
  Speaker 3: that much time.
• 37:46
  Speaker 7: Well, I mean, the companies argue that they'll be much
• 37:48
  Speaker 7: more efficient. They will be. They are also saying they're
• 37:51
  Speaker 7: not going to raise prices, They're saying they're not going
• 37:54
  Speaker 7: to close stores, they're not going to fire workers. So
• 37:57
  Speaker 7: for them, it's it's really about economies of scale and
• 38:00
  Speaker 7: becoming bigger and more efficient.
• 38:02
  Speaker 3: Okay, we're going to check in with you again about this.
• 38:04
  Speaker 3: This is too much, too interesting. Thank you so much, Sarah.
• 38:07
  Speaker 3: Thank you, Bloomberg Legal team leader Sarah forden Our. Thanks
• 38:11
  Speaker 3: also to Bloomberg Senior editor for Technology and Strategic Industries,
• 38:14
  Speaker 3: Michael Sheppard and Brian Moriarty with Hamilton Brooks Smith Reynolds
• 38:19
  Speaker 3: and that does it. For today's edition of Bloomberg Law,
• 38:22
  Speaker 3: I Ami Morris and for June Grosso. For more Bloomberg
• 38:25
  Speaker 3: Law analysis and interviews, you can head to Apple Podcasts, Spotify,
• 38:28
  Speaker 3: and the Bloomberg Business app. Just download the latest edition
• 38:31
  Speaker 3: of the Bloomberg Law podcast. Stay with us. Your top
• 38:34
  Speaker 3: stories and global business headlines are coming up right now